Bangladesh has achieved remarkable economic growth in recent years, emerging as one of the fastest-growing economies globally. However, to sustain this momentum and achieve long-term economic stability, it is imperative to focus on internal resource mobilization. This entails optimizing the country's financial resources through improved tax collection, better management of public enterprises, and the development of domestic financial markets.
While the government has taken a number of initiatives, there are always areas for further improvement. This article tries to provide a strategic approach for enhancing internal resource mobilization in Bangladesh, aimed at supporting sustainable development and reducing dependency on external aid. In order to propose some recommendations we need to understand the key challenges in this particular area
Bangladesh faces several challenges that hinder economic growth. One of the major issues is the low tax-to-GDP ratio: Significantly below the average for developing countries, limiting government funding for public services. There also exist issues with state-owned enterprises (SoE): Despite the government's remedial initiatives, many SOEs still operate at a loss, putting pressure on valuable resources. We are still a country with low saving rates that impede capital formation and investment. Additionally, the financial market is still in the developing stage which hampers investment. On top of it all, a large portion of the population still remains unbanked which results in limited financial inclusion.
In order to emphasize on mobilizing the internal resources there are certain strategies which includes:
- a) Enhancing tax revenue collection: Modernize tax administration and broaden the tax base;
- b) Strengthening public enterprise management: Improve efficiency and profitability of state-owned enterprises;
- c) Developing domestic financial markets: Foster a robust and inclusive financial sector;
- d) Promoting financial inclusion: Expand access to financial services across all population segments;
- e) Encouraging savings and investments: Implement policies to boost domestic savings and investments.
Under each strategy we need to carry out some actions efficiently. The major actions include but are not limited to the proposed list.
In order to enhance tax revenue collection, modernization of tax infrastructure is a must. We need digital tax collection systems and data analytics to reduce evasion. Capacity development of human resources is an integral part of this package. Besides, taxpayer education is important so the need for public awareness campaigns on tax compliance is necessary.
Additionally, reviewing areas and systems of tax exemptions in order to ensure that exemptions are effectively contributing to growth. Efforts to broaden the tax base needs to be continued which have to eventually include the informal sector and simplification of tax regimes for SMEs. Again, local administration and local government institutions may be formally included in order to broaden the tax base as they have more factual data and information about the people and businesses that exist within their periphery.
It is necessary to strengthen public enterprise management which can be implemented by reforming the governance. In addition to that, financial autonomy (SOEs to make independent financial decisions) can be considered in some cases. We can also opt for selective privatization and public private partnerships, in particular, privatizing non-strategic SOEs.
Developing domestic financial markets can be done by strengthening financial oversight and also by having nationwide education on investment and infrastructure development along with upgrading technology for market operations. Promoting financial inclusion is crucial to this. The inclusion can be broadened by expanding banking services, ensuring more branches in rural areas and promoting more mobile banking and supporting microfinance and SMEs.
Above all, we need to encourage more savings and investments. There are several ways for expanding the savings and investment such as introducing attractive savings options and favourable interest rate policies and providing investment incentives.
None of this is possible without effective implementation which is as important as formulating good policies. The implementation plan can be phased out over several years:
- Phase 1 (0-6 months): Conduct comprehensive research and develop action plans, engage stakeholders to build consensus
- Phase 2 (6-18 months): Pass necessary legislative reforms and initiate capacity-building programs and public awareness campaigns
- Phase 3 (18-36 months): Implement and evaluate pilot programs and scale up successful initiatives.
- Phase 4 (36+ months): Nationwide expansion of successful programs and continuous monitoring and adaptation
Bangladesh is developing as an emerging global economy and attracting global attention. In order to keep this momentum up and running, initiatives for improving the process of internal resources mobilization. It is crucial for ensuring Bangladesh's long-term economic stability and growth. There is no time to waste, we need to act now to build a self-sufficient and resilient economy, fostering a prosperous future for all its citizens.
Author: Dr. Mohammad Kamrul Hasan is a researcher and a Public Administration Practitioner. E-mail: [email protected].
