**8The key to the prospects of the economy during 1998 will be export led growth of manufacturing. ***

THE new year is always of fresh hopes and renewed aspirations. It is the time to forget the turmoil of the year before. First of January is always the day of a new beginning. Let us try again — that Is the spirit: start of again, regardless of handicaps.

Human decisions make or unmake an economy. Omissions and commissions on the economic front are the key elements — unless the weather is too unkind. The year 1997 was rosy on the weather front. Therefore it was a year of bumper crops. However, in sectors other than agriculture, the performance were less than expected. An economy like Bangladesh should basically grow on the strength of the expansion of the manufacturing sector which again Is critically dependent on the growth of merchandise export. No doubt, total export earnings have been growing but not at the desirable rates leading to the much sought after rapid Increase of manufacturing outputs.

The key to the prospects of the economy during 1998 will be export led growth of manufacturing. Garments, textile, knitwear, leather goods, ceramics, fertilizer, and the more traditional Jute goods and sea foods exports during the year will determine the course of the economy. In addition, if agriculture Is able to sustain its performance of the last two years, the growth of the economy would be further boosted up. However, we cannot put too much hope on agriculture.

The mainstay of economic growth ought to be manufacturing in 1998. How far Is It feasible? We must remember that the world economy has dramatically changed in the later part of 1997. The rising wage cost combined with stable foreign exchange rates in South-east and East Asia, promoted the export of labour intensive goods and services from Bangladesh. This is no longer true today. The exchange rate In Thailand. Indonesia, Republic of Korea as well as In our neighbouring South Asian countries have all dramatically declined during the last four to five months so that in dollar terms, the competitive advantage that we enjoyed thus far no longer exist. For our exports, we will face much more competition.

Tne very first thing that the government must do is to review its exchange rate policy. Only six months back, our currency in dollar terms was 40 per cent cheaper than Thai Baht. Today they are at par. How can we remain competitive, unless other costs can be reduced? Pros[>ects of such reductions are very limited. The only alternative therefore is to reduce the value of Taka. Otherwise. it would be difficult if not Impossible to maintain the competitive and expand our exports at the desirable rate.

Devaluation has several other implications. First the price of petroleum products and vital import costs will increase. By no means subsidy from the budget is possible to sustain rising cost of fuel. At the moment, the world price of crude petroleum is falling. It should therefore be possible to buy cheaper fuel in dollar terms ana undertake large-scale conversion to compressed natural gas (CNG). The combined effect of these two measures should soften the impact of devaluation.

The reality of the world economy can never be avoided and therefore any delay in ensuring a more realistic exchange rate would have direct implication in terms of’the rate of growth of the economy. The international financial turmoil of past few months have some other negative in-■ fluence for the-national'economy. The expected foreign direct investment from South Korea in export manufacturing may not be forthcoming during 1998. Private Japanese Investment will also fall. Under the circumstances, it will be necessary to promote domestic investment much more. It should be obvious that unless Bangladeshi investors come forward, foreign investment will always remain far behind. But the BOI tends to behave in a manner which implies that its role is confined to foreign investment only. This must not be the case.

In order to overcome the investment crisis of 1998, BOI should immediately put forward an

action plan, first of all. setting out the measures to promote domestic investment in manufacturing sector alone. There is no need to get involved with energy sector investment. Those should come regardless of prevailing global financial crisis and economic downturn in Japan.

The silver lining on the export front is the strong economic growth prospects in Western Europe. USA and Canada which means that increasing exports from Bangladesh to these countries can be sustained. These are also the main markets for our manufactured exports.

The biggest event of 1998 is going to be the opening of the Bangabandhu Bridge across the river Jamuna. For the first time in history, the great physical barrier between the two halves of the country Is going to be removed. It is the greatest event since independence of Bangladesh. The consequences of such an epoch making event are going to be revolutionary and the economic revolution will only begin in 1998. First, the prices of agricultural products exported from North Bengal will decline. It would lead to agricultural diversification: vegetables grown in Thakurgaon and Gaibanha will easily reach Dhaka and supplies of all sorts of fresh produce will be vastly augmented. We can expect that next summer, supply of mangoes from Rajshahi will not only increase but its quality should also improve. Although the world market would continue to remain the mainstay of economic growth, the growth In the domestic markets due to the bridge across Jamuna is also going to be substantial.

The other big events of 1998 belong to the energy sector. It is expected that early in the year, negotiations relating to exploration and drilling for oil and gas will be completed and also the contracts with independent power producers will be signed. Consequently, we may expect a huge inflow of foreign investment which in turn would have a multiplier effect on the construction sector as well as other sectors of the economy. The year will mark the beginning of the grand energy sector development and its full Impact should be on stream by the year 2000 in full force — well before the next general election.

Provided the government does not shift its policies, the role of the private sector will expand considerably in the telecommunications, airline and transport business. By the end of 1998. It is expected that use of mobile telephone should become fairly widespread. Similarly, private airlines may dominate the internal market and the opening of the Bangabandhu Bridge will lead to rapid increase in bus and truck services, most probably across the border to destinations in India. These are significant development, particularly in terms of their contribution to GDP In the fiscal year 1998-99.

What will happen to economic reform? I think It is now anybody's guess since the overall speed of the reform process as whole have slowed down in the recent past. There are hard decisions involved and the time is running out. After 1998, there will be no time for politically difficult decisions like taking firm actions against loan defaulters, privatizing loss making public enterprises and getting the prices right. No doubt, widespread economic reform would generate strong beneficial effects on the economy and the party in power is bound to gain out of It during the next election.

During 1997, the water sharing treaty and the CHT peace agreement were the two landmark events completed by the government — regardless of the criticism by the-Opposition. The favourable impact flowing out ot the two agreements will convince the people and the overwhelming support of the people is inevitable within the next two to three years. Decisive measures for economic reform should have similar impact.

What will be most important for the government in 1998 is bold actions — without any fear and favour. Can we conceive of a fearless and favourless Government of Bangladesh? If we cannot, we are doomed. It is the fate of the people which is at stake and the issue goes well beyond the tenure of a particular government.