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Higher growth hinges on investment: CPD

The think-tank in a budget proposal asks govt to cut bank borrowing

Star Business Report
The Centre for Policy Dialogue (CPD) yesterday said the government must revive stagnant investments to achieve higher economic growth -- a major challenge in the upcoming national budget.
Reducing reHance on bank borrowing and utilisation of foreign aid would be other major chaHenges, according to the civil society think-tank.
Like every year, CPD has come up with a set of proposals for the budget for fiscal 2012-13. The proposals included sectoral recommendations and imple-
mentations of the budget.
“Investment promotion should be the major focus in the upcoming budget,” said Dr Debapriya Bhattacharya, distinguished fellow of CPD. Boosting investment is an urgent requirement for macroeconomic stability and social justice, he added.
The investment rate in Bangladesh is stuck at around 24 percent of GDP for several years now, though the country needs to take it to 30 percent for higher growth. The situation worsened in the last fewyears because of an energy crisis, especiaHy gas. Prof Mustafizur Rahman, executive director of CPD, said the government should emphasise proper utilisation of foreign aid so that it could avert pressures on the balance of payments, exchange rate and reserves.
Dr Fahmida Khatun, head of research of CPD, read out the budget proposals in a press conference at the think-tank's Dhanmondi office.
The proposals include increasing the tax-free income limit to Tk 200,000 from Tk 180,000 now for individuals and raising the minimum tax threshold to Tk 2,500 from Tk 2,000.
The think-tank also suggested accommodating transfer pricing provisions in the forthcoming Direct Tax Act. Bangladesh incurs a loss of $1.8 billion a year for transfer pricing.
On agriculture and food security, CPD urged the Finance Division to undertake a comprehensive study to assess the impact and distributional mechanism and justice relating to the subsidies given to the farm sector.
It said special allocation should be made to innovate and promote improved salt and submergence-tolerant varieties in the southern districts and water efficient varieties and other high-value crops.
CPD proposed to extend tax exemption for poultry farmers up to 2015 from June 2013 considering the spread of the avian influenza virus. The government may waive the existing 3 percent custom duty on capital machinery used by the
agro-processing industry, it said.
Other suggestions include reintroducing food rationing for industrial workers in major industrial clusters, increasing allocations for research and development of jute and jute goods, helping shipbuilders withdraw payment guarantee to both local and international banks and reducing customs duty to 1 percent from 3 percent at present for local market oriented small and medium enterprises.
Value-added tax for internet use could be reduced from existing 15 percent, CPD said. It urged the government to take steps to complete the Leather Industry City and Active Pharmaceutical Industry.
On the ongoing power crisis, the thinktank said the government should place greater importance on medium (100-200MW) and large (500MW) base load power plants instead of smaller rental power plants to reduce growing subsidies. To achieve the target of the Power System Master Plan 2010, CPD said, more coal-based power plants are required.
On social safety nets, CPD advised the government to conduct a survey on poverty prevalence at the district level to achieve the target.
The second phase of the 'Employment Generation Programme for the Poorest' should focus on highly poverty stricken areas and the daily wage for the programme should be enhanced.
The think-tank also said Bangladesh should gradually move towards social security programmes in future.