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Heal economy first: MCCI

Star Business Report
The government faces an uphill task of healing the economy, restoring growth momentum and rebuilding the confidence of businesses and investors after recent months of political unrest, a leading chamber said yesterday.
"Much will depend on how quickly the prevailing political stalemate can be resolved through dialogues among the fending political parties," the Metropolitan Chamber of Commerce and Industry said in a statement yesterday, reviewing the economic situation in Bangladesh between October and December last year.
The present calm after the January 5 elections might be short-lived as unrest may flare up again if the opposition political parties cannot be brought into confidence, it added.
"The foremost task for the government is therefore to ensure political stability."
" Besides, it should be made clear to all that there is no compromise with security and the law and order situation. This is also necessary to enhance the country's image abroad."
The chamber said the economic and social sectors performed remarkably well in the past decade. "All these gains have now come under threat because of the recent political unrest."
It said the performance of the industrial sector in the second quarter of the current fiscal year was lower than that in the same period of the previous year. The MCCI blamed this on political unrest, low disbursement of industrial term loans, slow growth in the settlement of import letters of credit, a sharp decline in private sector credit growth, and infrastructural bottlenecks.
"Moreover, the production and supply chain in most of the manufacturing industries broke down due to frequent countrywide shutdowns and blockades."
The chamber said many factories had to cut production by as much as 50 percent to avoid congestion at warehouses. On the other hand, all industries were facing a serious problem due to disruption in the supply of raw materials because of the blockades.
The MCCI said a lacklustre situation prevailed in the investment scenario, both in local and foreign direct investment.
It also said employment, mainly in the private sector, has dropped sharply due to the recent political unrest, as most manufacturers and entrepreneurs have almost put a hold on fresh investments and expansion plans.
"On the economic fronts, there is already a long to-do list for the government, and the recent unrest has only lengthened this list."
Thus, the infrastructure of roads, highways, bridges and railways that were extensively damaged or destroyed during the days of strikes and blockades will need to be repaired and restored on a priority basis.
"This will call for a large increase in public expenditure, but it should not be much difficult as the budget deficit so far in this fiscal year is well within the target."
The chamber urged the government to organise its expenditure priorities by concentrating on urgent projects and leaving aside the new and costly ones.
It said the government's best strategy at the moment should be to develop education and skills development programmes, improve the essential physical infrastructure, increase electricity generation, support agriculture, and promote investment in the industrial sector.
It said businesses would have to be given adequate policy support, so that they can recoup their losses.
"Policy supports recently announced by the government should be extended to all important sectors, such as agro-based industries, transport and small businesses and entrepreneurs."
It said governance in the banking sector and capital markets must be improved, since growing debt defaults and recent loan scams and frauds at the state-owned banks have depleted resources of the once strong banks and affected the banking sector.
Strong measures will be needed to prevent recurrence ofbanking sector frauds and improve loan recovery.
"Bangladesh Bank should be made independent of government control, which is necessary for enhancing the quality of its supervisory and regulatory functions," said the chamber.
It also said the government should continue with its ongoing reforms of tax policy.
Strong efforts should be made to win back the trade privileges to the US and avert the threat of withdrawing the privileges from the EU by duly addressing the compliance issues, the MCCI said.