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Double trouble

Muhith needs to address unemployment, non-investment while he places fatty budget today

Inam Ahmed
Since his graduation in computer science from a top private university, Razen has been looking for a suitable job. He has not found any in the last one year.
Even in a supposedly booming sector like IT, jobs are scarce these days.
This is the big challenge Bangladesh is going to face next year and beyond.
Private investment has dipped. The violent politics that the country experienced last year paralysed business. Scared entrepreneurs put on hold investment plans.
That fear factor is still working even after the election. Businessmen are not sure how long the fragile peace will last. They are not sure if another violent agitation will start.
As they sit on the fence, investment dips, and so do jobs. So when Finance Minister AMA Muhith presents his budget today one of his main challenges will be to jack up the sagging investment and pump money into private hands.
The figures are already frightening. Of the projected 16.5 percent private credit growth, only 11 percent was achieved through March.
And despite an apparently stable macroeconomic situation, Muhith still has much to worry about.
If he has to create jobs, he has to hike GDP growth rate. For that he has to take steps to increase investment quite considerably from the current 28.7pc of GDP to around 33 percent. For that to happen, political stability -something beyond his realm - must prevail. He also needs to keep in mind that capacity utilisation has already touched almost the maximum limit. So growth has to come from incremental investment alone.
What will happen to his large development budget is another big concern for Muhith. A 30 percent bigger ADP is not a child's play to implement.
There are quite a few major vital projects in the ADP. Some of these
schemes such as the widening of Mymensingh and Dhaka-Chittagong highways are limping, causing immense drain on the economy.
Of the total $65 billion foreign trade, $50 billion are executed through the Dhaka-Chittagong highway alone. And yet the government could not achieve much headway in its implementation.
Delays would only scotch GDP growth. But with the same arcane bureaucracy how much can he do?
He has to worry about earnings too. This year is a frightening year with revenue falling sharply. So what magic tax reforms he can produce to improve collection remains to be seen. How much he can shift away from indirect tax (read Vat here) to direct taxation is an open question. And for the government the exact opposite of collection - spending money effectively to provide services to the people - will be equally vital. People are already fatigued with the deteriorating law and order.
There comes the question of governance which is in a poor state today. Everyone talks about corruption everywhere. Nothing happens without speed money and crony contacts.
One of the touchiest institutions -bank - is inflicted with the same malaise today. The latest scandal of Basic Bank is another case. Everybody knew what was happening in that bank and yet nobody took efforts to stop it until the tills were cleaned out.
With all this one can always question how long we should continue recapitalising the state banks and why. Recapitalising is just a synonym to cover up funding the thieves from the tax payers' pocket. Some crooks will come and loot the banks and taxpayers will pay for it.
So Muhith has to think what he can do to better govern the banks.
Yet another big concern is the future of exports and remittance, both of which are sagging. Garment sector, the mainstay of export, is under pressure with a transitional change underway to improve compliance with labour and safety standards.
The current audit will lead to closures of quite a few factories. The units that do the subcontracting will lose orders. There will be job losses. So Muhith needs to think how he will go for inclusive growth by spreading safety net programme for those who will lose.
And more important would be for the government to ensure compliance because Bangladesh garment cannot afford another Rana plaza tragedy or anything near it.
Rural economy will be another choke point because of slowdown in remittance. The village economy is to an important extent fuelled by remittance. Think of the $14 billion finding its way to the rural and semi-rural areas and the consumption demand this is creating.
A real turmoil will happen if this money flow stops. Already we see a definitive drop in consumption because of the twin pressure of lack of investment and remittance.
So Muhith's job will be to push hard so that ministries will ensure overseas jobs.
But above all he has to think about improving investment climate. He has to think of infrastructures and quickly proceed with setting up the special economic zones, the authority of which is already in place.
It is estimated that 80 million jobs will migrate from China very soon and with these special zones, Bangladesh can easily grab 15 million of them. And this will be a real challenge for