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Tuesday, March 22, 2016

Bangladesh-made uniforms for British army : Satexco has been supplying uniforms to the army for the last 10 years

Refayet Ullah Mirdha

A Bangladeshi company supplies uniforms to the British army, which is another testimony to the excellence of the country's garment sector.
Satexco, a garment company inside Dhaka Export Processing Zone (DEPZ), has been serving the British army for the last 10 years, said Iqbal Hossain, managing director of the company.
Besides uniforms, the company also regularly supplies army jackets, rucksack, webbing, ammunition pouch, water containers, bayonet holders, pistol holsters and heavy tents, Hossain told The Daily Star yesterday.
He said his company also supplies camouflage dresses, dark olive-coloured dresses, winter jackets, light desert uniforms, wind proof jackets and normal jackets to the army.
"We also supply uniforms and other stuffs to some other European countries like France, The Netherlands, Belgium and Denmark.”
He said sometimes he supplies uniforms to the Royal Air Force as well.
“We have a good opportunity to grab a bigger market of military uniforms among the NATO [North Atlantic Treaty Organisation] countries, as we have already proved our strength in the segment in major European nations.”
“Established in 2000, a European-Bangladeshi joint venture Satexco supplied uniforms and accessories worth $3 million to the British army while the company's current annual sales value is $36 million."
The company maintains a modest 10 percent year-on-year business growth in revenue generation, he said.
He praised the performance of his 500 skilled workers who have been making such specialised clothing items over the years for such sophisticated customers.
“All the factory personnel of the company are Bangladeshi. But, sometimes we bring skilled technical persons from Europe and other countries to train our workers.”
He said his company imports most of the uniform-making fabrics for the European army.
“We make the uniform as per the design and style supplied by the authorities concerned. The high-ups of the armies of the concerned countries regularly inspect the factory and production processes at the DEPZ to ensure quality production,” he said.
The uniforms and others stuffs are exported after being tested by a third country, he said.
Hossain started uniform-making business in 2000. A Bangladeshi who was brought up in England, Hossain started garment business with a retired British army major.
“One day the major asked to set up a factory for making uniforms for the British army that matched with my thinking. Finally I partnered with him and set up a factory at the DEPZ."
reefat@thedailystar.net
Source: The Daily Star, 31 May 2012


ADP Implementation Foreign aid to be cut 24pc

Rejaul Karim Byron

The planning ministry has proposed slashing foreign assistance from the current Annual Development Programme by 24 per cent mostly due to non-availability of matching funds and delay in approval from the donors.
According to the proposal, foreign aid of Tk 5,110 crore would be trimmed from the ADP to Tk 16,095 crore, said ministry sources.
Besides, Tk 2,520 crore budget support would be revised to Tk 1,425 crore.
The revised ADP will be placed before a meeting of National Economic Council (NEC) on Sunday for approval.
The ministry has suggested carving the highest Tk 1,254 crore from the Padma Bridge Project.
An Economic Relations Division (ERD) report said finalisation of appointment of contractors for the project will not be possible by June next year as the donors are yet to approve the tender documents.
After reviewing 20 foreign-funded projects, the ERD has listed several reasons for lowering the foreign assistance.
For example, the bank guarantee submitted by the selected bidder of World Bank-funded Efficient Lighting Initiative for Bangladesh (ELIB) project was found fake. As a result the authorities concerned decided to go for re-tendering and a WB assistance of Tk 168 crore remained unutilised.
An ERD high official said in such cases the total tender process needs to start afresh.
The allocation for the Khulna 150 MW Power Plant Project is going to be downsized by Tk100 crore as a shipment of imported goods had been deferred due to delay in signing an agreement between the government and the concessionaire.
Three donors including the Asian Development Bank (ADB) and Norwegian Agency for Development Cooperation (Norad) have been financing the 10-Town Power Distribution System Development Project. The main financier ADB has completed all the purchases for the project.
But in the meantime, the deadline for Norad's loan activation expired and as the donor did not renew the deal, Tk 60 crore project aid would be slashed, mentioned the ERD report.
After preparing the tender schedule for the Southwest Region Gas Distribution Network Project, it was sent to the financier ADB in August last year for its opinion. The Energy Division had received ADB's opinion after four months.
Due to this delay, completing the purchase for the project would not be possible in the current fiscal year and consequently Tk 119 crore foreign aid would be carved.
About Tk 203 crore would be slashed from the Road Network Improvement and Maintenance Project, funded by ADB.
After the government had acquired the required land, the concessionaire sought another year to complete the project. But as the ADB refused to extend the loan execution period, the authorities had to downsize the scheme.

The project aid for laying a double line railway track between Tongi and Bhairab Bazar would be slashed as the matching funds were not available.

Sorce: The Daily Star, 31 March 2012

Macroeconomic stability for economic growth and employment


Rizwanul Islam

In recent weeks and months, the issue of macroeconomic stability has received a good deal of attention in Bangladesh. The concern appears to have arisen from a number of relatively recent developments in the economy that include: (i) persistence of high inflation, (ii) excessive government borrowing from the banking system, (iii) depreciation of the domestic currency, (iv) decline in foreign exchange reserve, and the (v) continued ill health of the country's stock market.
The government has persuaded itself to consider the overall macroeconomic situation as unstable and is devoting attention to attain stability. And with that end in view, a restrictive monetary policy has been adopted. Views of independent economists/observers have ranged from terming the situation as one of crisis to one of challenge. In the entire debate, the issue of economic growth appears to have taken a back seat and that of employment is conspicuous by its absence.
Moreover, the discussion on all sides appears to be based on the conventional approach to macroeconomic stability in which double digit inflation is considered to be high and hence undesirable, a budget deficit of over 5% of GDP is also considered to be bad for an economy, and macroeconomic stability is considered almost synonymous with low inflation and low budget deficit. In this conventional approach, macroeconomic stability is necessary for achieving sustained growth, and hence needs to be pursued even at the cost of a negative short term impact on growth. That has been the approach taken by the government.
Over and above the restrictive monetary policy, the government is also being advised to adopt a similar approach in fiscal policy. A number of questions may be raised in the context of the situation and policies mentioned above.
* In a developing country like Bangladesh, should macroeconomic stability be the goal of policy making or an instrument for achieving goals like economic growth and employment?
* Should macroeconomic stability by defined narrowly as one of low inflation and low budget deficit or in a broader framework?
* Inflation is considered to be bad for an economyboth in terms of its impact on economic growth and cost of living, especially of the poor. But how much inflation is bad for growth? And is inflation always bad for the poor?
* What kind of inflation are we fighting in Bangladeshdemand-pull or cost-push? And how effective is restrictive monetary policy likely to be in fighting the latter variety of inflation?
* Could one think of an alternative approach to macroeconomic policy, especially with economic growth and employment as the goals rather than stability itself?
While it would be foolhardy even to think of trying to address all the above questions in a short article like the present one, the list is provided in the hope that it might spark off some re-thinkingboth amongst policy makers and specialistsabout the goals and instruments of macroeconomic policy making in the country.
As for the first question, I guess there would be no major disagreement on the suggestion that in a country like Bangladesh, macroeconomic stability should be an instrument (rather than an objective by itself) for achieving the goals of economic growth and employment. Moving on to indicators of macroeconomic stability, while inflation and budget deficit are important basic indicators, it is important to look at the broad situation with respect to variables like (i) changes in real exchange rates, (ii) foreign exchange reserves in relation to import requirements, broad money, and short term debt, (iii) external debt as percent age of GNP/GNI, (iv) short term capital inflows in relation to GDP, (v) growth of exports, (vi) ratio of current account balance to investment and GDP, (vii) real estate prices, and (viii) real stock prices.
If one adopts a longer term view of the economy, one will note that the macroeconomic situation of Bangladesh has been quite stable for a considerable period of time in recent years. For example, inflation had been around 6% per annum until the economy was hit by the global food price crisis in 2008. While inflation increased sharply since then, much of that rise was due to a rise in the prices of food in the global market, and non-food inflation remained lower than food inflation (except in recent months). Budget deficit remained within manageable limits. Foreign exchange reserve rose to a healthy level in 2009 and declined only in 2011. In fact, foreign exchange reserve has remained well below short term debt, and there is no major reason for confidence in taka to be shaken. External debt in relation to national income is well below 30%, which is considered to be a reasonable level for developing countries. On the whole, the situation was one of reasonable stability on the macroeconomic front. What, then, is the problem? More particularly, what has been the change?
Admittedly, there has been excessive borrowing by the government from the banking system, which could potentially be inflationary. But inflation had risen even before the increase in government borrowing, and much of that earlier inflation was food inflation. Only since December 2011, non-food inflation has been showing a sign of increase. Important questions to ask are: what rate of inflation is likely to hurt economic growth in Bangladesh and what is so sacrosanct about single-digit rate of inflation? Recent reviews of the relationship between inflation and economic growth do not support the contention of a negative relationship between the two variables. Instead, it is found that both very low and very high rates of inflation may be inimical to growth, and there is a range of inflation rate within which growth can continue unhindered. In fact, many economists consider some degree of inflation as necessary to grease the wheel of economic growth in developing countries. Even within an organisation like IMF, there seems to be some rethinking going on regarding how low inflation rate should be in order to maintain macroeconomic stability.
There are also examples of countries (e.g., Republic of Korea and Indonesia during the early periods of growth) where fairly long periods of high economic growth have been associated with high (double digit) rates of inflation. Actually, it is hyperinflation that is dangerous for investment and growth. For Bangladesh, empirical exercise (undertaken by the present author) covering the period 1981-2006 shows that the relationship between economic growth and inflation was statistically insignificant. Of course, such exercises should be updated to see if the relationship has changed. However, casual observation would indicate the opposite: the rate of economic growth since 2008 has not declined although the rate of inflation has been higher than before.
What about the fear that inflation hurts the poor? This certainly is a major concern, especially if it is food inflation. And in Bangladesh, it is food inflation that was dominant since 2008. But such inflation is primarily of cost push variety and influenced more by supply side factors. Measures aimed at curbing demand (e.g., through monetary policy instruments) are unlikely to have much impact on such inflation. In India, interest rate was raised 13 times between March 2010 and December 2011, and yet, there has not been much success in reducing inflation. Instead, economic growth is slowing down.
In fact, a degree of food price rise is even considered desirable from the point of view of maintaining incentives for producers of food grainsas long as the poor consumers can be protected through other means (e.g., public food distribution, cash transfers, food stamp, etc.). Even non-food inflation need not always hurt the poor. If credit growth supports increased production that is employment intensive and creates jobs, and if real wages of workers increase, inflation may not hurt the poor.
Availability and growth of credit is an important factor for a developing economy like that of Bangladesh. Of course, if credit growth is spurred by government borrowing and that in turn is mostly for meeting costs of importing fuel for energy generation, it would not contribute directly to production. But with the current monetary policy stance, the pendulum is likely to swing too far in the opposite direction. If the annual credit growth is brought down from 28% to around 20% and the burden falls primarily on the private sector, the growth of credit to the private sector may go down to around 18% or even less. And that may really hurt growth (and employment).
It would be important to find a way out of the dilemma of maintaining a healthy growth of credit for productive purposes without creating a bubble in the economy (especially in the real estate sector and the stock market). Likewise, it would be important to maintain public sector expenditure, especially in infrastructure and other development oriented activities, without giving rise to excessive deficits, although I wouldn't say that there is anything sacrosanct in keeping the deficit to within 5% of GDP. If budget deficit can be financed through means other than borrowing from the banking system (e.g., by mobilising private savings), it need not add to inflationary pressure. All these are in the realm of what I would call development oriented macroeconomic policy. That, of course, could be the subject matter of another article in future.

The writer, an economist, is former Special Adviser, Employment Sector, International Labour Office, Geneva.
Source:  The Daily Star, 14 March 2012

Rethinking macroeconomic stability

Rizwanul Islam

In recent weeks and months, the issue of macroeconomic stability has received a good deal of attention in Bangladesh. The concern about macroeconomic stability appears to have arisen from a number of relatively recent developments in the economy that include:
* Persistence of high inflation;
* Excessive government borrowing from the banking system;
* Depreciation of the domestic currency;
* Decline in foreign exchange reserve; and the
* Continued ill health of the country's stock market.
The government has persuaded itself to consider the overall macroeconomic situation as unstable and is devoting attention to attain stability. And with that end in view, a restrictive monetary policy has been adopted.
Views of independent economists/observers have ranged from terming the situation as one of crisis to one of challenge. In the entire debate, the issue of economic growth appears to have taken a back seat and that of employment is conspicuous by its absence.
Moreover, the discussion appears to be based on the conventional approach to macroeconomic stability in which double digit inflation is considered to be high and hence undesirable, a budget deficit of over five percent of GDP is also considered to be bad for an economy, and macroeconomic stability is considered almost synonymous with single digit inflation and budget deficit below five percent of GDP.
In this conventional approach, macroeconomic stability is necessary for achieving sustained growth, and hence needs to be pursued even at the cost of a negative short term impact on growth. And that's the approach that has been taken by the government.
Over and above the restrictive monetary policy, the government is also being advised to adopt a similar approach in fiscal policy. A number of questions may be raised in the context of the situation and policies mentioned above.
* In a developing country like Bangladesh, should macroeconomic stability be the goal of policy making or an instrument for achieving goals like economic growth and employment?
* Should macroeconomic stability by defined narrowly as one of low inflation and low budget deficit or in a broader framework?
* Inflation is considered to be bad for an economy -- both in terms of its impact on economic growth and cost of living, especially of the poor. But how much inflation is bad for growth? And is inflation always bad for the poor?
* What kind of inflation are we fighting in Bangladesh -- demand-pull or cost-push? And how effective is restrictive monetary policy likely to be in fighting the latter variety of inflation?
* Could one think of an alternative approach to macroeconomic policy, especially with economic growth and employment as the goals rather than stability itself?
While it would be foolhardy even to think of trying to address all the above questions in a short article like the present one, the list is provided in the hope that it might spark off some re-thinking -- both amongst policy makers and specialists -- about the goals and instruments of macroeconomic policy making in the country.
One of the major issues in macroeconomic management during the past few months has been excessive borrowing by the government from the banking system which could potentially be inflationary. But inflation had risen even before the increase in government borrowing, and much of that earlier inflation was food inflation.
Only since December 2011, non-food inflation is showing a sign of increase. And important questions to ask are: what rate of inflation is likely to hurt economic growth in Bangladesh and what is so sacrosanct about single-digit rate of inflation? A closer examination of the relationship between inflation and economic growth does not support the contention of a negative relationship between the two variables.
Instead, it is found that both very low and very high rates of inflation may be inimical to growth, and there is a range of inflation rates within which growth can continue unhindered.
In fact, many economists consider some degree of inflation as necessary to grease the wheel of economic growth in developing countries. Even within an organization like IMF, there seems to be some rethinking going on regarding how low inflation rate should be in order to maintain macroeconomic stability.
There are also examples of countries (e.g., Republic of Korea and Indonesia during the early periods of growth) where fairly long periods of high economic growth have been associated with high (double digit) rates of inflation.
Actually, it is hyperinflation that is dangerous for investment and growth. For Bangladesh, empirical exercise (undertaken by the present author) covering the period of 1981-2006 shows that the relationship between economic growth and inflation was statistically insignificant. Of course, such exercises should be updated to see if the relationship has changed.
However, casual observation would indicate the opposite: the rate of economic growth since 2008 has not declined although the rate of inflation has been higher than before.
What about the fear that inflation hurts the poor? This certainly is a major concern, especially if it is food inflation. And in Bangladesh, it is food inflation that was dominant since 2008. But such inflation is primarily of cost push variety and influenced more by supply side factors.
Measures aimed at curbing demand (e.g., through monetary policy instruments) are unlikely to have much impact on such inflation. In India, interest rate was raised 13 times between March 2010 and December 2011, and yet, there has not been much success in reducing inflation. Instead, economic growth is slowing down. It remains to be seen whether restrictive monetary policy can achieve the desired result in Bangladesh.
A degree of food price rise is even considered desirable from the point of view of maintaining incentives for producers of food grains -- as long as the poor consumers can be protected through other means (e.g., public food distribution, cash transfers, food stamp, etc.). Even non-food inflation need not always hurt the poor. If credit growth supports increased production that is employment intensive and creates jobs, and if real wages of workers increase, inflation may not hurt the poor.
Availability and growth of credit is an important factor for a developing economy like that of Bangladesh. Of course, if credit growth is spurred by government borrowing and that in turn is mostly for meeting costs of importing fuel for energy generation, it would not contribute directly to production. But with the current monetary policy stance, the pendulum is likely to swing too far in the opposite direction.
If the annual credit growth is brought down from 28 percent to around 20 percent and the burden falls primarily on the private sector, the growth of credit to the private sector may go down to around 18 percent or even less. And that may really hurt growth (and employment).
It would be important to find a way out of the dilemma of maintaining a healthy growth of credit for productive purposes without creating a bubble in the economy (especially in the real estate sector and the stock market).
Likewise, it would be important to maintain public sector expenditure especially in infrastructure and other development oriented activities without giving rise to excessive deficits, although I wouldn't say that there is anything sacrosanct in keeping the deficit to within five percent of GDP.
If budget deficit can be financed through means other than borrowing from the banking system (e.g., by mobilising private savings), it need not add to inflationary pressure. All these are in the realm of what I would call development oriented macroeconomic policy. That, of course, could be the subject matter of another article in future.

The writer, an economist, is former Special Adviser, Employment Sector, International Labour Office, Geneva.
Source:  The Daily Star, 13 February 2012

Economic pain exposes policy failure

Maruf H Khan Noorpuri

Over the past six months we have witnessed a dramatic and accelerating deterioration of economic conditions in Bangladesh. This has been severely aggravated by poorly calculated fiscal, monetary and foreign exchange policies. This is no longer a matter of opinion but a painful fact for economic agents (employers, employees, exporters, importers, entrepreneurs and so forth) of all description.
Fiscal policy execution, as is now well-known, has been aggressively creating a widening budget deficit. In a country that is devoid of a proper government bond market it has succeeded in squeezing liquidity and creating a rising public debt burden. It would be tolerable if the borrowed funds from the economy were appropriately invested in infrastructure. There is unfortunately limited evidence for this. The funds seem to be applied to support an expanding government and a fuel bill caused by government tardiness in removing fuel subsidies. It is fair to note, with regard to the latter, that the government has commenced, albeit rather late, to remove fuel subsidies that this country cannot and should not support.
Foreign exchange policy has been poorly managed for quite some time. The designated guardians of the currency have failed to instill policy that would inspire confidence in the country. The treasury bill market for instance is closed to foreign investors on the pretext (according to some Bangladesh Bank officials) that foreigners would add to the volatility. Readers please note that in the past year the stockmarket was down by nearly 50 percent and the Bangladesh taka by 20 percent without the assistance of the “foreign investors”. A lack of understanding of the global market and inadequate anticipation of foreign exchange reserve decline has clearly contributed to this dismal outcome. This decline in the currency is serious as it is an unambiguous indictment of existing macroeconomic policy. It is nothing short of destroying the wealth of the country, whatever there was. It crushes the country's purchasing power, discourages foreign capital investment and of course increases the cost of imports. Exports cannot be goosed up by just dropping the price. Beggar-thy-neighbour policies have been shown through multiple examples to be an unmitigated failure. China today, Japan before, Germany and Switzerland still, have strong currencies that have corresponded with strong exports. A strong taka should be at the core of policy.
Monetary policy execution adds violently to the toxic mix that the Bangladesh economy has had to endure in the recent months. It is important to look back at the track record of the Bangladesh Bank. In 2009 and 2010, monetary policy was far too lenient as money expansion led to unsustainable events, namely the sharp appreciation of the stockmarket in those two years and rapid credit growth. This was made worse by wholly inappropriate margin policy for which the finance ministry and the Securities and Exchange Commission (SEC) were also responsible. Headline inflation did increase in early 2011 much of that however was food and energy. Monetary policy was rightly tightened in late 2010. However, in the recent months one would have to be blind not to note the sharp deceleration in economic growth. Exports are falling, real estate prices are weaker, consumer durables are softer and jobs are being lost. Credit growth has fallen sharply, admittedly from unsustainable levels (consequence of poor policy in 2009).
Inflation is rightly a target, but the wrong focus measure will cause a false reaction, and make any healthy economy unbearably sick. In most countries the focus on inflation is “core' inflation. This usually refers to inflation excluding food and energy. Interest rates are a blunt instrument, and unless one is delusional, interest rates do not have an effect on the change in food and energy prices. In the past year in the global markets, soybean oil is down 20 percent, wheat is down 30 percent, sugar is down 33 percent and rice is unchanged from a year ago but down 25 percent from the late summer peak. The rate of change referred to here is based on the USD price change on the Chicago Board of Trade Futures Exchange. Oil prices are up but adjusting taka interest rates cannot and will not change the price dynamic, just as it did not with regard to the food items mentioned. We believe the core inflation is falling and is probably below 5 percent and average real rates are therefore 6 to 10 percent (depending on the term) on the real economy. This rate burden coupled with the sharp domestic and global economic decline (factually based) makes the recent additional monetary tightening not only absurd but suggestive of severe weaknesses in the monetary policy operator's comprehension of economic and financial reality.
Bangladesh's GDP in real USD terms is probably currently only growing at 3 to 4 percent and possibly less. No matter who you are in Bangladesh, this is a disastrous situation. The much stated objective of the finance ministry for 7 percent growth is not going to be achieved with the current policy mix as described, in particular given the recent decline in the taka exchange rate. Bangladesh has a dynamic and able private sector; unfortunately the policymakers are handicapping the entrepreneurs of Bangladesh in an untenable manner. We actually believe that Bangladesh's potential growth rate is well north of 7 percent and achievable, however it requires a radical change of course by those currently responsible for policy design and implementation.
The policymakers should be commended for working to remove fuel subsidies, the removal of the commercial bank's lending cap and the stated (but yet to be official) removal of capital gains tax. However, much more needs to be done urgently. Interest rates need to be cut, taxes in the corporate sector need to be slashed, foreign capital enabled in all maturities of the government debt market and not least the size of government needs to be cut aggressively. If these measures are not taken then Bangladesh will inevitably lose its competitive edge and capital will not enter the country. Capital that is critical to create jobs, lift incomes and drive entrepreneurship. South Asia and Southeast Asia is full of opportunity for international capital but Bangladesh is not at an obvious investment destination unless the policy mix is altered rapidly. Far too much has been squandered recently and the Bangladesh economy cannot afford the government's current policy mix to continue.

The writer is the chief executive officer of Timurid Investment Management Company (TIMCO).
Source:   The Daily Star, 24 January 2012

3 Years of Government: Sustained growth in agriculture sector ; Better food management helped tackle price spiral

The government's policy support for farm sector along with better management of public food distribution system (PFDS) helped the country achieve a sustained growth in agriculture sector over the last three years.
Taking office right after the 2007-'08 period of high volatility of global food prices, the AL-led grand alliance government put food security high on its agenda. And soon it was manifested in various steps the government took.
The steps include price cut of non-urea fertilisers, providing free irrigation during the Aman season and rebate on electricity charges for farmers, increased supply of quality cereal seeds in the market through state-run agencies, and special rehabilitation schemes for farmers of cyclone-hit and haor areas to recoup previous losses.
But a particular initiative by the agriculture ministry, in a way, revolutionises the livelihood of an 18 million-strong farming community. They were provided with farm input cards that helped them open bank accounts and get access to the benefits of farm inputs and subsidies directly through banking channel.
In tandem with such initiatives by the agriculture ministry, the government also made sure food grains in the market were available thereby containing already high food prices from further rise.
To cushion the poor and vulnerable ones from the effects of high prices of rice, the government significantly enhanced its allocation of rice for subsidised open market sale (OMS) from less than 2 lakh tonnes in fiscal 2008-09 to nearly 9 lakh tonnes in the last fiscal year (2010-11).
It is to the credit of the food ministry that when as many as 20 private bidders, even after winning the bids, failed to import rice and wheat to supplement the domestic production over the last two years, the government cancelled those bids and signed three-year to five-year long bilateral import deals with Vietnam, Thailand and Ukraine so that a sustained import line remains open under public sector.
That smart move helped the government keep its food reserve at an optimum level creating the confidence that any domestic crop failures would not be a major problem.
Ensuring availability of food in the market was the main thrust of the government's efforts to cope with a lot of balancing jobs in the volatile food front.
The efforts were to be made to ensure that import shipments are on schedule to meet the gap between domestic cereal output and the rising demand, to reign in surging food prices and also to infuse food and cash flows in the rural economy so that one-third of the population living below the poverty-line do not go hungry.
Other than OMS operation, the government also increased food supply through various other year-round public food distribution mechanisms including VGD, VGF, Fair Price Card programmes, and thereby made food available and accessible to both rural and urban poor.
Before this government's takeover, the annual food distribution was somewhat around 1.3 million tonnes under the PFDS whereas it was raised to 2.7 million tonnes in the last fiscal year and the projected distribution for the current fiscal now stands at 2.9 million tonnes.
Social safety net programmes (SSNPs) expenditure was around 1.5 to 1.8 percent of the national gross domestic production (GDP) before the present government took over. The government expanded the SSNPs, many of which are food-aided, to 2.5 percent of the GDP in the current fiscal year.
Bangladesh Bureau of Statistics cites this as a major factor in reducing poverty rate from 40 percent in 2005 to 31 percent now.
However, as the number of SSNPs and quantity of food grains being dished out through PFDS increased over the last three years, concern about the quality and fairness of such activities also surfaced.
Although law enforcers detained many unscrupulous traders, officials and grassroots level political activists for misappropriation of food grains meant for distribution among the poor, there still remains some systemic lacunae that need to be mended.
Food officials also admits flaws in monitoring and political pressure at times.

Source:  The Daily Star, 08 January 2012

Deep Sea Port : China offers to build, fund it


Remains open to partnering the project with India, US or any other country

China has proposed to invest in four mega infrastructure projects, including the $5 billion deep-sea port and $700 million multi-lane tunnel under the Karnaphuli river in Chittagong.
The government, however, is going slow on the deep-sea port issue, as it finds itself in a quandary over whom to pick with three other countries -- Japan, India and the US -- showing interest in building the port, said two policymakers of the government requesting anonymity.
Acknowledging Bangladesh's dilemma, China has said it is open to building the deep-sea port in partnership with other countries.
“We have no problem building the port in partnership with India or the US or any other country,” said Li Jun, the Chinese ambassador to Dhaka, while exchanging views at The Daily Star Centre in the capital on Wednesday.
He said China might give soft loans for the implementation of the projects. “It can also be done under the government-to-government formula or by engaging private sectors.”
Of the four countries, China was the first to make a formal offer to invest in the deep-sea port.
Ambassador Li Jun said a Chinese company was ready to invest in the infrastructure projects and was awaiting a response from the government. The company had even opened an office in Bangladesh three years ago, he added.
China is waiting for a concrete response from the Bangladesh side. Once we have it, we can determine whether it will be a government-to-government or a public-private partnership deal,” said the Chinese ambassador.
He said a high-level delegation from China would visit Dhaka next month to discuss the projects and investment.
The Chinese envoy believes this port can turn Bangladesh into an economic hub of the region. South China can benefit from this port once another project to link Bangladesh with China is also implemented.
The two other projects China has proposed are the construction of Bangladesh-Myanmar road corridor (a part of the Asian Highway) and a Chinese industrial park near the river Karnaphuli similar to that in Shanghai.
China Communications Construction Company (CCCC), a Chinese state-owned company now repairing the Jamuna bridge and conducting a feasibility study of the proposed Karnaphuli tunnel, submitted the proposal to the Economic Relations Division (ERD) and the principal secretary to the prime minister on August 1.
CCCC proposed the four projects under a single package. It offered to provide the entire money needed to set up the industrial park.
A top ERD official said, “We are not thinking about the Chinese proposal right now. We will look into that once the Padma bridge issue is over.”
Captain Shariful Ahsan, chief executive officer of Deep-Sea Port Cell, said, “We should not hurry with a mega project like the deep sea port. We will wait for more proposals and then go for the most suitable bidder.” The cell was formed in August 2010 for quick execution of port-related decisions.
A Japanese firm conducted the Techno-Economic Feasibility Study on the proposed port at a cost of Tk 14 crore. The study, submitted to the shipping ministry in July 2009, recommended forming a deep-sea port authority and passing a deep-sea port law immediately.
The government has yet to make any move on these issues. So far, it has only selected the site (Sonadia Island) for the deep-sea port.
The Japanese study outlined a three-phase construction plan and assessed a huge financial potential.
The first phase was supposed to start at the end of 2011 and be completed by 2015 at a cost of Tk 13,000 crore. As per study, the port could go into operation in 2016 if the suggested work was done in time.
The second phase could be completed in 2035 and will require Tk 26,000 crore. The country would have got a fully-fledged international port with the completion of the final phase by 2055 at an estimated cost of Tk 1,100 crore.
The study estimated that the port would boost the country's GDP growth by 2 percent, as it would generate huge employment, increase export and import and raise the country's capacity to handle cargos.
Experts say there is no alternative to a deep-sea port as the capacity of Chittagong port will be exhausted by 2015. Bangladesh will face serious problems without a deep-sea port once transit is allowed to India, Nepal and Bhutan.
“We are in a fix as to what to do. If we take help from one country, the other bidding countries may not take it easy considering the present geopolitical dynamics. That's why we should proceed cautiously,” said a senior government policymaker preferring not to be named.
He said that among the interested parties, the US seemed to be the most enthusiastic. The American embassy in Dhaka and visiting US envoys have talked to government policymakers on the issue more than 20 times.
Considering the geostrategic importance of the deep-sea port, India too has talked to government policymakers at least seven times, while China came up with open proposals more than five times.
Meanwhile, the 3.1-kilometre tunnel under the Karnaphuli river is making little progress. The feasibility study of the project is still not completed.
The theme of the Chinese Industrial Park on the eastern side of the Karnaphuli is “One city and two towns”. The western part of the river has been prospering but the eastern side is hardly developed.
“We are very keen to set up the industrial park, but for this we need a vast area of land. We have requested the government to manage the land,” said CCCC General Manager Wu Guangsheng.
The proposed project to build a road linking Bangladesh and Myanmar has also remained shelved for years due to non-cooperation from the Myanmar government.
According to a plan, the project can be implemented in two phases. In the first phase, a two-kilometre road from Ramu to Gundum in Bangladesh and a 23-kilometre road between Taungbro and Bolibazar in Myanmar can be constructed.
Sources in the communications ministry said Bangladesh had proposed that Myanmar implement the first phase with its own fund, but Myanmar did not respond to it.

In the second phase, Myanmar is to set up a 110-kilometre road link inside its territory, between Bolibazar and Kyanktow. There is a road linking Kyanktow with the Chinese province of Kunming, which links up with the Asian Highway Network.

Source:  The Daily Star, 28 September 2012

Exclusive Interview


'China-Bangladesh relations have become the model of friendship between countries with different social systems and different cultures'
China's new ambassador to Bangladesh, Li Jun, arrived in Dhaka on February 18 and presented his credentials to the President on March 6. In an exclusive interview with The Daily Star's Diplomatic Correspondent Rezaul Karim recently, he talked on a wide range of bilateral issues. He said he would try his best and cooperate with the government and people of Bangladesh to improve further the ties between the two countries. He also said China and Bangladesh are good neighbours. Since 1975, the bilateral relationship has always been developing in a smooth manner and bilateral cooperation in various areas has been deepened. Following are excerpts from the interview.
The Daily Star (TDS): As the new Chinese Ambassador in Bangladesh, what are the priorities you plan to emphasise during your assignment in this country?
Li Jun (L J): In March and June 2010, H.E. Sheikh Hasina, Prime Minister of Bangladesh, and H.E. Xi Jinping, Vice President of China, had a successful exchange of visits. The two sides issued a Joint Statement and decided to establish and develop a "Closer Comprehensive Partnership of Cooperation" between China and Bangladesh from the strategic perspective and on the basis of the principles of longstanding friendship, equality and mutual benefit. I believe this set the direction of and provided the guidelines for the development of our bilateral relationship.
During my tenure,
* I will do my utmost to consolidate and develop the bilateral relationship with the aim of promoting the development of our two countries and the welfare of our two peoples;
* I will continue to push for more exchanges of high-level visits and contacts and friendly exchanges between government agencies, parliaments, political parties, and non-governmental organisations of our two countries;
* I will continue to push for intensified cooperation in trade, investment, agriculture, transportation and infrastructure development on the basis of equality and mutual benefit;
* I will continue to push for a further widening of people-to-people and cultural exchanges and cooperation with a view to promoting mutual understanding and friendship between the two peoples;
* I will continue to push for strengthened exchanges and cooperation between the militaries and law enforcement departments to safeguard respective national security and stability and promote peace and stability in the region;
* I will continue to push for closer coordination and cooperation to uphold the common interests of the two countries as well as that of the developing countries in international and regional affairs, such as climate change, energy and food security.
I am confident that with the joint efforts of our two countries, the closer comprehensive partnership of cooperation between China and Bangladesh will be brought to a new high and bring tangible benefits for our two peoples.
TDS: Bangladesh and China enjoy excellent bilateral relations. How do you foresee these relations developing further in the days ahead?
L J: The traditional friendship between our two peoples date back to over two thousand years ago. Since the establishment of diplomatic relations in 1975, China-Bangladesh ties have been developing in a smooth manner and the pragmatic cooperation in various fields has been further strengthened. It was the efforts that successive governments and the peoples of our two countries have made that contributed to the enhancement of China-Bangladesh friendship. To them I pay my tributes.
Currently, the development of relations between China and Bangladesh enjoys the right time, right place, and right people. China is implementing the 12th Five Year Plan with scientific development as guidance and transforming economic growth pattern as the main objective. At the same time, Bangladesh is pushing forward the "Digital Bangladesh" and "Vision 2012." Our development strategies have provided us great scope for cooperation. China and Bangladesh are close neighbours, the region where we are situated has been experiencing rapid growth, which created more opportunities for regional and international cooperation. Apart from that, our bilateral relationship has neither problems left from history, nor conflicts of interest at present. Compassion, understanding, support, and mutual-assistance have always been the main theme of our relationship.
I am convinced that the traditional friendship between China Bangladesh and mutually beneficial cooperation will better contribute to the development of the two countries and benefit the two peoples.
TDS: What are the major follow-up events after Prime Minister Sheikh Hasina's visit to China in March 2010?
L J: In March and June 2010, H.E. Sheikh Hasina, Prime Minister of Bangladesh and H.E. Xi Jinping, Vice President of China had an exchange of visits to each other's countries. The two sides decided to establish a "Closer Comprehensive Partnership of Cooperation" from the strategic perspective and on the basis of the principles of longstanding friendship, equality, and mutual benefit. A Joint Statement was also issued which reflected the consensus reached by leaders of both countries to further consolidate and develop China-Bangladesh relationship.
Since then, there have been positive developments in bilateral relationship. There have been constant exchanges of high-level visits between the two countries. The Speaker of Bangladesh Parliament Abdul Hamid and Foreign Minister Dipu Moni, as well as many ministers, have visited China. Liu Qi, Member of Political Bureau of the Central Committee of Communist Party of China (CPC) and Secretary of CPC Beijing Municipal Committee, Qin Guangrong, Governor of Yunnan Province of China as well as other high level officials visited Bangladesh.
There has been much progress in bilateral economic and trade cooperation. Bilateral trade volume in 2011 reached $8.26 billion, with an increase of 17% compared with 2010. Bangladeshi export to China reached $449 million, an increase of 67.5%. According to local news reports, Chinese investment in Bangladesh in 2011 amounted to over $200 million. The agreements on introduction of 3G technology and expansion of 2.5G network, and on Shajhalal fertilizer factory project were signed. The construction work will start very soon. China also exempted debts of Bangladesh worth more than 600 million RMB.
There also have been positive developments in bilateral cultural exchanges. In November 2011, Beijing Night Art Performance and Charming Beijing Photo Exhibition were successfully held in Dhaka. Fantastic performances of the Chinese artists and beautiful pictures of Beijing deepened Bangladeshi people's understanding towards China. "Happy Chinese New Year" cultural events have become a famous Chinese cultural brand in Bangladesh. Every year, Dhaka citizens flock to the theater to enjoy the exciting moments of traditional Chinese New Year.
In addition, there has been big progress also in other areas such as agriculture, education, military, etc. I will continue to push forward the all-dimensional cooperation in various fields between our two countries.
TDS: During the PM's visit to Beijing, Bangladesh and China agreed to strengthen cooperation in the military and law enforcement areas at various levels. Is there any progress in those fiends?
L J: Military cooperation is an important part of the all-dimensional cooperation between China and Bangladesh. In the Joint Statement issued during Prime Minister Sheikh Hasina's visit to China in March 2010, the two sides agreed to strengthen exchanges and cooperation between the militaries and law enforcement departments to safeguard respective national security and stability and promote peace and stability in the region. Military cooperation between China and Bangladesh strictly adheres to relevant international law and norms on international relations, and is not against any third party. In 2011, there was successful cooperation between the two countries in this regard. Air Chief Marshal Ma Xiaotian, Deputy Chief of the General Staff of People's Liberation Army and Vice Admiral Ding Yiping, Deputy Commander of Navy of People's Liberation Army visited Bangladesh with big success. General Mubin, Chief of Army Staff of Bangladesh paid a visit to China, which was fruitful. I believe this tendency of friendly cooperation will be maintained and further developed.
TDS: How do you evaluate China-Bangladesh relations under the present Awami League-led grand alliance government in comparison to ties under previous governments?
L J: The friendship between China and Bangladesh is a genuine and time-tested one. No matter which party is in power, this bilateral relationship maintains the tendency of moving forward. Since the establishment of diplomatic relations in 1975, successive governments of Bangladesh have been making important contributions to the development of the bilateral relationship. China-Bangladesh relations have become the model of friendship between countries with different social systems and different cultures.
During the tenure of current government under the leadership of H.E. Sheikh Hasina, China-Bangladesh relations have witnessed considerable development, and the all-dimensional cooperation between the two countries has been continuously strengthened. Presently, China-Bangladesh relations are standing at a new starting point, facing unprecedented historic opportunities. The Chinese side stands ready to closely work with the Bangladesh side to further enrich the closer Comprehensive Partnership of Cooperation, strengthen the existing bilateral cooperation in different fields, and enhance the friendship between the two peoples.
TDS: Strategically, how does China see Bangladesh in the geo-political equation in the region?
L J: China adheres to the foreign policy of "building friendship and partnership with the neighboring countries," and would like to establish and maintain good-neighbourly relations with all its neighbouring countries. China attaches importance to the important role of Bangladesh in maintaining peace, stability and development of South Asia. China is willing to join hands with Bangladesh and further promote the closer Comprehensive Cooperative Partnership between the two countries.
TDS: The cabinet recently approved the draft of Sonadia Deep Seaport Authority Act. Is there any development from the Chinese side about construction of the deep seaport at Sonadia in Chittagong?
L J: The deep seaport in Sonadia Island is of strategic importance to Bangladesh and will be helpful in enabling Bangladesh to become the regional transportation and logistics centre. Chinese enterprises have advanced technologies, equipments and ample funds. Over the years, China Harbour Engineering Company Ltd has accumulated rich experience in this regard. Presently, this company has established an office in Dhaka and stands ready to participate in this project in a commercial manner. Chinese enterprises are also ready to cooperate with enterprises from other countries to jointly take part in this project. So long as the Bangladeshi side shows enough will and determination, this project can make positive progress very soon.
TDS: How can China cooperate with Bangladesh in tackling the impact of climate change in Bangladesh?
L J: As a country most vulnerable to climate change, Bangladesh has been experiencing sufferings caused by climate change. China fully understands and respects the concerns of Bangladesh over it. During international negotiations on climate change, China has always been supporting the legitimate and reasonable requests of Bangladesh and the Least Developed Countries as a whole. As developing countries, China and Bangladesh should stick to the principle of "common but differentiated responsibilities" and work together to safeguard the common interests of developing countries.
China and Bangladesh are both victims of climate change. On this issue, the two countries face the same challenges and our basic interests are the same. Over the years, China has already carried out cooperation with Bangladesh in the area of adaptation. For example, China helped Bangladesh in projects of river dredging. The Chinese Government provided relevant training for Bangladeshi officials and technicians. China will continue to strengthen the cooperation with Bangladesh in this regard on the basis of "equal consultation, mutual benefit and common development". China will continue to support the capacity building to help Bangladesh better resist the adverse effects of climate change. Relevant government institutions of the two countries can have detailed discussions.
TDS: Is there any progress in the construction of the 8th Friendship Bridge (2nd Meghna Bridge) and Bangladesh-China Friendship Exhibition Centre?
L J: Consultations are going on between our two countries concerning the 8th Friendship Bridge. I believe there will be a positive result soon. As for the China-Bangladesh Friendship Exhibition Centre, we noticed some news reports saying that the Bangladeshi government has decided to build this Centre at Purbachal. We would be very happy to get the confirmation from and work with the Bangladeshi side so that concrete progress can be made concerning this project.
TDS: Would you be willing to provide assistance to Bangladesh in launching a communication and remote sensing satellite into orbit in the near future?
L J: China is willing to provide assistance to Bangladesh in launching a satellite. This has been reflected in the Joint Statement issued by the two countries during the visit of Her Honourable Prime Minister Sheikh Hasina to China in March 2010. The two sides can have further consultations in this regard.
TDS: Will you provide assistance for the dredging of riverbeds and for capacity building through training of personnel?

L J: Bangladesh is a country with a large number of rivers. River dredging is essential to the livelihood of Bangladesh people and the development of this country. Against the backdrop of global climate change, river dredging becomes even more important. China understands the need of Bangladesh and always tries to extend its help. Each year, the Chinese government provides relevant training courses for Bangladeshi government official and technicians. Besides, the Chinese government strongly supports qualified Chinese enterprises to take part in dredging projects. In September 2011, China Harbour Engineering Company Ltd was selected to implement a project for Jamuna River dredging (14 kilometers). China will continue to provide its support at the request of Bangladeshi government.

Source: The Daily Star, 19 July 2012

China-Bangladesh relations: Contemporary convergence

The relationship between Bangladesh and China dates back centuries. Historical records show that there were three Silk Roads that connected primeval China with the Indian aubcontinent. The Southern Silk Route was a bridge between the eastern part of Bengal (today's Bangladesh) and the Middle Kingdom. War and other conflicts in the region, particularly during and after World War II, disrupted the Sino-Bengal historical ties and connectivity.
However, economic rise of China in the past three decades as well as Bangladesh's steady economic growth since the early 1990s have resulted in better trade ties between the two nations. Further, the contemporary economic convergence in Asia, thanks to the shifting global centre of economic gravity towards east has created a space to re-establish their historic connectivity.
According to Dany Quah, an academic from London School of Economics, the global centre of economic gravity that was once at a point deep in the middle of the Atlantic Ocean in the 1980s has shifted east over the past 30 years, and could well shift even further over the next 30 years clustering around the border between China and India. Professor Quah observed that as incomes and populations change through time, so too does the world economic centre of gravity shift about on Earth.
That said, the relationship between Bangladesh and China has been coined as "time-tested, all-weather friendship." There is a plethora of bilateral agreements between Dhaka and Beijing including, trade, soft loans, social contacts, cultural exchanges, academic interactions, infrastructure development and military sales. China is the largest supplier of military hardware to Bangladesh. Here I discuss the current state as well as emerging trends in Sino-Bangladesh relations -- focusing on trade, investment, infrastructure and connectivity. The key challenges -- regional geo-politics as well as Bangladesh's internal political dynamics -- to further strengthening the ties between the two nations are also highlighted.Both China and Bangladesh witnessed marked increase in trade in recent decades: China's Trade-to-GDP ratio has exceeded 55% and that of Bangladesh's approaches 50%. China is Bangladesh's largest trading partner, with total trade exceeding $7 billion in 2010. However, the former remains a minor export destination for the latter. Beijing has offered duty-free access to 4,721 Bangladeshi products to address the growing trade imbalance.
Nevertheless, massive structural shift in the Chinese economy is creating huge opportunities for Bangladesh. Beijing is increasingly focusing on the development of high-end manufacturing and services. This is largely due to the rising wage cost in the coastal regions of China and appreciation of its currency. Moreover, following the recent financial crisis, there is a realisation that the country's current growth model that relies excessively on exports and investment needs to be rebalanced, with a greater emphasis on consumption. Development of high-end manufacturing and service sectors is the key in this regard.China's move towards a vertical economy has already created much room for Bangladesh, owing to its abundant supply of labour. In fact, Bangladesh is fast approaching Asia's apparel hub, and a recent Mckinzey report indicates that the country's RMG exports will double by 2015 and nearly triple within a decade. With Bangladesh's more favourable demographic transition in hand, more complementarities could also emerge in the medium term owning to contrast in China's ageing and other demographic disadvantages.While Beijing is offering some privileges to export Bangladeshi products to China, it shows significant promise to eventually become an ultra market for Bangladeshi products, particularly RMG, given its sheer size. This coincides with projected relative economic decline of Europe and the United States, Bangladesh's traditional export markets.As far foreign direct investment (FDI) is concerned, China has become an important source of outward FDI in Asia and Africa, even in the West. There is also a significant Chinese investment in Bangladesh. But the scale can be much higher than the existing level. In fact, according to the Board of Investment, a record 219 foreign investment projects registered with it in 2011, including a large number from China.
The next critical issue with regard to Sino-Bangladesh relations is connectivity. China's economic growth has resulted in regional inequalities within the country. While coastal areas have witnessed spectacular increase in living standard, the hinterlands are relatively less developed. To bridge the gap between the hinterlands, particularly landlocked south-western China, and the coastal regions, Beijing is making huge investments.
Being landlocked, the Yunnan province of China seeks greater economic engagement with Bangladesh including access to the Bay of Bengal. Both Beijing and Dhaka have been negotiating a number of mega infrastructure projects, notably highway and railway networks, connecting Chittagong and Kunming through Myanmar. While Yunnan has a ready infrastructure and the Myanmar part of the project is being built, Dhaka has to act fast to connect with the network. China also wants to develop a deep-sea port in Chittagong.
If the plan is eventually materialised, the Chittagong-Mandalay-Kunming highway offers another opportunity for Bangladesh in the Mekong sub-region (GMS), consisting of Cambodia, China (Yunnan and Guangxi Zhuang), Lao PDR, Myanmar, Thailand, and Vietnam. The GMS is a natural economic area bound together by the Mekong River, covering 2.6 million square kilometers, and a combined population of around 326 million. China, Asean and Asian Development Bank (ADB) are spending big to develop infrastructure in the region. According to ADB, priority infrastructure projects in the region worth around $10 billion have either been completed or are being implemented.While the infrastructure projects that aim to connect Bangladesh with south-western China, Myanmar and other GMS regions make much economic sense, geopolitics is a hurdle to connecting the dots between Bangladesh and China. Bangladesh, which is sandwiched between two rising giants China and India, has to address some geopolitical issues aligning with its long term interest. Beijing's massive infrastructure spending, particularly sea port development in South Asia and elsewhere in the world, has been seen, notably by its arch rivals India and United States,, as part of the Middle Kingdom's "String of Pearl Strategy," a manifestation of China's rising geopolitical influence through efforts to increase access to ports and airfields, develop special diplomatic relationships and modernise military forces, inter alia.
Nonetheless, owing to the highly polarised politics in Bangladesh, the two key political parties' skewed relationship with Beijing and New Delhi has been a barrier for the country to augment its physical connectivity with its South and East Asian neighbours. However, as discussed, economic dynamism in East and Southeast Asia, economic convergence in Asia and Bangladesh's aspiration for higher economic growth indicate that economic forces could triumph over geopolitics in the near future.
To sum-up, while trade volume between China and Bangladesh continues to increase thanks to the latter's steady economic growth and the former's diversified exports basket, China's structural shift could rectify the Sino-Bangladesh trade imbalance to some extent. In fact, trade between Bangladesh and other Southeast and East Asian economies is also on the rise. So is the investment trend. However, when it comes to connectivity and infrastructure development, the state has to play a big role balancing the country's economic imperatives and geopolitical risks. Given the massive economic changes that are taking place in East Asia, centring China, Bangladesh should adopt to a de facto "Look East Policy" to bring itself closer to the new global centre of economic gravity.The writer is a Visiting Research Fellow at the Institute of Governance Studies (IGS), BRAC University.
E-mail: imonsg@gmail.com

Source:  The Daily Star, 25 January 2012