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ORGANIZATIONAL SUB SYSTEM

By 01820134549 Nov 26, 2013 5713 Words
INTRODUCTION:
The Jatio Sangshad JS adopted the Appropriation Bill-2013. Finance Minister AMA Muhith piloted the bill. The day's sitting was chaired by Speaker Dr Shirin Sharmin Chowdhury. The new budget is the last fiscal plan of the Awami League- led grand alliance government which came to power with an overwhelming victory in the general election held in 2008. JS passed the Finance Bill-2013 with some changes to the tax-duty proposals, which include scrapping mandatory pre-shipment inspection and making it optional and imposition of tax at source on all kinds of soft drinks. About 1,023 cut motions were proposed by 20 opposition lawmakers but they spoke on the cut motions on about 5 demands for grant. The cut motions were rejected by voice vote. Ministers of different ministries concerned placed their proposals for expenditure through 56 demands for grant, which were passed by voice vote. In the budget for the FY 2013-14, the growth target has been set at 7.2 percent, which experts believe as attainable through effective measures in implementing the ADP. In a least developed country like Bangladesh the financial sector and the money market are grossly imperfect. This severely constrains the smooth operation of the transmission channels of monetary policy. In consequence, fiscal policy is arguably the most potent macroeconomic policy instrument to accomplish the development objectives. Fiscal policy is embodied in the budget. The allocation of expenditure across various activities, the level of revenues raised and its distribution among various sources, the resultant deficit and the methods of financing a given level of deficit impinge on the accomplishment of development goals relating to, interalia, growth, inflation, incentives to save and invest, income distribution, employment and poverty alliviation. This assignment seeks to analyze selected aspects of FY14 budget from this perspective. It should be emphasized at the beginning that the achievement of the goals of a budget depends on its implementation. Therefore, this article will specially focus on the likelihood of meeting some of the quantitative targets and the implications of potential failure to achieve these targets. Furthermore, a realistic budget must be based on the immediate past experience and also likely developments in the politico — economic scenario during the upcoming year. The budget for FY14 is the last one prepared by this government which will be implemented by three regimes `This is also the last chance for the incumbent government to fulfill (or make progress towards fulfilling) the pledges in the run up to the forthcoming national election `The budget has been prepared in the backdrop of – ƒEnhanced public investment Moderated inflation Moderated inflation ƒSubstantial Surplus in BoP ƒStable inflow of remittances. At the same time - ƒSlippage in GDP growth ƒFalling private investment Significant shortfall in revenue mobilization. Reliance on bank borrowing for financing fiscal deficit. Lower domestic demand `Overall the economy has moved towards a lower level equilibrium where stability has been more or less maintained, whilst the objective of enhancing economic growth has been compromised `The objectives of the budget for FY14 seems to be Undertaking fiscal consolidation backed up by high growth of revenue. Reverting the downturn of private investment.

SECTOR-BASIS BUDGET:
The budget has a target to bring down the inflation to 7 percent. In the budget for the fiscal year 2013-14, expenditure for the Annual Development Programme (ADP) has been estimated at Tk 65,870 crore.

The revenue income in the budget has been targeted at Tk 1,74,129 crore, of which, Tk 1,36,090 crore will come as NBR tax revenue, Tk 5,129 from non- NBR sources while Tk 25,240 crore will be collected as Non-Tax- Revenue.

The total deficit is Tk 55,032 and of the total amount Tk 21,068 crore will come from foreign sources while Tk 33,964 crore from domestic sources, Tk 25,993 crore from banking system and Tk 7,971 crore from savings certificates.

The power and energy sector got Tk 11,343 crore to improve power generation.

The agriculture sector got Taka 17,477 crore, development and non-development budgets combined. SSSSSS
Tk 12,635 crore has been allocated for social safety net and welfare while Tk 14,475 crore for defence.

BUDGET MONEY COMES FROM------
Revenue + Foreign Grant 1,23,323 1,14,693
Total Expenditure 1,63,589 1,52,428
ADP 46,000 37,508
Foreign Loans 13,058 3,625
Sale of Saving Instruments 6,000 271
Borrowing from Banks 18,957 27,191

TARGETED GDP:
We already saw gape in GDP amount from different organization. Government says it is almost seven but actually six+. Estimate of deficit as percentage of GDP is contingent on the level of deficit as well as GDP. The basis of estimate of the level of GDP is unclear. Preliminary estimates of Bangladesh Bureau of Statistics show 6.03 percent real growth in FY13; the budget statement notes growth rate ranging between 6.3 percent and 6.8 percent. GDP growth target: The 7.2 per cent GDP growth targeted by the budget for FY2013-14 is not only desirable but also essential. In fact, the 7.2 per cent growth target will appear modest to many experts because the country will need to grow by a much higher than the targeted rate if the objective of achieving a middle-income country status by the beginning of the next decade (Vision 2021 objective) is to be achieved. There is, therefore, hardly any reason to brand this 'modest' target as ambitious. On the contrary, recent developments at home and in the global economy raise strong optimism about the achievement of the targeted growth. Notice that despite slow global economic growth, real GDP growth in Bangladesh averaged 6.2 per cent over the past four years. Now, with the global economy showing signs of recovery, and the emerging Asian economies, too, moving ahead to sustain satisfactory economic growth by pursuing cautious and prudent macroeconomic policies, Bangladesh's growth prospects appear brighter. External demand is picking up with gradual recovery of trade partner economies, remittance inflows are growing by double digits, public investment is planned to increase significantly, and most importantly, the political unrest that has been badly hurting economic activity over much of the present fiscal year is very likely to ease prior to the national elections to be held in the middle of the ensuing fiscal. The7.2 per cent GDP growth targeted in the budget thus appears quite pragmatic and appropriate. The justification cited (expected higher production of Boro paddy, potato and corn) is less than convincing, given that the share of entire crop agriculture including vegetables in GDP is only around 10 percent. The share of the above- mentioned crops is unlikely to be higher than 6-7 percent. It is not clear what rate of GDP growth has? SALES SAVINGS:

This is more popular and secure for village level people. Dak Ghor saving is primary saving instrument in this country. Financing through sale of saving instruments will also definitely fall short of budget provision in FY14 amounting to Tk. 4,971 crore despite some tax incentives provided in the budget. The actual net sale in the first ten months of the current fiscal year was only Tk.679 crores. In this context, it may be observed that the saving capacity of many people has declined due to persistently high inflation over the past few years. This is also reflected in the slower growth of bank deposits. In this situation, mere provision of tax incentives cannot raise net sale of saving instruments dramatically.

TARGETED ADP:
Present government has some huge project which includes Metro Rails, Padma Bridge, DAP and so on. Though those are there election manifesto but they are trying to start those project before time comes to end. Annual Development Program (ADP) allocation for FY14 excluding Padma Bridge amounts to Tk. 59,018 crores. Here again, the immediate past experience with respect to implementation capacity has to be taken into account. For example, the budget provision for FY12 was Tk. 46,000; the eventual implementation was Tk 37,508 crore. ADP Allocation in Industrial Sector `Proposed allocation for the industrial sector in ADP14 is Tk.2313.9 crore which is12%and20.8%higher than ADP13and RADP13 crore. One single project i.e. Shahjalal Fertilizer Project received over 2/3rd of total allocation (43% to be completed by FY14) ` 40 projects will be implemented in FY14; inclusion of 1 new project (BSCIC Industrial Park,Bhairab) ƒTimely completion of projects remains a concern (strengthening and modernization of BSTI and SARSO); TAX COLLECTION:

A number of useful tax-related measures are proposed in the budget that would ensure equity in taxation, improve revenue collection, and also strengthen the tax administration. The prominent ones are to increase the threshold of tax-free income for individual taxpayers, simplify income tax returns so that taxpayers can avoid hassle in submitting returns, undertake the drive to broaden the tax net,

establish an ICT-based countrywide computerised tax system, prepare a strategic action plan to modernize the Customs department in the near term, replace the prevailing mandatory PSI system in customs management by an optional PSI system in order to ensure hassle free Customs valuation and assessment of imports, and install ASYCUDA world software (customised software) to help the Customs to resolve problems associated with classification and valuation of imported goods.

The extension of the existing tax-holiday facilities by another two years till June, 2015 should encourage setting up new industries and boost industrialization effort. No major amendment in tax structure of motor cycles, except that tax has been reduced on roller chains. No modifications in the tax structure for reconditioned vehicles but restructuring of the depreciation rate ƒCars older than three years will be comparatively cheaper, `Modernize tax administration and management. Increase of manpower, including senior officials and logistics support has been proposed. A survey needs to be carried out regarding the human resource required in view of potential number of taxpayers. The fully advanced and automated ASYCUDA World software will replace the existing PSI system on a pilot basis. Improving the tax compliance culture and tax payer services. Introduction of Alternative Dispute Resolution (ADR) to speed up tax related disputes `Coordination and cooperation between the Customs, VAT and income Tax department will be ensured

INCOME TEX:
Personal Income Tax `Personal income tax threshold has been increased to Tk. 220,000 from 200,000Will be helpful for low income earners ƒHowever, taxable threshold in Bangladesh is lower than India ,It is to be noted that the threshold for India is Rs. 200,000 (equivalent to Tk. 274,000)– ƒBut India has a higher marginal rate on personal income tax – 30% in India vs25% in Bangladesh `Threshold for women and senior citizens have been revised upward to Tk 250000 from Tk 225000. Good move considering the necessity of reducing tax liability of marginal taxpayers. CORPORATE TAX:

Corporate tax is one of the most earning sector for government. Tax for publicly traded mobile phone company has been increased from 35% to 40%. One particular firm will be affected ƒErosion of incentive for being listed (spread reduced from g(p 10% to 5 %) `Tax rate increased for cigarette companies. Good move for revenue mobilization and public health. Corporate tax remains unchanged for other cases

BLACK MONEY WHITENING:
Black money is not sound good but whitening is worse than this. This facility shows that government agencies does not have ability to find out corrupted people. This facility was available for all regime after independency without 1991-95. 2013-14 budget proposed extension of the scope for whitening undisclosed income for investment in the real estate sector at a flat rate of 10%. Holders of undisclosed money can invest in this sector by paying g taxes between Tk. 750 to Tk. 5,000 and Tk. 1,000 to Tk. 7,000 depending on location and size. In case of plot/land, buyers can purchase by paying 10% tax on total value ƒTax will be 20% in case of more than one plot/land. However, the provision on allowing undisclosed money in the capital market has not been extended. The scope for whitening black money is morally unacceptable and economic benefits remain questionable. The opportunity benefits only some particular sector(s) `Only Tk. 38 crores was received as tax as against the total whitened amount of Tk. 1,305 crores during 2009-2013 IMPORT AND SUPPLEMENTARY DUTY:

The present 3% customs duty on the import of capital goods reduced to 2%and 12% on raw materials reduced to 10% ƒShould be helpful in terms of stimulating private investment ƒWill reduce the investment cost and working capital cost. Provision of 5 % regulatory duty on goods chargeable to 25% customs duty will be continued. Regulatory duty on few items which are chargeable at 10% customs duty has been proposed at 5% ƒWill enhance effective rate of protection for import-substituting industries and discourage import of these commodities. Import Duty. Full exemption of customs duties applicable to essential goods such as rice, pulse, wheat, onion, agricultural inputs, life-saving drugs and industrial raw material like cotton will continue Will benefit consumers ƒ

VAT COLLECTION:
Existing uniform trade VAT at the rate of 4% at all levels of wholesale and retail sales will remain unchanged. 15% would be applicable for traders who are willing to pay VAT on actual value addition. CAPITAL MARKET:

Capital market crash was the most talkative issues in this government regime. 40 laks small investors lost their capital in market crash, but this budget has brought some good news for small investors. Some of the proposed measures, for example, the continuation of the existing provision of tax exemption on gains from share transactions, rescinding the existing provision of charging 3 per cent tax on the premium over the face value of shares of a company, repeal of the provision of charging 0.05 per cent tax at source on the total income from bond sale and also allow 15 per cent tax rebate on investment in private alongside public mutual fund, and the increase in the threshold of tax-exempted income from dividend from Tk 5,000 to Tk 10,000 will hopefully help stabilise the capital market and also offer fresh incentives to stock market investors.

NBR AND REVENUE:
NBR is primary responsible for revenue collection. Though they have some limitation to collection of revenue but they are performing their job regularly.There are serious questions about the feasibility of reaching NBR revenue target which accounts for about 80% of total revenues. The revised estimate in the budget document retains the same figure as original budget provision of FY13. The collection during the ten months of FY13 is Tk. 83,031 crores leaving a balance of Tk. 29,228 crores to be realized in the remaining two months. This is evidently a herculean task. The actual realization of revenue from this source during FY13 is unlikely to exceed 1,06,000 implying a required growth of about 28 percent during FY14. The various indicators such as significantly negative growth of imports including capital machinery and raw materials, considerable deceleration in the flow of credit to the private sector, notable increase in the share of classified loan in the banking system, falling levels of profit in banks and likely slowdown of export growth in the wake of recent developments in the garments sector inevitably point to deceleration of economic activities. The situation will be further aggravated by likely continuation of confrontational politics. In addition, a number of tax-related proposals will have a depressing impact on revenue collection. One can, therefore, predict with reasonable degree of certainty that NBR tax revenue collection will fall short of FY14 budget estimates. In a similar vein, the revenue estimates in the FY2013-14budget are perfectly realistic. How can one treat the revenue estimates as ambitious when total revenue in FY13-14 is projected to increase by just 19.90 per cent, while actual revenue collection increased at much higher rates in the immediate past years, for example, 21.57 per cent in FY12-13, 23.54 per cent in FY11-12, and 22.51 per cent in FY10-11 SME INDUSTRY:

Proposed rise in annual turnover ceiling from Tk70 lakh to Tk80 lakh for tax purposes will reduce tax burden and would have positive implications for SMEs’ competitiveness `Increase investment ceiling of small & cottage industries from Tk.25 lakh to Tk.40 lakh for tax exemption: annual turnover from Tk.40 lakh to Tk. 60lakh: Positive initiative `Proposed upward revision of VAT eligibility on turnover of small traders, wholesalers and shopkeepers: May not have significant adverse impact because hike is not significant Light Engineering Light Engineering `Reduction of CD on capital machineries & intermediate products will reduce overall production cost

Proposed allocation of Tk. 2,592 crore(8% of total subsidy in FY14) Positive export incentive: `Leather: Proposed reduction of CD on selected inputs of leather (chromium, casein etc) is likely to reduce production cost. Leather Estate Project: Poor allocation for relocation of leather estate to Savar resulted in only 28% of completion of the project till now(original completion date: 30,June 2012) `Jute: Proposed extension of timeline for exemption of 15% of the income tax for Jute Industries till June, 2015 will support newly set up industries INFORMATION COMMUNICATION AND TECHNOLOGY:

Significant downward revision of ICT budget in FY13 (63%) ƒADP allocation for FY14: Tk.757.6 crore, 56.6% higher than FY13 and 1532%higher than forFY13 153.2% `No mention about ICT Development Fund (Tk.700 crore) as mentioned in AL’s Election Manifesto ƒICT Skill Trust Fund has been proposed with an allocation of Tk.50 crore for skill development to train10,000 professionals in next two years: Positive initiative ƒAttention needed for timely completion of SASEC Information Highway, Software Technology Park, and connection to the 2nd Sub- marine Cable: HTP, Kaliakoir(FY16): Delayed; New timetable. ICT `Reduction of CD on computer accessories is appreciated (web camera, server rack) Proposed reduction of CD on optical fiber and its raw materials will help quality optical fiber to be available at cheaper price ƒReduction of SD on SIM cards will little impact on telephone sector; rather it would affect local SIM producers `Development of National e-governance architecture under A2I Program needs to be expedited.

POWER AND ENERGY:
ADP allocation for power sector in FY14: Tk.9053 crore(17.2% of total allocation) 146% and 57% higher than ADP and RADP in FY13 respectively ƒ 14.6% and 5.7% higher than ADP and RADP in FY13 respectively. A total of 54 projects will be implemented in FY14 ƒ5 power generation plants to be completed in FY14:capacity 1480 MW. Proper monitoring is required for timely completion of projects `Four private sector projects are ongoing: Chittagong (Mohra) 50 MW, Potenga, Chittagong 100 MW, Ghorarshal, Narshindi100 MW, Ashugonj50 MW: Proper monitoring is required `Proposed reduction of CD on solar lantern and LED lamp will help access by low income group people and will reduce kerosene subsidy `Exit plan for quick rentals is not yet clear ƒSubsidy for power sector will remain high in FY14 (Tk.5500 crore. `The plan does not indicate significant diversification in energy sources as was originally envisaged. Primary Energy: Gas- Total allocation is Tk. 2255.0 crore in FY14; 40.2% and 62.7% higher than ADP and RADP in FY13 respectively `A number of projects for gas exploration is being implemented: A number of IOC projects is expected to be completed by 2013: additional supply of 300MM. Recently government declared 10,000MW capacity for daily basis need, but it remain in some written paper not in the field. AGRICULTURE SECTOR:

80% of country people directly or indirectly have relation with agriculture. But this budget frustrated them because of lower funding in agriculture. Lower than the revised budget of FY 2013. 7.9%of total budget expenditure. Allocation for the Ministry of Agriculture is reduced toTk.12,270 crores in the proposed budget from Tk.14,878crores in FY2013 budget, mainly due to cut back of agricultural subsidy Allocation for agriculture and allied sectors in FY2014 budget (non- development and development) is Tk.17,471 crores, which is 11.95% Lower Allocation for Agriculture pp) lower than the revised budget of FY2013

CLIMATE CHANGE:
Bangladesh is one of the most affected country in the world for the climate change. Bangladesh Climate Change Trust Fund (BCCTF): Implementation of 112 projects in the past fiscal year is satisfactory but very little fund utilized (Tk255crore) casting doubt on the weight of these fund utilized (Tk.255crore), casting doubt on the weight of these interventions. Need more capacity building and involvement of union and upazila level stake holders. Need to finance rigorous systems for monitoring and evaluations well as for project selection `Steps toward early warning system by mobile phone good sign. Development of the legal and institutional framework for disaster management has picked up–the Disaster Management Act, 2012 has empowered UP level committees. INDUSTRY SECTOR:

We are gradually entering in the industrial sector for economic growth. Textiles and RMG: Proposed exemption of CD on acrylic yarn will make the fiber locally available at lower cost which will facilitate development of spinning mills ƒReduction of SD for a number of woven/knit fabrics would reduce leakages through bond facilities and reduce ling `10 vocational institutes, strengthening of the knit tred textiles colleges and support to RMG sector under BWTG program would be properly implemented as per the revised timeline `Pharmaceutical Industry : Completion of API Industrial Park Project will be further delayed (48.5% in FY14; extended till 2015). Reduction of duty on cartridge/membrane filter for the pharmaceutical industry was likely to benefit local companies. The budget has proposed a number of measures to stimulate industrial sector and to promote private sector investment. These have tried to address the concerns of decelerating growth of private investment. Industry Local industries have been given protection and support through the following changes in tariffs and duties. Some of these are import-substituting. Through---

imposition of CD / SD on imports;
withdrawal/reduction of SD Through (a) imposition of CD/SD on imports; (b) withdrawal/ reduction of SD on domestic production; and (c) reduction of CD in imported input Imposition of 60% SD on imported potato chips, increase CD to 10% on imported milk powder and reduction of CD over milk tanker, Exemption of CD over raw materials of paper and reduction of CD over acrylic yarn Increase SD over float glass and reduction of CD over cobalt dioxide for glass industry,andreductionofCDofrawmaterialsforceramicindustry industry, and reduction of CD of raw materials for ceramic industry Increased specific duty on billet (adverse impact on real estate sector) •Exemption of CD on alloy steel and exemption of RD on CR coils Imposition of CD over LPG cylinder, and reduction of import duty on generator py,pyg parts `A number of proposed changes in the fiscal measures may have adverse impact on domestic industries Reduction of SD on imported SIM cards; reduction of SD on imported consumer goods (sweet biscuits, waffles and wafers, and rusksand toasted bread

Subsidy:
Total subsidy for FY13 increased by 29.8% mainly due to BPC and agriculture (77.8% and 58.2% of incremental, respectively) `Total subsidy in RBFY13 is 3.6% of GDP
No clear mention of the total demand proposed for FY2014
`Total subsidy is expected to be Tk. 28,695 crore(2.4% of GDP) ƒreduced by 23.3% `The is reflected in loans and advances (-) 25.3% reduction) `Agriculture subsidy will be reduced by 25.0%
`BPC subsidy is expected to be Tk. 7,950 crore((-) 47.8% lower) `PDB subsidy for is expected to be Tk 5500 crore(64%higher) `PDB subsidy for is expected to be Tk. 5,500 crore(6.4% higher) ƒWill it require another set of price adjustment–can the incumbent government undertake this?! `Subsidy allocation for lower than the limit provided by the IMF- ECF program Less subsidy in agriculture is not good sign for the agricultural development to cope with newly agricultural technology and for 70% people who are directly or indirectly related with agricultural production as well their life.

WHICH SHOULD BE OR NOT TO BE:
The fall in allocation to agriculture and local government and rural development is not beneficial for the rural population.

Lower allocation to social security and welfare can be hardly justified in view of a very large number of people living below poverty line, despite notable progress in the reduction of the proportion of the total population below the line.

The increase in allocation to transport and communication is welcome in light of the importance of this sector for accelerating growth. However, a significant part of the increase is attributable to Padma Bridge. I am not convinced of the economic justification to construct Padma Bridge by using domestic resources right now.

Energy and power crisis is yet to be resolved. Hence, the reduction in allocation to this sector is beyond comprehension.

Finally there has been a dramatic increase in expenses for public administration which does not enjoy a great deal of confidence of the people in terms of efficiency, integrity and quality of services.

FY14 budget allocates Tk. 15,443 crores for subsidies against the revised estimate of Tk. 16,808 crores for FY13. There is no explanation how the reduction will be effected. More specifically, allocation for subsidy to agriculture in FY14 is Tk. 3,000 crore less than the revised estimate for FY13. In an election year, subsidy reduction in this sector would be impossible. Overall, the subsidy is likely to overshoot by a significant margin.

WEAKNESS OF BUDGET:

Having looked at the positive sides of the budget, we now turn to some of its weaknesses. The worst of them all, allowing black money is a retrograde step, unfair to honest taxpayers, and tantamount to encouraging corruption. The Finance Minister as well the NBR had already made it known that no new taxes would be introduced in this election year, but there is no understandable reason why export income, incomes of NGOs that run commercial enterprises, and private universities are kept outside the tax net. No serious effort is discernible in the budget to improve on the allocation of public expenditure among priority sectors. We understand that resource constraints do not often permit adequate budgetary allocation to genuinely deserving sectors despite the government's best intentions. Nevertheless, some of the sectors that would deserve increased allocations are indicated in the following:

Contrary to the Finance Minister's claim in his budget speech that the budget has attached highest priority to the power and energy sector, the allocation to this sector in percentage terms has turned out to be lower than that in the past year. Thus, the sum of Tk. 113.51 billion allocated to this sector for FY 2013-14 is 5.10 per cent of the combined development and non-development expenditure, while in the outgoing fiscal the percentage allocation to this sector was 5.28 per cent of the total budget.

2. Allocation to Information Technology has been kept minimal although the budget document recognises it as the key driver of socio-economic development in this century.

3. A significant percentage of expenditure remains vague and unspecified, which may open up opportunities for misuse and corruption. The heads of these expenditures should be spent out in detail and made transparent when the budget will be finalised.

4. Agriculture and rural development represent wide areas of economic activity apart from traditional agriculture, viz., rural housing, rural infrastructure, sanitation, land and water resources, livestock and fisheries, rural electrification, and development of small and medium scale industries, which are important sources of rural income and employment. Allocation to agriculture and rural development in the proposed budget has, however, declined in both absolute and percentage terms. In the coming fiscal, 14.50 per cent of the combined budget (development and non-development) has been allocated for agriculture and rural development, whereas 18.41 per cent of the total budget was allocated to these sectors in the outgoing fiscal.

5. Agricultural subsidy has been drastically reduced in the proposed budget. Available subsidy to this sector in FY 2013-14 will be Tk.90 billion, as against Tk. 120 billion made available in the outgoing fiscal. The reduction of agricultural subsidies would harm the poor and small farmers. As regards agricultural credit, too, the target of distributing agricultural credit has been set at a marginally higher level for FY 2013-14 (Tk. 145.95 billion), compared to the target of Tk. 141.30 billion set for FY 2012-13. Thus, apart from providing some tax incentives mentioned earlier, the 2013-14 budget does not provide enough support to the overall agriculture sector.

6. Human resources development: The budget document recognises that a healthy, educated, efficient and conscious population is a pre-requisite for sustainable development of a country, but this recognition has never been translated into practice in the country. In the most recent years, the government expenditure on education has stagnated at around 11 per cent of the combined budget, or 2.0 per cent of GDP. In healthcare, the percentage allocation in the budget has systematically declined over the past few years. Public expenditure on health has fallen from 0.9 per cent of GDP in 2011-12 to 0.8 per cent in 2013-14. Only 4.3 per cent of the total budget has been allocated to health in FY14, down from 5.1 per cent in 2011-12. The quality of education and healthcare is also very poor.

Education and health sectors: Bangladesh should understand that rapid expansion of human capability is both a goal in itself and an integral element in achieving rapid economic growth. Taking cue from the experience of some of the fast-growing Asian countries like Malaysia, Thailand, Singapore, South Korea, Taiwan and China, Bangladesh should devote at least 2.0 per cent of GDP to health and 4.0 per cent to education. A better educated and healthier labour force at all levels of the society is the sine qua non for achieving faster economic growth, which is necessary for converting Bangladesh to a middle income country in not-so-distant a future.

7. Very rightly, the allocation to railway and bridge divisions has been increased in the budget. However, strict vigilance and oversight will be needed to ensure that funds are used properly and not wasted by corruption.

8. Climate change and environment: Mitigating the impact of climate change, preservation of environment and biological diversity, disaster management, afforestation, protecting ecologically critical water bodies from pollution, and construction of flood shelters in flood-prone and river erosion areas are serious issues but budgetary allocation for these purposes seems to us inadequate. Allocation could have been increased to enhance the Climate Change Trust Fund for implementing the 194 or so of the environmental projects undertaken with the country's own resources. In addition, regulations should be strictly enforced to control pollution by forcing delinquent industries to install ETP in their plants.

9. Poverty alleviation: Sustained government and private effort has dramatically reduced poverty in the country. The FY14 budget has significantly expanded the scope and coverage of social safety net programmes to bring down poverty further. Strict supervision and vigilance will, however, be needed to prevent abuse and ensure that the funds distributed under social safety net programmes do reach actual and intended beneficiaries.

It must, however, be remembered that most of the safety net spending are transfer expenditures that solve the immediate problems of the poor, but these do not generate much employment and hence may not have any lasting effect on poverty reduction. Poverty can be reduced only by generating productive employment through consistently higher growth in industry, agriculture and rural sector. That would call for establishment of labour-intensive industries and development of SMEs. The emergence of a skilled and educated labour force is also a critical pre-requisite for increasing production, productivity and employment. Crucially important, however, is the presence of a vibrant private sector nurtured by well-articulated monetary, fiscal, and sectoral policies pursued by government.

Finally, we welcome the formulation of the district budget, a maiden effort in this country, but without devolving power to the Local Government and transferring authority and power from the civil administration to elected representatives at the local level, district budgets will be meaningless. The provisions of the 1997 Local Government Act will therefore need to be adequately enforced if the district budgets are to be worthwhile. SOME SPEECH ABOUT BUDGET:

NBR Chairman Ghulam Hussain said the cut in import duties for SIM cards would not affect the revenue earning from the sector, as sales would go up. Education Minister Nurul Islam Nahid said the government was not indifferent to the teachers of non-MPO (monthly payment order) educational institutions Bangladesh Bank Governor Atiur Rahman said nobody should worry about inflation as the country would be able to attain its target on containing inflation in the current fiscal year. Ranjit Kumar Chakraborty, additional secretary of the finance division, said the government would try to limit its borrowing from the banking system as much as possible and borrow more from other sources.

Concluding observations:
I understand and sympathy with the Government’s desire to increase revenue and expenditure as proportions of GDP. The numbers speak for themselves. No comments are needed excepting that the only item where the target was heftily overshot was borrowing from banks. It has been claimed that all the budgets of the present government were ambitious, but fully implemented. However, the quantitative targets of FY14 do not seem to be anchored on experiences of the recent past and the upcoming politico-economic scenario. Sector wise expenditure allocations do not conform to generally agreed priorities and some of the tax proposals are of dubious merit. In light of the above discussion it can be concluded that if the expenditure target for FY14 is to be met, there will be a hefty increase in government borrowing from the banking system over the budget figure of Tk. 25,993 crores with deleterious consequences for already slowing private sector investment and GDP growth. It should be noted here that for FY13, targeted bank borrowing has been revised to hit Tk.28,500 crore against the budget figure of Tk. 23,000 crores.

In the weeks since it was presented in the parliament on June 6, the annual budget for FY2013-14 drew sharp criticism from certain quarters. The major contentions were that the budget was over-sized and ambitious, and that the projected targets for GDP growth, revenue collection, and expenditures etc. were unattainable. A closer examination will, however, reveal that the contentions are spurious and not based on any logic or actual statistical data. Criticisms of government budgets are very common as no budget can satisfy all groups of a society, for even as it may bring benefits to some people, others may suffer some incidental, though unintended, effects. In the opinion of this scribe, the proposed budget is business- and investment-friendly, although there are a few areas in which there are opportunities for improvements. In what follows, it will be argued that the proposed budget has all the qualities of a good budget; that the targets set in the budget are pretty realistic, and that it will bring benefit to major productive sectors of the economy and contribute to enhancing economic growth. There are nevertheless a few trade-related fiscal measures proposed in the budget that offer opportunities for rethinking, and perhaps revision, which the Finance Minister may be pleased to consider in consultation with leaders of the business community before the budget is finalised and presented for ultimate parliamentary approval.

If we look at some of the principal objectives of the budget - raising and sustaining a higher GDP growth to transform Bangladesh into a middle income country, enhancing the rate of investment, mitigating the power and energy sector deficit, and attaching the highest priority to the agenda for establishing 'Digital Bangladesh', the proposed budget can hardly be called ambitious as far as the targeted GDP growth, the size of the budget, revenue generation and the government's recurrent and development expenditures are concerned.

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