finalthe economic condition of bangladesh

7/29/2019 FinalThe Economic Condition of Bangladesh

1/11

1

Topic 1: The Economic Condition of Bangladesh

Introduction

The current issue of Bangladesh Economic Update focuses on the overall economic condition of

Bangladesh particularly in the half way of FY 2011-12. The issue investigates the sector-wise

performance of current fiscal year in light with the targets set in national budget of FY 2011-12,

Medium Term Macroeconomic Framework (MTMF), Medium Term Budgetary Framework

(MTBF) and other national plans, policies and goals. The issue also tries to explore current

implementation status and of Annual Development Program (ADP), and makes projection

thereof.

MACROECONOMIC SCENARIO

GDP Growth

The government has targeted to achieve the GDP growth rate of seven percent in FY 2011-12

based on assumptions of further improvements in the global and domestic economy and taking

into account the expected impacts of reforms initiated in various sectors. In FY 2011-12,

according to business usual scenario, the growth rate of GDP might be at 6.82 percent but the

MTMF projection is seven percent. The gap between business as usual scenario and MTMF

projection might be 18 percentage point. In FY 2010-11, the growth rate of GDP was 6.66

percent that was 59 percentage points more than that of the previous fiscal year. However, in FY2011-12, the growth rate of GDP might be 6.82 percent that is only 16 percentage points more

than that of the previous fiscal year.

Savings and Investment

The target of the government is to stimulate GDP growth rate at 8 percent by 2013 where the

share of investment to GDP is required at 35-40 percent. GDP growth rate was 6.66 percent in

FY 2010-11 with 28.40 percent of savings and 24.73 percent of investment. In FY 2011-12, the

targeted GDP growth rate is seven percent, whereas savings as percentage of GDP and

investment as percentage of GDP is targeted at 28.90 and 24.86 percent respective

Inflation Rate

For achieving the targeted GDP growth rate, containing the rate of inflation at a tolerable limit is

a prerequisite. In FY 2011-12, the government has targeted the rate of inflation at 7.5 percent


2/11

2

while it was 8.8 percent in FY 2010-11 and 7.31 percent in FY 2009-10. In November 2011,

general inflation rate is 10.51 percent while it was 8.14 percent in November 2010.

In FY 2001-02, the rate of general inflation (12-month average) was 2.79 percent and point-to-

point was 3.58 percent while consumer price index (CPI) was at 130.26. The rate of inflation

continued to increase further in the next fiscal years. In FY 2007-08, the rate of

Trade Balance

General inflation (12-month average) was higher at 9.94 percent and the rate of point-to-point

inflation was 10.04 percent. But in FY 2008-09, the rate of point to point inflation followed a

huge decline and dropped down to 2.25 percent as well as general inflation declined to 6.66

percent.

Import and Export

An increasing trend has been observed in import payments and export earnings over the years. In

FY 2011-12, import payments and export earnings are estimated by the government at USD

35400 million and 25700 million respectively. However, in 2010-11, import payments was USD

33660 million and export earnings was USD 22930 million.

Budget Deficit

In FY 2011-12, total revenue and foreign grants is estimated at Tk. 1233.23 billion that is 24

percent higher than that of the previous fiscal year in which total revenue is Tk. 1183.85 billion

and foreign grants is Tk. 89.38 billion.

The government has estimated total revenue collection at Tk. 1183.85 billion in FY 2011-12

against Tk. 951.87 billion of the revised budget of FY 2010-11. The tax collection from NBR

sources is estimated at Tk. 918.7 billion in FY 2011-12 that is about 21.52 percent higher than

that of the collection of the previous fiscal year. The revenue expenditure in FY 2011-12 is

estimated at Tk. 1635.89 billion. The total expenditure for development sectors is estimated at

Tk. 506.42 billion and Tk. 1129.56 billion for non-development sectors in FY 2011-12.

Principal and Interest Payment

Total payment in April 2011 amounts USD 744 million in which USD 588 million was principal

payment and USD 157 million was interest payment. Both principal and interest payment have

risen at a much higher rate during the 1990s. In FY 2001-02, the principal and interest payments

were USD 435 million and USD 151 million respectively. Under the business as usual scenario,

in FY 2011-12, total payments might stand at USD 923.71 million, which is 3 percent higher


3/11

3

than that of the previous fiscal year. In the current fiscal year, principle payments might reach at

USD 705.15 million and interest payment at USD 191.54 million, which are 80 and 20 percent of

total payment.

Public Finance Balance

In the budget of FY 2011-12, the government has targeted to collect total revenue of Tk. 1183.85

billion which is 13 percent of the total GDP. The National Board of Revenue (NBR) has to

collect Tk. 918.70 billion in the FY 2011-12 which is 77 percent of the total targeted revenue.

However, the collection was 78 percent of total targeted revenue in FY 2010-11. In August 2011,

the collection of total tax revenue is Tk. 61.06 billion that is 7 percent higher than that of the

collection of August 2010, among which NBR tax revenue is Tk. 58.82 billion and non-NBR tax

revenue is Tk. 2.23 billion. If the current trend prevails, at the end of this fiscal year, total tax

revenue might amount at Tk. 824.53 billion against the government target of Tk. 957.85 billion

indicating a gap of Tk. 133.32 billion.

Tax

Revenue is the essential element to manage the governments fiscal budget. It is a better way to

finance the budget deficit than the borrowings from any other sources. In FY 2011-12, total

targeted revenue is Tk. 1183.85 billion which is 27.51 percent higher than that of the preceding

fiscal year. Moreover, the targets of tax and non-tax revenue are set at Tk. 957.85 billion and Tk.

226.00 billion respectively in FY 2011-12. NBR and non-NBR revenue are proposed at Tk.

918.7 billion and Tk. 39.15 billion respectively in FY 2011-12, while in FY 2010-11, the

contribution of NBR and non-NBR were Tk. 790.91 billion and Tk. 32.2936 billion respectively.

In FY 2010-11, the collection of total revenue, tax revenue and non-tax revenue was Tk. 984.57

billion, Tk. 823.21 billion and Tk. 161.36 billion correspondingly.

Remittance

The receipt of remittances during July-November 2011 is USD 4927.74 million which is USD

346.31 million or 7 percent higher than that of the same period of FY 2010-11 while the amount

of total receipt of remittance was USD 4581.43 million in that year.

Foreign Exchange Reserve

The foreign exchange reserves are essential for paying the import bills and to repay the foreign

debts. The gross foreign exchange reserves are declining over the years. It has declined to USD

9285.20 million in November 2011-12 from USD 10338.3 million in October 2011-12, the


4/11

4

lowest ever in the last 12 months. This is lowered by USD 1461.42 million or 13.66 percent than

that of November 2010-11. This foreign exchange reserves has declined mainly due to the

payments of the petroleum and imports of different capital machineries and increase in budget

deficit and debt. According to the Bangladesh Bank, foreign exchange reserves were highest in

December 2010 at USD 11174.4 million.

Industry

Bangladesh is in the process of transmission from a predominantly agrarian economy. The

present government is promised to increase the contribution of industrial sector in GDP from

30.33 percent in FY 2010-11 to 40 percent by the calendar year 2021. In addition, the proportion

of labor force employed is projected to accelerate from 17.85 percent in FY-2009-10to 25

percent by the calendar year 2021.

SOCIAL SECTOR

Health Sector

FY 2011-12 has witnessed a downward allocation in entire social sector in the national budget.

The proposed budgetary allocation in FY 2011-12 in health sector is Tk. 88890 million

(including development and non-development), which got reduced by Tk. 200 million and

revised at Tk. 88690 million. Moreover, the proposed public investment in health, population

and family welfare sector has marked negative revision during most of the years between FY

2001-02 and FY 2011-12.

Education Sector

The government has given due importance on education sector for attaining the targets set in

Millennium Development Goals (MDGs), National plan on Action (NPA) - II, National

Education Policy (NEP) 2010 and National Budget for FY 2011-12. The finance minister has

proposed a budgetary allocation of Tk. 203160 million in FY 2011-12, development and non-

development combined, that is 12.4 percent of the national budget and 9.37 percent and higher

than the revised budget of FY 2010-11.

Gender

Bangladesh is a developing country with a per-capita GDP of USD 755 (Bangladesh Economic

Review, 2011). In the 2010 Human Development Index (HDI), Bangladesh has ranked 129

among 164 countries, and according to the Gender Inequality Index (GII) it has ranked 116


5/11

5

among 138 countries (UNDP, 2010). Hence, Bangladesh has to go a long way than many least

developed countries for eliminating gender disparity

POVERTY AND INEQUALITY

Despite considerable thrust on poverty alleviation in all plan documents since the independence

of Bangladesh, a significant portion of population is still living below the poverty line. It is a

constitutional obligation of the government to provide a decent living standard for the citizens by

alleviating poverty. In its election manifesto, the present government has therefore laid special

emphasis on poverty alleviation and pledged to reduce poverty. They made a commitment to

reduce the rate of poverty to 25 percent and 15 percent by calendar year 2013 and 2021

respectively.

EMPLOYMENT

In case of employment generation, the government has planned to create employment

opportunities for about 656 lacs and 26 thousand man-month in the FY 2011-12 which is 5.58

percent higher than that of the previous fiscal year. But the employment opportunities are largely

depended on investment. Over the years the growth rate of investment has decreased from 14.9

percent in FY 2010-11 to 6.76 percent in FY 2011-12. Therefore, it is evident that the trend of

employment opportunities has been following a decreasing trend during the last few years which

has resulted from the decreasing investment scenario.


6/11

6

Topic 2: How many EPZs in Bangladesh? Their establishment dates and

facilities they provide for our business organization.

Export Processing Zone (EPZ):

EPZ is also called foreign-trade zone, formerly free port is an area within which goods may be

landed, handled, manufactured or reconfigured, and re-exported without the intervention of the

customs authorities. Only when the goods are moved to consumers within the country in which

the zone is located do they become subject to the prevailing customs duties. Free-trade zones are

organized around major seaports, international airports, and national frontiersareas with many

geographic advantages for trade. It is a region where a group of countries has agreed to reduce or

eliminate trade barriers. Free trade zones can be defined as labor intensive manufacturing centers

that involve the import of raw materials or components and the export of factory products. The

first EPZ is started in 1983 at South Halishahar in Chittagong under the name of Chittagong

Export Processing Zone (CEPZ), well known as Chittagong EPZ with the provision of

Bangladesh Government Act related to EPZ as Bangladesh Export Processing Zones Authority

Act, 1980 and now there are eight EPZs located in Bangladesh.

EPZs in Bangladesh at glance:

SL. No: Name Est. Year Zone Area(Acres)

No. ofIndustrial

Plots

Location

01 Chittagong Export Processing

Zone

1983 453 502 Shouth Halishah

Chittagong

02 Dhaka Export Processing Zone 1987 361 442 Savar, Dhaka

03 Mongla Export Processing

Zone

1998 460 116 Mongla, Bagerha

04 Comilla Export Processing

Zone

1998 247.46 213 Airport Are

Comilla

05 Ishwardi Export Processing

Zone

1998 308.77 158 Pakshl, Pabna

06 Uttara Export Processing Zone 1st

July 2001 211.99 202 Shongalshi,

Nilphamari

07 Adamjee Export Processing 6th

March, 2006 293 307 Adamjee Naga


7/11

7

Zone (Proposed) Shiddirgonj,

Narayanganj

08 Karnaphuli Export Processing

Zone

22th September,

2006

222.44 254 Karnaphuli,

Chittagong

09 Rangunia Export ProcessingZone

(Private)

10

th

October,1999

400 300 Chittagong

10 Korean Export Processing

Zone

(Private)

30th

October,

1999

2492 498 Chittagong

Facilities to Invest in EPZ area:

EPZ attaches great importance to the role of foreign investment in accelerating the pace of

industrial development in Bangladesh. Both fiscal and non-fiscal activities or facilities are

provided by EPZ in Bangladesh thats are cited as follows;

The minimum wage of the workers in the EPZs is one of the lowest in Asia. ComparingChina, Thailand, Sri Lanka, Cambodia, Philippines, Vietnam, Indonesia and Malaysia

are experiencing wages increase and rising production costs but in Bangladesh the

scenario is different from others as production and labor costs are very low.

One window service: BEPZA has been providing ONE WINDOW SERVICE to itsinvestors. Operational and documentation procedures have been framed to make them

easy and simple with minimum formalities. Investors need only to deal with BEPZA for

all of their investment and operational requirements. BEPZA assists the investors with

everything like import, export, and subcontract permits etc.

Infrastructure: BEPZA provides infrastructure facilities for the investors. BEPZAprovides fully serviced plots and standard factory buildings for setting up manufacturing

industry. Investor can use these plots under a 30- year lease which is renewable. Apart

from these plots, an investor may also take lease of Standard Factory Building (SFB)

owned by BEPZA. All the utility connections such as electricity, water, internet &

telecommunication are readily connected in the enterprises of the EPZs. BEPZA has also

allowed setting up of hi-tech infrastructure facilities like Central Effluent Treatment


8/11

8

Plant, Water Treatment Plant, Inland Container Deport (ICD), Internet service, Power

Generation Plant as service oriented industries in the EPZs.

Support: BEPZA has allowed setting up of support service business facilities for theinvestors such as local and foreign banks, Off Shore Banking Units (OBU), insurance

companies, C & F agents, freight forwarder and courier service in the EPZs. Other

administrative facilities, such as Customs Office, Police Station, BEPZAs Security, Fire

Station, Public Transport, Medical centers etc are available in the EPZs.

Fiscal Incentives: 10 years tax holiday for the Industries established before 1st January, 2012 and

Industries to be set up after Dec. 31, 2011.

Income tax exemption of salaries of foreign technicians for three years (For theprojects approved before March 22, 2009).

Duty free import of machinery, equipment, construction materials. Duty free import of raw materials. Duty free export of finished goods. Relief from double taxation. Exemption from dividend tax for tax holiday period. Duty free import of two/three duty free vehicles for A & B type industries subject

to certain conditions (For the projects approved before March 22, 2009).

Full repatriation of profit, capital & establishment. Non-fiscal incentives:

Investment protected under the Foreign Private Investment (Promotion andProtection) Act.

BEPZA is a signatory of MIGA (Multilateral Investment Guarantee Agency) andICSID (International Centre for Settlement of Investment Dispute).

BEPZA is a Member of WIPO (World Intellectual Property Organization) andOPIC (Overseas Private Investment Corporation).

100 percent foreign ownership permissible. Enjoy GSP benefits in EU countries, Japan, Australia, USA, Canada, Norway, etc. No ceiling on foreign investment. Foreign currency loan from abroad under direct automatic route (OBU facilities).


9/11

9

Non-resident Foreign Currency Deposit (NFCD) allowed for 'A' type industries. Operation of FC account by 'B' and 'C' type industries allowed. Resident permit / Citizenship granted for foreign investors. 100% backward linkage raw materials, accessories are allowed to sell to export

oriented industries inside and outside EPZs.

Taking and offering subcontracting are allowed both inside and outside EPZ. 10 percent sale of finished products except garments, defective finished goods and

surplus raw materials.

Support service facilities and work permits are issued by BEPZA. IP & EP issued within the same day. No UD (Utilization Declaration), IRC (Import Registration Certificate), ERC

(Export Registration Certificate) & renewal of bond license required.

Intra / inter zone sub-contracting & transfer of goods allowed and easily availableand trainable workforce.


10/11

10

Topic 3: How many sea ports in Bangladesh? Their establishment dates and

facilities they provide for our business organization.

There are two sea ports in Bangladesh. Their details are given below.

Port of Chittagong

Introduction

The Port of Chittagong is the largest seaport in Bangladesh, located by the estuary of

the Karnaphuli River in Patenga, near the city of Chittagong. It is a deep-water seaport

dominated by trade in containerized manufactured products (especially garments, jute and jute

goods, leather products, fertilizers and seafood), raw materials and to a lesser extent passengers.

It is one of the two main sea port of Bangladesh - most of the export and import of the country

are handled via this port. Window berthing system was introduced at the seaport on August 6,

2007, enabling the sea port to provide the arrival and departure times of all ships. Two berths at

the port terminal are kept in reserve for emergency. In 2006 the port handled 27 million tons of

cargo and 0.8 million tons of containers. The port handled 1.5 million TEUs (twenty equivalent

units) containers in 2010-11, up from 12.12 lakh TEUs in the previous year, according to the

CPA Traffic Department.

Establishment History

This port has a large historical background. It is traced out that the port was first established in

the 4th

century B.C.

During the 9th century the activities of the port increased tremendously as the Arab traders

started using the port as their base port. They used to call the port "Samunda". The port was

under their control at the time.

It remained a port during Moghul time. Later in early 19th century the British took control of the

Chittagong port. The port of Chittagong became a natural outlet for the Northeastern regions of

the then British-India that led to the enactment of Port Commissioners Act of 1887.

The requirements for a sea port was fulfilled in 1887 and as a result this year is called the

establishment date of the sea port as Chittagong Port.


11/11

11

Port of Mongla

Overview

It was formerly located at Chalna, about 11 miles (18 km) upstream on the Pushur River, but it is

now located 48 km south of Khulna city, as established on 11 December 1954. The Port is

surrounded as well as well protected by the Sundarban mangrove forest. The anchorage was

shifted to Mongla in 1954 as the place could accommodate sea-going vessels with greater

draughts.During the Pakistan period, the administration of the port was under a port director,

whose main office was at Khulna. The port is situated at the confluence of the Pashur River and

the Mongla River. It lies about 62 miles (100 km) north of the Bay of Bengal and is connected to

the major inland river ports and to the rail terminal at Khulna. It is very near to Sundarbans. The

port has trade links with almost all major ports of the world, although vessels arriving here are

mostly from ports of Asia, the Middle East, Australia, Europe and North America and the ships

rarely come to Mongla from the countries of Latin America or Africa.

Establishment

The port of Mongla was established on 11 December 1954.

Facilities provided by the sea ports to our business organization

The present situation of our country is that the base of the development of our country is

business. And the sea ports help business from different aspect to run smoothly. The facilities

our business organizations get from the sea ports are:

Transportation facilities of goods those are exported or imported. Making potentiality of foreign direct investment. Expansion of insurance business. As the products of our country can be send to the other country as their requirement so

more related business organization are establishing in our country rapidly.

The importers of our country can have the ordered cargo early. Foreigners come to start business here in our country as they can easily receive their

produced goods in their vicinity etc.

finalthe economic condition of bangladesh

Documents