Interim govt signals shift away from growth-centric development model
Finance adviser says interim govt focusing not just on growth but on overall development
The interim government has signalled a decisive shift away from the long-standing development model focused solely on GDP growth. This approach, which was a hallmark of Sheikh Hasina's 15-year regime, has faced criticism for its questionable impact on the broader population.
Chief Adviser Prof Muhammad Yunus and Finance Adviser Salehuddin Ahmed outlined the government's new direction during separate events in Dhaka today. Both emphasised the need for a more inclusive and balanced strategy, prioritising equitable benefits for all segments of society.
Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD), lent support to their views. He expressed concerns over the reliability of past economic data, suggesting that many figures were manipulated or politicised.
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This approach has failed, both in environmental and economic terms, Chief Adviser Prof Yunus said at the inaugural session of the 3rd "Bay of Bengal Conversation" in Dhaka morning.
He said the future of Bangladesh will be based on "human rights, freedom of speech and justice".
He reiterated the need for creating a world of three zeros - zero net carbon emission, zero wealth concentration - by introducing social business to solve the people's problems, rather than maximising profit, and zero unemployment by turning young people into entrepreneurs rather than jobseekers.
At another event, Finance Adviser Salehuddin Ahmed said the interim government is bringing about changes to its development strategy, focusing not just on growth but on overall development.
The benefits of growth should reach everyone, not just a privileged few, he said at a policy dialogue on "Financial and Economic Reforms in Bangladesh 2024" at Brac University in Dhaka.
"Special importance will be given to human resource development, particularly in education and healthcare," said Salehuddin Ahmed, who earlier served as governor of the Bangladesh Bank.
CPD's Debapriya Bhattacharya, Farzana Lalarukh, commissioner at the Bangladesh Securities and Exchange Commission (BSEC) and Selim RF Hussain, CEO and managing director of BRAC Bank, also spoke at the dialogue as special guests.
No tax on Adani's electricity
At the Brac University event, Adviser Salehuddin said the Awami League government prioritised growth without ensuring whether its benefits trickled down. "Development gains were not equitably shared, with a small group enjoying most of the advantages."
He added that many public institutions were undermined due to a lack of good governance and accountability. "Bureaucratic inefficiency was rampant, with officials waiting late hours to approve files based solely on orders from the top."
Numerous projects were undertaken without proper feasibility studies, and tax exemptions have been granted in many cases, said Salehuddin Ahmed.
"For instance, no taxes have been applied to Adani's electricity bills, despite the company charging thousands of crores," he added.
"Who knows how or why these decisions were made?" he remarked.
Capital market, NBR
The finance adviser said reform initiatives have been undertaken in various sectors, including banking, capital market and revenue collection.
"Many are concerned about falling share prices, but that's inevitable. If you turn Z-category shares into top-rated ones, how can you sustain their prices?" he questioned.
He also noted that the capital gains tax has been reduced, and Investment Corporation of Bangladesh has been allocated Tk3,000 crore. "Further changes are anticipated in the near future," he added.
The adviser said reforms will be introduced in the National Board of Revenue (NBR), separating its tax policy and tax administration functions.
"The same entity will no longer both formulate policies and oversee tax collection. Work on this is already underway, and details will be announced soon," he added.
BSEC Commissioner Farzana Lalarukh in her address said the capital market regulator had been used to implement political agendas and benefit certain individuals.
For instance, she said entrepreneurs in 2023 raised Tk5.1 billion from the capital market, while banks disbursed over Tk200 billion in loans during the same year, she mentioned.
"Despite this, only 1% of investors' financing needs were met by the stock market. As a result, the capital market has not played a significant role in long-term financing and diversified financial instruments have not been introduced," added the commissioner.
She said the biggest issue facing the capital market today is a lack of trust. "Regaining investor confidence is now the BSEC's top priority."
She noted that market players are far ahead of the BSEC in terms of operations, with the commission's surveillance and intelligence capabilities being weak.
"The current commission is working to enhance these areas, with a focus on digitalisation to address manipulation," she added.
Lalarukh also mentioned that the market regulator is working on the appointment of independent directors, creating a pool from which companies can choose suitable candidates.
Inflation
Addressing inflation control, Finance Adviser Salehuddin Ahmed said the current inflation is not demand-driven but stems from supply chain disruptions.
"From producers to Karwan Bazar, goods pass through 16-17 intermediaries," he mentioned.
He said the biggest issue arises with those who, without any investment, enter the system. "This is not legitimate intermediation; it is outright extortion. While intermediaries are necessary, their numbers must be reasonable."
He further noted, "Compromise in politics is difficult, but when it comes to extortion, they easily reach agreements. Therefore, the solution in this area must also be political."
Banking, NPL
In his comments, CPD's Debapriya Bhattacharya said, "The central bank used to say one thing but do another. During the day, it assured the IMF it wouldn't print money, yet at night money was printed," he mentioned.
Referring to former Bangladesh Bank governor Abdur Rouf Talukdar, Debapriya remarked, "After causing a crisis in the banking sector, who knows where he is now!"
"Corporate governance in the banking sector has been completely destroyed, with directors appointed on political considerations to benefit the oligarchs," added Debapriya.
BRAC Bank Managing Director Selim RF Hussain said the banking sector has experienced widespread irregularities, with even the most basic rules and regulations being ignored.
Extensive reforms are urgently needed to save the sector, including strengthening the central bank, increasing digitisation and addressing compliance gaps, added Hussain, who is also chairman of the Association of Bankers Bangladesh.
He also called for initiatives to make the banking sector more inclusive and sustainable, with strong measures to eliminate the culture of loan defaults.
Manipulated economic data
Debapriya said GDP growth figures published during the previous government's tenure were "seriously flawed and politically manipulated".
"GDP cannot increase without investment. Private investment has remained stagnant at 23% of GDP for a long time. Despite growth, revenue collection has not increased," he said.
A strange coalition of interests supporting corruption and opposing reforms has formed within the country, said Debapriya.
"This coalition includes politicians, bureaucrats, and businesspeople, who together have fostered an oligarchy, who is also the head of the committee on drafting a white paper on the state of the economy.
While preparing the white paper, he pointed out widespread irregularities in two key sectors of the economy: banking and energy. "These two sectors have been completely consumed by the oligarchs."
Yet optimistic
Adviser Salehuddin Ahmed assured that there is no reason to be disheartened, as the country has made significant progress and will continue to move forward.
He noted that there has never been a shortage of food. He credited farmers and agricultural scientists with playing the most significant role in the country's advancement.
"The current government may not be able to complete all reforms but will leave a legacy of reforms for future administrations to carry forward," he said.
He also mentioned that efforts are underway to bring back money laundered abroad, with negotiations having taken place with the US and other countries.
