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| May 8, 2004 |
Address by
Mr. M. Saifur Rahman
Hon'ble Minister for Finance and Palnning
Goverment of the People's Republic of
Bangladesh
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Hon'ble Prime Minister,
Distinguished Cabinet Colleagues,
Distinguished Vice-President
of the World Bank and
Representative of IMF,
Excellencies,
Ladies and Gentlemen
It gives me immense pleasure to welcome
you all this afternoon to the Bangladesh Development Forum
2004 here in Dhaka. Last year, in May, we met in this
very room to share our common agenda of building a prosperous
Bangladesh. I cherish the productive discourse that we
had with our valued development partners at last year's
Forum in forging a meaningful partnership in our journey
towards a poverty-free Bangladesh based on based on equality
and justice. I express my profound gratitude to our Hon'ble
Prime Minister for her gracious presence in this inaugural
session of the Forum. I gratefully recall her visionary
speech that set the tone of the Development Forum last
year. Her august presence today will inspire and invigorate
the deliberations of this Forum. I also take this opportunity
to express our heart felt thanks to all of you who have
traveled a long way to join us here. We greatly value
your participation in this Forum and hope together we
will successfully address the challenges that lie ahead
of us in achieving our goals of poverty reduction and
socio economic advancement. Let me now give a brief account
of what we have been able to achieve during the past one
year inn different spheres of the economy and the challenges
we have been encountering in the pursuit of our development
goals.
Hon'ble Prime Minister,
Ladies and Gentlemen,
2. Since the last BDF, our Government has continued to pursue
implementation of a wider and deeper reform process within
the framework of National Strategy for Economic Growth,
Poverty Reduction and Social Development (I-PRSP). I-PRSP
goals are universally recognized and so are the reforms
needed to achieve and sustain them. We own our I-PRSP
and we tried our best to build up that ownership on the
basis of a broader participatory process. You will all
appreciate that broad-based political support is a prerequisite
for implementing successful and sustainable economic and
good governance reforms. All transitional democracies
face challenges in mobilizing this support from political
opposition and vested interest groups. We are no exception.
But the unhealthy, intolerant and destructive political
opposition we have been facing in our endeavors to improve
the lot of the common people through implementation of
our I-PRSP is unprecedented. The pace of reforms therefore
has been uneven at times. Let me reassure you, Ladies
and Gentlemen, we remain firmly committed to face political
opposition in a constructive manner with tolerant understanding
of their views and to mobilize their support in order
to push the economy to a higher growth path with faster
poverty reduction. We welcome the latest decision of the
main opposition party to join the Parliament in the next
budget session.
Ladies and Gentlemen,
3. Despite the uneasy
political environment I have just mentioned we have made
remarkable achievements in macroeconomic management and
human development. The economic growth is likely to exceed
projected 5.5 percent for this year with fiscal deficit
contained at sustainable limit. During the first six months
of this fiscal year agricultural sector grew at a rate
of 4.2 percent, which is a significant improvement over
its growth in 2003. Industry so far recorded the highest
growth of 7.3 percent.
4. Facilitation of remittance inflows
helped to grow remittance at unprecedented rates over
last two years. Even during the first nine months of this
year it registered a robust growth of 11.4 percent over
the same period of last year. Exports also rebounded and
it has grown at a rate of 15 percent over the same period.
Import payments also registered a strong growth - about
18 percent. This reflects a strong pick up of domestic
demand, including investment and consumption. From a deficit
of US$ 1018 million in FY01, current account balance became
surplus to the tune of US$ 240 million in FY02 and US$
594 million in FY03. The overall external balance of payment
position remains positive and continued to improve during
the first nine months of FY04. This facilitated building
up foreign exchange reserves to a record level in recent
years about US$ 2.8 billion this month.
5. During the
first eight months of this fiscal year credit to the private
sector by commercial banks registered a growth of about
12 percent. Agriculture credit also increased by 10 percent.
However, industrial term loan disbursement over this time
increased by phenomenal 76 percent. This suggests a strong
industrial activity. According to latest available data
domestic investment has grown by 20 percent and foreign
investment by 85 percent during first ten months of this
year. We have been able to achieve this growth despite
all odds emanating from negative politics.
6. For ensuring
pro-poor growth, total allocation for poverty reduction
expenditure was raised to 42 percent (6.3 percent of GDP)
of total budgetary allocation in fiscal 03. It has been
further raised to 47.4 percent (7.5 percent of GDP) in
fiscal 04. We are committed to increase pro-poor expenditure
by about 1 percent of GDP every year.
Ladies and Gentlemen:
7. Significant progress has been made in the social sectors
- particularly in education, health and social welfare.
Bangladesh has achieved the highest primary school enrolment
rate in the developing world. It has achieved gender parity
in enrolment at the primary and lower secondary levels.
Infant mortality has been scaled down to half. Our immunization
rated are much impressive than most of the developing
world. Micro credit programmes are in place to empower
rural women. Allocation for human development i.e. education,
health, nutrition will be substantially increased every
year. We are giving increasing attention to ensuring quality
of expenditure in service delivery and reduction wastage
and leakage in resource utilization.
Ladies and Gentlemen:
8. The Government has adopted an ambitious reform agenda
most of which are in the process of implementation. The
impressive macro-economic performance in this fiscal year
bears testimony to the impact of these reforms. The Government
has already received the recommendations of the Revenue
Reforms Commission and Public Expenditure Review Commission.
The Government is implementing these recommendations to
augment mobilization of more domestic resources and increase
the tax-GDP ration which is one of the lowest in world.
The objective over the medium term is to increase tax
revenue by at least 0.5 percent of GDP per year reaching
12 percent of GDP from the present level of about 10 percent
With this end in view the entire tax administration is
being modernized and tax structure rationalized with vigorous
enforcement measures. Trade liberalization reforms initiated
by us in early nineties, but later stalled by the previous
Awami League Government, is being further intensified
through our successive budgets and we are committed to
continue this process in right earnest. Further reforms
in public expenditures will include more transparency
in budget presentation, reduction of wastage and leakage
in expenditure, increased allocation to pro-poor spending,
bringing greater interface between recurrent and development
budget. Audit has already been separated from accounts
and C&AG office is being strengthened as an oversight
agency. Reforms needed to achieve the above objectives
are now underway with the help of a few development partners.
The Government is implementing reform measures as contained
in IMF's Report on Standards and Codes (ROSC).
Ladies
and Gentlemen:
9. Recognizing the importance of the financial
sector as the backbone of the economy the Government has
embarked on an ambitious reform agenda. The Bangladesh
Bank Order, Nationalized Commercial Banks have been brought
under the supervisory control of the Bangladesh Bank.
Prudential guidelines have been issued by the Bangladesh
Bank to effectively regulate the banking operations. Rupali
Bank, one of the NCBs, will be divested by the end of
this year. Other NCBs are being restructured and their
resolution plans are being finalized. Growth of non-performing
loans by NCBs has been stemmed through implementation
of Memorandum of Understanding with the Bangladesh Bank.
Recently enacted Money Loan Court Las has already proved
to be effective in recovery of non-performing loans. Money
Laundering Prevention Act adopted by the Government recently
is being reviewed and necessary amendments will be enacted
soon to make it more effective. We adopted a market-based
flexible exchange rate policy on May 31, 2003. Market
exchange rate of Taka has remained stable since this transition.
The Government is committed to implement reforms as recommended
by the joint World Bank and IMF team on Fiscal Sector
Adjustment Programme.
Ladies and Gentlemen:
10. Development
of the Private sector is one of the cornerstones of our
development policy. We will continue to liberalize trade
regime and investment policies, reform the financial sector,
reduce interest rates and cost of doing business through
necessary reforms. The Government is firmly committed
to remove infrastructural bottlenecks including port facilities
to promote private sectors led economic growth. In the
energy end telecommunication sectors reforms are already
underway. Regulatory Commissions have been set up in both
these sectors and reform measures are being implemented
in removing structural bottlenecks including reduction
of system loss, improving bill collections and enforcing
adequate pricing policies for utilities. The recent reforms
in the telecommunication sector has brought about phenomenal
improvements in this sector and this process will be further
accelerated. Improving of infrastructure has been recognized
as key to promoting investment climate in Bangladesh.
We need accelerated financial support from development
partners in power, railway, roads and energy sector.
Ladies
and Gentlemen:
11. We have significant downsized State
Owned Enterprises through closure or privatization to
reduce fiscal drain and to stimulate growth of the private
sector. The Government has however been very careful about
the need for creation of alternative employment opportunities
for workers who lost their jobs and also ensured payment
of legitimate severance benefits to them in a vary transparent
way. The Government is converting some of the bigger closed
down SOEs into industrial parks and EPZs to stimulate
private investment and employment generation.
Ladies and
Gentlemen:
12. We recognize the importance of the role
of the NGOs in the development process of Bangladesh.
The Government considers the NGOs as partners in this
process and is committed to further promoting this partnership.
The Government has been promoting role of NGOs by channeling
funds to them through PKSF, Social Development Foundation,
and even from Government's own budgetary resources. In
order to create an enabling environment for the growth
of NGOs and Government-NGO partnership a regulatory framework
is being set up in consultation with the NGOs.
Ladies
and Gentlemen:
13. Improving governance and law and order
and combating corruption still remain the key challenges
of the Government. Since assumption of power the Government
has given priority attention to these areas and there
has been significant improvements. To improve overall
governance, the Government has undertaken a series of
reforms in various sectors such as banking, procurement,
financial management, education, judiciary, civil service,
health, police, etc. In addition to adopting effective
Procurement Guidelines, the Government has most recently
merged four ministries into two and adopted a few more
decisions to reform civil service which include merit-based
promotion and developing specialization in the civil service.
Necessary amendments have been made in law and regulations
and new laws enacted to bring about required reforms in
governance. Budgetary allocation has been increased for
the law-enforcing agencies and support of the development
partners has been sought to upgrade the skills of the
law enforcing agencies. Independent Anti-Corruption Commission
is being set up within a few days.
Ladies and Gentlemen:
14. I hope you will agree that solution of overall governance-related
problems is a long and arduous process and series of interlinked
and coordinated actions are required to solve them. Historical
administrative hang-ups and mindset cannot be eleiminated over night. Furthermore, broad
based consensus and participation are needed to create
an enabling environment for addressing these issues. I
am sure we could have achieved much more in these areas
had there been broad-based support and cooperation from
all concerned and end of unhealthy, destructive and confrontational
politics in our present society.
Ladies and Gentlemen:
15. I want to reiterate government's intention to do all
it can to bring about desired improvement in governance
with the support and active involvement of all sections
of the society including the opposition. We are also urging
upon the development partners to help us in combating
these concerns with necessary assistance and support.
Ladies and Gentlemen:
16. As you all know, we are now
in the process of preparation of full PRSP. We hope to
finalize it by December this year. In developing the PRSP
we will give due consideration to the views of the development
partners expressed in the Development Forum last year
here in Dhaka. We are following a broad based consultative
and participatory process in developing the PRSP. The
full PRSP, like the I-PRSP, will be completely home grown
by the country. This will be the strategic direction of
the Government fro pro-poor growth over the medium term.
Hon'ble Prime Minister,
Ladies and Gentlemen:
17. Before
I conclude, I invite you all to engage in a constructive
dialogue over the next two days over the medium term development
strategy of the Government. It will give you an opportunity
to assess the status of implementation of the I-PRSP and
the possibilities of your future support to us within
the framework of PRSP. Thank you. |
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