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Faulty Decisions

July 2, 2018

Two crucial decisions in the financial and development sectors may not have profound impacts on development as the government desires.

First, Bangladesh Association of Banks, platform for bank owners, has unequivocally decided to slash interest rates on both  deposits and lending. BAB stressed on spurring investment, right now sluggish, in the country.

Second, government has recently attributed  authority to project director to disburse fund of a given project. Earlier, only concerned ministries have the authority to a final say on disbursement of project funds.

The decisions have some downsides and are subject of criticism.Bangladesh’s next general election is scheduled to be held by the end of this year. In an election year, we usually witness gross deviation from the standards set to ensure transparency.

Govt drew a lot of flak after it amended the ownership law of the banks, consolidating control of the banks to family members of bank owners. It is widely believed that the decision will have significant leverage on approving risky/fake proposals aimed to launder money abroad.

Banks are still reeling from financial scams that piled up huge bad debts. A recent news report says , bad debts incurred by 13 listed banks have doubled in one year. A clear sign things are heading towards the dead end. Amid this situation, this latest decision may end up contributing to corrupt project, causing further troubles to ailing banks.

Over the last couple of years we witnessed rise of some people who spared no opportunity to curry favor with the government in a bid to steal public fund.

Moreover, trade balance has registered deficit in recent months as exports could not match with rising import bills. Economists and corruption watchdogs believe money laundering is being taken place through over-invoicing.  So, employment generation and rapid industrialization through investment remain a distant dream.

Given the prevailing political uncertainty and lack of business confidence, many are skeptical here about such decision could boost true investment in the next six months.

The second decision is an example of perks deliberately created by a quarter to pass nourishment to its loyal activists via digestive tubes in the name of development projects ahead of next general election.
Since there is no transparency at the grassroots  and higher chances of misusing public fund for political purposes,  these projects may not bring the desired goals.

Our roads offer a just example why this is going to be the case. Every year millions of dollars are spent on roads and highways to make them operational. Yet they could not cope with one Monsoon. Recently I watched a report on a newly-built approach road in Faridpur. The bridge and the road were inaugurated few months before the arrival of Monsoon. Pre-Monsoon rain already washed away the approach road, making the bridge useless and soiled the image of government.

Another report said contractor used bamboo instead of steel to make a culvert bridge in Chittagong.

So people like me cast doubt on whether facilitation of funds will really bring the desired outcomes the projects intended to attain.

Provided that no radical changes are visible in the next six months  in investment and implementation of people-oriented projects, govt can try explore other means to increase investment.

It can court foreign investors to invest in SMEs. Proposals are already there. Germans show keen interest in SMEs. Govt should engage in one-to-one meeting with individual investor and do everything to make them happen in the next four months. The Thais have similar plans. Even the Indians.

With this small and medium initiatives we are optimistic to bring positive change in management and innovation in SMEs. Superior management and technology in SMEs are bound to make a difference in our industrial sector. FDIs in SMEs will not only improve efficiency, it will create quality jobs for Bangladeshis, a thing that the government is desperately trying to achieve.

We should take our cues from the Indians, who already allowed FDIs in retail sector.

So govt should not raise its eyebrows on FDI proposals of opening a grocery or barber shop or   clothes store. It should welcome them and facilitate their implementation. At the end of the day, these FDIs will introduce professionalism, superior management and better use of technology. Most importantly they will create quality jobs and impart work ethics to employees.

In brief, two major policy decisions —one by the bankers and another one by the government — are destined to fail as they could worsen the misappropriation of public money ahead of election. Best alternative is to court foreign investors to invest in SMEs in order to create jobs in the next six months.

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From → Analysis

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