Performances and Challenges

20.10.2009, Sunday

President Calls for Concensus: Stresses mutual cooperation among parties: President Zillur Rahman yesterday called for mutual cooperation and understanding of the political parties to reach consensus on issues of national interest. I hope the country’s political parties will extend their hands of mutual cooperation and understanding in the national interest and for development of fair democracy,” he said addressing the inaugural function of ‘Jagannath University Day’ at the Osmani Memorial Auditorium. More: The Daily Star, 20 October 2009

Global Recession: Tk 3424cr stimulus plan announced: The government yesterday announced a Tk 3,424-crore stimulus package to cushion the blow of global economic 2009-04-20__front01downturn. The fund includes Tk 450 crore in cash subsidies for the export sectors already hit by the recession. Unveiling the plans at a press conference, Finance Minister AMA Muhith said the package may not satisfy all as only selected sectors will have cash incentives.  However, he said, those who are not getting the cash benefits will receive a bundle of policy supports no less valuable.

Of the plans, some will be implemented during the last quarter of the current fiscal year and the rest in fiscal year 2009-10. In April-June period, cash incentives for export of jute goods, leather and leather goods, and frozen foods will be increased by 2.5 percent.

To meet the expenses for fiscal and policy support under the stimulus package, an additional Tk 3,424 crore will be allocated in the revised budget for the current fiscal year. Of the allocations, Tk 450 crore will be spent on cash subsidy for export sectors, Tk 1,500 crore on agriculture, Tk 600 crore on power sector, Tk 500 crore on re-capitalisation of agriculture loans and Tk 374 crore on social security programmes.  With these, the budgetary allocations will mount up to Tk 14,554 crore, from Tk 11,130 crore originally.

Prime Minister’s Finance and Planning Adviser Dr Mashiur Rahman, Bangladesh Bank Governor Dr Salehuddin Ahmed, Finance Secretary Dr Mohammad Tareque, Economic Relations Division (ERD) Secretary M Musharraf Hossain Bhuiyan, National Board of Revenue (NBR) Chairman Dr Nasiruddin Ahmed were present at the press conference held at the secretariat.

The finance minister said the additional funding for the social safety schemes will mean a rise in the number of pension-holders and the amount of pensions.  The finance secretary said Tk 1500 crore allocated for agriculture will be used to ensure smooth flow of agri-loans through recapitalisation of Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and Karmasangsthan Bank.

The amount set aside for power sector will be used to shore up the financial base of the Power Development Board (PDB).  Of the export sectors, jute and jute-made products will see cash incentives rise to 10 percent from 7.5 percent, leather and leather goods to 17.5 percent from existing 15 percent, frozen foods and other fish export to 12.5 percent from 10 percent. However, no additional cash incentive has been announced for garments and ceramic sectors.

Explaining the rationale for not granting cash incentives to RMG and ceramics industries, the finance minister said these sectors have indeed a slowdown in growth, but their export figures did not dip in the current fiscal year. “We’re not saying they are insulated from the effects of economic downturn. But the projection up to June this year says the time is not ripe yet for giving them cash assistance,” he added.

Muhith said the government has drawn up the fiscal package in light of the recommendations of its special task force and technical committee. Under the fiscal package alongside fiscal and financial stimulus plans have been taken for policy support and administrative reforms. It will be implemented in immediate, medium and long-term programmes.

The policy supports to be executed during the last quarter include disbursing 70 percent of the incentives immediately after primary examination of the claims and the rest 30 percent after necessary audits. If any beneficiary is later found to have taken more than what it really needs actions will be taken against it. Previously, the money would be released only after a full audit.

To help the export sector, Bangladesh Bank will expand its credit at 7 percent interest to all products. It will also stretch the time limit for repayment to 120 days, upped from 90 days at present. The central bank has already raised the limit on Export Development Fund’s credit for a single borrower to $1.5 million from $1.0 million.

It yesterday issued a circular announcing the decisions to bring down the lending rate below 13 percent and allow rescheduling facility without down payment. Meanwhile, the finance ministry has requested the civil aviation and tourism ministry to withdraw the surcharge on carrying fruits and vegetable on international routes. Programme to supply garment workers rice at subsidised price has started.

Bangladesh Bank will take necessary steps on case-to-case basis to help the export-oriented industries survive the recession. At the press conference, the finance minister described the measures planned to be included in the next fiscal year’s budget to increase export, remittance and investment.

BB Governor Dr Salehuddin Ahmed said sectors that have not been chosen for cash incentives will get banking facilities worth much more than the direct monetary help. He said the commercial banks will have to make sacrifices with regard to their earnings to ensure these facilities for the exporters.

Source: The Daily Star, 20 April 2009

Stimulus falls short of expectations: Garment leaders say they are neglected2009-04-20__bus11Business leaders yesterday expressed dissatisfaction over what they said was the neglect of the readymade garment sector in a stimulus package, but lauded the government’s “timely” steps for other areas to tackle fallout from global recession.

The mixed reactions came hours after Finance Minister AMA Muhith rolled out a Tk 3,424 crore stimulus package that consists of cash subsidies, loan facilities and social security.

Under the package, the government has marked Tk 1,500 crore for the agriculture sector, Tk 500 crore for farm loan re-capitalisation, Tk 600 crore for the power sector, Tk 374 crore for social security (food) and Tk 450 crore for the exports sector.

Jute and jute goods, leather and leather goods and frozen foods will be beneficiaries of the stimulus to the exports sector.

Asked to comment on other export-oriented sectors, including garments and textiles, Muhith said different steps such as policy support and bank-loan rescheduling have been declared for those areas.

“I welcome the overall initiative taken by the government in response to the demands of the business community. However, it is not a full-fledged stimulus package,” said Annisul Huq, president of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the apex trade body.

Huq said the highest export-earning sector should have been given more importance in the stimulus package, as garments exports growth is declining.

“Similarly, the spinning sub-sector has also been hit by the recession. The spinners should also benefit from the announced stimulus package,” Huq said.

Talking to The Daily Star, Abdus Salam Murshedy, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said he was not delighted over the terms of the stimulus package, as the government excluded the garments sector.

“Since the government did not grant any cash subsidy for the garments sector, we demand a full-fledged implementation of the policy support, which was earlier demanded from the government. Proper implementation of those demands will help offset losses from the recession,” Murshedy said.

Earlier, the BGMEA urged the government to provide bank loans at a single digit interest rate, relaxation of the Credit Information Bureau rules, termination of the 0.25 percent tax at source, extension of loan rescheduling from the three-and five-year terms to seven and 10 years and withdrawal of VAT on utilities.

“I hope the government will consider the garments sector in the second phase of the stimulus package,” Murshedy said.

“I am disappointed by the terms of the stimulus package, as the garment and knitwear sectors have not been taken into account,” said Fazlul Hoque, president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), in an instant reaction to the financial stimulus.

Abdul Hai Sarker, president of the Bangladesh Textile Mills Association (BTMA), said the announced stimulus package is inadequate, as the textiles sector will not benefit from it.

Spinning, under the primary textile sector (PTS), is the most affected by the recession and yet it has been neglected by the stimulus package, Sarker said.

He said the latest move has betrayed the government’s “unfeeling attitude” to the spinning sub-sector, which is vital to the readymade garments sector.

Later in the day, leaders of BGMEA and BKMEA from separate press conferences urged the government to review its decision and include woven and knitwear in the stimulus package.

In response to a query, Murshedy said the government should form a sub-committee, if necessary, to review the decision. “We are disappointed with the government’s decision as the whole clothing sector has been ignored.”

The BKMEA president said if the country’s garment sector sinks due to the recession, it would be difficult for the sector to recuperate. “The government has to bear the burden.”

Kazi Belayet Hossain, president of Bangladesh Frozen Foods Exporters Association (BFFEA), said increasing the cash incentive from 10 percent to 12.50 percent is too inadequate to offset the losses, as the exports of frozen foods declined by 11 percent in the July to February period due to the recession.

“At present, we are facing a liquidity crisis in the exports of frozen food. We need cash to stay on,” Hossain said.

“Cash subsidies would be given against export performances, but the problem is that we are now unable to export the item as demand for the luxury food item has declined significantly in the western countries,” he said.

Source: The Daily Star, 20 April 2009


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