Still on track for Vision 2021
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The national pride is at stake, and the race is on to complete Padma Bridge construction in time.
© bdnews24.com/Md. Asaduzzaman Pramanik
A celebrated civil servant, diplomat, a veteran of the Bengali Language Movement, an alumnus of Dhaka University and later Harvard University, Abul Maal Abdul Muhith MP has been the Finance Minister of Bangladesh since January 2009, becoming the only man to hold this particular office for seven years at a stretch; he had served another stint in the early 1980s. We spoke to him at his residence in early February 2016.
2015 seems to have been a fairly good year altogether for Bangladesh. We've had some great achievements: the Padma bridge; the foreign exchange reserves crossing the 27 billion dollars; Saudi Arabia opening up its doors again after lifting the embargo; achieving some of the major Millennium Development Goals. What else do you think you could have done?
Muhith: One of my grievances is that we have promoted public investment in a big way but private investment has not responded equally well. Private investment is about 22% and all the increase that is coming is from public investment, which has gone up from below 5% to almost 7%. I have done my bit, starting with big budgets, raising money from people and putting a lot of it in investment, but the private sector has not responded that well.
I think that the private sector has a lot of complaints, and we can't deny that these problems do exist. Skilled manpower is one of our basic problems at this moment.
Muhith: Some of the complaints were very genuine in 2009. Most of them disappeared over the first three years of this government. Energy was a serious problem. We told them that we shall have a crash programme for energy and we would try to put a stop to this in three years. We did it successfully with a high level of cost, you know, these short-term contracts – allowing parties to set up liquid-fuel based plants and so on. It was expensive but we did it.
"I have been saying since 2009 that we have to create a situation where economic forces will resist hartals and strikes. We have reached that position now."
But now there is no power crisis. There is no power crisis in the sense that anyone can get a connection now. We have increased generation. Transmission is still poor so you get run outs. Transmission is the area we are attending right now.
We have achieved this mainly based on liquid fuel but we are moving into coal, which will be cheaper but, of course, harmful for the environment. Because of the concern for the environment, presently technologies for use of coal have substantially improved.
What about gas supplies? There have been recent complaints about that.
Muhith: Gas … unfortunately we have very limited supply and we had the policy that we will not provide gas supply to industries. This year we have decided that we shall liberally grant gas connections because we have to depend on the world market for gas, and the world market for liquefied natural gas (LNG) is very large. It is going to continue with a limited demand for the next 20 to 30 years.
What steps have been taken, effectively?
Muhith: Effectively, if anyone is seeking a gas connection immediately, we are allowing it – telling them, however, that it might take two years to get it because we have to set it up. We have a contract with Qatar for supply of a million tonnes of LNG but we have to set up the pump port here first to receive the LNG, and a plant to reconvert it into gas. So that's why we are seeking two years from the people.
So there is reason to be optimistic?
Muhith: Oh yes! You just apply for the gas connection, we shall give it to you but we will make distribution in two years time.
You yourself don't seem to be extremely happy with the situation of the rates of interest because you want investment to come in. Rates need to be lower on bank loans.
Muhith: We do not determine the rate of interest. From 2004 it has been left to the market. Generally savings certificate (government bonds) rates are higher than the market interest rate and we usually tended to keep the rate pretty high. We have taken a decision now — two decisions really: if the government rate differs too widely from the others it must be adjusted; and another decision was that we shall not go on changing just because there is some change. We have reduced the interest rate at which we sell saving certificates.
Isn't there the possibility that there can be an adverse effect? Lowering the interest rates on savings could also mean that the people would have larger deposits and that would mean unused money.
Muhith: It will not be too bad I think. One big difficulty in the country is that the capital market is so underdeveloped. The existing companies must raise money from the capital market. Unfortunately it is not happening. We have reformed the capital market in a big way and I think it is now a regulated capital market; regulated by laws. But it is still to pick up.
How can the regulatory aspects be improved in order to encourage the capital market?
Muhith: The Securities and Exchange Commission over the last five years has enacted rules and regulations, and now they are being honoured, but it's still shy. Shyness is related to the shyness with investment in Bangladesh. One of the big reasons for shyness has been the political uncertainty. Investors were always worried by hartals (general strikes) and other things which got associated with hartals — killing and burning.
But we have been very fortunate in that aspect; for almost one year now there has been stability.
Muhith: And this has been done by us; I'll tell you how. I have been saying since 2009 that we have to create a situation where economic forces will resist hartals. Now, it has reached that position because people are working. All people are working in the country. There is no unemployed labour in the villages at the moment. You can't get a worker at less than 300 taka per day.
Coming back to the manpower export issue, what actually is being done in order to make these people more skilled, more qualified, better educated?
Muhith: That is the area of attention in this country now: skills formation, skills improvement. Even the unskilled labourers; they can also be provided training — not in skills but in behaviour. Saudi Arabia takes the largest number; the next concentration is the UAE, so we can do something about it. So skills is now of the highest importance … skills formation, skills training is receiving the highest attention now in the government as a whole.
We were talking about the infrastructure …
Muhith: Infrastructure, of course, held up investment. We have solved it for power; that is one important infrastructural element. We have improved transportation but not solved it yet.
"Bangladesh needs a government in every district: one centralised government, but most of the jobs are done by the local boards: the councils. They do all the jobs and there is a relationship of grants."
Number one — what we are doing now — is to improve railways. Railways, when I came to office, did not have any allocation of development fund. They have about Tk 4,000 crores (40 billion) each year now. Railways doesn't have wagons, doesn't have coaches; they do not have engines – nothing. These things are arriving. The orders that we gave in 2010, 2011 are now maturing; we are getting some of them.
One decision Sheikh Hasina took, coming to office, is that all future railways will be dual gauge. That is now standard and so I think by the end of this year almost 80% of the railway lines will be dual gauge.
Railways is only one aspect.
Muhith: Then waterways. They have shrunk substantially, so the water department has been told, "Forget about all your waterways; concentrate on some waterways that you must keep navigable — Jamuna, then Meghna. Jamuna, Meghna on this side, on the other side Ganges, so Ganges upto Gorai is being dredged. We have a project now, not in hand but in contemplation, where we are thinking of having the right bank of Brahmaputra as well as Jamuna; one route from near the Jamuna bridge — it will go up to Padma. (That's) one big route. And two programmes are associated with it: the building of this embankment which would be the road, and the dredging programme.
So is this going to be satisfactory from the point of view of the investors?
Muhith: Yes. I think World Bank itself is talking about it.
Political stability, obviously it's been there; evidently there has been growth and so on. Apart from …
Muhith: The opposition has, officially or unofficially, without announcement, taken a decision that hartal is not a means for coming back to office. They have now completely abandoned killing and burning, see? That, I think, is a good thing that is happening.
Political stability apart, what else do you think is being done to encourage more investment in the country?
Muhith: Well, my present attempt is to assure our own investors — not foreign investors, our own investors — that it is time you brought out your money and used it because now you are yourself convinced that there is political stability. If they have concerns they say "Dudak" (Anti-Corruption Commission). Dudak will continue to be there and it is necessary because Bangladesh is a highly corrupt country at the moment; the level of corruption is very high. We are, however, taking many measures against corruption.
What exactly is being done to fight corruption?
Muhith: Number one, I meet people every now and then coming up and shaking hands with me and saying, "Sir, the wages you have stipulated now, we can live from." That is the number one step: give them living wages.
Second, anti-corruption (Commission) is being strengthened, it's alright; but I don't believe that anti-corruption can do much. But a great deal can be achieved by digitalisation. I will give an example. I am Chairman of the Governing Body of a college. Its annual income from admission of new students was about 8 lakh to 10 lakh takas.
I digitalised it in the sense that online admission (was introduced); the annual income now is 82 lakh. The students used to pay 82 lakh even before, but it all went to the "rent seekers". So with technology, you have to attack corruption.
With the Asian Infrastructure Bank competing with the World Bank, are we in a position to exploit the situation?
Muhith: Certainly. It has increased the options for us. The idea of the bank was floated only in 2013; in 2016 it has become a reality, and I think their first board meeting for giving money will be held in three-four months' time.
There has been a raise in the salaries of government employees, but can it also have an adverse effect? Can we expect inflation coming from it?
Muhith: No not yet; not much of inflation. Somehow this is a very good year for this pay increase because this is a year of reduced prices of every commodity in the world. In Bangladesh it has not been reduced to that extent but it will have to be reduced. Every commodity in the world is being reduced in price.
Why have we not made any changes in the fuel prices in Bangladesh?
"We are creating a sovereign fund of our own in order to be able to sell this reserve to investors … sale includes state agencies also."
Muhith: We wanted (our petroleum marketing companies) them to recover (from previous losses due to prolonged subsidies). We are considering this subject right now. This is coming before my committee, the economic affairs committee, which will take the decision and give it to the Prime Minister. My own position is that it must be reduced. Maybe not to the extent it has gone down because, well, you always have a national price. For example we had two prices for petroleum in our national, what should I say, psyche: $80 per barrel and $30 per barrel.
The Petroleum Corporation kept it at $30 but the government as a whole kept it $80. Now, the first decision I am going to give in this meeting is that the Petroleum Corporation cannot dictate a party; it will be a government price, whatever it is.
What would have happened if I had reduced the price? Not much, because government liabilities remained quite heavy with the Petroleum Corporation and others, so if I was settling accounts and making it more transparent and effective, then I would have had to clear my previous slate. Now it is almost cleared; and that is why we are taking the decision now.
So are you actually diverting the surplus funds to projects such as Padma?
Muhith: No, I am not expecting much of a short fall in the budget estimates. This year provided for 15% increase, the highest in the last few years. 11% has been the average, so this year already the ambition was high. Luckily the prices of other things are helping us, so I think in the revised budget there will not be much of a change.
Since I have brought up the Padma bridge project …
Muhith: It's not simply Padma Bridge project. Padma was a challenge; it required courage which the Prime Minister had, so we could start it.
Providing Tk 5,000 crores (50 billion) to Padma where we have increased government revenue from 90,000 crore to about 300,000 crore, which is likely to be 340,000 in the next budget, it does not present a serious problem; we can take care of it. But I should mention this: I have a list now of five or seven mega projects including Padma.
Padma, Payra, Maheshkhali … the development of Mongla is another one. These seven mega projects require investments to the tune of three to five billion (US) dollars in a period of five years.
There will be a sort of a capital budget or mega budget — mega project budget — which will be linked with how the income flows. So Bangladesh, which has practically little debt, will incur debts. You see, in Bangladesh, the total debt burden is only 22 or 24 billion dollars, which is absolutely nothing.
And none of these projects is somehow going to compromise the foreign exchange reserves?
Muhith: No no no, that will not be a problem. We are creating a sovereign fund of our own in order to be able to sell this reserve to investors … sale includes state agencies also.
You stated that in order to achieve Vision 2021 we would need a growth rate of 8%. We haven't achieved that yet; we've not even achieved 7%. Yet you guarantee that within the next year or so we should be able to achieve it. What do you base that guarantee on?
Muhith: The upbeat mood in the economy, the confidence in the economy … of everyone, every actor! Every stakeholder is confident that it can be done. That's it; this is most important.
Is confidence all that matters?
Muhith: Confidence alone is enough at this moment because we are doing it. We have the experience of doing it, so the same experience has to be repeated; that's all.
Coming to climate change, we are going to need a huge budget to fight that. Foreign monies can be obtained; what have you done so far to obtain the funds?
Muhith: Foreign money has been committed in books in large amounts. In actual fact, not much has been dished out because the foreign funds which have been created … the disbursement practices of these funds are horrible. I have spent from my own climate fund something like 3,400 crore (34 billion) in climate mitigation.
But these are very small mitigation projects …
Muhith: No no no, it may be small but look at the total amount. It's cited everywhere that Bangladesh is unique in this respect. No other country has been doing so much.
And what have I got as foreign aid? Hundred and seventy million!
The question is, what can you do to get that foreign aid? I mean, it's there, obviously.
Muhith: No, it's not there because they must change their procedure. With this procedure you cannot access them. Fifty million (US dollars) was committed to us in 2009 or 2010; it is still to be disbursed. Hundred and twenty million will be obtained because it is coming to the World Bank, so with World Bank we have settled the procedure. It will come easily, I know. So there lies the problem; they have the money but they have not been able to draw up the rules and regulations as to how to use it. The donors who have given the money are being very short-sighted. They think that people will loot it, therefore they have put in stringent conditions of disbursement.
Trade links with India, Nepal, Bhutan …
Muhith: Another big opportunity, and that is because of the present climate of relationship between these countries. I think never in the history of the sub-continent perhaps has the relationship between these countries been so good.
(Indian Prime Minister) Manmohan (Singh) permitted us to talk to Bhutan and Nepal, and even the north-eastern states if necessary, and draw up our programmes for power and water use. They said, "You agree on something. When you have agreed we shall sit with you; tripartite (talks) will take place, and more or less what is convenient to you, we shall agree on."
Accordingly, the meetings between Bangladesh, India and Nepal were concluded in the last year of the Manmohan government. Gowher Rizvi and Dr Mashiur Rahman did the work. It is held up now because we have to get it to this tripartite meeting. As soon as it is done, the three countries can have their joint projects. Bhutan's King is saying, "I have only one resource. We have some forest resources but really the money earning resource is only power; I am prepared to give you as much power as you want."
How long before we actually see it?
Muhith: Well, the new alignments which have been thought, they should give it to us in three years. India has now agreed, that "you choose where you want to build a road, our part we will do". This strip of India has to be built; that (clearance) is waiting for this tripartite meeting.
Allocations in social sector like health, education in Bangladesh are much lower than in Malaysia, Thailand, India.
Muhith: Yes, it is true that allocations are very low but the yields are pretty good; with such low investment I think we are not doing too badly in the promotion of health and education. The allocations are low because our total budget is very small. It's only 15% of the gross domestic product, whereas in India it is 32% of the gross domestic product; in Pakistan it is 28% or something like that. We have to reach that level and we are trying to do it. We have one big problem and that is, unlike Pakistan or India, this is a British type of government: one government for the whole country. This country can be easily divided into sixty-four countries; that is an issue of devolution of power and authority and that is not very easy to solve because without that the capacity for implementation cannot be increased at the rate at which I want it. I have talked to the Prime Minister and she is convinced and probably she will make some effort in seeing what kind of devolution can be done in 2018 or so.
So this is still in negotiation?
Muhith: Bangladesh needs a government in every district: one centralised government, but most of the jobs are done by the local boards: the councils. They do all the jobs and there is a relationship of grants. The central government will give so much in this programme if you do this, if you do that … that way you also influence the policy.
This is the third year of this term, which is a crucial point. Actually, it is a turning point. What's your turning point now for the future? What are you promising the country?
Muhith: I am not making any more promises than what I have made because I am not yet sure I can make this promise of the district governments. It is sort of in the cooking pot, but I can't announce it yet. So my announcement still remains that we will be a middle-income country – not low middle income, it will be better than that.
(About) this vision, however, I should say perhaps, even I was not that confident, it's the Prime Minister who made it the Vision of the Nation.
