Only the tax break offered to businesses in the proposed budget for the 2021-2022 fiscal year will not be adequate to attract desired private sector investment, said the Centre for Policy Dialogue (CPD).
"The private sector will not see growth, if Bangladesh cannot improve its business environment or its position on the ease of doing business index. The government has to pay attention to this," Prof Mustafizur Rahman, distinguished fellow of the CPD, told the media at a post-budget briefing at a hotel in Dhaka on Friday.
Describing the proposed budget as "not enough", he said, "Businesses have applauded the budget in their instant reaction, but if private investment does not increase, the facilities offered in the budget would bring no fruit."
Towfiqul Islam Khan, senior research fellow at the CPD, said, "Corporations had been offered various tax breaks in the budget for the current fiscal year as well, but in the first nine months, private sector credit growth remained stagnant at 8.8% while the revised target was 14.8%."
"Besides, the decrease in capital machinery import was 19.8% in this period compared to the same period of the previous fiscal year. This indicates that private sector investment did not grow," he continued.
"Based on this experience, the government has set the private sector credit growth target at 15% in the proposed budget and private investment has been estimated to be 25% of the GDP. But, I think this target cannot be achieved," he further said.
Echoing Towfiqul Islam Khan, Dr Khondaker Golam Moazzem, research director at the CPD, said there is no guarantee that the facilities offered in the budget would increase private sector investment because "we did not see that happening in the past".
"Instead, the government should have offered the 10-year tax break facilities to small and medium enterprises for agro machinery industries. If they invest Tk1 crore, they would get the benefits as stipulated in the proposed budget. However, this limit should be reduced to Tk40 lakh," he opined.
Prof Mustafizur Rahman said even though the government has strongly considered issues relevant to the Covid-19 crisis at setting the revenue targets of the budget announced for the next fiscal, it failed to reflect the impact of the pandemic in allocating funds, he said.
"If the finance minister had not mentioned it in his speech, it would not have been clear from the allocation that the budget had been given with the Covid-19 crisis in consideration."
Referring to the fact that a huge number of people lost their jobs due to Covid-19, Mustafizur Rahman observed that although there has been some recovery in employment, the earnings of the affected are yet to get back to the pre-Covid levels.
Covid-19 has pushed up poverty and inequality in the country, he maintained, adding, "But, the finance minister did not propose any allocation for the new poor in social safety net programmes. He did not offer any new project or programme to protect jobs or to create new employment."
"The main theme of the budget should be reducing poverty and inequality through creating employment. But, there is no reflection of this commitment in the proposed budget."
He also said that the government could increase revenue earnings through ensuring some reform measures. A one taka investment in strengthening the National Board of Revenue (NBR) would ensure a return worth Tk100.
"Considering the lowest tax-to-GDP ratio in Bangladesh, the government should initiate reforms in the NBR," he said.
Fahmida Khatun, executive director of the CPD, presented the keynote at the event.
She said the finance minister in his budget speech said the budget attaches priority to health, agriculture and employment generation, but the actual allocation does not reflect these promises.