More realistic plans required in budget for post-Covid-19 economy: BCI
The FY2020-21budget’s allocation of Tk10,000 crore to handling Covid-19 must be spent fairly and prudently
The Bangladesh Chamber of Industries (BCI) said the plan outlined in the FY2020-21 budget, to overcome the economic downturn caused by the Covid-19 pandemic, is insufficient and should have been broader – with more precise and realistic action plans.
However, on behalf of the BCI, its president Anwar-Ul-Alam Chowdhury (Parvez) thanked the government for trying to address the pandemic in the budget. Incentives for trade and commerce, including in the health sector, agriculture, fisheries and livestock, plus food security, have been allocated more in many related sectors, which he commended.
The effect of Covid-19 may raise the unemployment rate and the BCI recommends special incentives be undertaken to deal with this situation.
In the current budget, Tk10,000 crore has been allocated to handle Covid-19. This money needs to be spent fairly and prudently. The BCI believes that to prioritise primary health care in the management of the health sector, the allocation to this sector should be spent efficiently – keeping in view the need to make healthcare services easily available to the people by involving both the public and private sectors.
Anwar-Ul-Alam Chowdhury said small and medium enterprises, at present, face a serious risk due to the Covid-19 pandemic. It is important to have a clear outline of what is important, not just the garment industry, but also to keep the small capital mills afloat and provide employment to these small traders through financial incentives and the creation of skilled workers.
Thanking the finance minister for raising the tax-free income limit for individuals to Tk3 lakhs, as well as setting a minimum tax at five percent and maximum tax limit at 25 percent – which is a reflection of BCI's budget proposal – he said businesses would undoubtedly benefit somewhat from the reduction in corporate taxes, and reducing corporate tax rates in the industry is required to keep the post-Covid-19 economy afloat.
Anwar-Ul-Alam Chowdhury proposed VAT returns systems be completed online, the refund system be simplified plus VAT, duty and advance tax be refunded within two months as per the provisions of value-added tax and related duties act.
In the proposed budget, BCI has proposed to reduce the advance tax on the import of raw materials and materials from five percent to four percent and adjust the advance tax to four tax periods instead of two tax periods.
The economic growth that has been projected at 8.2 percent in the budget also seems to be very ambitious and must be made more realistic.
The budget deficit is Tk1,90,000 crore. To meet this deficit, the government has promised to borrow Tk64,960 crore from the banking sector. If the government borrows this amount from the banking sector, it will hurt the flow of credit to the private sector.
Additionally, 11.2 percent of the budget has been allocated for the transport and communications sector, which is not urgent at the moment. The money allocated to this sector would have been more welfare-oriented if such incentives packages had been included in the rural economy. Many have now migrated from the cities to the villages because of Covid-19.
Special schemes can be taken to activate rural economic activities dependent on agriculture and cottage industries, keeping in view the need to reduce rural unemployment and create employment. Covid-19 incentives in small and cottage industries will keep rural economies running during the crisis.
A total 15.1 percent of the budget has been allocated for education and technology. There is a need to build a skilled workforce by establishing adequate vocational training schools at the upazila and district level and providing necessary logistical support to create employment plus increase productivity for the workers of large, small and medium enterprises. The BCI thinks that there is a need to have a clear outline in this regard while spending money in the budget.
The BCI president said the budget guidelines for tackling Covid-19 should be short-, medium- and long-term, which was not observed in the proposed budget. It is important to focus on the domestic market-oriented industries and not just on exports.
The government's incentives packages must be disbursed properly because there will be no expected benefit if they are delayed six months.
To continue the economic progress through balanced regional development, the BCI proposed taking necessary steps to create employment by encouraging investment and industrialisation not only in Dhaka or Chittagong but also in the northern and remote areas of the country.
Potential industries include agro-processing, light engineering, and many more. The development of these promising industries will require educated and skilled workers – in this case, education plays a big role through which professional and technical skills can be developed in people. For this, the Ministry of Human Resources is now necessary.
The BCI president said despite the encouraging growth over the last decade, Bangladesh is under the pressure of rising unemployment. That pressure is rising because of the Covid-19 outbreak. A large number of migrant workers are facing job uncertainty due to the virus' effects worldwide. So, sustaining existing employment is a greater challenge than creating new jobs.
The decision to disburse a loan of Tk2,000 crore to increase employment opportunities for expatriate workers and unemployed youth in agriculture and small and cottage industries is timely. However, the basis on which such loans would be given is not outlined, so, like other years, only opportunity-seekers will avail it.
If the VAT on utility services of SME entrepreneurs is waived from March to September, it will be easier for entrepreneurs at small and medium enterprises to survive in the current situation. Additionally, the BCI has called for a waiver of rent on industrial establishments located in the Bangladesh Small and Cottage Industries Corporation and Export Processing Zones from March to September.
At the local level, a source tax of two percent has been proposed for the purchase of daily necessities through local letters of credit, whereas in the past there was no source tax. This will increase the value of daily necessities. The BCI suggested it be fixed at one percent instead of two percent.
The source tax on the export value of export-oriented industries has been increased to 0.5 percent. The BCI is proposing to set the tax at 25 percent and corporate tax at 10 percent for all export-oriented industries.
He called upon the government to take necessary steps to expedite the disbursement of all incentives packages announced by the government through commercial banks – including a working capital loan assistance package of Tk20,000 crore for small and medium enterprises and Tk30,000 crore for large-scale industries.
He added that the practice of laundering black money continues in the proposed budget and that it is illogical because earning black money and using it are both unjust and illegal acts. This will discourage legitimate earners.
Finally, the BCI expressed its gratitude to the prime minister for the financial incentives packages to address the Covid-19 situation.