Things Remain The Same

Things remain the same 3 months later, Commit true reforms to make things better.

It has been more than 3 months since the interim govt assumed power with commitment to sweeping reforms. It is too early to comment how it made progress in that endeavor. White paper on economy is likely to see the light by Sunday next week. No major change is visible, this is the perception. One cadre-based party witnesses lifting of restrictions while the other one sees imposition of restrictions. Financial institutions free from one political creed while some specialized financial institutions see tightening of grip by other political creed. Financial institutions should be free from control of any kind of political creed. This should be the governing principle of financial institutions. At the same time, business and employment market should be free from all kinds of creed and garrison-based interference.

Consensus and reconciliation should take place among feuding parties. What we are seeing now is that consensus is being formed among like minded political parties. It will not dispel the uncertainty in politics and will not send a positive signal to the economy. Budget deficit may become wider in this backdrop and foreign loan may not be that easy next year. Moody's downgraded credit ratings of Bangladesh. Other credit rating agencies are likely to do so. Interim govt has not yet spelled out the date of next election. But elite civil society members stress for 4/5 years for implementing the reforms.

Current govt has a favorable ground to end discriminatory policies and to set up check and balance mechanism among state organs,particularly holding law enforcement agencies accountable to people. It is also in a favorable position to hold electoral reforms. Ordinances targeting free and fair election, accountability of law enforcement agencies and economy are enough for this moment. For these reforms, a govt does not need long time to stay in power. Most importantly , we have to initiate the culture of practicing democracy and accountability. This habit takes time to develop. A central bureaucratic machinery and a group of enlightened cannot install it and ensure it. But they can start the process.

Americans get rid of slavery through bloody disagreement. They outlawed slavery. They strengthened institutions to make sure they do not have to walk on the same path over some issues.

Govt ended controversial law that gave immunity to powerplant owners. It is planning to end draconian laws. Caretaker govt is being brought back to surface. But govt indulges in monetary and fiscal expansionary policies. While govt is lacking vital revenues, it lowered tariffs and VAT. Govt is providing liquidity worth Tk 225 billion to 5 trouble ridden banks. Earlier it had reintroduced a law that relieves microcredit agencies from tax obligations for 5 years. It is planning to issue bonds worth Tk 50 billion to pay energy dues¹. It is a continuation of practice started by previous regime that I highlighted in my "Economic Reforms: Morning Shows The Day" piece². It is mulling to introduce "Universal Basic Income", which aims to give every family a minimum income per month,costing the govt Tk 750 billion every year. Look what happened to Hasina regime,which gave 10 million family cards to families to provide subsidized food. It hardly reached the target group and her official residence got plundered, mob looted her fish, vegetables and swan. Moreover, there are kleptomaniac groups who are poised to siphon off this kind of social security programs.

It is a laudable move to give the exporters 8-year long extended credit to mitigate the loss from transitory effect of depreciation of Taka. But SMEs need more this kind of credit facility than exporters who benefit from Taka depreciation. I read a news report that divulged how a Gazipur-based SME sustained loss from rising interest rate,costing him around Tk 1.8 million. This SME needs more support from the govt to recuperate the loss.

Central bank said it would no more provide liquidity after this latest one. I think it will go for more policy rate hikes after the scheduled visits of IMF in the first week of December. Broader political consensus among feuding parties, alignment of monetary and fiscal policy, innovative program like the extended credit and a specific date on election could be the recipe for recovery. Otherwise, we will drive along the same roundabout.

References:

1. "Govt Owes Tk 500 Billion To Energy Sector,Govt Mulls Issuing Bond",Sheikh Abdullah & Abul Kashem,The Business Standard,November 05,2024. Link:https://www.tbsnews.net/bangla/%E0%A6%85%E0%A6%B0%E0%A7%8D%E0%A6%A5%E0%A6%A8%E0%A7%80%E0%A6%A4%E0%A6%BF/news-details-274296
2. "Economic Reforms: Morning Shows The Day",Rezaul Hoque,https://hoquestake.blogspot.com,January 12,2024. Link:https://hoquestake.blogspot.com/2024/01/economic-reforms-morning-shows-day.html?m=0

La Semaine Dernière A Mes Yeux

(23 novembre --- 29 novembre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
23	Khichuri,Pangash,Œuf	Riz,Petit poisson	Riz,Chou,Petit poisson	---
24	Riz,Soupe aux lentilles,Œuf	---	Riz,Ruhi,Soupe aux pois blanc avec tête de chèvre	Goyave
25	Riz,Soupe aux pois blanc avec tête de chèvre	---	Riz,Ruhi	Singara(marché)
26	Riz,Soupe aux lentilles,Œuf	---	Riz,Poulet	Singara(marché)
27	Pain,Poulet	---	Riz,Épinard,Pangash	Singara(marché)
28	Pain,Chou fleur,Œuf	Riz,Soupe aux lentilles,Pangash	Pain, Soupe aux lentilles,Pangash	---
29	Pain,Tête de chèvre dans pois blanc	Riz,Poulet,Soupe aux lentilles	Pain,Œuf,Soupe aux lentilles	---

Specify The Timeline

Clear timeline to transfer of power May bring the recovery much earlier.

Interim govt completed its 100-day in power. In a televised address, Chief Advisor told the country would head towards election after necessary reforms.But no specific date is provided. Earlier an ordinance had been introduced validating the rule of the interim govt. It laid out that tenure of the current interim govt would be till the assumption of power by a new elected govt. From the ordinance, one cannot surmise the duration the current govt intends to stay.

No one is questioning the intention of the govt,but a specific election date is good for the economy. It will get a signal when this will end and when a new govt will take power. It will dispel uncertainty with so many factors. Take for instance the real estate sector. Since the regime change, the sector has been going through a bad spell. Some developers are too afraid to kick start new project. And many property owners are finding it difficult to encash / resell their properties as there are no buyers. Moreover, govt raised registration/reregistration fees to a level that discourages resell of properties. Since most of the nouveau riche are related to outgoing regime, there are not too many buyers with ample money to invest into property. It is a safe sanctuary of opaque capital as law permits investment of opaque capital in this sector. Since the anti-corruption drive is strong, investment of opaque capital into real estate has dried up. In addition, developers with genuine capital are reluctant to invest as interest rate is on the rise. It will raise their cost during implementation of the project. A BBC Bangla report revealed that a retired teachers couple shelved their plan for buying new apartment as they perceive the time uncertain,fearing unable to pay the instalment or developer company may go bankrupt. A specific election date will send a signal to the housing market when the tenure of this regime will be over. So the group planning to wind up business will go out of the business and the other group planning to step into this sector will have an idea when to step in. Some planning to go abroad will sell their properties to developers. Investors with opaque capital will get an idea when to invest. Construction sector recruits a lot of workers,addressing unemployment in major cities and absorbing rural labor force residing in the cities. Now this vital sector is in stalemate as the status of the current govt is creating some kind of uncertainty. Ongoing sit-ins, workers agitation, political differences among parties do not offer much room for optimism.

I thank the govt for honest reporting of the inflation data. Many blamed this govt for the rise in inflation rate(10.86%) during October. Inflation rose because govt took into account true price levels of the commodities. I will thank the govt more if it allows multiple parties including platforms of banks and the central bank to calculate and publish CPI and PPI.

In terms of revenue collection, govt achieved target from VAT but lags behind the targets of income tax and other duties. Govt is keen to tackle the inflation by March when the fasting month of Ramzan will commence. In this regard, it reduces the prices on edible oil,sugar,onion,rice and dates. As I have mentioned earlier,govt may review its decision on tariff on sugar and edible oil since the two are major sources of import revenue. Moreover, restrictions on potato export and revoking cash subsidy on potato export may lower the prices on potato. Potato export to Russia, Japan and the Middle East to some extent aggravated the situation.

I am expecting some structural changes from this govt rapidly. Govt doled out cheques as compensation to victim families of July-August movement. If it introduces an ordinance that requires perpetrator law-enforcement agency or personnel pay compensation to the victims of unlawful act, then it will curb tremendously recurrence of such extra judicial incident. The govt has a moral high ground to introduce such ordinance and no one will question its objective.

If the govt takes more time to publish white paper on corruption it may take it. But I have some observations on money laundering. Groups or individuals channelled out money outside the country without proper consent of Bangladesh Bank but showed it on the tax files /legal documents of the group's foreign subsidiary (under the same name) should not be deemed as money laundering. The money is in productive use as part of risk mitigation and maybe some regulations at home did not allow it to be transferred in legal way. Transfer of money to shell companies under false name or to unproductive investment should qualify for money laundering accusations. At the same time, govt should introduce another ordinance that holds agencies engaged in money laundering or failed to detect it.

We see in many countries there are parliamentary committee to oversee the conducts of security establishment. Unfortunately, we have not seen yet any reform commission on defense. Had they been active in time and played their role in due course we might not have seen so much corruption and a party might not become so authoritarian. Most of the corrupt groups are closely associated with the Armed Forces or police. Moreover, the Armed Forces were also involved in many mega projects. Yet they are not accountable for their conducts. There should be parliamentary oversight committee to summon them and offer their explanation over controversial issues.There should be constitutional clauses on safety of media outlets,journalists and owners of outlets to report on defense related irregularities. Since govt is opening new reform commission at measured intervals,it may open a new one on defense.

So far remittances and foreign assistance/soft loans give the govt an aura of confidence to start some expansionary fiscal policy. But I think from March it should align its fiscal policy with the monetary policy,which needs more tightening as policy rate is still lower than the inflation rate. The first priority is to fix the economy and then to go for other ones. Resuming regulatory role and a specific timeline to transfer of power may send a positive signal to the economy.

La Semaine Dernière A Mes Yeux

(16 novembre --- 22 novembre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
16	Pain,Chou fleur	Riz,Chou fleur,Poulet	Riz,Chou fleur	Biscuits
17	Khichuri,Œuf	Riz,Courge amère,Soupe aux lentilles	Riz,Courge amère,Soupe aux lentilles	Pomme
18	Khichuri,Œuf	Riz,Radis,Soupe aux lentilles	Nouilles	---
19	Khichuri,Œuf	Riz,Feuilles de radis,Purée de banane verte,Soupe aux lentilles	Pain,Feuilles de radis,Purée de banane verte	Pomme
20	Pain,Chou	Riz,Feuilles de gourde de bouteille,Purée de banane verte,Soupe aux lentilles	Riz,Feuilles de gourde de bouteille,Purée de banane verte,Soupe aux lentilles	---
21	Riz,Soupe aux lentilles,Œuf	Riz,Épinard,Pangash	Riz,Épinard,Pangash	---
22	Riz,Soupe aux lentilles, Œuf	Riz,Radis	Pain,Radis	---

Stop The Tie-in

Privileged sales and banks' money to in-laws Lead us to a market full of flaws.

In recent weeks, some mobile operators are offering mobile phones with new SIM connection. "Tie-in" sales are pretty common in consumer activity but we have to keep an wary eye on such sales as it has the potential to harm consumer interests in the long run. In addition, many leading operators are offering insurance to protect your cell phones from future damage. At first sight, it appears harmless and beneficial to consumers. But a deeper look may unravel some uncomfortable truth.

For instance, operators offering "tie-in" sales are also providers of high speed data. With high speed data, you will often notice that browsers auto add plugins or updates,often supplied by malicious providers with dubious intentions. Furthermore, YouTube streaming or other live streaming like in Facebook often makes your device vulnerable to hacking. Apart from that ,WiFi hotspots and free WiFi network also make your handsets and devices vulnerable to hacking. Maybe some deranged employee within an operator may engage in harmful activities, causing you lots of trouble financially. I experienced these things in the past and am often vocal against such consumer practices. I used the public operator for some time at ease ,experiencing higher pace of internet and no damage to my handset whatsoever. But for the last 11 months, I have stopped using it as services deteriorated. Switching to other operators only brought back those bad experiences back. Why are you offering insurance to handsets or new handsets with new connections if you are not acknowledging there are some faults in your side causing damages to consumers' handsets? Damages range from wiping out the operating software to key-logging the onscreen keyboard,from dark screen to dysfunctioning touch pad. Very few consumers have little knowledge about what happened. Moreover, lack of technical knowledge of the law enforcement agencies and consumers also fails to track the origin of the problem .

From the perspective of fair business, "tie-in" may cause unhealthy business competition. Say company A holds significant market share in industry A and another company B (say it is in the mobile phone business) holds significant market share in industry B. The companies decide to offer "tie-in" product for industry A(say the mobile SIM market). This "tie-in" will consolidate their market shares for both the industries by pushing up their sales. In this time of austerity, while consumers tighten their pockets, this kind of "tie-in" gives unreasonable privileges to the companies who consolidate their market shares to worrying level. This should be stopped.

At the same time, there should be no access to public banks' money for operators whose owners are politicians or in-laws of politicians. In the past, we witnessed how banks' money fallen into the hands of politically blessed in-laws became bad loans, only worrying the ordinary depositors and worsening banks' balance sheet. If they have better business ideas, they should go to the stock market, to IFC/MIGA or to the Dubai/Singapore based banks. They should not be given access to local banks' money.

From poultry ingredient market to the cellular networks ,we see how tie-in is adversely effecting the consumers, leaving a heavy blow to welfare and competition alike. For the sake of business and consumer's interest in this time of austerity, all kinds of privileged sales pitch should be stopped.

La Semaine Dernière A Mes Yeux

(09 novembre --- 15 novembre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
09	Khichuri, Œuf	Riz,Ruhi	Riz,Ruhi	Biscuit
10	Khichuri,Ruhi,Œuf	Riz,Purée de banane verte,Ruhi,Poulet	Pain,Poulet	Pomme
11	Riz,Poulet	Riz,Soupe aux lentilles,Ruhi,Poulet	Pain,Lait	---
12	Riz,Soupe aux lentilles,Œuf	Riz,Pomme de terre,Soupe aux lentilles	Riz,Pomme de terre,Soupe aux lentilles	Pomme
13	Khichuri,Œuf	Riz,Chou fleur,Soupe aux lentilles	Riz,Chou fleur,Pianju(marché),Soupe aux lentilles	Pomme
14	Khichuri,Œuf	Riz,Tête de Ruhi dans soupe aux haricots mungo	Riz,Tête de Ruhi dans soupe aux haricots mungo	Singara(marché)
15	Khichuri	Riz,Feuilles de radis,Petit poisson	Riz,Feuilles de radis,Petit poisson	---

Need Prudent Decision

Prudent macroeconomic management Helps to weather the bad event.

Bangladesh Bureau of Statistics (BBS) is about to publish the inflation rate for October. September inflation rate declined to 9.92%. Despite the ongoing contractionary monetary policy, market has yet to reflect the official inflation data. Govt lifted all duties and taxes on rice import following the heavy loss of Aman paddy cultivation due to unusual precipitation in August-September. This is happening at a time when the govt embarked on bringing the corrupts to the book. During this anti-corruption drive many groups are reluctant to open L/C. On the other hand,high interest rate and lack of instructions from the central bank bar new entrants to go for rice import. Govt has to play crucial role to encourage grain import in this troubling time.

Yesterday(November 06), I read a Reuters report that depicts pessimism about economy following Trump's victory. The report says a fresh round of trade war would accelerate inflation as consumers will pay higher prices for consumer goods¹.

I do not think so. Previous round of trade war under Trump presidency shrank global growth by 0.30%,according to the IMF. This time too, both the IMF and the World Bank projections hint slow down of major economies except the USA for next year. When growth shrinks,demand for output falls and it brings down the price levels. Trump's plan to impose 10% tariff on all foreign goods and 50% tariff on Chinese goods are likely to protect the car industry, particularly the electric vehicle industry. Apart from that it will bring pace to import substitution industry in the US along with the new tax rebate policies for the US businesses. This is heading towards more jobs,more income and more consumption. Trump is likely to recuperate loss from tax rebate by cutting govt spending abroad ( less military spending abroad, less foreign assistance, less fund for climate change etc). This Trumpian resource mobilization will boost consumer activity, a good news for Bangladeshi apparel export. I also disagree with Reuter's fear that it will delay Fed's plan for lowering the policy rate. Fed has already lowered the policy rate. Fall of demand for goods will bring down the price levels. Moreover, Saudis are planning to cut the prices for oil for Asia in December². Prices of fuel, which influence the price levels, registers a decline. So lowering trend of inflation along with boost of American export due to increasing military spending across the globe will force the Fed to lower the policy rate. Back in June 15 this year, I highlighted in my piece titled "Macroeconomy Amid Trade War V", how fall in prices of soya and soya meals may help Bangladesh in the fight against inflation³.

Most importantly, high tariffs on Chinese goods will help relocating manufacturing units to other countries. More FDIs are expected under Trump presidency. In general for Bangladesh, non-food inflation will come down in the first two quarters of next year if any disaster does not disrupt the global supply chain.

Many social media channel claimed China refused to provide fresh credit to Bangladesh. They equated the decision with the regime change. I think it is economic reason rather than political one. Prior to former Prime Minister's visit to China,a Politburo member of Chinese communist party came to Bangladesh in an official visit along with EXIM bank of China and other ministry officials. They held talks with the central bank about the macroeconomy. JICA officials also held talks with the central bank about economy at this time to know first the real economic situation here. According to a report by Reuters⁴, Chinese public debt tripled its GDP due to the crisis in its housing market. So it slows down the economy and the party directing fresh credit to the manufacturing sector at home while the Belt and Road project gets less priority. I think for this reason China is not committing new loan to Bangladesh.

Last week, another decision, it appears, may hurt govt's revenue collection target for the next year. Government decided to revise 30% tax on capital gain from the stock market. The new rate is 15%. It will evidently hamper govt's revenue collection target of Tk 4.8/5.1 trillion next year. No ordinary or common people come to invest in share market, where opaque capital enjoys safe sanctuary. Earlier govt slashed tariff on edible oil and sugar. There are too many fiscal relaxations when the fiscal policy is supposed to align with the monetary policy. I think except the handful few kitchen items , which are consumed by all income groups, there should be no relaxation on taxes.

Government has to reconsider its decision on soft tax policy when normalcy in daily life and kitchen market has yet to return [and it has to meet a colossal revenue target]. Economic activities are not in full swing. Though external situation is in favor of a quick recovery, weathering the bad spell requires prudent economic management.

P.S.: BBS published the inflation for September when I am preparing the piece. General inflation increased to 10.87% and food inflation increased to 12.66%.

References:

1. "Trump Victory To Reverberate Through Global Economy ",Balazs Koranyi,Reuters,November 06,2024. Link: https://www.reuters.com/markets/us/trump-victory-reverberate-through-global-economy-2024-11-06/
2. "Aramco Cuts Oil Prices To Asia",Yahoo Finance,November ,06,2024. Link:https://finance.yahoo.com/news/aramco-cuts-oil-prices-asia-185011180.html
3. "Macroeconomy Amid Trade War V",Rezaul Hoque,June 15,2024.https://hoquestake.blogspot.com. Link:https://hoquestake.blogspot.com/2024/06/macroeconomy-amid-trade-war-v.html?m=1
4. " Why Trump Tariffs Pose A Bigger Threat To China's Economy This Time",Marius Zaharia,November 06,2024. Link: https://www.reuters.com/world/china/why-chinas-economy-is-more-vulnerable-trump-tariffs-this-time-2024-11-06/

La Semaine Dernière A Mes Yeux

(02 novembre --- 08 novembre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
02	Riz,Lait	Riz,Petit poisson	Pain,Soupe aux lentilles,Œuf	---
03	Riz,Soupe aux lentilles,Œuf	Riz,Soupe aux lentilles,Petit poisson	---	---
04	Khichuri,Œuf	Riz,Feuilles de radis,Soupe aux haricots mungo avec tête de Ruhi	Pain,Soupe aux haricots mungo avec tête de Ruhi	---
05	Riz,Œuf,Soupe aux haricots mungo avec tête de Ruhi	Riz,Petit taro chinois,Petit poisson	Pain,Petit taro chinois,Petit poisson	---
06	Riz,Œuf,Soupe aux lentilles	Riz,Ruhi,Feuilles de radis,Purée de banane verte	Pain,Ruhi	---
07	Khichuri,Œuf,Ruhi	Riz,Purée de banane verte,Soupe aux lentilles	Riz,Ruhi	---
08	Khichuri,Œuf	Riz,Petit poisson,Soupe aux lentilles	Riz,Petit taro chinois	---