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ProfilesNovember 1 2013

Bangladesh finance minister seeks middle ground

Bangladesh’s finance minister, Abul Maal Abdul Muhith, discusses the country’s stable gross domestic product growth, achievements in tax revenues and why he is confident that Bangladesh will become a middle-income country in the next five years.
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Bangladesh finance minister seeks middle ground

The finance minister of Bangladesh, Abul Maal Abdul Muhith, is about to head off to his home district for four days. It will be a chance to touch base with his constituents ahead of the country’s upcoming elections.

But for now, he reflects on the government’s objectives that were laid out after prime minister Sheikh Hasina was elected in December 2008. “This government came to power five years ago, which was a critical time for the world as well [as Bangladesh]... We had time to think in our election manifesto and this is what we more or less followed. The position we took was that we should give emphasis on domestic demand, agriculture and rural development. And the country was going through a serious power crisis, so that had to be given high priority,” says Mr Muhith.

Steady growth

Despite the global recession, Bangladesh has managed to maintain its stable outlook with ratings agencies, and a report by Standard Chartered notes that the country has not recorded negative growth in the past 27 years. In more recent years, Bangladesh’s growth in gross domestic product (GDP) has been consistent, hovering around the 6% mark. World Bank figures show that in 2009, GDP growth was 5.74%; in 2010 it was 6.07%; 2011’s figure rose to 6.71%; and in 2012 it was 6.32%. “Our biggest success is not in the growth, but the stability in growth,” says Mr Muhith.

Per capita income in Bangladesh is about $1700 per annum, a figure that Mr Muhith expects to increase. “I am confident that the process we started – of leap-frogging in development – is going to continue and Bangladesh will be a middle-income country in the next five years,” he says.

Mr Muhith points to the country’s developmental achievements in the past 20 years, for example, in reducing infant mortality by combating diarrhoea and introducing improvements in immunisation and nutrition. By the end of 2012, Bangladesh had already met several targets of the UN’s Millennium Development Goals, such as reducing poverty and improving education. In a meeting with Bangladesh’s prime minister during the UN general assembly in September 2013, UN secretary-general Ban Ki-moon praised the country’s leadership on these goals, as well as its empowerment of women.

Growth in the government’s tax revenue has been another achievement for Bangladesh. “In 1983 we collected 8% of GDP as revenue, in 2009 we collected a little less than 11%. Now we are collecting 14% as revenue. Thirty years’ growth has been achieved in just five years,” he says.

Hard task

But challenges for Bangladesh remain, not least because of the global economic environment. “The global recession has been quite strange – it is not leaving us,” says Mr Muhith. “We have managed quite well in exports, but the trade picture globally is not that good.”

Remittances from overseas workers, which contributed to Bangladesh’s current account surplus in 2012, have declined. “Remittances growth has suffered in the past four years,” says Mr Muhith. According to data from the central bank, inflows of remittances in August 2013 were $1.01bn, down from $1.24bn the month before, and down from $1.18bn year on year. 

Inflows in the form of foreign direct investment (FDI) started strongly at the beginning of this fiscal year. Standard Chartered Global Research notes that FDI into Bangladesh is mainly in the ready-made garment, banking and energy sectors. In the first two months of fiscal 2013, FDI stood at $317m, representing year-on-year growth of 36%. 

In Mr Muhith’s meeting room there is a copy of the morning’s newspaper, which carries a front-page story on violent protests the day before. When asked to comment on the dispute – and subsequent riots – over the minimum wage for garment workers, Mr Muhith says: “We adjusted wage rates three years ago when [the rate] was doubled.

“I think the garment industry was too conservative with its declaration that it would only increase wages by 20%. In my mind that is absurd and the demand of the workers to take the minimum to Tk8000 [$100 a month from a current level of Tk3000 a month] is also absurd. Unfortunately the garment industry generated this demand and many others are taking advantage of it,” he says, adding that he expects the matter to be resolved with a compromise.

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