The Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) Tuesday said unemployment problem is worsening due to the mismatch between supply and demand in the labour market.
"In order to solve the problem, Bangladesh needs to create jobs at a rapid rate, which can come mostly through rapid expansion of productive and skilled intensive formal and informal sector activities of public and private sector," the MCCI said in its review of Economic Situation in Bangladesh during July-September 2012 (Q1 of FY13).
The MCCI said country's overseas employment registered a drastic fall in recent months due to various types of restrictions imposed by major labor-importing countries, in particular the UAE, which was the biggest recruiter of Bangladeshi workers in recent years.
The scenario for Bangladeshi workers seeking employment in Japan, Iraq, Egypt and Saudi Arabia is also dismal. Only two workers went to Japan in September against some 380 people in August. In Iraq, only two persons got employment in September against some 71 in August. Manpower export to the UAE has come down heavily as the country slapped a restriction on issuing all kinds of visas for Bangladeshi passport holders.
ing to solve this problem and send workers to the oil-rich Middle East and emerging economies in Southeast Asian countries. The government has also moved to revive the flagging overseas employment situation by broadening footprints in regions as remote as Australia, New Zealand, Europe, Latin America and Africa.
According to the National Board of Revenue (NBR), total tax collection grew 6.34 percent to Tk 126.91 billion in July-August of FY13 compared to Tk 119.34 billion in the corresponding period of the previous fiscal year, buoyed mainly by income tax receipts.
The income tax collection by the NBR exceeded the target in the first three months of the current fiscal year with a 22.84 percent growth compared with the corresponding period of the previous fiscal. The NBR collected Tk.55.98 billion in income tax in Q1 of FY13 against the target of Tk 55.79 billion for the period.
The ADP implementation trend remains sluggish as usual in the first quarter of the current fiscal year. The rate of implementation of the ADP in Q1 of FY13 was 12 percent, slightly higher than the implementation of 11 percent in the corresponding quarter of FY12. According to IMED sources, all government ministries and divisions together have utilized Tk.63.81 billion from the total outlay of Tk.550 billion ADP in the July-September quarter of FY13. Of this total expenditure, the amount of local funding was Tk.43.07 billion (13 percent of Tk.335 billion allocation) while the project assistance was Tk.20.74 billion (10 percent of Tk.215 billion outlay). During the period, the implementation rate of the locally funded projects declined by 2 percent from 15 percent while that of aid-financed projects increased by 6 percent from 4 percent compared to Q1 of FY12.
Exports grew by as little as 2.06 percent to US$6.29 billion during the first three months of the current fiscal compared to US$6.16 billion in the corresponding period of the previous fiscal.
The low growth was mainly due to the financial crisis in the European Union (EU) and slow growth in the United States (US), which together account for more than 70 percent of the country's total exports. The export earnings also fell 5.19 percent short of the target. Earlier, exports experienced a negative growth from March last due to weak demand in the US and the EU markets. The situation slightly improved in July, 2012 but export growth again turned negative in August. Export earnings in September were lower than in August but yet recorded a 31.38 percent growth over September, 2011 because of very low figures in that month. The export earnings in July and August were US$2.44 billion and US$1.95 billion, respectively. The government set a US$28.0 billion export target for FY13, 15.3 percent higher than FY12 exports.
Import payments in the first two months of FY13 decreased by 3.30 percent to US$5,312 million from US$5,493 million in the corresponding two months of the previous fiscal (Table 8). In August, 2012 imports also stood lower by US$358 million or 12.63 percent to US$2,477 million, against USD2835 million in July 2012. This is also lower by 3.05 percent compared to August 2011.
The flow of inward remittances increased 19.48 percent in the first quarter of FY13 over the corresponding period of the last fiscal year.
This higher growth was an outcome of proactive roles of the central bank, and the stable exchange rate of Bangladesh Taka (BDT) against the US dollar. The BB already took a series of measures to encourage the expatriate Bangladeshis to send their income home through the banking channel instead of the illegal 'hundi' system. Bangladesh received US$3.55 billion during Q1 of FY13 compared to US$2.97 billion in the corresponding period of the previous fiscal.
According to the Economic Relations Division (ERD), foreign aid inflow rose by 162 percent in July-August of the current fiscal as Japan started releasing aid funds despite its own woes at home. Japan, the country's largest bilateral donor, gave US$113 million as loan. The World Bank (WB) dispensed US$108 million in credit while lending from the Asian Development Bank (ADB) amounted to US$53 million. The country obtained a record US$306 million of net aid in the first two months of the current fiscal, up from US$116 million in the corresponding period of the previous fiscal year. That compares with donors' commitment of US$544 million worth of loans and grants.
The government has repaid US$146 million worth of interest and principals of the outstanding loans during July-August period of FY13. In the same period of FY12, some US$147 million worth of interests and principals of the outstanding loan has been repaid. The implementation of foreign-aided projects increased by 5 percentage points in July-August of FY13 compared to the same period of FY12, due to a joint effort by the ERD and donors. Problems in foreign aid utilization are discussed every three months at the Local Consultative Group, a platform of the local representatives of development partners.
Foreign Direct Investment (FDI)
The Board of Investment (BoI) received 420 investment proposals worth Tk.148.76 billion in the first quarter of the current fiscal, 3.1 percent less than that of previous three months' Tk.153.53 billion. Joint venture and foreign investment proposals increased to 212 percent in July-September, 2012 compared to the corresponding months of the previous fiscal. A total of 49 foreign and joint venture companies were registered with their investment proposals worth Tk.10.43 billion in the BoI.
The BoI received the highest investment proposals from the service sector entrepreneurs that contributed 38.48 percent of the investment proposals, followed by textile sector 34 percent, chemical sector 9.0 percent, agriculture industry 8.0 percent, and other sectors 11 percent. The investment proposals could generate employment for a total of 82,314 people. There is, however, a big caveat regarding FDI. The reported figures are merely proposals. The reality may be different because of investors of many countries that plan to invest in Bangladesh fail to invest because of many inherent problems.
Because of the seasonal character of the country's crop sector, the production of all major crops will be spread over the coming months of the fiscal, but indirect evidence, e.g., export data for the first quarter under review, indicates good performance of the agriculture sector in the same quarter. Certain agricultural products are exported right from the production stage, i.e., immediately after production. Hence, increased export of a product in a given period can be strongly indicative of increased production of that product in that period.
Thus, exports of agricultural products, including fruits, vegetable and cash crop, showed a robust 17.54 percent growth to US$134 million in Q1 of FY13 compared to US$114 million in the corresponding period of FY12.
Data on domestic production for food grains are not available for the quarter under review. The actual production of food grains during FY12 stood marginally higher at 34.79 million metric tons (mmt) compared to 34.51 mmt during FY11, but fell 2.63 percent short of the target (35.73 mmt) set for the fiscal. In FY13, the DAE has set the target at 15.67 mmt for aus and aman production. Farmers have already started harvesting early varieties of aman rice in the north.
Domestic Market Prices
Domestic market prices of rice and wheat remained static during Q1 of FY13. In the fortnight ending 4 October 2012, wholesale rice price in Dhaka city markets remained static at Tk.23.5 per Kg, while retail rice price rose by 3.6 percent to Tk.29.0 per Kg. These prices are about 23.3 percent and 12.9 percent, respectively, lower that a year ago. Over the same period, both wholesale and retail prices of atta in Dhaka city markets declined sharply by 5.4 percent and 5.9 percent down to Tk.28.0 per Kg and Tk.32.0 per Kg, respectively. These prices are about 12.3 percent and 20.0 percent, respectively, higher than a year ago.
International Prices and Production
In the fortnight ending 5 October 2012, the price of Thai 5 percent parboiled, Vietnam 15 percent white, Pakistan 5 percent parboiled, and India 5 percent parboiled rice decreased by 1.8 percent, 2.7 percent, 5.3 percent and 1.2 percent down to US$560 per mt, US$428 per mt, US$450 per mt and US$425 per mt, respectively. However, Kolkata wholesale rice price rose slightly by 0.3 percent, up to US$310 per mt. The Dhaka wholesale price stood at US$288 per mt on the same date. Over the same period, both the Russian and the Ukraine wheat prices increased sharply by 6.1 percent each, bringing them up to US$350 per mt. The US SRW wheat prices also rose by 1.9 percent, to US$341 per mt. The Dhaka city wholesale wheat price stood at US$347 per mt on the same date.
The share of the broad industrial sector in the country's GDP increased to 31.26 percent in FY12 from 30.37 percent in FY11. But for the glaring energy and infrastructural constraints, the sector could have occupied a higher share in GDP. Most of the country's industries faced the power problem, but yet the broad industrial sector grew by 9.47 percent in FY12, a respectable 1.27 percentage points higher than the 8.20 percent growth in FY11.
There is, however, no official data yet on the performance of the sector in the quarter under review but since there has been a significant improvement in power supplies, it is very likely that the sector has maintained the past year's growth rate in the first quarter of the present fiscal. On the other hand, a drastic fall in the private sector credit and settlement of LCs for industrial imports in the beginning of the Q1 of FY13 might have had an adverse effect on production in all industrial sub-sectors.
The manufacturing sub-sector grew by 9.76 percent in FY12 compared to 9.45 percent in FY11 and its share in GDP rose to 19.01 percent in FY12 from 18.42 percent in FY11. The overall growth was mainly due to the contribution of small industries, which grew at 7.18 percent in FY12 as against 5.84 percent in FY11. The large and medium industries' growth decelerated from 10.94 percent in FY11 to 10.78 percent in FY12.
The BBS data on the quantum index of industrial production (both medium and large, and small-scale manufacturing) are not available since July-June of FY12. The actual performance in Q1 of FY13 will be known after the impact of recent developments in the domestic credit situation, power and gas supplies, and industrial imports on industrial production is properly assessed.
As in most other sectors of the economy, the growth prospect of the construction sub-sector hinges greatly on the development of the country's power and gas sectors. However, the increase in public sector rehabilitation of roads and highways in Q1 of FY13 indicates that construction activities grew faster in this quarter than in the past fiscal. As the BBS estimated, the construction sector expanded by 8.5 percent in FY12 compared to 6.5 percent in FY11.
A major problem now facing the construction sector is the high price of construction materials that has significantly raised the construction cost and hence the price of apartments. The price of construction materials has increased mainly due to short supply of raw materials but partly also because of the appreciation of dollar against taka. The price of each ton of mild steel (MS) rod increased by 44 percent, one bag of cement by 21 percent, one thousand bricks by 33 percent, and one cubic feet of sand by 15 percent during the last one year. Similarly, the price of electric cables went up by 67 percent, stone chips by 18 percent, tiles by 26 percent and aluminum fabrications by 16 percent during the same period.
The power supply situation was far more improved in the quarter under review, but yet the availability of power is grossly insufficient to meet the overall demand. In fact, the shortage of power now poses the biggest threat to Bangladesh's economic growth as many newly-built industrial units, homes and other establishments have long been deprived of power connections. The present demand for electricity is around 6,500 megawatt (mw), while actual generation varies between 5,700 mw and 5,800 mw. The estimated demand supply gap currently is thus around 800 mw in peak hours. Gas shortage accounts for at least half of this gap. The highest electricity generation was recorded at 6,350 mw on 4 August 2012 and it was the maximum generation in history. On 30 September 2012, power generation was 5,526 mw, according to BPDB website. To combat the acute power shortage, the government plans to increase power generation to around 7,000 mw by 2013 and 10,000 mw by 2015.
As per the BBS estimate, the services sector recorded a slightly lower growth of 6.06 percent in FY12 compared to 6.22 percent in the previous fiscal. The lower growth was mainly due to the lower growth in agriculture and large-scale industry, and slower expansion in trade activities. The broad services sector has nine sub-sectors, data on which are yet insufficient to enable an understanding of how they have fared in the quarter under review. Nevertheless, there are indications that real estate, community & social services, and financial intermediation have perhaps recorded slower growth, while transport, storage & communication, wholesale & retail trade, education, public administration, and hotels & restaurants have done well. A much faster growth of the overall services sector is possible in the present fiscal if production in real sectors increases at a greater pace.
Data on loan disbursement to SME sector are not available for Q1 of FY13. SME loan disbursements by banks and non-bank financial institutions (NBFIs) increased by 28.41 percent to Tk.93,148 crore. All institutional providers, viz., private banks, specialized banks, foreign banks, state owned banks, and non-bank financial institutions, participated in SME loan disbursements. These loans contributed significantly to raising production in SMEs. Bangladesh Bank is expected to undertaken its SME financing program for the present fiscal as it did in the past few years.