Financially weak banks should consider mergers in a bid to reduce the pressure of default loans, according to Salman F Rahman, the prime minister's adviser on private industry and investment."There are systematic issues in our banking industry as borrowers are allowed to take short-term loans for long-term investments, resulting in many bad debts," he said during a press meet at the Dhaka Reporters Unity.Rahman then suggested that establishing more specialised banks for investment could help relieve the country's financial constraints in this regard.
Besides, the economic impact of Covid-19 increased the amount of non-performing loans (NPLs) worldwide and Bangladesh is no exception as borrowers struggled to pay back instalments amid the coronavirus-induced economic downturn. The adviser also emphasised widening the tax net to increase government revenue as the tax to gross domestic product (GDP) ratio in Bangladesh is among the lowest in the world. "Still though, the size of the national budget is about 10 times what it was back in 2009, when the current government assumed office," Rahman said, adding that regular taxpayers bear the brunt of this expense as many people remain outside the tax net.
He went on to say that the Bangladesh Investment Development Authority (Bida) would provide the necessary support required to facilitate foreign direct investment through its One-Stop Service (OSS) platform from next year. Potential clients can already avail more than 40 services from the OSS, an online platform integrating relevant government agencies to streamline the investment procedure in Bangladesh.
"However, complexities regarding certain policies of the National Board of Revenue are always raised by both foreign and domestic investors," Rahman said. Regarding the recent hike in fuel prices, Rahman said it was tough for the government to bear the huge amount of subsidies required to keep costs low. And although fuel prices recently fell in the international market, the demand is rising as the global economy has reopened. Responding to a question about the capital market, he said there was weakness in the market as 80 per cent of all investments come from retail investors and institutional investors make up the rest.
The case should be the opposite, he said, adding that the market is quite dependent on equity instead of bonds. "We are working to improve the bond market. Bangladesh Securities and Exchange Commission is also sincere in this regard." Explaining the reasons behind remittance outflow, Rahman said local companies often hire foreign experts for senior positions due to the lack of skilled domestic workers. And although more local experts are being employed by the garment industry, its emerging manmade fibre segment requires foreign expertise. But since these foreign employees spend much of their income while staying in Bangladesh, outgoing remittance does not exceed more than $300 million per year.
Regarding developments in the health sector, Rahman said the treatment for all maladies would eventually be available in Bangladesh. In addition, local pharmaceutical companies are gearing up to manufacture Covid-19 vaccines next year. "Beximco Pharmaceuticals will set up a dedicated facility for Covid-19 jabs within the next six weeks while Incepta Pharmaceuticals has signed a deal with Chinese companies to manufacture vaccines," said the vice-chairman of Beximco Ltd.
Beximco is in talks with the Serum Institute of India, Pfizer, Moderna, and other global vaccine makers to manufacture Covid-19 vaccines in Bangladesh. Vaccines will be required in the future as well since there is a possibility that the Covid-19 pandemic will continue indefinitely. "So, local vaccine manufacturing is required," he added.
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