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“Beckoning a New Era of Prosperity”

Interview - May 12, 2015

Honourable Minister of Finance Abul Maal A Muhith sat down with United World to discuss the continuity and growth that Bangladesh is experiencing at present and the economic outlook for 2015. The Honourable Minister of Finance, along with the rest of the government, is well on its way towards the 2021 vision; to become a middle-income country.


I would like to start off with the 2014-2015 budget speech, "Beckoning a New Era of Prosperity," as you remarked, this is first time in history that the government of Bangladesh has been reelected. What opportunities does this continuity offer?

Well you see, the feeling in 2013 was that it was going to be a really tough election and it would be a neck and neck sort of competition. I must say our Prime Minister was very clever, and she strategized very well. The first thing that she did, which really made an impression, was in the month of September; she declared that her own government would be the interim government. She invited other parties to participate which was a good gesture because the question was that in the past elections had not been fair, so that was an attempt to move to the usual traditions in other democracies for ensuring fairness. In other countries it is the government in power that declares the day of election. During that time the government functions in caretaker mode, which means that you do not take major policy decisions on various things. She was not obligated to do this by the Constitution, it was her own decision. Further to this, in December perhaps, to discuss what we could do; she said, "come in and have a discussion" and she invited Khaleda Zia to the discussion as to how we can ensure a free and fair election.

Begum Zia rejected the offer, and that was the most stupid step taken by any political party in this country. It is the first time they are not in Parliament. So that was their great mistake, they gave us a free ride. It is questioned as to why there were so many uncontested seats in the elections; the simple reason was we were expecting a tough competition; therefore, to ensure the discipline in the party, we would forced our contesting candidates to withdraw. In the past some people would withdraw, and some people would become independent candidates, but this year 154 of the candidates were single candidates. That is why there are so many uncontested seats; it was because of the foolishness of the opposition that they got elected so easily. So, as you know we're criticized now that "well it was not much of an election; 154 seats are uncontested." Yes it is true, but that's not what we thought was going to happen. We thought that it would be a competition and we had to make sure that we would do well. Then, of course, the election was boycotted; fortunately this did not create any grave crisis in the country because it did not really resonate with the electorate.

Turning to your question, the advantage in having continuity, I feel very strongly about it. Because I have so many things I started in the last term. We had a very big agenda and a really detailed agenda, so it was quite clear at that time that you couldn't fully execute the agenda. So this has given us an opportunity to continue to execute the agenda, and add to it. It gives me the opportunity to achieve the elusive target that I've been looking for in the last few years; 7% growth. In the last year it remained stuck up in the high 6.

Unfortunately the current unrest and blockade may have some effect on achieving this, but I have the expectation that these difficulties will be over very shortly. The demand is that they will continue the blockade until the government is out of office, but there is no chance for that. The movement has not gained that kind of ground support, but it is affecting the economy; you see inter-district transportation being affected will in turn soon lead to shortages of food, in particular perishables. This is harming all people, so it is in the interest of everyone that this blockade is stopped as quickly as possible. 

I'd like to turn now to Vision 2021. How and what progress is being made towards the original vision?

Vision 2021 is very achievable right now because at the very core of the vision is becoming a middle-income country by 2021. Which means that there is a literal improvement in the living standards in the country. In my view, as we're proceeding, we shall reach our goal in 2018. Under the present rules and regulations it takes three years for the United Nations to assess the graduation of a country. In three years you'll see whether it is sustainable or not. We have already met the key indicators for one year, and this is remarkable because we have been able to maintain growth of around 6% during the Global Financial Crisis. A lot of people don´t realize that. They compare us like this; "Well, 6% growth was achieved before 2007-2008 so what's in it." Yes, there is something in it, because at that time global growth was close to 5% or a little more and now it is below 4%, it’s around 3.5%. In this period of meltdown, to be able to maintain 6% plus good growth is truly remarkable.

One of my most important strategies was putting the emphasis on agriculture. Because you get quick results and cover the largest amount of the population; so domestic demand gets a push from them. And this has happened, in the last five years we've had reasonably good agriculture growth and food production has really substantially increased in five years. In Bangladesh there is no way that you can increase available land. So from the same available land we need much higher production. I dream that we can also change the technological position of the country. In other sectors our exports growth has been quite substantial in the last 6 years. I think it has been more than double digits each year.

We are certainly in a very strong position and our foreign exchange reserves allow us to be a little bolder than what you would be otherwise. I think that is why we walked out of the negotiations with the World Bank on Padma. Two things helped me to make my decision; because when the Prime Minister told me that we would just walk out of it I didn't take it well. Because it was a cancellation, which is kind of a punishment. The reality is that the cancellation was a stupid decision by an existing president, and it was something he should not have done. He is not a good international civil servant. He was leaving on the next day, and they cancelled it on 29th. This is most discourteous behavior for an international civil servant. We are grateful that the new President of the World Bank was bold enough to make a different decision, he began negotiations. But I walked out of it for a different reason; in the bank the custom prevails that after two years it becomes a new project again and they have to do fresh feasibility, etc., which means wasted time. I was keen to start the project straight away as the entire donor community that did the design approval, not the World Bank only. It would not be efficient or productive to start the process again. We didn't change anything, we just began from where it was stopped. As far as budget allocation was concerned, I was not at all bothered because I have increased the budget size in the last three to five years by three times. So, I was quite sure that I should be able to provide the right funds!

What do you think needs to be discussed in Washington with regards to better development spending?

My most important discussion at the World Bank was on budget support, because budget support is something that is good for many reasons. Number one is: budget support means that you are supporting the policies of the government; as you get money released on various tranches and you use it any way you like within your program. I'm hoping that this sort of arrangement will be negotiated by the support program in the current fiscal year.

With the IMF there is a minor issue, which will be resolved in the next month. The truth is that the current IMF program was not asked for. I met the Managing Director in Korea in 2010 and he suggested before the Korean meeting that the IMF had new programs that extended credit facilities; and that Bangladesh may consider something of that kind. Because we do not have a balance of payment problem now therefore the IMF can't just come in, but there may be certain events or payment problems in the not distant future, so then they can come in.  That's how the program was prepared. The IMF mainly prepared the program on the basis of statements which my Prime Minister and I made. They said: "Well, you have made these promises but you have not fixed dates. So this is what we will do, we can provide dates, because dates mean that you have to act on them. That's how the program must be prepared." As I say, every condition is picked up from our speeches so I can't distance myself from them. 

One of the promises I made in the first budget was that the VAT law would be reformed. This has become one of the conditions and the reform should have been implemented by 2015, but it's a long process. Anyway, I already extended it to 2016, which they accepted. The reform is essentially to have one VAT rate. All over the world several have rates of 15% or 10%. But in Bangladesh, when we started it, we could not have one rate. Say the rate is 15%, but because we do not have good details on record we see that in this sector  value addition is very small, so let them pay 5%; let them pay 3%, or something like that. Even to estimate that we need to make a drastic change in the accounting system and that's why, though the law was passed in 2012, we targeted 2015 as the year of implementation; because you have to set up the accounting practices in smaller units. Through a committee review process there was a recommendation that the threshold should be increased. I don't see any difficulty with that, it is currently 28 lakhs, and they suggested it should go to 36 lakhs. Exact figures may not be the same, but it should be increased.  The committee was initially set up because the private sector was very unhappy with the law. Their complaint was that the government discussed with them but did not abide by any of their recommendations. It happens you know, with big institutions and the bureaucracy, it happens. I think we can now solve it quite comfortably. 

I'd like to talk further on private sector and, in particular, public-private partnerships. These are becoming a bigger part of the government program in priority areas such as power, gas and infrastructure.

I have been allocating funds for the PPP Program and nothing happens, no fund is distributed. It is a genuine criticism, and I was probably much too ambitious, I didn't realize that moving towards this new strategy would take such a long time. 

We do have a number of small projects that are running. For example, setting up dialysis centers, as there was much demand and the government had land so they have given the land to an investor who is investing in the dialysis center. It's a small example I'm giving because I think three or four dialysis Centers have been done all over the country, and financially it has been good for both parties. I think public-private partnership now will start to take off. With more funds and a closer look at implementation, I expect good moves on public-private partnerships in the coming years.

You spent your whole life serving Bangladesh as a civil servant here, as well as serving internationally. In your various roles you have remarkable achievements to your name. What advice would you pass on to the next generation? What do you most want to leave behind?

I want them to live in a country which is not poor, and live in a country where they can do whatever they want. That is freedom. That is democracy. The greatest gift of democracy is that it allows you to do what you want to do. It is not the best system, but it is the most acceptable system. It satisfies you all, you see? Everyone has the feeling that, you live a life with the chance to get this fellow out! You know, to me democracy has been a solution for many problems.

You see I'm very lucky. In 2000 I decided to retire. I mean I first retired in '83 from the civil service. I was one of the only officers who opted to retire on completion of 25 years of service. I had worked internationally with the World Bank for a year and with the ADB for two and a half years, and they gave me good money compared to what I had in the civil service. My early retirement from service helped me to live a life with honest earnings.

But I am very grateful that Sheikh Hasina, gave me a chance as an old man...

An experienced man!

You know I became minister of Sheikh Hasina in 2009, when I turned 75 years old [laughs]. The beginning of the Assembly, 25th of January 2009 we had the first session of Parliament, it was my birthday, and before we came to the session Sheikh Hasina had brought a small cake to cut for me [laughs]. It is wonderful at the age of 75 to be able to do some of the things that I wanted, accomplish some of the things that I want to leave for the next generation.