‘Increased money velocity can transform Tk1 into Tk10’

Ashraful Islam, Planning Editor, Barta24.com, Dhaka
Photo: Barta24.com

Photo: Barta24.com

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Renowned economist Dr Birupaksha Paul emphasised the need to break the monopoly in the mobile financial service (MFS) sector in order to enhance the circulation of money.

He acknowledged the transformative impact of MFS providers like bKash and Nagad on the economy of Bangladesh but stressed that their monopolistic practices, which contribute to their significant profits, must be dismantled to promote greater velocity of money.

Birupaksha Paul, a former Chief Economist of Bangladesh Bank and Economics Professor at the State University of New York in Courtland, recently shared these insights in an exclusive interview with Barta24.com, focusing on contemporary issues within Bangladesh's financial sector.

The discussion encompassed the potential of digital technology in financial services, digital financing, remittances, and the assessment of current trends. Ashraful Islam, Planning Editor of Barta24.com, facilitated the conversation.

Dr Paul suggested that the development of the mobile financial service sector should strive to reach the level that the remittance sector has seen through its portrayal as a matter of public interest. He believes that this advancement will enhance the velocity of money, allowing a one-taka note to generate value equivalent to Tk10.

He also advocates for increased competition for the development of the mobile financial sector.

The first part of the interview with Birupaksha Paul unfolds as follows:

Barta24.com: Despite some negative feedback regarding digital financing technologies, they undeniably contribute to diversifying financial services. What's your take on this?

Dr. Birupaksha Paul: Absolutely, technology has played a pivotal role. Back when I was a university student, I recall a gentleman who used to deliver money orders in the afternoons. He'd hand over a portion of the amount upfront, keeping some as gratuity. People eagerly awaited his arrival for news of their money orders.

Back then, digital technology wasn't as prevalent. Now, platforms like 'bkash' and 'Nagad' have revolutionised the process. I even discussed this in an interview with The Economist. Today, even a rickshaw puller can easily send money to their relatives and notify them. However, the transaction costs remain high, which needs addressing. Ideally, these costs should be brought down to zero, exploring alternative means to benefit the MFS service providers.

Institutions like 'bKash' already generate revenue through advertisements on their platforms. The government may consider exploring alternative revenue streams for them.

If a common man is charged Tk20 for a transaction of Tk1000, it poses a difficulty for him. With that Tk20, he could purchase another essential product. Every taka matters, especially to the common man.

During my tenure at the Bangladesh Bank, 'bkash' dominated 85% of the mobile financing landscape before other competitors emerged.

In Bangladesh, once a monopoly is established, it tends to persist for a prolonged period. Conversely, abroad, creating a monopoly often faces numerous challenges. High Court intervention can break a monopoly, and court scrutiny is involved in potential mergers to prevent monopolistic outcomes.

Unlike many countries with robust Anti-Competition Commissions, our Competition Commission lacks visibility and effectiveness. It is often led by retired bureaucrats, which contributes to institutional weaknesses in innovation index rankings.

Barta24.com: Why hasn't the system developed for remittance been replicated in internal mobile financing?

Dr. Birupaksha Paul: Unlike expats, who don't incur extra costs when sending remittances, internal mobile financing lacks similar efficiency. To facilitate easier access to funds domestically, substantial agency support is crucial. Increasing the circulation of money, as advocated in the Quantity Theory of Money, strengthens the economy. By boosting monetisation and velocity, consumers can meet immediate needs and enhance overall satisfaction and social welfare.

Personal experiences highlight the swift transfer of funds, exemplifying the convenience and benefits of efficient financial services. For individuals like rickshaw pullers, who rely on timely transactions to support their families, these services provide invaluable consumer surplus. Ensuring timely access to funds can prevent tragic consequences, promoting safety and well-being within society.

Beyond economic benefits, these financial services offer psychological and welfare advantages, underlining their significance in enhancing inclusion and overall societal welfare. It's imperative to delve deeper into these topics to fully understand their impact and potential.

Barta24.com: How crucial will digital technology be in achieving the macroeconomic goal of transforming into a developed country by 2041?

Dr. Birupaksha Paul: Technological advancement is imperative for progress. We must assess our position in the Global Technology Index to gauge our advancement. Mere increases in per capita income do not guarantee development, as evidenced by cases like Yemen and Somalia, where sudden resource discoveries did not translate to overall development due to underlying societal issues. Development requires a multifaceted approach, encompassing education, societal values, and governance.

Enhancing social safety, promoting justice, and fostering empathy are vital components of progress. Amartya Sen highlights the importance of a free media in preventing famines and fostering accountability. Furthermore, advancements in information economics contribute to rational decision-making and expectations. Thus, digital technology serves as a catalyst for comprehensive development and societal progress.

Barta24.com: We're witnessing a political aspiration to transition into a developed country. How do you assess its feasibility?

Dr. Birupaksha Paul: Our esteemed Prime Minister envisions a developed country by 2041, displaying remarkable foresight and determination. Despite skepticism from engineers, she pressed forward with projects like the subway, illustrating her resolve. However, many advisers surrounding the prime minister provide her with incorrect advice and misinformation.

From an economic standpoint, the timeline for achieving developed status seems ambitious. Economic realities demand more than just political enthusiasm. While GDP growth is a crucial metric, it's not the sole indicator of development. Social indicators and values, depicted eloquently in Satyajit Ray's film "Jalsaghar," are equally significant. 

Sudden wealth doesn't equate to nobility or progress. True development requires investments in mental and physical health, education, and social welfare. Bangladesh faces various challenges, including environmental degradation and health crises like Covid-19. Prioritizing holistic development over solely economic gains is essential.

Relying solely on GDP and per capita income metrics is shortsighted. Recent devaluation has affected per capita income, necessitating a broader perspective on development beyond monetary figures. Addressing these challenges requires a comprehensive approach and a focus on sustainable growth, rather than quick fixes.

In striving for a better world, we must prioritize the beautification and strengthening of our institutions to foster trust and reliability. Whether it's visiting the passport office or dealing with agencies like Rajuk, the public should have confidence that their affairs will be handled efficiently and transparently. Despite progress, corruption remains a persistent issue, eroding our advancements and hindering growth.

Even amidst challenges like Covid-19, countries like the US have managed to sustain growth, demonstrating the importance of effective governance and institutional integrity. However, in Bangladesh, corruption has impeded our potential, leading to a decline in growth and enabling large-scale money laundering.

It's crucial to address institutional weaknesses and ensure consistency in policies to maximize the benefits of digitisation. Merely adopting technology without strengthening institutions risks empowering wrongdoers rather than benefiting society. We must focus on comprehensive reforms and prioritise the fight against corruption, shifting our focus from corruption indices to knowledge economy indices and innovation rankings.

These efforts will not only enhance financial inclusion but also empower the marginalised segments of society. Political rhetoric must be backed by sustained action, with a collective effort to address systemic issues. Just as in healthcare, where overall well-being is vital, a single weak link can compromise the entire system's performance. Therefore, holistic improvements across all sectors are imperative for sustainable progress and prosperity.

Barta24.com: How effectively have we harnessed the potential of digital technology in the financial services sector?

Dr. Birupaksha Paul: Access to capital is essential even for setting up small tea shops in villages. However, financial inclusion efforts have fallen short in providing access to credit, particularly for small businesses. Many NGOs attempt to address this gap, but challenges persist, including issues with fund allocation and financial architecture.

A critical aspect to consider is the balance between bonds and equity in financial institutions' balance sheets. Unfortunately, our financial regulations often hinder rather than facilitate inclusive practices. Diverse directorships in banks and financial institutions can bring valuable perspectives and ideas, yet we often lack diversity in leadership roles, which hampers innovation and inclusivity.

Contrary to international norms that value diversity, Bangladesh tends to favor homogeneity, whether in educational institutions or workplaces. This aversion to diversity undermines inclusion efforts and stifles creativity. Cultural biases and nepotism further exacerbate these challenges, hindering progress and effective decision-making.

Cultural shifts are necessary to embrace diversity and foster an environment of tolerance and acceptance. Without addressing these cultural barriers, achieving meaningful progress in financial inclusion and innovation will remain elusive. It's crucial to recognise and challenge these biases to create a more inclusive and dynamic financial sector.

While India has also seen the rise of wealthy individuals, their success is rooted in a corporate structure with contributions from various sectors, benefiting society at large. Recent achievements, such as the success of BATA, highlight the employment opportunities created by embracing diversity—whether cultural, religious, or gender-based.

The strength of America lies in its cultural and religious diversity, which fuels innovation and progress. Despite challenges, America's resilience stems from its knowledge-driven economy, as noted by economist David Romer. Unlike physical resources, knowledge yields endless possibilities, exemplified by the tech giants that consistently lift the country's economy.

However, progress must be genuine, not just rhetoric. True empowerment of the poor requires tangible actions, not just words. Sadly, our justice system often fails to hold the powerful accountable, allowing corruption to persist unchecked. The stark reality is that while small-time offenders face punishment, those responsible for massive financial crimes evade justice, further exacerbating inequality and injustice.

Edited by: Mahmood Menon, Editor-at-large, Barta24.com


Industrial sector’s contribution to GDP exceeds 37 percent: PM

Staff Correspondent, Barta24.com
Prime Minister Sheikh Hasina

Prime Minister Sheikh Hasina

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Prime Minister Sheikh Hasina said that the contribution of the industrial sector to the GDP has already exceeded 37 percent. About 99% of Bangladesh's industries and businesses are covered by the cottage industry SME sector.

She said, this sector controls 70 percent of the country's economic activities, which is about 80 to 85 percent of the total industrial employment. The SME sector supplies 30 to 35 percent of the total domestic industrial product demand. Our government has declared this year as 'National Handicrafts Year'.

Prime Minister Sheikh Hasina said all this in a speech given on the occasion of '11th National SME Product Fair-2024' to be held on May 19. Small and Medium Entrepreneurs Foundation (SME Foundation) is organizing the 11th National SME Product Fair 2024.

Referring to Bangabandhu's thoughts on industrial development, the Prime Minister said, the greatest Bengali of all time, Father of the Nation Bangabandhu Sheikh Mujibur Rahman's industrial development ideas blossomed in the Jukta Front’s election manifesto in 1954, which he prepared himself.

She said that four points of the 21-point declaration of the manifesto were his industrial development plan. In 1956, he was the Minister of Industry, Commerce, Labour, Anti-corruption and Rural Assistance of the then East Pakistan. During this time, he took the initiative to expand the industry in Bangladesh.

After independence, the Father of the Nation announced the country's first industrial and investment policy in 1973 and nationalized industrial establishments. He formed the necessary offices under the Ministry of Industry. In the light of the development philosophy of the Father of the Nation, we have implemented comprehensive programs for the development of the industrial sector in the last 15 years. As a result, the industrial sector of the country is gradually progressing towards prosperity.

Referring to the contribution of the industrial sector to the GDP, Prime Minister Sheikh Hasina said that the contribution of the industrial sector to the GDP has already exceeded 37 percent. Almost 99% of Bangladesh's industries and businesses are under the cottage industry SME sector. It controls 70 percent of the country's economic activity, accounting for about 80 to 85 percent of total industrial employment. The SME sector supplies 30 to 35 percent of the total domestic industrial product demand. Our government has declared this year as 'National Handicrafts Year'.

Referring to the contribution of her government in the proper development of small and medium industries, the Prime Minister said, we are formulating various business-friendly policies and implementing programs for the proper development of small and medium industries. In continuation of this, Industrial Policy-2022 and SME Policy-2019 have been formulated. We have given importance to the SME sector in SDG-2030, Rupkalpa-2041, Eighth Five Year Plan, and various policies and strategies.

To counter the impact of the Corona pandemic, we have provided financial incentives to SME industries and cash assistance to contribute to exports. Cluster-based industrial development at the grass-roots level has resulted in more manpower being engaged in the labor sector and increasing the number of women entrepreneurs and workers.

30,000 entrepreneurs have been created by SMEF through 150 programs on women entrepreneurship and startups. In the last 15 years, using the credit wholesaling model, loans of Tk. 716 crore have been distributed to 8286 entrepreneurs, of which 23 percent are women.

Referring to the contribution in the industrial sector, Sheikh Hasina said, our government has introduced the President's Industrial Development Award, Bangabandhu Sheikh Mujib Industrial Award, CIP (Industrial) to recognize and encourage creativity of successful entrepreneurs/institutions in the industrial sector.

As a result, the highest production of 22.33 lakh metric tons of salt in the last 62 years, implementation of 112.24 percent of the annual development program and export earnings of 1.25 billion US dollars in the leather industry are notable, of which the contribution of the SME sector is 32 percent.

The Ministry of Industry and the SME Foundation are working to increase the contribution of the SME sector to 40 percent by 2031.

She said that the SME product fair plays an important role in the marketing of SME products. This fair will increase awareness and demand for domestic products made by micro, small and medium industrial entrepreneurs spread in different parts of the country. In order to build the foundation of a prosperous and sustainable economy, there is no alternative to creating labor-intensive and low-capital SME entrepreneurs in the country. Our government is determined to create a suitable environment for SME entrepreneurs to come forward with the expansion of business and trade.

The SME sector and the National SME Fair are playing a leading role in transforming the country's youth into skilled manpower and increasing their employment opportunities, and this is how the Father of the Nation Bangabandhu Sheikh Mujibur Rahman's dream of hunger-poverty, happy-rich dream of golden Bangladesh will be developed, as well as knowledge-based smart Bangladesh with information technology. 


Role of SME sector in employment generation is undeniable: President

Staff Correspondent, Barta24.com
Photo: Collected

Photo: Collected

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President Md. Sahabuddin said, the role of small and medium entrepreneurs in creating massive employment with little capital is undeniable, in addition to poverty alleviation and improvement of living standards of a large population of the country.

The President said all this in a speech given on the occasion of 'National SME Product Fair-2024' to be held on May 19.

Welcoming the initiative of the Small and Medium Entrepreneur Foundation (SME Foundation) to organize the 11th National SME Product Fair 2024, the President said, he extended his best wishes and congratulations to all those involved in the small and medium entrepreneur, including entrepreneurs and institutions participating in the fair.

He said that small and medium enterprises (SMEs) are an important sector in the socio-economic context of Bangladesh. The role of this sector in creating massive employment with little capital is undeniable, in addition to poverty alleviation and improvement of living standards of the country's large population.

Appreciating Prime Minister Sheikh Hasina's initiative, President Md. Sahabuddin said that under the able leadership of Prime Minister Sheikh Hasina, the government has formulated the SME Policy-2019 to ensure the development of the SME sector and sustainable industrialization.

The National Industrial Policy lays emphasis on creating an enabling environment for the development of SME industries as key drivers of industrialization. As a result of the successful implementation of Vision 2021, Bangladesh has become a middle-income digital Bangladesh today. Through the proper implementation of the National Industrial Policy and SME Policy, everyone should continue to make earnest efforts to increase the contribution of the SME sector to the GDP from the existing 25 percent to 32 percent.

He said, I hope that the National SME Product Fair-2024 will play an important role in increasing the mutual connection of entrepreneurs as well as improving the quality of products, expanding the market of manufactured products and increasing the export of SME products.

The President called on all concerned including government, private institutions and entrepreneurs to play a positive role in ensuring the proper development of the SME sector with the aim of creating a developed and prosperous 'Smart Bangladesh' by 2041.


Third Terminal: Foreigners eyeing Tk. 3000 crore business

Ishtiaq Hussein, Special Correspondent, Barta24.com
Photo: Collected

Photo: Collected

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The newly constructed third terminal is more than twice the size of Terminal 1 and Terminal 2 of Shahjalal International Airport. The area of the old two terminals is 1 lakh square meters, and the third terminal is 2 lakh 30 thousand square meters. Although it was partially inaugurated in December last year, passengers will be able to use all its facilities in December next year. Bangladesh Civil Aviation Authority (CAAB) is moving towards that goal.

The former two terminals can serve 80 lakh passengers annually. And with the new terminal, 1 crore 60 lakh passengers can be served.

Ever since the inauguration of the third terminal, there has been a discussion as to who will get the ground handling work of the third terminal. Because the government has built the infrastructure for the passengers, but if the passenger service cannot be ensured, then the passengers will have to suffer with this terminal like the old terminal.

Statistics show that Biman earns an annual revenue of Tk. 1500 crore from the ground handling of the two old terminals. And since the third terminal is more than twice as big as this, at least Tk. 3000 crores of revenue is possible from here. So various foreign companies are racing to get the ground handling work of the third terminal.

Those concerned say that everyone will want to take such a big business opportunity. And that's why foreign companies are dying.

The Ministry of Civil Aviation and Tourism has already informed about who will be responsible for the ground handling of the third terminal - Japan will decide in this regard. Now everyone is watching whom Japan will eventually take with them in this service sector.

The name of Biman Bangladesh Airlines is the first to be discussed in this work because Biman has a long experience in this sector. Moreover, Bangladesh's state-owned company Biman is the sole service provider of Shahjalal International Airport in the ground handling sector.

However, apart from Biman, many other foreign companies are trying to get this job. There are many speculations about which company gets the job based on the partnership with Japan.

However, the Aviation Minister said that Japan will do the ground handling work. In this case, if the plane is taken, domestic interests will be protected. We have prepared the aircraft to provide ground handling services to the third terminal.

On the other hand, CAAB Chairman M Mofidur Rahman says that Japan will provide ground handling services. The name of the aircraft is also under discussion. We have also spoken for Biman.

However, Japan is verifying the capacity of the number of passengers and aircraft that will move through the third terminal. Aircraft capacity has also increased. In the meantime, Japan will select those it deems worthy.

But some say, in this case, it would be better if two to three organizations are appointed in the ground handling department. This will improve the quality of service as well as make it competitive. By doing this, the passengers will also get better service.

Those concerned say that handling such a large terminal may not be possible for Japan alone. In that case they will look for partners. In the meantime, Turkey's Celebi, UK's Menzis, Switzerland's Swissport and other companies are working to get this job. The British High Commissioner posted in Bangladesh expressed his country's interest in doing Menzies work in a meeting with the Minister of Aviation and Chairman of CAAB. Celebs in Turkey are eager to get work. Swissport is also in the running. They will also meet the Chairman of CAAB and give a detailed presentation about them.

Japan is interested in operating the third terminal on a PPP basis. For this reason, an organization called IFC has also conducted a survey. Further decision will be taken based on their report.

Complaints about airline services

Shahjalal International Airport, the country's main gateway, has no end of complaints about aircraft ground handling services. Ground handling service is one of the most important departments for passenger complaints. But Biman could never create service mentality in this sector. Even though there have been unarmed complaints about the services of this sector for decades, they have never been able to take proper steps to resolve them.

There are many cases of foreign airlines delaying the departure of flights due to lack of timely service. At various times, foreigners lobbied hard to get this ground handling, but in the end, Biman stayed with the government's blessing. The government has given this support at various times to prioritize the interests of the country, but this time it is no longer in that position. The government wants to have a plane. However, since Japan has built a third terminal with the help of JICA, the government is supporting the operation of the aircraft through the partnership.

Biman says it has bought Tk. 1,000 crore worth of equipment to get the third terminal working. In the last one year, more than 1000 manpower has been appointed in the ground handling department. Those concerned say that it is not enough to buy the equipment, there is a lack of coordination and cooperation in the work of the aircraft. Also training of staff is required. What is needed above all is a service mindset. If there is no change in this mentality, there will be no change in quality of service.

Why do foreigners want ground handling?

Biman Bangladesh Airlines is the only ground handling service provider of Shahjalal International Airport. The state-owned airline earns Tk. 1500 crore annually from this sector. Ground handling is a major source of revenue for national flag airlines. Since independence BIman is a single service provider in this sector. Foreigners have always had an eye on this sector. At various times they have tried hard to get this business through local business partners. Among them are Middle East-based Danata, Switzerland-based Swissport and Turkey's Celebi.

But not only Shahjalal, Chattogram Shah Amanat International Airport and Sylhet Osmani International Airport have been doing ground handling since the beginning of Biman just as ordinary passengers have been angry about Biman's ground handling services over the years, so have the 30 foreign airlines operating from Shahjalal. There are allegations that Biman has failed to provide international standard service. Moreover, the responsibility of failure to deliver luggage on time also fell on these foreign airlines. Foreign airlines have repeatedly pointed the finger at the aircraft regarding these complaints including luggage theft, broken suitcases. They allege that Biman is responsible for all this. But they have to pay compensation for that.

What is Biman saying?

Biman's Managing Director and Chief Executive Officer Shafiul Azim expressed a positive attitude towards getting the work of the third terminal and said that Biman has the capacity, expertise and necessary equipment to provide ground handling services of the third terminal. More equipment will be purchased in the future and special emphasis is being placed on staff training.

"The aircraft's ground handling staff is highly skilled. They have the necessary skills and certifications. Airline workers are also in high demand abroad.

He said that due to the limited amount of baggage belt in the old terminal, the limitation to provide the service has to be faced. However, the new terminal will have more baggage belts, so passengers no longer have to waste time standing in line to get their luggage. Besides, the number of check-in counters in the old terminal is also less. It creates pressure on passengers. New terminals will not have this problem. Aircraft capacity has been increased by purchasing new parts and hiring new staff. So it is not right to question the capability of the aircraft.

What do the experts say?

Aviation expert ATM Nazrul Islam said, new airlines are not increasing suddenly. Shahjalal will handle two crore 35 lakh passengers in 2035. Biman will lose big business if the third terminal works.

He said, it will not be good for the country or for the interests of the country. But Biman has to improve the quality of service. Otherwise the state-owned airlines will lose their single business in this sector.

He also thinks that preparations should be made now by starting this in December. And since there are good business opportunities here, foreigners can be attracted.

Efficient management should be provided to provide passenger friendly service. About 6,000 manpower will be required to operate the third terminal. Those concerned say that it is not just about having sophisticated machines, but the skills of the people behind the machines are important. If not, the suffering of passengers will not be reduced.

Kazi Wahidul Alam, an aviation expert and former member of the board of directors of Biman Bangladesh Airlines, said that the passengers will get ample space and a good environment in the third terminal. However, the organizations that will be engaged in airport services should change their approach and at the same time increase the quality of service.


Increase in dollar price will not affect imports: Salman F Rahman

Staff Correspondent, Barta24.com
photo: Collected

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Prime Minister's Private Industry and Investment Adviser Salman F Rahman believes that even if the price of dollar increases, there will be no impact on imports in the country. But there will be a huge impact on exports. As a result, remittance income and export-oriented industries will benefit, he said.

He said these things in a briefing with reporters after the opening ceremony of the US Trade Show on Thursday (May 9).

He said there was no option to increase the price of the dollar to face the economic challenges.

Prime Minister's Private Industry and Investment Adviser said that increasing the price of the dollar will reduce the pressure on the reserves. It was very necessary to bring inflation under control. Inflation is above 9 percent which we need to reduce. At the same time, increasing the price of the dollar will not put any pressure on the country's economy. That's because the country is doing very well in the agricultural sector. We have become self-sufficient in food.

Salman F. Rahman called on all those who have TIN to be brought under the tax and said that more tax is being imposed on those who are paying tax. All those who have TIN should be brought under the tax. At the same time, the tax net should be increased by reducing the tax rate. Countries around the world that have reduced tax rates and increased tax nets have seen revenue rise.

Salman F. Rahman called upon all traders to be brought under tax and said that under the leadership of the Prime Minister, many people are doing good business in upazilas and even in rural areas. They should also be brought under tax net.

Salman F. Rahman also believes that if the currency of the countries from which the world imports more is traded, the pressure on the dollar will decrease.