M A Taslim, PhD., Professor of Department of Economics, University of Dhaka, Chairman of Bureau of Economic Research, and Member of Bangladesh Better Business Forum (BBBF) gives his views.

During this fiscal year the country's economy was affected greatly by two floods and one severe cyclone, which caused widespread damage to the coastal areas. Agriculture has been affected very badly; crops destroyed and there have been massive losses in terms of lives and property. Rehabilitation will require a huge effort.

The anticorruption drive of this government has made the business community shy away from investment and taking part in many business activities. As a consequence there is a huge impact on economic growth. The performance of the economy this year will indeed be poorer than the previous year.

The global economy is also slowing down. Government has focused on the 6.5% growth rate but this seems to be too optimistic; I suspect it will be lower-perhaps not more than 6%. However, it will depend on how we operate our economy. We could have bumper production of Boro crops but this will depend on timely supply of fertilizer and providing proper irrigation facilities.

Unfortunately, the news we are getting is that the supply of fertilizer is still inadequate and the distribution channel needs to be streamlined. If this problem can not be overcome it will be a great shock to our agriculture sector and consequently to the economy. If production of Boro is hampered, we will have to import rice and that will increase local food prices. As a result, the income of rural people will plummet. So the government has to be more careful about the supply of fertilizer, electricity or diesel to the farmers in the Boro season.

The performance of export has been poor. Already, in the first three months of the current fiscal year, export has declined by about 5% from what was in the same period of the last year. Global trade is likely to decline this year, which will affect our economy. Bangladesh's export is overwhelmingly dependent on export of garments but the performance in this sector from June to August last year was not good. Though the garment entrepreneurs say they are confident about making up for the losses of those three months in the coming months but I suspect that the performance will not be as robust as it was in the previous year.

I do not think China is a big threat. Rather the Chinese market is a big opportunity for us if we can explore it. Chinese and Indian markets are expanding but this doesn't mean that the Bangladesh garment will lose their opportunity.

The global market is big enough to offer increased opportunities to all countries. Bangladesh can try to diversify into the Chinese and Indian markets. I think China will not be very successful in the market of cheap garments, which is the principal strength of Bangladesh. Besides, the production of garments from Africa and Thailand is declining. So overall, I think we have a good prospect in the garment sector in 2008.

Electronic industry has huge potentialities but I do not know why it is not growing in the way it should. Perhaps the trade & industrial environment is not conducive to the growth of the electronic industries.

China, Hong Kong and Malaysia first started with garment industries and then they moved to electronics. But, in Bangladesh I am surprised such progress is not taking place.

The other sector that has good potential global markets is the pharmaceutical industry. This is because the sector enjoys some concessions from WTO. If the industry can exploit that then the sector will grow at a fast rate. However, I don't expect it to become the number one sector. This is because unless Bangladesh is able to sell a large quantity of medicines to the western world, export will not be significant.

Also, there will be stiff competition from other developing countries like India, Pakistan and China. Another important sector is the software industry. But unfortunately neither the government nor the private sector is making required investment in this sector.

If we invest in IT education and training then we can create a tremendous manpower potential. Already there is a great demand for such manpower worldwide. India is facing shortages of manpower in the ICT sector, so Bangladesh can be a potential supplier of such manpower for the Indian market. Indeed manpower export can be a great potential for us as we can tap into the markets of many countries needing skilled workers. Unfortunately this is not happening; rather we are still limiting ourselves to the export of unskilled workers who often work in inhuman conditions in the Middle East and other countries. We need to concentrate on export of skilled workers. If we can do this then our manpower export can even reach 20 billion dollars.

Investment suffered substantially in 2007 and I do not see any significant improvement in 2008 because business confidence usually takes time to recover.

There is a possibility that the business sector may take an attitude of 'wait and see' before making any massive investments. This will mean we will hardly see any local investment this year. One way the government can offset this problem is by encouraging more foreign investments but so far we have not seen any signs of this happening.

If the Government can encourage investors to invest in the power sector such as electricity, gas etc then there will be some investment activity in this country. This will also change the domestic investment climate encouraging the local investors to invest. But this government is temporary and so businessmen are not encouraged to take any long-term decision. So I don't foresee any large-scale private investment in the immediate future.

I don't believe in the principle of subsidy except for agriculture. Agriculture contributes to 18% to 20% of GDP but it employs more than 50% of the population. It bears the burden of employing unemployed and underemployed. It is employing 40% more labour force than it should be. So, it is taking a great burden on behalf of the nation. It obviously needs some subsidy for diesel and fertilizer but the amount of subsidy that has been given to this is not sustainable. The government has to work out an appropriate mode of providing the subsidy. Also, it is important to ensure adequate supply of inputs rather than providing them at a low price.

We are mostly importing food items. The weight of food prices in the CPI is nearly 60% of food, so if food price goes up then CPI will automatically go up, which is not a concern of the western countries where they spend a small portion of their total income on food. Food prices are also going up in the international market. Bangladesh having a small open economy, can not sustain lower prices. The only way we can offset the price hike is by raising the income of people, but this is a great challenge. For this to happen our agriculture sector needs to be more productive.

Also, inflation always creates uncertainty about prices. It is the poorer people who lose out, because they can not respond to the increasing prices.

About IMF and World Bank, I would say the philosophy of IMF and World Bank does not match ours. Also my feeling is that the monetary contraction policy that IMF forced on us in 2005 was not right. But then I do not think criticizing IMF and World Bank is a solution as we do not have the intellectual capacity to be able to do the work these organizations are doing for us.

Bangladesh Bank and the ministry of finance are not adequately equipped to design fiscal and exchange rate policies by themselves. So, they go by IMF and World Bank directives. Right now BB needs to build its internal capacities in order to be able to make their own policies. When we can build our own capacity, we will not need IMF-WB advice.

Bangladesh Bank is a large institution; its size is 10 times of WTO: total manpower of WTO is around 600, whereas BB has around 6000. But WTO deals with trade issues of the entire world. The difference between the two organizations is in the efficiency of manpower and the types of manpower.