K.A.S. Murshid PhD, Director of Policy Resource Program, Research Director of Bangladesh Institute of Development Studies (BIDS) gives his views.

We have heard from the Finance Advisor saying that there will be some impact of Sidr on the micro level but not as much on the macro level. In one sense I agree with him. The areas heavily affected by Sidr do not contribute to a large portion of the GDP of the nation, although it is true that shrimp cultivation has been affected and we may see some negative impact on exports.

I think there will be some persistent effect of Sidr. If we are going to divert a large amount of budgetary resources for reconstruction and recovery, it will have an impact. Also there is likely to be some impact on prices; prices already being quite sensitive, these additional shocks (two floods and Sidr) on agriculture-based industries will aggravate the price conditions, particularly food prices. Now, while on one hand the recovery process is complex and it demands some macro resources-substantial financing-we need to retain a good economic atmosphere for sustained growth, on the other.

Inflation will continue, I am afraid, because of global price trends. We need a tight monetary policy, and we should keep a balance between domestic production and prices. Our market prices generally tend to follow Indian market prices and the only way we can overcome such dependence is by producing a lot of food grain for internal consumption and for export. We need to examine the global situation and ascertain whether there is any significant rise in prices or not. We have to think about our food security.

Bangladesh Bank's monetary policy remains cautious. Although they have not tried to regulate the exchange rate, I think, we have to rethink the matter seriously. For some reason we are afraid to touch the exchange rate policy.

I am not a great believer of subsidies, unless we make a very special case that these are only provided for the short term. Given the economy is reeling from natural disasters, I think an arrangement can be made to provide subsidies to agricultural inputs and make them available to farmers. In the Sidr-affected areas the people need to rebuild their houses, farms and so they need credit rather than relief. So in my opinion subsidized credit should be given for agricultural inputs to farmers of those areas. For the rest of the country, I think a compelling reason has to be provided before subsidies can be offered in general.

Lots of attention is being given to the SME sector, but I think the agriculture sector needs a lot more attention than any other sector. Now we really need to focus on agriculture. The recent growth in agriculture is good but the question is: Is the growth sustainable? And it is difficult to see how we can sustain this thing without more investment and infrastructure related to agriculture.

There are a lot of seminars held with the intention of promoting SMEs. My sense is that building a small business and to see it grow is challenging, because after the entrepreneur spends on legal, semi legal, or illegal costs there little is left to plough back as investment. I think we need to look on the simple economic view on SME. At the ground or operational level we have to analyze if by investing in a small shop, such as bakery or in a lathe machine, one can retain a margin for livelihood. I am not convinced that is the case.

As regards our export sectors, I think exports from garments have been affected by the high inflation rate and depreciation of Taka. Due to inflation, real wages of labors have fallen. But as Taka depreciates Garment exporters are happy as they think they can be more competitive. But I think this is a short-term effect. If the labors are not happy, their productivity will fall. I think that the inflation will continue because of global market condition. This means the food prices will continue to rise and real wages of worker will continue to decline.

Now, China and Vietnam are big threats for the garment sector and so far we have been able to manage those threats. China faces some difficulties in the American market and their cost of production is continuously rising, but if they can overcome those difficulties then our producers will face some major challenges. Overall, I think the garment industry is now mature enough to respond to such challenges. While these developments should be reason to worry, I do not think they are severe to the point that we should panic.

There is a lot of demand for our pharmaceutical products in some Asian and African countries. Our pharmaceutical products are now being recognized as high quality. But unless a sector can engage in research and development of its own and unless it can significantly introduce new technology, it cannot achieve sustained growth in export markets. I think the sector has a lot of potentiality and significance, and hard work ahead.

The biggest achievement of the government, I think, is in the non-economic area-they have been able to carry on with some important reforms. The biggest failure is, while they have provided political stability, they have failed to provide economic stability.