So far the current year has been a caustic test for Bangladesh, both politically and economically. The cloud of uncertainty that loomed large on the political horizon early this year following the reinstallation of democracy seems to have dissipated, but not quite. Awami League has yet to convince the nation that for the party national interests are at the top of the agenda. Although the economy fared relatively well in FY 2008-09 despite global recession, the total export during the period rising by more than $1 billion from about $14 billion in FY2007-08, experts hold the view that it is not until late 2010 that the economy will be set on a steady course.

Meanwhile some mixed signals are coming from different quarters, creating confusion surrounding the country's politico-economic scenario. Some tend to see 2010 as the year of political stability, with the government further consolidating its power base in the absence of any viable opposition and creating a vibrant economic growth context through successfully implementing its fiscal policies. However, there are others who think just the opposite, apprehending political turmoil and a further slowdown in economic growth.

On an objective note, politics next year is least likely to be violent and the economy most likely on the road to vibrancy if not vibrant. With BNP having borne the brunt of the past caretaker government's repressive measures and now apparently embroiled in internecine feuds no formidable threat to the Awami League government is anticipated, barring any unforeseeable event. As regards the economy, GDP growth is expected to be much more than 5 percent as forecast by the International Monetary Fund (IMF). The fear that the second shock from the world's financial earthquake will affect Bangladesh badly only serves such international organizations in that this gives them more room for imposing their own agenda. More often than not, IMF and World Bank go by the book in assessing a financial situation, making forecasts and recommending measures, ignoring some important and relevant realities. For example, IMF recommends that Bangladesh introduce more stringent tax reform on the grounds that Bangladesh's tax-to-GDP ratio is about 8.5 percent, 4 percentage points lower than the average of the developing regional economies. What they do not take into consideration, however, is the living conditions of the bulk of the Bangladesh population and their per capita income. Similarly the World Bank's Doing Business Report, which ranks Bangladesh 115th in 2009 and 119th in 2010, is very much open to question.

Given the scale of damage to the world economy, the decline in Bangladesh's GDP growth from 6.2 percent in FY2007-2008 to 5.9 percent in FY 2008-09 is not unsatisfying. Foreign remittances rose to $9.6b in FY2008-2009 from $8.9b in FY2007-08. Foreign exchange reserves have crossed the $10 billion mark, which is equivalent to more than 5 months of prospective imports. Market capitalization on the Dhaka Stock Exchange (DSE) has crossed 1000 billion taka and is expected to double in 2010, with the entry of new companies and corporate houses. During the period from January 2009 to August 2009 readymade garment export grew by 5.7 percent compared with the corresponding period in 2008. From 10 percent in July 2008 inflation came down to 2.2 percent in June 2009, although it rose by about 2 percentage points in the subsequent months mainly due to the rise in international commodity prices. During the current fiscal year the exchange rate of taka against the dollar fluctuated by about 1 per cent only.

The new year may not hold out very rosy economic prospects for Bangladesh but it will at least show the end of the tunnel. The fiscal policy under implementation bears testimony to the country's determination to face any challenge successfully. Bangladesh Bank has already strengthened its in-house capacity for stress testing and is going to introduce Basel II regulations. What the government needs to do in addition is invest substantially in the transportation and power infrastructure, increase the productivity of the country's vast human resource base and revise gas and coal policy to the benefit of the nation.

Economic Outlook

Dr. K.A.S Murshid, Economic Expert, BIDS, maintains that the GDP growth rate should be over 6 percent almost certainly. Pointing out that Agriculture and Garments are the two sectors that are of particular importance, he argues, "As the world moves out of recession, the garments sector should do even better. The agricultural sector is receiving a lot of attention from policy makers."

As regards investment, he says, "FDI remains shy. Domestic investment is constrained by the energy constraint. Unless this constraint is removed, investment will not pick up greatly, especially for SME. The big investors with own captive power will continue to do well."

He emphasizes the need for attaining efficiency in the public sector, reducing the cost of doing business, reducing corruption and improving infrastructure.

Professor Munim K. Barai of Eastern University and former Political Advisor, Canadian High Commission, discards IMF's forecast of 5% growth, saying it is misjudged as were some of the past predictions made by the Bretton Woods Institutions. "In the last fiscal, we have not seen any contraction in any of the sectors. Agriculture sector has done well. Growth in manufacturing sector could have been affected had there been a decline in the export of garments and other exportables from Bangladesh. That did not happen. The service sector is the single largest sector in the economy of Bangladesh. Our most important source of foreign income, remittance, has increased at a much higher level. So the IMF's lower growth prediction that was based on the assumption that global recession would impact GDP growth of Bangladesh negatively should not be correct to the extent it has been made."

He makes the following suggestions:

1. Look for newer external markets for Bangladeshi products, particularly RMG. Japan is featuring in discussions in this regard.

2. Ensure a better political environment so that economy does not suffer from the spill-over effect.

3. Provide official help and financial support to the needy people who are going to other countries as guest workers. Find more innovative ways for better use of their remittance.

4. The vice of business syndication should be dealt with in a strong and determined manner.

Abu Alam Chowdhury, Vice President, FBCCI, is hopeful that Bangladesh in 2010 will be in a stable position, economically. "We, the FBBCI, are committed to helping the government overcome the anticipated crisis situation. To this end, we are already working with the government to resolve tax and VAT issues." He underscores the importance of translating words into action.

The following represents the DCCI view as provided by one of its members on condition of anonymity:

It is very difficult to forecast growth in a situation of uncertainties. For example, the global situation shows signs of turning around for two months and then next month that entire rosy look disappears and there is a slide. However, it is noteworthy that despite the wavering global scenario, Bangladesh has shown improvements on quite a few economic indicators other than the investment sector. Remittances and exports were expected to fall in a big way following the global meltdown, but that did not happen. Export growth may have slowed down a bit, but the stream of remittance is steady. Revenue income has increased. Foreign reserves have crossed the $10 billion mark. Decline in raw material imports due to fall in industrial activity may be a contributory factor. If the energy crisis is taken care of, at least partially, the resultant boost in investment may lead to a high growth.

My own estimation is that the global recession has also opened opportunities for Bangladesh. Price of costly imports such as oil and fertilizer has been coming down. Again, take the case of footwear and garments industry. Due to recession, the western world is turning away from fashionable and costly designs in footwear and clothing to simpler ones. This is an opportunity for Bangladesh. Already, Bangladesh is getting more orders for ordinary and essential shoes than for high fashion slippers and sandals. If Bangladesh can utilize this opportunity properly, exports may continue their general upward trend.

An easy monetary stance without a corresponding jump in production and investment as expected is quite likely to lead to inflation. Besides, the recently announced pay rise in government sector will sooner or later bring in inflation. We cannot check it.

The whole country is poised to go for an industrial and investment boost. Western countries are looking to relocate in Asia. We had investment seeking visits from countries like Germany. Once the required investment climate is available, industrial activity can take off and 2010 can be a good year for us.