Speech 2000 - 2001
Part I

I seek your leave to place before this august House the budget for the financial year 2000-2001 and the supplementary budget for 1999-2000.

2.     I would like to commence my presentation by expressing my deepest gratitude to Allah, the Merciful and the Compassionate, for bestowing on me the rare opportunity of placing five consecutive national budgets before this august House. I am immensely grateful to Honourable Prime Minister Sheikh Hasina, the worthy daughter of the Father of the Nation Bangabandhu Sheikh Mujibur Rahman, for the invaluable guidance and unstinting cooperation she has kindly extended to me in discharging this important responsibility.

3.      While   placing   this   fifth   budget   of   the   present Government before this august House at the dawn of the new millennium and the new century, I pay homage to Bangabandhu Sheikh Mujibur Rahman, the dreamer, the architect and the father of this independent and sovereign nation. Responding spontaneously to his clarion call, the brave Bengalees took up arms, sacrificed their blood and achieved independence. I recall the memory of those fearless freedom fighters whose heroism and self sacrifice will inspire future generations in days to come. I pay homage to the four national leaders, the able lieutenants of the Father of the Nation. The brutal assassination of the four national leaders within the premises of the jail will go down as a shameful episode in our history. We are distressed to observe the repetition of the nefarious activities by defeated anti-liberation forces. Every conscious and patriotic citizen of Bangladesh is now indeed concerned as they realise the design of the unholy alliance of the anti-liberation and autocratic forces. The nation is witnessing with concern the unfortunate delay in trial of the killers of the Father of the Nation and his family even after reaching its final stage. The question in the minds of each and every conscientious Bengalee who believes in the ideals, vision and spirit of the great war of liberation is: has not the final hour for completion of the trial of the killers of the Father of the Nation arrived even after twenty five years? In order to establish rule of law in this country it is absolutely necessary to immediately complete this trial process and to implement the verdict.  

4.     In the election manifesto of 1996, the Bangladesh Awami League declared: "The founder of independent and sovereign Bangladesh and Father of the Nation Bangabandhu Sheikh Mujibur Rahman wanted to build a happy, prosperous and exploitation-free Bangladesh. Bangladesh Awami League is fully committed and promise-bound to translate this dream and aspiration of Bangabandhu into a reality". Today, at the very outset, I want to apprise this august House of the progress achieved by the Government of Prime Minister Sheikh Hasina in implementing Bangabandhu's political and economic vision for building a happy and prosperous Bangladesh.

5.      The present Government assumed office after winning a free and fair election held in an environment of transparency and neutrality at a very critical juncture of political transition in Bangladesh. One of the commitments in our election manifesto was: "the problem of Chittagong Hill Tracts will be politically solved".  Prime  Minister  Sheikh  Hasina has  fulfilled  her electoral commitment with utmost sincerity. The Chittagong Hill Tracts Peace Treaty has, on the one hand, ensured basic human rights as enshrined in the Constitution for a disadvantaged segment of the society and on the other hand, it has also helped create a congenial atmosphere for socio- economic development of the country.

6.      It was pledged in the election manifesto of 1996 that "in order to achieve a permanent solution of Farakka problem Bangladesh Awami League will conclude an agreement for a just and realistic resolution of the problem through bilateral discussion with neighbouring India". This commitment has been fulfilled through successful conclusion of Ganges Water Sharing Agreement. This Agreement has ensured due share of water for  Bangladesh and has  laid the  foundation  for environmental  protection   and   accelerating   agricultural development in South-West region of Bangladesh. The present Government has discarded the sterile policy followed during the last two decades and has established a new relationship with South-Asian neighbouring countries on the basis of equality and friendly cooperation. By declaring the 21st February as the International Mother Language Day UNESCO has not only recognised the sacrifice of the martyrs of the language movement of 1952, but also has given Bengali language and the Bengali nation a unique and prestigious place in the comity of nations.  The sincere personal  initiative of Prime  Minister Sheikh Hasina in restoring peace and tranquility following the tension triggered by nuclear test carried out by two South Asian countries has been appreciated by the world at large. The award of UNESCO Peace Prize to Prime minister Sheikh Hasina, the election of Bangladesh as a member of the UN Security Council through unanimous support of 172 countries and visit to Bangladesh by Heads of States/Governments of a number of friendly countries including US President Bill Clinton bear eloquent testimony to the success achieved by the present Government  in  the  international  arena.  Undoubtedly, Bangladesh today is a proud name amongst nations across the world. Bangladesh made successful breakthrough in entering the international sports arena during the tenure of the present Government. It is the personal initiative and patronage of Prime Minister Sheikh Hasina that has enabled our cricket and football teams to bring laurels from abroad. Imbued with self confidence and determination, the nation's vision is now set on a more promising future.

7.      GDP  growth  rate  is  the  most  widely  accepted  and dependable indicator of economic development. At present GDP growth rate is estimated in Bangladesh on the basis of two types of indices. So far, according to old index, GDP was calculated taking into account 1984-85 as the base year for price index. In the new estimates, the price index of 1995-96 is taken as the base year to calculate growth rate. In the period FY 1991-92 to FY 1995-96 the annual growth rate of GDP according to old index was 4.4 percent, but according to the new index, the annual growth rate during this period is 4.5 percent. From FY 1996-97 to FY 1999-2000 according to the old index the annual growth rate is 5.5 percent as against 5.1 percent in terms of the new index.

8.      According  to  the  estimates  prepared  by  Bangladesh Bureau of Statistics, the growth rate of GDP in FY 1999-2000 is likely to be 6 percent in terms of old index as against 5.5 percent in terms of new index. Whatever indices are used for this purpose, the hypothesis that Bangladesh never achieved such high growth rate as it did over last four years remains unshaken.  

9.      It is necessary to mention here that this growth rate was not achieved in a tranquil economic environment. In 1997-98 financial year, the meltdown in the economies of South-East Asia led to a turbulent and unstable economic environment. In 1998-99, Bangladesh economy was hit by the most devastating and prolonged flood of this century. In March 2000, prices of petroleum products reached highest level in the last nine years. Increase in prices of primary products was not limited to

petroleum products only. According to the statistics of IMF, during the last one year, the prices of primary products (excluding petroleum)  increased by about  5  percent.  In Bangladesh, expenditure on imports has increased by about US$ 237 million only on account of import of petroleum products.  However the increase in price  level  has been contained and therefore the upward trend in international price level has not as yet penetrated Bangladesh. As a result of unprecedented flood in 1998-99 the inflation rate edged up to 8.92 percent (on the basis of twelve months’ average). The rate has gone down to 4.58 percent (on the basis of twelve months' average) in April this year owing to efficient economic management. The inflation rate dropped to 3.09 percent (on point to point basis) this April as compared to April last year.

10.    The  stupendous  tasks  of infusing  dynamism  in  the economy following devastating flood of 1998 and reducing inflation have been thwarted again and again by opposition political parties. Persistent attempts were made to obstruct economic development and destabilize the economy through repeated hartals and destructive activities. These destructive activities without any issue and without popular support have seriously jeopardized  lives  and livelihood  of millions  of labourers, hawkers, shop-owners, rickshaw-pullers and toiling masses who make their living through physical labour. It is a pity that during the Bangladesh Development Forum meeting at Paris last April the opposition parties, in flagrant disregard to national interests, had resorted to lobbying to dissuade the development partners from extending aid to Bangladesh. Despite these anti-people and negative activities we succeeded in achieving higher growth rate and in reducing inflation. This success has been achieved through efficient and prudent economic management. Despite adverse regional environment and natural disasters, the pace of economic growth has been sustained, thanks to the untiring efforts, resilience and self confidence of people.

11.    The  present  Government  had  inherited  a  devastated agricultural system in 1996. I take this opportunity to remind this august House the following assessment in Awami League's election manifesto of 1996: "The BNP Government during their five-year-rule has brought the agricultural system on the verge of collapse. Eighteen farmers were gunned down by the previous Government only because they asked for fertilizer at fair price. External dependence for food had increased. Awami League is determined to put an end to this". I am proud to claim today that the Government of Sheikh Hasina has fulfilled the electoral commitment to revitalise the agriculture sector. When the present Government assumed office, total annual food production stood at 19 million tons. During the current year food production is likely to be around 24.3 million tons. Over last four years, annual food production has increased by 5.3 million tons. On the contrary, food production dropped to 19.00 million tons in 1995-96 from 19.3 million tons in 1991-92. Over last four years, Bangladesh has witnessed consecutive record production of food grains. This unprecedented production in the agriculture sector testifies to the success of the policies pursued by the present Government.

12.    In the election manifesto of 1996, Bangladesh Awami League promised, "necessary and appropriate subsidy will be provided to this sector". In fulfilment of this promise, Taka 411 crore was given as subsidy for fertilizer import during the last four years; whereas no such subsidy was given by the previous government. At that time no subsidy was provided for electricity consumed for irrigation. In 1999-2000 the cost of each kilowatt hour of electricity was Taka 2.63, whereas electricity tariff for irrigation equipment has been fixed at Taka 1.75. Therefore, during the current year 33 percent of the electricity cost has been given as implicit subsidy for electricity used in irrigation. In 1994-95 the rate of implicit subsidy for diesel used in irrigation equipment was 9.3 percent; in 1999- 2000 this rate has increased to 26.7 percent.

13.    A congenial atmosphere for agricultural growth has been created through complete removal of import duty on irrigation equipment, power tillers and other agricultural equipment. The Government's procurement price of food-grains has been significantly increased to encourage the toiling farmers. In 1995-96, the procurement price of Aman rice per quintal was Taka 1100. In 1999-2000 this price has been increased to Taka 1250 per quintal. Likewise, during the same period the procurement price of Boro rice has been increased from Taka 1125 to Taka 1300 per quintal and that of wheat from Taka 750 to Taka 880.

14.    Revolutionary changes have taken place in the field of agricultural credit. In FY 1998-99 alone agricultural credit to the tune of Taka 3005 crore has been disbursed. Never before in Bangladesh such a huge amount of agricultural credit was disbursed by the banking system. From 1991-92 to 1995-96, the annual disbursement of agricultural credit on an average was around Taka 1141 crore. From 1996-97 to 1998-99. it increased to Taka 2055 crore. During the first 9 months of the current financial year, agricultural credit to the tune of Taka 2009 crore has already been disbursed. The importance of agricultural loan for modernisation, diversification and overall development of agriculture is unquestionable. But disbursement of agricultural credit and its recovery gradually declined under the previous Government  due  to  their  aimless  policies  and  weak management. Moreover, the farmers were seriously discouraged by corrupt practices. The present Government has made agricultural credit easily available and its distribution process quicker and corruption-free through various administrative reforms and amendment of traditional practices and processes. The present Government has revised traditional policies and has introduced systems through which sharecroppers and farmers directly involved in the production of agricultural products can obtain  agricultural  credit without collateral.  Through  this system, Bangladesh Krishi bank alone has extended agricultural loan on easy terms to about one lac sharecroppers. During this period, about 7.5 lac new farmers got access to agricultural credit from institutional sources. 964 bank booths were opened to disburse agricultural loans in inaccessible rural areas where no branch of Krishi Bank existed. It is gratifying to note that success has been very impressive not only in loan disbursement but also in loan recovery from all classes of borrowers including sharecroppers. In line with the directives of Prime Minister Sheikh Hasina, the Krishi Bank and Rajshahi Krishi Unnayan Bank have expanded activities by establishing new branches.  In  tandem  with  the  increase  in  agricultural production, the Government has adopted appropriate  and pragmatic policies to improve the income level of farmers through  setting  up  agro-based  industries  and  increasing agricultural exports. The present Government's pro-people and agriculture-friendly policies have proved that despite natural disasters, Bangladesh can bring about revolutionary change in agriculture by creating favourable economic environment for the toiling peasantry.

15.    Following  the  assumption  of office  by  the  present Government there have been gradual reduction in incidence of poverty owing to acceleration of the rate of growth and especially thanks to remarkable success in agricultural sector. According to the estimates of the Bangladesh Bureau of Statistics, 47 percent of the population were below the poverty line in April 1996. This number has declined to 44.7 percent in May 1999. Simultaneously, remarkable success has been achieved in development of human resources. In FY 1995-96 adult literacy rate was 44 percent, it increased to 60 percent in FY 1999-2000. Gross enrolment in primary schools is 97 percent now. 65 percent of students enrolled in primary schools successfully complete their primary education. In 1996, the average life expectancy was 58.9 years which rose io 60.8 years in 1998. From 1991 to 1996 the annual average rate of increase in life expectancy was 6.7 months whereas from 1996 to 1998 the average rate of increase was 10.8 months. In 1996, child mortality rate was 67 per thousand; it declined to 57 per thousand in 1998. Daily per capita calorie intake in 1996 was 2216 kilo calorie which rose to 2283 kilo calorie in April 1999. The per capita income estimates and social development indicators  clearly  suggest  that  over  the  last  four  years Bangladesh has successfully reached a new turning point in poverty reduction.

16.    Economic growth is an essential but not a sufficient condition of poverty alleviation. The fruits of economic growth do not directly reach the segments of the society, isolated from the mainstream economy. It has been rightly observed in Human Development Report 1993: "But there will always be those excluded wholly or partially by the market: the very young, the very old, the disabled and those with heavy domestic commitments". Our ultimate goal is welfare of people; not market-driven development alone. Therefore, over the last four years the Government has in a planned way created a social safety net to alleviate poverty through innovative and effective projects and programmes.

17.    An allowance for elderly poor people was introduced in FY 1997-98. Under this scheme over 4 lac elderly people receive Taka 100 as allowance per month. In FY 1999-2000 an allowance for distressed widows and deserted wives was introduced. About 2 lac women are receiving allowance under this scheme. A National Foundation for physically and mentally retarded people has been established with an initial grant of Taka 10 crore for their education, training and rehabilitation. Six homes for elderly (Shanti Nibas) have been established at a cost of Taka 10 crore for housing and nursing of helpless elderly people. A project named "Asrayan" has been introduced at the personal initiative and supervision of the Prime Minister to provide accommodation to 50,000 homeless families. So far, under this scheme housing facilities as well as micro-credit have been extended to 17,260 ultra poor families at a cost of Taka 60.48 crore. In FY 1997-98, a Housing Fund was established with a grant of Taka 58 crore. An additional sum of Taka 15 crore was released to this fund in subsequent years. So far an amount of Taka 43.50 crore has been disbursed from this fund through NGOs as house building loan to 22,000 families in 202 upazilas in 62 districts. About 1.1 lac people will benefit from this programme. In 1998, an Employment Bank was established with a paid up capital of Taka 75 crore with the objective of creating employment opportunities for the youth. Branches of this bank are in operation now in 24 district headquarters. A programme called "one house one farm" has been launched under the leadership of the Prime Minister to increase income of the poor people. Responding to the call of the Father of the Nation the people of this country once converted each house into a fortress to resist the enemies. It is my firm conviction that they will, in the same way, win the war against poverty by responding to the call of the Prime Minister Sheikh Hasina. A fund has been established for oppressed. destitute women and child welfare with an initial grant of Taka 5  crore.  Over  the  last  four  years  various  food  related programmes have been rapidly expanded for the disadvantaged and the poor. In 1998-99, 4.2 million distressed families were provided food for a period of seven months at a cost of about Taka 585 crore. In 1999-2000, food assistance was given to 2.35 million families for 3 months and 4.21 million vulnerable families for 2 months. Taka 229 crore was spent on VGF programme in 1999-2000. Under the above programmes so far Taka  1222  crore  has  been  spent  for  social  security. Furthermore, micro-credit amounting to Taka 2035 crore was provided  in  various  projects  of  14  ministries  of the Government. NGOs have disbursed micro-credit totalling Taka 7735 crore to 87 lac members. We understand that four years is far too inadequate for alleviation of complex and widespread poverty in Bangladesh.  Nevertheless, the innovative and creative projects undertaken by the present Government have established a firm and sustainable base for alleviation of poverty in Bangladesh.

18.    Economic growth without social justice has no fruit and social justice without economic growth has no root. Therefore, the present Government has initiated wide ranging activities for economic reform simultaneously with expansion of social safety net. For the first time in the history of Bangladesh the present Government has opened up telecommunications, power and physical infrastructure sectors to private investment, especially foreign investment. It may be mentioned here that due to policies pursued by the previous Government aimed at serving party interests, the price of a cellular telephone was over Taka I lac; but this has now come down to less than Taka 10,000 as a result of the liberal and welfare oriented policies of the present Government. In 1995-96, foreign investment in physical infrastructure amounted to US$ 286 million which jumped to US$ 748 million in 1998-99. Financial sector reforms have been accelerated. The present Government has largely established discipline in the banking sector burdened with huge classified loans of the past. The supervision of Bangladesh Bank over the banking sector has been intensified and strengthened and all out efforts are now in place to eradicate corruption, irregularities and political inrerference in this sector. Bankruptcy Act has been put in place and separate Money Loan Courts and Bankruptcy Courts have been set up in Dhaka and Chittagong. Steps have been taken to gradually strengthen the Bangladesh Bank by amending Bangladesh Bank Order  and  Banking  Companies  Act.  Capital  Market Development Programme will be shortly completed with the assistance of the Asian Development Bank. Proposals for amending four laws in this regard have been placed before this august House. Moreover, a law has been enacted to establish a Central Depository System and implementation of this system is now at its final stage. A project has been taken up for reforms of  the  judicial  system.  The  Administrative  Reforms Commission will soon submit their report. Furthermore, local government system has been reorganised for "democratisation of democracy" on the basis of the report of the Local Government Commission. Meanwhile, laws relating to Union Parishad have been amended and the newly elected Union Parishads have assumed their offices. Law relating to Upazila Parishad was enacted in 1998. Law pertaining to Zila parishad has meanwhile been placed before this august House. The laws relating to Municipalities and City Corporations have already been amended and elections to Municipalities and Chittagong City Corporation have been successfully completed.

19.    An  American  statesman  rightly  said:  "An  idealist believes the short run does not count. A cynic believes the long run does not matter. A realist believes that what is done or left undone in the short run determines the long run". Whatever have been done or left undone in the field of reforms are both important for the economy. The dividends of implemented reforms have already been received. For example, there has been remarkable increase in foreign investment as a result of reforms  in  telecommunications,  power  and  gas  sectors. Financial sector reforms have generated irresistible public opinion against the loan default culture. The percentage of classified loans in private sector banks stood at 39.5 percent in 1995. It has declined to 26.5 percent in 1999. Furthermore, the assumption of liabilities of state-owned enterprises by the Government will significantly reduce the percentage of classified  loan  in  nationalised  commercial   banks.  The collaborative efforts of the Government and Bangladesh Bank for reducing classified loan will continue. On the contrary, where reforms could not be implemented, the problems became more complex. For example, the experience of the state owned enterprises may be recounted in this connection. Excluding financial institutions, losses of state owned enterprises in the current year have been provisionally estimated at around Taka 3100 crore. The loss of Bangladesh Petroleum Corporation alone amounted to around Taka 1633 crore owing to non- adjustment of local price of petroleum in line with international prices. An analysis of the reasons for loss of other state owned enterprises indicates that the reform initiatives of the previous Government were defective. In fact, reform initiatives of the previous Governments were based on abstract ideas ignoring socio-economic realities of the country. We have reached the conclusion from our experience over the last four years that in order to "globalise" our economy successfully, we will have to "indigenize" our reform process. For example, strategy for privatization  by  the  present  Government  has  undergone significant changes owing to "indigenization" of policies in this area.  Previously, industries which were in operation were privatized. This was detrimental to the interests of labour and consequently  labour  unrest  impeded  the  process  of privatization. Three new policies have been initiated in respect of privatization. First, the workers of the industries identified for privatization are paid their dues before the transfer of the undertaking.  Second,  where  possible,  the  feasibility  of transferring ownership to the workers is considered. Finally, where surplus land is available, such lands are sold separately. I am confident that new policies of privatization would accelerate the process of privatization and contribute to reduction of losses in state-owned enterprises.

20.   The skill of the present Government under the dynamic and bold leadership of Prime Minister Sheikh Hasina in handling the challenges of relief and rehabilitation during the devastating flood in 1998 has been lauded both at home and abroad as a remarkable instance of success. I would like to remind this august House that despite flood losses to the tune of 6 percent of GDP resulting from 1998 flood, we had succeeded in largely tiding over the adverse effect of flood on the agriculture sector in the FY 1998-99. Because of uncertainties in export market resulting from flood and the delay in repairing the  infrastructure,  flood  losses  were  more  prolonged  in nonagricultural sectors. Particularly growth in industrial sector in FY 1999-2000 will be less than that of 1997-98. Industrial production grew by 8.54 percent in FY 1997-98.Because of floods it plummeted to 3.19 percent in FY 1998-99. Industrial growth rebounded to 5.5 percent in first seven months in FY 1999-2000. The growth rate of industrial sector in the same period in 1998-99 was only 2.3 percent. With a view to analysing the economic performance in FY 1999-2000, I would like to recount the main trends of money supply and external balance.

21.   A moderately expansionary monetary policy has been pursued during last two years with a view to counteracting the recession in some sectors resulting from the flood. During the first nine months of FY 1999-2000, broad money grew by 13.4  percent, the corresponding growth in the previous year was 7.5 percent. Cash Reserve Requirement (CRR) of the commercial banks was reduced from 5 to 4 percent. In order lo encourage adequate flow of credit, the bank rate of the cential bank was reduced from 8 to 7 percent. As a result, domestic credit increased significantly. In March, 1999 domestic credit grew by 13.8 percent compared to the same period in the previous year and private sector credit grew by 11.5 percent. Domestic credit in the corresponding period of last year grew by 10.5 percent. However, the expansionary monetary policy had no discernible impact on the rate of inflation. There has been secular decline in the rate of inflation during last ten months. The rate of inflation
at the moment is very satisfactory.

22.   Exports were hit worst by flood in 1998. In FY 1996-97. export grew by 14 percent; in FY 1997-98, by l6.83 percent. Export growth in FY 1998-99 shrank to 2.9 percern in the wake of flood. In the first nine months of the current fiscal year, export growth increased to 8.4 percent. This growth rate is expected to accelerate in the last quarter of the fiscal year. Exports of frozen food, raw jute, readymade garments, leather and chemicals have increased. However export of tea and jute goods declined in the current fiscal year. The net disbursement of foreign aid in the first seven months of the current fiscal year is  US$  830  million  compared  to  US$  770  million  in  the corresponding period of last fiscal year. According to estimates of Bangladesh Bank, imports grew by 2.5 percent during the period July-January in FY   1999-2000  compared  to corresponding period in last fiscal year.

23.   The Government is pursuing a two-fold strategy for encouragement of exports. First, Bangladesh Bank determines the exchange rate on the basis of real effective rate of exchange, calculated on daily basis with a view to protecting the competitiveness of Bangladeshi exports. The exchange rate vis-a-vis the US dollar was changed twice so far in the current fiscal year. Taka was devalued by 4.9 percent against US dollar and by 3.22 percent against pound sterling during the current fiscal  year.  This  has  stimulated  exports  and  encouraged remittance by expatriate citizens. During the period July-April in FY 1998-99, remittance stood at US$  1380 million. The corresponding figure in the current fiscal year is US$ 1558 million. Remittances by expatriate citizens during this period grew by 12.8 percent. Secondly, subsidy and other assistance have been given to selected export items. In FY 1999-2000, a sum of Taka 631 crore was allocated for different types of assistance and subsidy for readymade garments, manufactured leather products and jute goods, artificial flower, quilt etc. Similar facilities will continue in FY 2000-2001. I propose to allocate Taka 632 crore in FY 2000-2001 for such facilities.

24.   A review of economic activities of last four years clearly suggests that high growth rate in a stable macroeconomic framework has been achieved. Particularly, we have unlocked the immense potentialities of the agriculture sector. A social safety-network has been institutionalised for the first time in the history of Bangladesh. However, we must not be complacent about the past, we must prepare ourselves for the new challenges  of  the  future.  The  distinguished  American industrialist Henry Ford rightly said, "Anyone keeps learning stays young, the greatest thing in life is to keep your mind young". We must consolidate in areas where we have already succeeded. Simultaneously, we must take initiatives in areas where measures are necessary. Before discussing the budget, I would like to discuss a few new initiatives of the Government.

25.   In different phases of human history, natural resource and physical capital were the engines of growth. Knowledge is the determinant of growth in the 21st century. A new horizon for development has been opened for countries deficient in natural resources and physical capital.  However, the benefits of knowledge-based growth will not automatically accrue to developing countries like Bangladesh. We must take concrete measures for ensuring transition to knowledge-based economy. With this end in view, we have taken few significant measures for promotion of information technology. In FY 1998-99, all customs duty and taxes on computer and spare parts exclusively used   in   computers   were   withdrawn.   Necessary telecommunication facilities were offered for the development of software industry. However, the benefits of these measures are yet to materialise fully. One major obstacle to development of information technology is that we do not have adequate training facilities to create well-qualified programmers. In the budget for FY 2000-2001, I propose to make a lump allocation of Taka 15 crore with a view to encouraging additional facilities for training programmers of international standard. Educational institutions or training institutions in both public and private sectors are eligible for such assistance. A special committee will  scrutinize  the  applications  for  grants.  If  necessary, additional allocation for this purpose will be considered in the future.

26.   On the face of it, investment in industrial sector in Bangladesh is highly satisfactory. According to estimates of Bangladesh Bank, total disbursement of industrial credit in first six months of FY 1999-2000 is about Taka 5856 crore which is 38.8 percent higher than that of the corresponding period of the previous year. Taka 5158.7 crore was disbursed for working capital and Taka 697.4 crore as term-lending - which grew respectively by 42.7  percent  and  15.4  percent  over  the corresponding period in last fiscal year. Latest statistics indicate that total disbursement of industrial loan during first nine months (July-March) of the current fiscal year stands at Taka 8,508 crore of which Taka 1,158 crore was provided as term loan. The main problem of industrial investment is not the quantity. The main deficiency is the concentration of industrial investment in a few sectors. Particularly, investment in two promising sectors is not at all satisfactory; these two sectors are software and agro-processing and food industry. One reason is that these sectors are still considered to be risky. With a view to promoting investment in these two sectors, I propose to allocate 'Taka 100 crore for establishing an Equity Development Fund in the Bangladesh Bank. This fund will be managed by the Board of Directors of Bangladesh Bank under the stewardship of its Governor. This fund will invest in financially viable software, food processing and agro-processing industries. However, the maximum investment from this fund will be limited to 25 percent of the equity. Hopefully, this measure will contribute to new investment in these sectors.

27.   The   efficacy  of  state  owned  banks  has  been circumscribed by bad and substandard loans resulting from mismanagement in the past. On the one hand, the taxpayers have to bear the burden of the deadweight of the losses of these institutions; on the other hand, the borrowers have to pay interest in excess of what would have been the equilibrium rate. In order to tide over the crisis of state-owned enterprises, the Government has decided to pay up the debts of state-owned enterprises which have already been laid off. I propose to issue interest earning bonds to the tune of Taka 1800 crore to the nationalized commercial  banks.  Considering this  financial package into account, the nationalized banks have decided to reduce interest in those thrust sectors where investment is limited. They have also decided to introduce rebates ranging from 5 to 10 percent for borrowers for timely repayment of loans. The details of such measures will be announced by each nationalized bank separately.

28.   Jibanananda Das, the poet, once proudly wrote, "I have witnessed the charm of Bengal; I do not, there fore, wander through the world in search of natural beauty". The beauteous Bengal ofJibanananda with its blue shade of Hijal, Banyan and Tamal trees has faded away; a large number of species of birds, animals, trees and flowers has disappeared. Environmental degradation has not only dimmed the natural beauty of this country, it has also posed a serious threat to life of its citizens. Particularly, environment pollution problem in urban areas has become all the more acute. The stark realities of environmental pollution in Dhaka reminds one of the dire predictions of an ecologist: "Should we allow environmental deterioration to continue, man's fate may be worse than extinction". This problem has been compounded by poverty. The hairnful wastes originating from slums with subhuman conditions have got enmeshed with mechanical pollution. The Government has already undertaken a number of measures for mitigation of pollution. This complex problem cannot, however, be solved by the Government alone; the civil society and people of all walks of life must come forward to solve this problem. The problem is not one of lack of financial or technical resources. There is an acute dearth of appropriate institutions. In many cases, small pilot projects will have to be undertaken to identify appropriate solutions. With a view to encouraging innovative projects for resettlement of the inhabitants in backward zones of urban areas, I propose to earmark an allocation of Taka 15 crore in the budget for FY 2000-2001. Special grants will be given from this allocation to appropriate government and non-government agencies  for  undertaking  innovative  projects  for  slum rehabilitation and protection of environment in the urban areas.

29.   I would like to present now the salient features of the revised budget for FY 1999-2000. Total revenue in this fiscal year was originally estimated at Taka 24,151 crore of which the target for taxes administered by National Board of Revenue was Taka 17,500 crore and the target for other taxes and non-tax sources was fixed at Taka 6,651 crore. Owing to the delay in implementing compulsory preshipment inspection, sluggish growth in imports and industrial sector and lower than expected inflation, the target for NBR has been refixed at Taka 16,000 crore. The state-owned enterprises will not succeed in achieving their targets because of non-adjustment of administered prices despite price hike in the international market and decline in productivity. The target for miscellaneous taxes and non-tax revenue has been refixed at Taka 5,345 crore. There will, therefore, be a shortfall of Taka 2,806 crore in revenue receipts. It may be mentioned that similar shortfall in revenue receipts was also evident in other South Asian countries. There was a shortfall of four percent in revenue receipts in India in FY 1999-2000.

30.   Expenditure on account of interest increased from Taka 2,805 crore in the original budget to Taka 3,554 crore in the revised budget owing to increased borrowing from banking system and devaluation of taka. Despite austerity in other areas, the estimates for revenue budget had to be refixed at Taka 18,444 crore to provide for additional expenditure on account of interest. The total outlay for Annual Development Programme has been raised from Taka 15,500 crore to Taka 16,500 crore to complete the rehabilitation of infrastructure damaged by flood. Despite an increase in foreign aid, these revisions will cause, in the revised budget, a deficit of Taka 3,934 crore which will have to be financed through borrowing from the banking system. The fiscal deficit in the budget for FY 1998-99 was estimated at 5.3 percent of the GDP (on the basis of new GDP estimates), it is estimated to edge up to about 5.8 percent of the GDP in the revised budget for FY 1999-2000. It may be mentioned here that the fiscal deficit in India (on the basis of combined deficit of the central and state governments) varied between 6.2 percent and 10 percent of GDP during the period 1994-95 to 1999-2000. Despite such deficits, India succeeded in attaining growth in a stable macro framework. In the 1990s, budget deficit in Italy was around 10 percent of GDP. In Japan it now stands at about 8 percent of GDP.

31.   The experience of financial management in Bangladesh during last two years suggests that harmful effects of bank borrowing are limited. There is no direct correlation between government borrowing and inflation in Bangladesh. On the contrary, inflation- rate in Bangladesh has been continuously falling during last ten months despite a surge in government borrowing. Secondly, as yet there has been no crowding out of private sector credit owing to expansion of government credit. In mid-April, commercial banks in Bangladesh had excess liquidity to the tune of 6.3 percent of their deposits despite an increase in government borrowing.  Furthermore,  credit to private sector increased by  11.5 percent during first nine months of the fiscal year. Thirdly, as the distinguished economist Robert Eisner rightly pointed out, the manner in which Government uses its borrowing determines whether it could be harmful or beneficial. If borrowed money is invested in economically sound projects, benefits are likely to outweigh the costs. As the bank borrowing is used for financing Annual Development Programme, such borrowing is likely to be conducive to growth in Bangladesh. Commenting on budget deficit, the Economist (May 20-26, 2000) in a recent report rightly pointed out, "Sometimes it should be boosting public investment instead. If a budget surplus is achieved by starving, say, education or public infrastructure of funds, this would actually reduce future growth".

32.   Total revenue receipts for FY 2000-2001  have been estimated at Taka 24,198 crore. This target is 13.3 percent higher than that of the revised budget for the current year. Total revenue expenditure for FY 2000-2001 has been estimated at Taka 19,633 crore. This is 6.4 percent higher than the revised estimates.  The  main reason  for this  increase  in  revenue expenditure is the increase of interest cost on domestic and foreign loans. The allocation for interest in the revised budget of FY 1999-2000 is Taka 3,554 crore and Taka 3,748 crore in the budget for FY 2000-2001. If additional expenditure on account of increase in interest are excluded, the revised revenue budget, compared to original budget, would have decreased by 105 crore and revenue expenditure in FY 2000-2001 would have increased by only 5 percent. It may be recalled here that the distinction between revenue and development budget is gradually becoming blurred. First, the Government has to borrow for financing development projects. However, the interest on borrowing, which now stands at about 19 percent of revenue budget, has to be provided from revenue budget itself. This contributes to gradual increase in the size of the revenue budget. Expenditure in all social sectors is also gradually increasing.  There  is  no  qualitative  difference  between allocations for social sectors in revenue and development budgets. In 1990-91, the share of social sectors in revenue budget was 13 percent. In FY 2000-2001 the share of social sectors such as education, health, etc. stands at about 24 percent. Furthermore, staff of completed projects have to be transferred to revenue budget. The allocations for maintenance of the completed development projects are also going up in the revenue budget. At least 50 percent of revenue expenditure directly originate from development expenditure. The artificial distinction  between  development  and  revenue  budget  is gradually disappearing and in the near future two budgets will have to be integrated to ensure efficient utilization of resources. It may be recalled here that development partners in the last Bangladesh Development Forum held in Paris recommended the elimination of artificial demarcation between revenue and development budgets.

33.   Taking into account the needs of development, the Annual Development Programme (ADP) for FY 2000-2001 has been fixed at Taka 17,500 crore. The size of the ADP is 13 percent higher compared to ADP for FY 1999-2000. About 50.2 percent of the resources will be provided by domestic sources and 49.8 percent from foreign sources. However, domestic resources for ADP cannot be provided from revenue surplus alone. In FY 2000-2001 also, bank borrowing to the tune of Taka 3,514 crore will be necessary for financing the proposed ADP. However, the overall fiscal deficit would stand at about 5.9 percent of GDP.

34.   A conscious effort for poverty alleviation lies at the heart of all activities of the present Government. The highest priority has been given to poverty alleviation in resource allocation. In the ADP for FY 1999-2000, Taka 5,313.42 crore was allocated for sectors directly concerned with alleviation of poverty. This allocation has been raised to Taka 6,006.10 crore in FY 2000-2001. In the revenue budget for FY 1999-2000 a sum of Taka 3,439.17 crore was allocated for poverty alleviation activities (such  as  gratuitous  relief,  test  relief,  vulnerable  group development and feeding, food for work, housing for poor, allowance for the elderly and expenditure for providing health and education services in the rural areas). In FY 2000-2001, this allocation is proposed to be raised to Taka 3,892 crore. The combined allocation in development and revenue budget for poverty alleviation in FY 1999-2000 was Taka 8,752 crore. In FY 2000-2001, it is proposed to be raised to Taka 9,898.1 crore. In other words, the combined allocation for poverty alleviation has been raised by 13 percent. In FY 1999-2000, 26.28 percent of combined revenue and development budgets was allocated for poverty alleviation. In FY 2000-2001, the share of poverty alleviation activities has edged up to 26.60 percent.

35.   The highest allocation in the combined revenue and development budgets has been proposed for education sector in FY 2000-2001. The proposed allocation for this sector is about Taka 5,596 crore. In FY 1995-96, the year immediately preceding the assumption of office by the present Government, total allocation for education sector in revenue and development budgets stood at Taka 3,522 crore. The allocation has increased to Taka 2,074 crore or 59 percent over that of in 1995-96. One of the reasons for this unprecedented rise in expenditure in this sector   is the increase in government subvention for non- government teachers. In 1996-97, total subvention for non- government college teachers was Taka 120 crore; it has been raised to Taka 235 crore in the revised budget for FY 1999- 2000. In FY 1996-97, total allocation for non-government secondary school teachers was Taka 395 crore; in the current fiscal year, it has been raised to Taka 654 crore - an increase of 66 percent over a period of three years. In the same period, subvention  on  salaries  of  teachers  in  non-government madrassas has been raised from Taka 227 crore to Taka 344 crore. Total additional expenditure on account of the increase in salaries of the teachers of these institutions stands at about Taka 491 crore. In registered primary schools, subventions have been refixed on the basis of revised pay scale in 1997. Furthermore, the percentage of subvention has been raised to 80 percent in case of teachers with five years' experience in registered primary schools. In FY 1996-97, total allocation for registered non-government primary schools was Taka 54 crore. In the revised budget for FY 1999-2000 it has been raised to 110 crore. Revenue expenditure under this subhead has doubled in last three years.

36.   In the education sector, emphasis has been laid on the quality of education. The construction of 7214 secondary school buildings, 1792 non-government madrassas and 574 non-government colleges have been completed under various projects. The construction of additional 5124 non-government secondary schools, 317 government secondary schools, 1741 non-government madrassas and 3 government madrassas will be undertaken under three new projects. With a view to encouraging female education, stipend to 4 million female students has been provided in the year 2000. A project costing about Taka 119.79 crore has been launched for introduction of vocational  education at  SSC  level  in  selected secondary schools. I propose to allocate Taka 19 crore for this project in FY 2000-2001. I propose to allocate Taka 73 crore for university education in the development budget for FY 2000-2001. I also propose to allocate Taka 8 crore for purchase of books and scientific equipment in government and non-government schools in the revenue budget for FY 2000-2001. Emphasis has been laid on teacher's training and English education at secondary level. Furthermore, a sum of Taka 480 crore has been earmarked in FY 2000-2001 for stipend and food for education to discourage dropout in primary schools. In accordance with the election commitment in 1996, a realistic programme has been undertaken for eradicating the curse of illiteracy from the country by 2006.

37.   In the election manifesto of 1996, Bangladesh Awami League pledged:  "A comprehensive programme will be undertaken to ensure "Health for All". In the light of this commitment, a new health policy has been approved. The National Health Policy laid down a comprehensive definition of health. According to this policy, health does not merely imply absence of physical illness or infirmity - it connotes freedom from mental, physical and social illnesses. Allocations for the health sector has been gradually increasing. In the revised budget for FY 1995-96, the combined revenue and development allocation for health and family welfare sector was Taka 1611 crore. In the FY 2000-2001, I propose to raise this allocation to Taka 2,689 crore. In the original budget for FY 1999-2000 for health and family welfare ministry, allocation was Taka 990.20 crore. In FY 2000-2001, I propose to increase this allocation to Taka 1112 crore. With a view to expanding health services during the period 1998 to 2003, a five year sectoral programme at a cost of Taka 9944 crore has been undertaken. I propose to allocate Taka 1539 crore for this programme in FY 2000-2001. With a view to providing one community clinic per 6000 people for bringing health care services to the doorstep of the people, a project for the construction of 18000 clinics has started. 6000 clinics are expected to be completed by FY 1999-2000. Furthermore, construction of 180 union health and family welfare centres and eleven maternal and child care centres is in progress. The Government has already recruited four thousand nurses. 4193 officers and employees of family planning project have been transferred to the revenue budget. The process for recruitment of 1000 new doctors in FY 2000-2001 has already started.  Furthermore,  a national nutrition project has  been launched with the assistance of the World Bank. I propose to allocate Taka 35.70 crore for this project in FY 2000-2001.

38.   One of the major failures of the previous Government during the Fourth Five Year Plan was their inability to ensure generation of adequate electricity in line with the rising demand. In FY 1995-96 effective capacity for electricity generation was 2105 megawatt. As a result of untiring efforts and prudent policies of the present Government, over the last four years this capacity has been raised to 2700 megawatt in FY 1999-2000. In FY 1994-95, per capita electricity production was 92 kwh, it rose to 110 kwh in FY 1999-2000. Over the last four years, per capita electricity production has increased by 19.5 percent. During this period the installed capacity for electricity generation has increased by 1256 megawatt out of which the shares of Government, non-government and mixed sectors as well as for rehabilitation of existing units are 450 megawatt, 302 megawatt, 70 megawatt and 434 megawatt respectively. Moreover, an additional 476 megawatt electricity is generated by captive generators which are encouraged by waiving duties and taxes. Meanwhile, agreements have been signed for generation of 1188 megawatt electricity in the private  sector out of which production of 302 megawatt electricity has already commenced. Considering the importance of the power sector, the allocation for this sector has been raised. The allocation in the ADP for FY 1999-2000 was Taka 1,770 crore. It is proposed to be raised to Taka 2,202 crore in the ADP of FY 2000-2001. The allocation for this sector has been proposed to be raised by 24.5 percent in the next year as compared to the ADP for the current year. In the development budget of FY 2000-2001, proposal has been made for an allocation of Taka 620 crore specifically for expansion of the rural electrification system. The Rural Electrification Board has taken up a project to expand renewable energy technology in inaccessible rural areas where electricity distribution is very expensive. Initiatives are afoot to strengthen and expedite administrative reforms in the power sector.

39.   Necessary policies and guidelines have been developed to attract private investment in energy and mineral resources sector.  Agreements  have  already  been  signed  with  four international oil companies for gas exploration in 8 blocks. So far about US$ 600 million has been invested in these 8 blocks. Besides, 9 blocks have been allocated to large oil companies for exploration. We hope, production of gas will significantly increase in view of foreign investment. In the revised budget of FY 1999-2000, the allocation for oil, gas and natural resources sector was Taka 609 crore. This allocation has been proposed to be raised to Taka 655 crore in the budget for FY 2000-2001.

40.   The development of the transport sector is not only indispensable for economic development but also very effective for alleviation of poverty. In the ADP for 2000-2001, highest allocation has been given to the transport sector. The proposed allocation for this sector has been estimated at Taka 2,578 crore. Out of this allocation 67.3 percent will be spent on roads, 4.2 percent for payment of arear bills of Bangabandhu Bridge, 22.4 percent on railways, 4.7 percent on civil aviation and 1.4 percent on shipping. During the first three years ofthe present Government,  the  Roads  and Highways  Department has completed construction of 1817 kilometers of metal led road and 1369 kilometers of brick road. In FY 1999-2000, additional 715 kilometers of metalled road and