The study also significantly revealed that the overall informal payments and other inefficiencies add up to 40 per cent to transport-related costs for imports in the country. Thus, the case for streamlining the transportation mediums in this corridor, should be obvious. Not only in this particular corridor, similar transportation related improvements and efficiencies need to be achieved throughout the country. The same will call for significantly adding to the number of transportation-related infrastructures, their maintenance and various supportive functions including also the elimination of the tolls and other man-made abuses.

Indeed, transportation is counted as a major cost of business. The countries that have developed or are noted for moving up in the economic ladder, owe a lot to successful transport planning. Transport planning can involve many things from building shortest road, rail or waterway systems for the dispatch of cargoes to identifying and promoting the cheapest medium of transports and integrating them to the needs of various users.

For example, waterways may be relatively cheaper for the haulage of cargoes of the readymade garments (RMG) sector in Bangladesh. But speed of delivery requires their transportation through land routes whereas other importers or producers, not bothered by the need for fast freighting, can opt for the cheaper waterway. Thus, different categories of users can use different mediums of transport suitable to them but each of these mediums needs to discharge their utility efficiently for the optimum benefits of businesses. Thus, the challenge is adding to capacities of the different transportation mediums and making them function with utmost efficiency.

The functioning of the Chittagong port was reported to have much improved under the immediate past caretaker government. . The government gave focused attention to improving the operations of this port in all respects and engaged the joint security forces for the purpose. The results were very impressive. The time of handling cargoes was brought down from eight days to only three days. The time to unload cargoes and to leave the port was reduced to a little over one day. The earlier congestion completely disappeared and foreign shipping companies started taking lower charges while coming to Chittagong port after knowing about its improvements and the reduced risks of calling on it. This attitude on the part of the shipping companies helped in the saving of resources for businesses that had to be wasted when the port was very inefficient.

The improvements attained in the running of the port were retained for some time after the transition to the elected government. But according to recent media reports, the improvements are coming under a threat as vested interests have again become active to establish their dominance over the port. Needless to say, the government must wake up to this danger–immediately — and do its best to reverse this trend for the better.

There are also more things to be done to build upon the gains to be made from a more efficient Chittagong port. A suggestion was made from businesses that along with further improvement in the port’s functioning and adding to its capacities, the government should adopt a plan with no loss of time to build, at least, one expressway exclusively for use by business operators in the strategic business corridor between Dhaka and Chittagong. The plan on its implementation can lead to saving of some Taka 50,000 million annually for businesses from substantial reduction of transportation costs on the corridor.

The reduction of this cost is only one aspect of the benefits from this project. The competitiveness of the export-oriented industries, specially of garments, would increase significantly after it is built. The expressway would help mightily in shortening the crucial lead time for garments exporters in both carrying imported raw materials to production destinations swiftly and similarly cut down on the time to reach finished products at the port for loading on ships. Not only costs would fall for industries geared to exports, transportation costs of all types of consumer and essential goods from Chittagong would likely fall notably from their faster dispatch and hence reduced transportation costs.

The projected expressway will cut down the time of movement between Dhaka and Chittagong for business cargoes by nearly four hours. It takes an average of at least seven hours now for a container-laden truck to reach Chittagong from Dhaka, using the existing Dhaka-Chittagong highway. The expressway would be an exclusive one for high speed travel by vehicles carrying only business cargoes.

Apart from this expressway, the government should also give attention simultaneously to building inland container depots (ICDs) to be supportive of both the port and the expressway. Undoubtedly, the ICDs would take pressure away from the Chittagong port and also ease the movement of traffic on the vital Dhaka-Chittagong corridor. Similarly, railway’s transportation capacities in this corridor can be increased and improved by double-tracking the existing single line and improving railway management. The waterways — with ICDs of their own — need to be similarly developed.

All of these measures will need to be taken in line with projections of present and potential uses of the transportation mediums . That is why it is absolutely necessary that the works should proceed under a comprehensive or master plan with components in it that can be progressively realised in tandem with the needs of the users. It is also imperative to make progress on different proposed projects to develop Bangladesh as a regional hub for transportation.

The Institute of Internal Auditors (IIA) recently adopted a Professional Practices Framework (PPF) that includes both new and updated internal audit standards. This framework provides a context for internal audit activities to mesh with other mechanisms of corporate governance. Two Statements on Auditng Standards (SAS) refer directly to internal audit activity:

SAS 65, The Auditor’s Consideration of the Internal Audit Function in an Audit of Financial Statement (1991), encourages external auditors to consider internal audit activities when planning and performing the financial statement audit.

SAS 55, Consideration of Internal Control in a Financial Statement Audit, requires external auditors to obtain an understanding of internal control on every engagement. Because internal audit activities are a part of two of the five components of internal control, the external auditor must therefore gain an understanding of internal audit work.

The PPF includes a definition of internal auditing as well as the IIA Code of Ethics, Standards for the Professional Practice of Internal Auditing, practice advisories, and development and practice aids (see Exhibit 1).

The IIA’s definition of internal auditing reflects the broad duties of internal auditors in their organizations. The definition’s encompassing nature allows for future development of the role of the internal audit. The new definition is as follows:

Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

The IIA adds consulting activities to the more traditional assurance services in characterizing the work that internal auditors perform. In addition, the definition emphasizes the concept that internal auditing should add value to the organization. Finally, besides the familiar topic of internal control, two additional areas, risk management and governance, are specifically mentioned.

The IIA Code of Ethics has two components: “principles” and “rules of conduct.” The four principles are: integrity, objectivity, confidentiality, and competency. The rules of conduct amplify the principles and detail specific internal audit behaviors that are either mandated or prohibited. The code applies to all IIA members, IIA certificate holders and candidates, and those who provide internal audit services. Both individual internal auditors and entities that carry out internal audit activities must abide by the code.

The Standards for the Professional Practice of Internal Auditing (SPPIA) consist of three sets of standards, all of which are mandatory:

Attribute standards describe appropriate features of individuals and units performing internal audit work. The four broad topics of the attribute standards are shown at the top of Exhibit 2.

Performance standards pertain to the execution of each individual internal audit engagement. The seven areas at the bottom of Exhibit 2 address all aspects of leading and directing the internal audit activity as well as conducting each engagement.

Implementation standards elaborate on the attribute and performance standards and relate those standards to specific types of audits. Implementation standards may address issues associated with particular industries, regions, or types of services.

The internal auditor applies attribute, performance, and implementation standards when performing both assurance and consulting work. In an assurance engagement, the internal auditor is providing an independent assessment of one or more aspects of risk management, control, or corporate governance. When planning a consulting engagement, an agreement is made with the client as to the nature and scope of the work to be performed, again, related to risk management, control, or corporate governance. The results of assurance and consulting services help management achieve its objectives. Exhibit 3 shows the IIA’s explanation of both.

Practice advisories (PAs) provide internal auditors with guidance that is endorsed by the IIA but not mandatory. The PAs describe best practices that may aid the internal auditor in operationalizing the SPPIAs. Some PAs interpret the SPPIAs and may apply to all internal audit engagements. Other PAs provide specific advice for particular industries, topics, geographic regions, or specialties.

Development and practice aids constitute the largest element of the PPF. The aids offer training and education to internal auditors through continuing education courses, research reports, and other products and services. They are especially useful for addressing new and evolving areas and suggesting best practices. The aids are either developed or endorsed by the IIA.

Impact on External Audit Work

In considering the impact of internal audit on their work, external auditors should clearly differentiate between assurance and consulting engagements. They also need to understand the distinctions between internal audit engagements covering control, risk management, or corporate governance. They should also consider the requirements of SAS 65 as it relates to the understanding of internal auditing as a part of internal control, to the use of the internal auditors’ work or as assistants, and to quality reviews.

Assurance vs. consulting. When performing assurance engagements, the internal auditors independently design and execute the work. Because assurance service engagements yield an objective examination by the internal auditors, they receive more attention from external auditors, management, and board members than consulting services. Consulting services include an agreement between the internal auditor and the client as to the nature and scope of the work to be performed and are intended to directly aid managers in meeting their goals. Advisory services, training, or process design, which are normally relevant to improved operational activities, are examples of work that internal auditors may perform as part of a consulting engagement.

Control risk management, and corporate governance. Whether an engagement involves assurance or consulting, internal audit work falls into one of three categories: control, risk management, or corporate governance.

The IIA defines control as “any action taken by management, the board, and other parties to enhance risk management and increase the likelihood that established objectives and goals will be achieved.” Management uses controls to provide reasonable assurance that the goals and objectives of the entity are achieved.

Risk management involves directing the organization’s activities while at the same time regulating the likelihood and consequences of the entity’s risks, or exposures. The IIA defines risk as “the uncertainty of an event occurring that could have an impact on the achievement of objectives.”

Corporate governance is related to both controls and risk management. The governance process is composed of “the procedures utilized by the representatives of the organization’s stakeholders (e.g., shareholders, etc.) to provide oversight of risk and control processes administered by management.”

Of the three categories of work performed by internal auditors, internal audit assessment of controls over financial reporting is most likely to draw the attention of the external auditor and others responsible for public disclosures, while work addressing operational controls would be less so. Governance and risk management work could also prove beneficial to those representing the interests of the public, particularly if there are concerns about compliance or security issues.

SAS 55 and 65 Requirements

The PPF relates directly to several of SAS 55 and SAS 65′s specific requirements for external auditors. Some guidance applies to understanding how internal audit interacts with two of the five components of internal control. Other requirements are relevant if the work of internal auditors is incorporated into the external audit or if internal auditors are being used as assistants to the external auditor.

SAS 55 requires that the external auditor gain an understanding of the client’s system of internal control. The system is made up of five components: the control environment, risk assessment, control activities, information and communication, and monitoring. Internal auditors play a role in two of these: the control environment and monitoring.

To fully understand the control environment and monitoring aspects of internal control, the external auditor should inquire into the existence and function of the internal audit activity. Because of the standard’s recent issuance, external auditors should be especially careful to ensure that the PPF is being used, not the outdated Statements on Internal Auditing Standards (SIAS).

While SAS 55 mentions internal auditors briefly in its discussion of internal control, SAS 65 is devoted to guidance with respect to internal auditors. SAS 65 directs the external auditor to make inquiries concerning several aspects of the internal audit work.

The external auditor should ask about the level in the organization to which the internal audit activity reports. To encourage organizational independence, the internal auditor should report to a level high enough to accomplish its responsibilities, which typically means the audit committee. In addition, the internal auditor’s regular attendance and participation in audit committee meetings, as well as private conferences with the body, promote communication and help ensure the internal auditor’s independence.

The external auditor should also inquire about the charter for the internal audit activity. Such a document should exist and should define the purpose, authority, and responsibilities of the internal audit function. The auditor should have obtained approval of the charter from senior-level management and the board of directors.

Besides making inquiries about the organizational status of the internal audit activity, the external auditor should also ask about both internal audit plans and the scope of the internal audit work. Questions about plans should encompass the nature, timing, and extent of work, while questions about the scope of work should focus on access to records and limits placed on the internal audit activities.

Internal Audit Work or Assistance

Besides becoming familiar with the internal audit activity as part of understanding internal control, the external auditor may elect to give the function further consideration. If the work of the internal auditors is relevant to the financial statement audit or if the internal auditors can supply direct assistance in the external engagement, the external auditors should seek additional knowledge about the internal audit activity. SAS 65 notes that, when using internal audit work or when the internal auditors provide direct assistance, the external auditor should evaluate the competence and objectivity of the internal auditors and study the independence of the internal audit activity within the entity. The external auditor should also consider the results of external quality reviews of the internal audit activity.

In discussing competence, the PPF encompasses the individual professionals as well as the entire activity. Individually, internal auditors should be adept at applying internal audit standards and methodology. They should also have good communication skills. Policies should be in place for appropriate continuing education and experience. Depending upon the nature of the work performed, an appreciation of accounting, management, information technology, economics, law, finance, or quantitative methods may be necessary. Finally, collectively, the internal auditors should possess the knowledge, skills, and other competencies needed to perform the engagement.

Competency as an entire internal audit activity is recognized when each individual employs the due professional care and skill of a reasonably prudent and competent internal auditor. To further this goal, the PPF recommends that internal auditors establish their proficiency by becoming certified and staying current through continuing professional development classes and programs.

The concept of independence applies to both the internal audit activity and individual internal auditors. Appropriate organizational status ensures the activity’s independence. Individual independence, however, depends on the objectivity of each internal auditor. An impartial, unbiased attitude is to be maintained on all engagements, and conflicts of interest should be avoided. Rotation of the internal auditors across engagements and prohibition against the acceptance of gifts or fees from employees or associated parties also promotes objectivity. Finally, the review of internal audit work before its release aids in assuring that the procedures are performed objectively and that appropriate conclusions are drawn.

Impairments to independence, both in fact and in appearance, should be disclosed so work can be reassigned if appropriate. Besides possible conflicts of interest or bias, scope limitations may also threaten independence. Such restrictions should be communicated to the audit committee, along with their possible effect.

Quality Reviews

Besides considering competence, objectivity, and independence, concerned parties should also study the results of external quality reviews of the internal audit activity. The PPF promotes such external assessments as one component of the internal audit activity’s overall quality program.

Qualified individuals that are independent of the entity, such as external auditors, outside consultants, or internal auditors from other organizations, should perform external assessments at least once every five years. A formal report, expressing an opinion regarding the internal audit activity’s adherence to applicable standards, should be issued at the conclusion of the assessment. The report can include statements regarding the activity’s compliance with its charter and recommendations for improvement. Such reports are useful not only to the external auditors, but also to the internal auditor, senior management, and the board of directors.

Normally, a strategic plan is set for a five-year duration with the flexibility of making necessary changes as per demand. But it has to be frequently consulted and followed to ensure that the company is on track with expected results. In order to ensure that the plans are properly executed, the planner must also include the implementation mechanism. For instance, one needs to have an ‘action plan’ with proper delegation of jobs with authority and accountability as well as a time line.

Accountability is the key factor when it comes to delegation of authority and power. If a person is given an assignment to complete it by a certain deadline that person should be in a position to follow it up. Similarly, the person taking the responsibility should be accountable for his or her success and failures. For this, a well trained and highly ethical work force is required. Unfortunately, our country no longer produces such a work force, nor is there any fair recruitment through our Bangladesh Civil Service (BCS) process. Political interference always messes up whatever we do. Therefore, it is really hard to say what Bangladesh will achieve as a nation in terms of development and sustainability. We must enforce a strong Human Resource Management (HRM) programme in our government organizations, manned by BCS cadres that are free from undue interference it we want success in our strategic plans and goals.

Just establishing colleges and universities is not good enough; we need to ensure that the quality of education is maintained through proper and dedicated teachers under strict monitoring of the University Grants Commission (UGC) or an appropriate accreditation council. Otherwise, these organizations would also remain ineffective.

Most of our government departments are also under staffed and fail to carry out the jobs they undertake. Due to lack of proper supervision and monitoring many of our natural resources are plundered causing environmental threats and ecological imbalance. So, we can see that all matters are interlinked. To have a strategic plan and to implement it we need to have an efficient workforce. To have a politics and corruption free work environment we need to have dignified and quality non-political people in key positions, with full support from our corruption free law enforcement agencies so that they can perform fearlessly without encountering any threats or obstacles. Otherwise, whatever we plan will not see the light of day.

The preoccupation with backward linkages is perhaps a throwback from the defunct economics of a bygone era of the command economy. The economic planners of that era had to worry about backward linkages since the whole production process could grind to a halt if any input were not locally produced. This was due to the fact that the country did not trade much with the rest of the world either because the rest of the world imposed restrictions on trade with the country (as in the case of the early Soviet Union) or the country shut itself out from the rest of the world with a policy of import substitution industrialization (such as early China and India).

When trading opportunities are available inputs can be accessed in the world market. Indeed, globalization has completely negated the logic of backward linkages. No country should attempt to produce all the inputs needed for the production of any particular good unless it can do so competitively.

If one looks at the emerging industrial structure and the trade patterns of the developed countries, this becomes very evident. Intra-industry trade (essentially trade in inputs) is becoming increasingly important relative to inter-industry trade or trade in final goods.

The USA, the original home of the computer industry, now hardly manufactures much computer hardware. US companies have shifted their hardware production offshore. Even much of the work of software engineering has also been outsourced or shifted to such countries as India.

Many apparel companies in developed countries have either closed down altogether or shifted their operations offshore to developing countries where costs of production are lower. Interestingly some of these countries have actually increased their textile output at the same time they were closing down their downstream (forward linkage) apparel industry. Much of the textile output is now exported to the emerging clothing producers in the developing world.

Car manufacturers do not fabricate all car parts; whatever can be imported at a lower cost they simply buy from the international market. The very logic of globalization requires that a country does not try to produce everything it needs; it concentrates in producing only those commodities in which it has a comparative advantage while importing the rest.

Therefore, the creation of backward linkages for any industry must not become an obsession. Level playing field should be ensured for the development of all industries by exploiting their comparative advantage regardless of whether they are backward linkage activities or not.

Another idea that has percolated into economic policy discourse and seems to have considerable sway relates to high value products. It is often suggested, even by the highest policy makers, that the entrepreneurs should graduate to higher value products that presumably contain higher value addition. This is conceptually problematic.

High value and higher value addition may not always go together. For example, if an entrepreneur sets up a facility to produce cars (or plasma TV) by assembling mostly imported parts, he will produce a very high value product, but it would not have very high value addition. On the other hand, some very low value products, such as jute sacks or knit T-shirts, have very high value addition.

Requiring entrepreneurs to produce high value products with high value addition would therefore restrict them to only a small subset of the available production processes; and this cannot possibly be an optimal policy. More importantly there may be no economic advantage in producing high value products. In such case, advising entrepreneurs to shift to high value products is tantamount to asking them to commit business hara-kiri.

The most profitable business opportunities are usually available in mass, and hence cheap, products. Those who have succeeded in the mass market will not, and of course should not, abandon the market until they have lost competitiveness. The richest and most successful business enterprises are usually found to cater to the mass market.

The software giant Microsoft essentially produces a very low value product viz, a word processor. But this software has an enormously large market as it is useful to anyone who uses a computer, whether in an office, home or school. This makes it an extremely profitable product that has catapulted Microsoft owner Bill Gates to the status of the richest man of the world in a very short period. He will not be amused if he is advised to shift his talent to some extremely high value software such as those used for designing flight paths of satellites or spacecraft.

The retail giant Walmart serves the lower end of the market. Despite its tremendous success in retail business it has not moved upmarket by setting up very expensive and exclusive boutiques. Obviously it has not seen much profit in such a venture.

Toyota and Ford have very successfully produced cheap cars for the mass market for a long time. While they have small sections devoted to the luxury car market, their main concentration is the mass market. It will be a folly to advise them to try and produce cars to compete with the very high value cars such as Rolls-Royce or Ferrari. Incidentally, none of the latter carmakers is as profitable as the former.

In advocating for high value products what is lost sight of is the prime motivation for running a business, which is earning profits. Entrepreneurs will always choose the most profitable activity; and this is precisely what they should do if they wish to survive or excel in the marketplace.

A high value product does not necessarily guarantee high profits. Entrepreneurs should not switch to high value products unless they expect to earn higher profits. Most importantly, they should not abandon a profitable product regardless of whether it is of high value or not. Economists (vide Nobel laureates Arrow and Debreau) proved more than half a century ago Adam Smith’s proposition that when entrepreneurs in a competitive market produce the most profitable products their contribution to the output of the nation is at a maximum.

Corruption can be only one component among many others and scoring well in all of these other components is probably more crucial than frustrating corruption. If the conditions for fulfilling the other components of growth are reached, the same would likely create conditions for economic growth to soar into even the double digits in Bangladesh as in China. It is be no overstatement to say that Bangladesh has the potential for attaining annual economic growth of 15 per cent or above provided these other components of growth are well addressed through proper plans and their execution and the establishment and retention of a growth facilitating environment.

These other components which are discussed here range from human resources formation to abilities and resolve of leadership at various levels to even overcoming cultural or religious barriers. The point is this writer looks at achieving of a much increased growth rate in the context of Bangladesh for rapid alleviation of poverty and improved standard of living, as having many facets to it. In sum, what is suggested here is that the planners should come out of their traditional thinking on growth and look at it much more innovatively and dynamically. It would be impossible to describe in details the numerous ways and means of achieving growth within the limited space provided here. But describing a few should help in the clarification of the views expressed here.

For example, the country’s biggest export-oriented readymade garments (RMG) sector can contribute to growth by increasing productivity of its workers through selective and sustained training programmes. The RMG sector can expand in size from investing in the establishment of new units creating, thus, more employment and more wealth that would be contributory to the country’s economic growth in a major way. It can make its production and other processes leaner and fitter to increase its productivity and earnings. It can adopt total quality management (TQM) that puts each worker and every phase in the production process in the position of quality controllers that would make maintenance of large quality control departments or operations–redundant– leading to big saving of costs. In fact, TQM can be extended to progressively cover all or nearly all industries in Bangladesh that would be a plus factor to the viable running of these enterprises from costs savings as well as better quality control. The same would, then, add to economic growth.

Some countries, including very prosperous ones like Japan, have no scope to swiftly increase output from different sectors by only applying labour and capital to them. This is because they lack in large physical endowments. Japan, for example, has very little natural resources of its own. It cannot add to growth like a physically big and well endowed country such as Brazil by bringing more lands under the plough or harnessing for the first time untapped natural resources. Bangladesh is relatively a rich country with many virgin and unexploited fields. It can, for instance, take steps to utilize its vast discovered resources of coal and other minerals. It can extend diverse forms of agriculture into considerable fallow lands. It can aim to exploit its sea resources on a large scale in the long run. Substantial investments on a large scale are possible in Bangladesh in the tourism sector. Continuing investments into these and other prospective areas through a really dedicated business leadership helped by a similarly dedicated, efficient and visionary national or governmental leadership, indicate the possibilities of creating a faster pace of overall economic growth for the country.

Government itself can be a big promoter of growth by introducing and running policies to that end. Government can really try hard to overhaul the country’s archaic educational system which is largely a burden than asset. It can create facilities for scientific, technical and vocational education on a far larger scale than what are on offer at present. It can particularly expand in a big way the opportunities for skill training programmes. The net of these efforts will be the formation of a large enough workforce supportive of much stepped up investment activities leading to higher economic growth.

Government on its own or in partnership with the private sector, should encourage rapid growth of all sorts of infrastructures to facilitate cost-efficient business operations. Government can try and be more successful in preventing smuggling operations that would stimulate local enterprises to fill up the void from non availability of smuggled goods.

Government needs to also more and more improve and fine tune fiscal and monetary policies that would inspire and encourage entrepreneurship locally. Government can also more and more raise awareness of people about empowerment needs of half of the population of the country who are females by drawing them into gainful economic activities outside the confines of their homes. Religious and cultural barriers will have to be overcome to this end. But doing of it, successfully, will allow the economy to be the gainer from receiving more and direct output from female workers in the different formal sectors. This will also aid the economic growth process.

So, from the above, it may be realized that there are so many aspects to increasing economic growth than putting too much into one basket like steps to get rid of corruption only. Greater investments in the economy helped by enabling infrastructures, efficient utilities and consumption of adequate energies, plus helpful fiscal and monetary policies , plus much greater cost-efficient operation by the entrepreneurs themselves, are the keys really to attaining record economic growth by Bangladesh to realize its dreams of a better existence for its people.

 BPO is distinct from information technology (IT) outsourcing, which focuses on hiring a third-party company or service provider to do IT-related activities, such as application management and application development, data center operations, or testing and quality assurance.

In the early days, BPO usually consisted of outsourcing processes such as payroll. Then it grew to include employee benefits management. Now it encompasses a number of functions that are considered “non-core” to the primary business strategy.

Now it is common for organizations to outsource financial and administration (F&A) processes, human resources (HR) functions, call center and customer service activities and accounting and payroll.

It involves contracting of the operations and responsibilities of a specific business to a third-party service provider. Some people call it ITES or Information Technology Enabled Services as these days more outsourcing is done using Information Technology. 

International investment consultancy firm Mckinsey estimates that, by 2010, the global BPO business will be worth 180 billion dollars. India will be an outsourcing hub. China, Philippines, and Malaysia will follow India. Even one per cent of the market share would boost Bangladesh’s foreign exchange earnings tremendously. The earnings from this lucrative sector remains in the country.

What is the current status of Bangladesh? Is it prepared to grab a chunk of such a lucrative business? Here are the answers. BTRC (Bangladesh Telecommunication Regulatory Commission) has started issuing licenses from April 2008. Cost of each license is only five thousand taka with duration is of 3 to 5 years. For call centre entrepreneurs, BTCL will give leased Internet connection at discounted rates.

Call centres, run by different cell phone operators, are an example of the service. Bangladesh also develops software, on a limited scale, for foreign companies. Foreign investors can do it in their own or under joint collaboration in a host country. The track record of Bangladesh has been very good. Software programmers developed in Bangladesh are good at problem solving. And software development cost is very low in Bangladesh compared to other countries. Graphics design and animation can also be added to Bangladesh’s BPO basket. The development of a 5-minute animation in Bangladesh costs one fifth of that in India.

The technology-driven BPO sector requires 10 per cent of technical expertise, 50 per cent of international marketing expertise and the rest depends on the ability to complete contracts. Bangladesh has to train and prepare its manpower to serve overseas customers.

One of the causes of inflation, explained as such, relates to food prices in the international market. Bangladesh being a food importing country, any rise in food prices in the world market can push up the domestic prices of those commodities. In the not too distant past, the prices of essential commodities, like rice, wheat and edible oil, increased significantly in the international markets. So, domestic prices of those items shot up phenomenally then.

Then the link between rising prosperity and inflation is sought to be proved by many. Despite all its problems, Bangladesh has been performing well, in terms of economic growth over the last 10 years. Its gross domestic product (GDP) base is not small, in absolute volume terms. It is the 50th largest economy in a sample of 177 countries. Not many developing countries have grown faster than Bangladesh with bigger GDP volumes since the early 1990s. Those who seek to link inflation and GDP growth performance state that the high growth rate of GDP and the per capita GDP in particular has led to the creation of excess demand in the Bangladesh economy. This has resulted in a demand-pull inflation.

Then there is the growth of money supply that is directly related to the price situation. ‘Inflation is a monetary phenomenon’, so is explained by a good number of economists as well as some of the donor agencies. It is, thus, stated to be caused by the excessive supply of money in the economy. Bangladesh Bank has otherwise been found to be guided by the monetarist approach to inflation — and that is not without some good reason. If has been following a rather “cautious” monetary policy. Many consider it as a pragmatic step.

Then the question of relative strength of Bangladesh currency in relation to those of other countries, particularly that of neighboring India, is considered an issue of consequence for analyzing the price situation here. The Bangladeshi taka has depreciated to some extent against its intervention currency, US dollar over the past several years. But the Indian rupee has depreciated higher than that. As a result, the relative position of the Bangladesh currency has suffered, having its impact on the economy because India is Bangladesh’s major source of import, through both formal and informal channels. Imports from India in recent years constitute more than 20 per cent of Bangladesh’s total imports, comprising many essential food items.

If the import cost for Bangladesh is affected by the cross-currency exchange rates, this affects the prices. Any movement of prices in the upward direction indicates depreciation of taka relative to the currency in question after adjusting for inflation. This hypothesis does also provide some reasonably plausible explanation to the movements of prices of essential food items in Bangladesh. However, there are some disagreements among the economists and policymakers with regard to combating this situation. The policy of foreign reserve accumulation by the Bangladesh Bank is considered by some quarters as not being consistent with the exchange rate movements of taka vis-à-vis the Indian rupee in recent years.

Fuel prices is yet another factor that is cited to have a major impact on the domestic price situation. If the fuel prices go up, that impacts the prices of commodities through two major channels: the high prices of fuels lead to high cost for irrigation, which raises the cost of agricultural production; and, high fuel prices increase the cost of transportation, which also raises the prices of essential items transported from remote villages to urban areas.

The non-competitive market features — or what are stated to be “the syndicate” syndrome — are otherwise widely considered as being one of the strong factors, igniting price pressures. Here, argument is made about many middle-men, wholesalers and importers acting as syndicates and causing large price hikes, by making cartels and hoarding essential goods like rice, wheat and edible oil. Such cartels do reportedly fix the prices of these goods, dictate supply in the market, and earn excess profits.

However, there is yet no convincing, concrete evidence of ‘syndicates’ being in total control of the markets of essential commodities to take advantage of the weak consumer protection laws. However, some short-term alliances among the suppliers of such goods is not to be rule out to have some influence over supply and prices. This may have some impact on the rising prices of essential items.

Then the issue of growth of remittances and its links with inflation come. There has been a steady and substantial rise in remittance inflow over the last few years. Such inflow does, no doubt, contribute to demand-pull inflation in Bangladesh. Working as the Rising Prosperity Hypothesis, such demand-pull factors can push up prices. But increased remittance inflow alone is unlikely to be a major cause of inflation. This is so because the rise in demand has been supported by the rise in supply through increased imports.

There are many other factors behind the rising trend of inflation in Bangladesh. Such factors contribute, in their own way, to the price-hike of essential items. A detailed analysis of the situation is, thus, called for, in order to help devise a strategy for combating inflation effectively.

Already value added tax (VAT) and other indirect taxes that are paid as a part of prices of goods and charges for services, are otherwise found to be on the high side. This increase without a matching increase of direct taxes raises questions about the efficacy of the tax regime to ensure a balanced and equitable growth performance of the national economy. By their nature, indirect taxes do tend to create hardships for people and further stresses on their costs of living. Therefore, the government has, out of necessity, to look to improved collection of income tax to collect enough resources to be able to maintain the current level of its expenditures in routine as well as developmental activities.

But the picture of income tax payment is hardly inspiring in the context of Bangladesh. For this, the potential income tax payers need not be blamed so much, for it is a natural human tendency to retain as much of one’s wealth as possible. It, thus, becomes a responsibility of the government to motivate the individual to realize the importance of paying faithfully the taxes on their income. Bangladesh is a country of 150 million people with several millions of the very rich and rich class and a bulging upper middle class of no less than 30 to 40 million people. Out of this large number of people otherwise having the ability to pay income tax in varying proportions, hardly 0.7 million (7.0 lac) presently pay the same. But again, many of them do reportedly pay such taxes far disproportionately compared to their wealth or income. There are, indeed, potentials and justification involved in obliging this large number of people who are not paying income taxes or paying them very leniently to be involved in paying taxes regularly and properly.

But over the years a culture not conducive to payment of income taxes or payment of the same not in right proportion to actual income, has developed in this country. Government’s neglect of the problem and its passivity are largely responsible for this lack of compliance. It should, thus, bear a large part of the responsibility to wean away the potential income tax payers from their bad habit of non-payment or evasion. This process needs to be largely one of psychological motivation. Resourceful people must be inspired to declare their incomes relatively honestly. In this context, the concerned authorities should highlight properly the need on the part of all actual and potential taxpayers to abide by the income-tax laws and the consequences of non-compliance with laws. It should be a carrot-and-stick policy. The taxpayers do need to appreciate it well that payment of due taxes is required to promote transparency and accountability in all spheres of national life. Investments can properly be made out of income earnings duly shown in income tax returns.

For properly motivating those who enjoy annual income above the tax-exempted limit to pay taxes willingly and properly, the discretionary practices and any other arbitrary rules in areas of income tax-related matters should be done away with. The tax regime, too, has to be rational so that the taxpayers make full disclosures of incomes, duly earned. All concerned should also keep it mind that proper payment of income taxes is not a one-way street only; the same should also lead to benefits for taxpayers through government’s incentives given to them in different areas for their honest declarations. The proper dissemination of information about such benefits is also important in scoring improvement in the collection of income tax.

The prime objective of e-governance is to establish good governance, in the ultimate analysis. Honesty, efficiency, effective utilisation of time, space and resources, justice, fairplay, participatory democracy, accountability, accessibility, transparency, equity and vision in decision making are the hallmarks of good governance. Corruption levels has been found to have dramatically fallen in the countries that opted for e-governance. Also in Bangladesh, computerisation has significantly reduced middlemen and black marketing of railway tickets, to cite here an example only.

The colonial red tape practices can be done away through online interaction between the citizens and the government organisations. Pervasive bribery in government offices can, then, be reduced.

Through computerisation comes accelerated performance. Time is saved. Reliability, efficiency and effectiveness are raised. E-Governance also facilitates active participation of the citizens in the process of democratic governance of a country. The government can then seek public opinion on various issues using the website. Website discussion groups can be formed on various issues by the government for transparent decision making. Thus, citizens’ active participation can ensure pro-people decisions on the country’s resources, environment and other socio-political issues involving public interests. For all these computer literacy and related infrastructural support facilities assume a great deal of importance. E-Governance leads to e-Democracy, too.

Access to information — a fundamental right in the present-day world — can be ensured for each citizen. Lack of access to information creates digital gap among different social segments. This breeds lack of equity and social injustice. A non-discriminatory access to information can go a long way towards minimising class distance between different groups in the society.

Local information communication technology (ICT) companies do need to pay attention to hold seminars, workshops etc., to popularise e-governance. More ministries should adopt the system of e-Governance even for their internal use. Interactive websites can disseminate information to public. The scope for people’s active interest to interact will then be widened. Such websites should also be updated regularly. Otherwise, the public will be misled with backdated information.

All government organisations should be interconnected under e-governance network. Exchange of information between different departments without any manual intervention will then become easier. Bangladesh needs to install IOS (Inter Organisational Systems) or EDI (Electronic Data Interchange) software for this purpose. Discrete nature of software, if used in various government departments, will not support inter-departmental or inter-organisational data sharing.

Though the central bank statistics are more than six months’ old, the current level of spending on non-essential consumers’ goods does indicate that banks are still otherwise generous in extending loans to non-productive sectors. For instance, the sale of reconditioned automobiles, according to a recent FE report, went abnormally up in the last quarter of the last fiscal, thanks largely to the leaking of the information about the hike in the rate of duty on motor vehicles in the budget for the current fiscal. However, it would be unfair to blame the banks for channeling funds to non-productive sectors when the economy needs increased investment in sectors like manufacturing, infrastructures, agriculture and small and medium enterprises.

Banks that are now awash with idle funds are finding not many takers of long-term loans for investment in the real sectors of the economy. Under the circumstances, the banks have no choice but to concentrate more on consumer financing, to stay afloat. Besides, they are offering consumers’ loans, rather aggressively, at rates lower than before, because of their decreased cost of fund. Banks are paying less on deposits, in compliance with the central bank’s directive to lower their lending rates with a view to facilitating an increased flow of bank funds to productive sectors.

However, term lending by banks has not picked up to the desired level, despite the cut in lending rates, mainly because of both domestic and external factors. Power and energy problems are considered the main stumbling block to new investments in the country. The external factors, which have dampened investors’ enthusiasm, might soon start fading, albeit at a slow face, with the recovery of the major global economic powers from the ongoing recession. But none appears to be certain how soon the situation with power and gas supply would improve. Unless and until the investors are assured of uninterrupted supply of power and gas, the demand for long-term funds would continue to be slow.

The increased flow of credit to non-productive sectors with the real sectors performing below the desired level is, however, not a healthy development in the realm of economy. This can be linkened to the prevailing strong upbeat mood of the stock market that does otherwise provide a mismatch with the situation in the real sectors of the Bangladesh economy. And in the financial sector, there is now a fear among the high central bank officials that such unchecked flow of credits to the real estate and some non-priority sectors and areas might trigger ‘asset bubbles’ sooner or later. The sky-rocketing prices of urban land and apartments, more particularly in some posh areas in the capital city and a few other places, give also some disconcerting signals. The rate of increase of property prices in Dhaka is reportedly higher than those in many ‘glamorous cities’ in Asia and elsewhere. But Dhaka utterly lacks even in the modicum of facilities that are available in most other cities at abroad. In this context, the fear of some BB officials about ‘asset bubbles’ cannot be ruled out right away. Meanwhile, it should also be carefully examined whether any sizeable amount of the consumer loans taken under different heads is finding way into the stock market, which is overheated at the moment. Though some experts might feel otherwise, the possibility of bubbles in the making should not be discounted as any wishful thinking.