International Chamber of Commerce (ICC), Bangladesh president Mahbubur Rahman said the economic indicators showed a sign of slowdown during the last quarter of 2006 because the economy experienced a mixed trend in the same calendar year due mainly to political instability during the whole year.

He made the remark when presenting the Report of the Executive Board at ICCB’s annual council 2006 held at Dhaka Chamber of Commerce and Industry (DCCI) auditorium Saturday. ICCB president said the country will remain indebted to the present government for presenting a free, fair and credible election for bringing back much needed stability for sustained growth and prosperity to match with other members of the region.

“The country experienced a political stalemate towards the end of 2006, which ultimately led to the declaration of state of emergency. The business leaders took a number of initiatives during the year for bringing the mainstream parties into dialogue. However, unfortunately it did not bring any tangible results,” he said in the report.

The ICCB president said the businesses have appreciated the timely initiatives taken by the present caretaker government for bringing in political stability, reforms and reconstitution of the Election Commission (EC) and Anti-Corruption Commission, progress made in the separation of the judiciary, streamlining the administration, bringing the corrupt politicians and their cronies into task, the ICCB president said.

Mahbubur Rahman observed that despite all odds at the end of 2006, export earnings recorded a significant growth of 25.80 per cent, while import growth moderated to 19.8 per cent. At the same time, he said, remittance from non-resident Bangladeshis increased substantially by 29 per cent. Like the previous years, the growing inward remittances continued to give strong support to balance of payment situation. All these resulted in turning the current account balance to a significant surplus of US$579 million during the second half of 2006 and the foreign exchange reserve also improved to US$4.0 billion, he added.

The Bangladesh Bank has, however, attributed the higher growth in FY06 to a strong post-flood recovery in agriculture and a notable expansion in manufacturing activities despite excessive price hike of fuel and some other essential commodities in the international market. He said apparel export growth after MFA phase-out and higher inflow of remittance from workers also added to the success during the year. Real gross domestic product (GDP) growth posted 6.7 per cent in FY06, moderately higher than 6.0 per cent of FY05, Rahman added.

The ICCB president said the national output growth is likely to slow down in 2007 due to the anticipated slower GDP growth in FY07. The Asian Development Bank (ADB) has projected a 6.5 per cent growth for FY07, which is moderately lower from 6.7 per cent achieved in FY06. The Bangladesh Bank has also projected growth rate ranging between 6.5 and 6.8 per cent. The central bank has, however, linked the growth rate with the favourable political environment and end of disruption to the economic activities, he added.

ICCB annual report has also projected that in the coming days inflation will be a major challenge for the Bangladesh economy as rate of inflation is critical for accelerated economic growth and poverty reduction.

The report observed that businesses in 2006 had to struggle with power crisis. According to a study by the CPD, the country’s economy faced a loss of Tk 130 billion for outages during FY06, which is about 4.0 per cent of the GDP as against the loss of Tk 120 billion or 3.3 per cent of the GDP in FY05. The country’s power plants currently generate only 260OMW to 270OMW of electricity against the current demand for more than 450OMW, the report mentioned.

The continuous high global oil prices that have heightened pressure on the country’s balance of payment and threatened fiscal and monetary stability underscore the need for further rationalisation of domestically administered prices of petroleum products. It was, therefore, suggested that a pricing system providing for automatic adjustment of domestic fuel prices to international market situation be adopted, said the report.

The global economy, according to ICCB Report, is expected to grow moderately in 2007 after three years of high growth. In fact, global growth is expected to post 4.9 per cent, according to the projection of the IMF. Amongst the advanced economies, Germany, France, Japan and the United Kingdom are likely to move upward while the United States, Italy and Canada and the newly industrialised Asian economies are likely to slow down. Optimistic economists believe that the developing economies in Asia, which are playing an increasing role in driving world growth, would, to some extent, offset the impact of slowing US growth.

In the coming days, the emerging new power houses – India, Brazil and China will play a prominent role in the global economy because of their increased productivity due to falling communication costs, diffusion of technology and aggressive marketing initiatives. Consequently, it will also offer enhanced scope of productivity rise through deeper economic integration among the WTO member countries, the report added.

The ICCB Council expects that the present government would expedite the process to remove infrastructural inadequacies, especially power shortage and sustainable improvement of port operations as well as its expansion. Immediate careful attention for modernisation of National Board of Revenue (NBR) as well as Customs providing fiscal incentives including tax holidays to attract investment in basic industries, development of capital market, encouraging manpower export in a more organised manner and allowing Bangladeshi businesses to invest in the attractive overseas market by using part of their export earnings in order to arrest informal outflow of foreign exchange were also suggested.

Among others, ICCB Vice President Latifur Rahman, Executive Board members A. S. M. Quasem, Annisul Huq, M. Aminuzzaman, M. Shamsul Alarn, Mahbub Jamil, Mamun Rashid, Masih Ul Karim & Waliur Rahman Bhuiyan; and ICCB Members, namely, DCCI President Hossain Khaled, Rokeya A. Rahman, Barrister Dr. M. Zahir, Barrister Rafique-ul Huq, MCCI Secretary General C. K. Hyder as well as CEOs of banks, insurance companies, national and multinational companies also attended the Council.