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An expected decline in external fund flows recently propelled different bodies to recommend disintegrated fiscal and monetary policies for the forthcoming budget. In particular, the Dhaka Stock Exchange (DSE) recommended providing tax incentives to corporate sectors to boost investment that eventually would widen tax bases; the National Board of Revenue (NBR) recommended increasing the tax rates and bases to offset crumbling external funds; and the International Monetary Fund (IMF) advised increasing the bank lending rate to stabilize the economy (or price?).
   DSE suggested that NBR should amend current corporate tax structure and accordingly recommended (i) increasing tax disparity between listed and non-listed companies to 15 per cent from its current level of 7.5 per cent; (ii) reducing tax on banks and insurance companies to 40 per cent from its current level of 45 per cent; (iii) introducing differential tax schedule for small companies with market capitalization of 50-100 millions; (iv) providing 10 per cent tax rebates to newly listed companies; (v) reducing tax on treasury bonds from its current level of 20 per cent. Among other things, DSE also argued that new investment in capital markets should be regarded as ‘unquestionable’ for a minimum of 3 years.
   The rationale behind the DSE’s recommendations lies in the fact that a flourishing capital market is one of the important components to evaluate the overall development and growth of an economy. Besides, the capital market can broaden tax bases and generate more revenues for the treasury. Total market value of our capital market is approximately 4 per cent of GDP; whereas it is more than 25 per cent in our neighbouring countries. The DSE also argues that our capital market lacks the demand for development-oriented and competitive investment mostly because of current corporate tax structure and schedule. Registered publicly traded companies in Bangladesh pay 30 per cent corporate tax on net income less dividends. However, corporate tax rate is reduced to 20 per cent if listed companies distribute more than 20 per cent of net income as dividends. But if they distribute less than 10 per cent of net income as dividends or fail to distribute dividends on time, their corporate tax rates turn out to be similar to non-listed companies (i.e., 37.5 per cent). Capital gains from share transfers of listed companies, public limited companies and government securities are currently tax-exempted. However, capital gains from transfers of stocks and shares of private limited companies are subject to 10 per cent taxes (15 per cent in previous budget). Individual investors (but not institutional and large investors) receiving dividends up to Tk. 25,000 from listed companies are also tax-exempted. 
   It is conceivable that a 7.5 per cent tax disparity does not provide sufficient incentives to new businesses to be listed with our bourses. A comparatively high tax on banks and insurance companies eventually increases lending rates and decreases deposit rates. Higher taxes on fixed income securities induce (small) investors to invest in fixed bank deposits. In the short-run investors may be benefited from fixed deposits; however, in the long-run stocks and bonds theoretically provide higher returns as opposed to fixed deposits. Unfortunately our fixed income capital markets have not developed and expanded because of hostile tax rates on bonds and other debt instruments.
   Credit Rating Information and Services Ltd. (CRISL) was established on February 24, 2003 to rate our securities. CRISL has so far rated some of the banks and financial institutions. However, ratings for bonds and other debt instruments of listed companies seem to be publicly unavailable. More importantly, the credit rating methodologies of CRISL are flawed and not well-understood. Consequently we failed to develop well-diversified multi-sector open and close-end mutual funds, let alone exchange traded funds and derivative markets. Admittedly, a broader and well-diversified market generates more tax revenues to the treasury.
   The government should consider implementing and increasing security transaction taxes. It not only generates treasury revenues but also reduces speculative trading by informed traders (we have not forgotten the 1996 market crash!). The tax base is narrow in Bangladesh. Besides, most government revenues are generated through indirect taxes. NBR is looking for avenues that generate direct tax revenues for the treasury. As a part of this endeavour, NBR has recommended imposing taxes on all sorts of deposit rates. Interests earned on bank deposits are subject to taxes in Bangladesh. But financial institutions such as leasing companies that lend money against deposits are not paying taxes for interests that they accumulated over the years. NBR has also proposed that the government should form a special police force to realize taxes from tax defaulters; initiate a separate bench in the High Court to settle tax litigation; appoint magistrates to bring defaulters to justice and realize taxes; impose taxes on private schools, colleges, and universities; withdraw tax-holiday for new business enterprises. In a separate recent investigation, professionals such as doctors, consultants, etc., were also asked to submit their bank statements to NBR.
   More than 900 new industries have been established and 100,000 new employments (both white and blue colour) have been generated since the inception of tax holiday in 2001. Abolishing tax holiday will reduce the size of investment and wipe domestic industries out of a competitive world market. Industries, both local and foreign, in our EPZs will be affected if tax holiday is withdrawn. If NBR removes tax holiday, a discontinued tax rate may be reinstated to provide at least some incentives for new industries. The service sectors (such as financial intermediation, real estate, renting and business activities, public administration, defense, education, health, social work, community, social, and personal services, transport, construction, wholesale and retail trade, hotels, restaurants, storage, media, communication, utilities etc.) have already surpassed industrial and agricultural sectors in terms of their contributions to GDP. It is most likely that the service sectors will contribute a significant part of our treasury revenues in future.
   Although not clear to all, the IMF recently asked the government to increase the bank lending rate. The Bangladesh Bank (BB) also favoured the IMF’s prescriptions probably to control inflation caused by the double-digit growth rate of private sector credit. Accordingly, BB asked the commercial banks to increase their lending rate to correct the mismatch between lending and deposit growth rate.
   The double-digit lending rates in Bangladesh are much higher than our neighbouring countries. However, BB argues that the deposit rates, T-bill rates are also higher in Bangladesh. BB introduced floating exchange rate on May 31, 2003. For a short-holding period, the currency with the higher interest rates appreciates in value as opposed to the theoretical prediction that it should depreciate, as predicted by interest rate parity theory. Have we achieved currency appreciation with high interest rates? Probably the answer is known to even a neophyte!
   One does not need to be a student of economics to understand the effect of elevated lending rates. Higher interest rates will simply hamper the growth of investment in all major revenue-generating sectors. IMF’s prescription seems to be a big blow for DSE, FBCCI, and other business organizations. DSE (and to some extent NBR) considers IMF’s recent position as detrimental to the development of capital markets, industrialization, and major service sectors. The FBCCI and other business communities have argued that inflation, historically in Bangladesh, is not an outcome of erroneous monetary policy. Rather, supply shocks, productivity losses, currency devaluation, worldwide increases in oil prices, budget deficits, bureaucratic expenses, poor law and order situation at every stage of businesses (construction, production, transportation, marketing, retailing etc.) contribute significantly to business loss, price hike, and inflation.
   In last year’s budget, finance minister raised the ceiling of tax-exempted income in order to reduce the tax burden so that individuals could combat inflation and the rising cost of living. Would the finance minister increase the interest rates this year to provide his citizens with a better cost of living (or to make IMF happy)? External funds and foreign aid have already changed their flight and Bangladesh should prepare to be self-reliant. The remnants of Indonesia’s recovery and success during the Asian financial crisis ignoring the IMF suggestion or Argentina’s worst economic failure following the so-called IMF prescriptions can be a paradigm for Bangladesh.
   We can foresee a major quandary for our honourable finance minister. Simultaneously, we are optimistic that the finance minister will exercise his wildcard options (if any) given that the external fund flows will drastically decline in subsequent years and we are too young to be self-reliant.
   M Imtiaz Mazumder, PhD, is a senior lecturer of finance at Auckland University of Technology, New Zealand, E-mail: imazumde@aut.ac.nz

So, the papacy has left Italy, probably forever. The election of Cardinal Joseph Ratzinger as Pope Benedict XVI looks very much like the continuation of John Paul II’s papacy by other means. It is not Italian, and not in the least bit liberal. But whereas John Paul II was in many respects a radical pope who transformed the relationship between his office and the world, Benedict XVI lacks his extraordinary theatrical gifts and his joy at overturning formality. There was no candidate who could live up to that part of the old pope’s legacy - but it would be wrong to underestimate its importance.
   John Paul II was loved and admired by Catholics who disagreed with him profoundly. That is not the reputation that Ratzinger had as a cardinal. Those Catholics who disagreed with him - and they number in millions - saw nothing especially admirable or lovable about his personality. A recent poll among German Catholics suggested that even there opponents of his papacy outnumbered supporters by a clear margin. Now he is the Pope there will be some transfer of loyalty, but the underlying tensions must remain.
   This matters because he is walking into a crisis, in which he has himself played a symbolic role. The Roman Catholic church is in the final analysis a voluntary organisation that depends on the hearts and minds of its members. Where its teachings appear incredible or impractical they are quietly ignored; and this is a necessary safety valve in such a global organisation. It is well understood by all concerned that the church will not rupture itself to enforce a ban on birth control in western Europe, nor to abolish the death penalty in the US; nor even to ensure that priests in Africa live up to their vows of celibacy.
   On all those subjects, the church’s official teaching is wildly out of line with the local culture’s understanding of human nature. Pope John Paul II, by his evident theatrical humanity, was able to bridge this gap, even though he believed in all the things his various flocks rejected. Benedict XVI, no less an intellectual, is more closely identified with struggles within the church; and with the suppression of dissent by force when argument fails.
   The cardinals have chosen a man whose chief preoccupation ever since 1968 has been to preserve the church and its teachings from the corruptions of the modern age and from the collapse of hierarchy. One of the defining moments of his intellectual development was during the student revolts of 1968, when, as a theology professor, he discovered that the students could no longer be forced to listen to him or to accept his authority. This seemed to him to threaten the breakdown of civilisation, and perhaps there’s something in that.
   Teaching depends upon authority sometimes. But there are many different sorts of authority and when the force of argument failed Ratzinger fell back increasingly on Rome’s power to sack or silence dissenting theologians. Those who have feared him in his capacity as head of the Vatican’s Congregation of the Doctrine of the Faith - and that means almost every professional Catholic intellectual - will not find it easy to love him or to suppose that he is any more right now that he is the Pope.
   Pope John Paul II saw that a large part of his task was to stiffen the sinews of the church and make it stronger. But he came from a country where the church had grown strong in the face of persecution, and where there was never any shortage of candidates for the priesthood. Benedict XVI - Ratzinger - comes from a country where the church has grown weak in the face of a tolerant secularism, congregations are falling and there are fewer vocations to the priesthood every year.
   Inflexibility might make such a church not stronger but more brittle. Liberals have muttered for years that Ratzinger might just be the man to stiffen the authoritarian model of the papacy until it breaks. This is unlikely, if only because he is 78 and so won’t be around for more than 10 years. Besides, there is one reform that even a doctrinally conservative pope might make, which would follow the line of Pope John Paul II’s experiments with former Anglican priests. He might allow the ordination of men who are already married. Anything is possible.
   But perhaps the lesson of the new pope’s election is that if the church has to choose between its authoritarian character and compromise with the rich and secular parts of the world, it will move over further to the places which are neither. It seems impossible that the next pope will be European.
   The Guardian. Andrew Brown is the author of In the Beginning Was the Worm

As one grows older, matures with time and acquires considerable experience in life, he or she also tries to use the wisdom so acquired over the years in order to lead a better and regulated life. On a larger scale, this theory equally applies to the nation as a whole. However, in Bangladesh the story is somewhat different. Here life is yet anything but regulated. No system really seems to work and no set rules are followed in most of the cases. Sometimes the ‘cop’ might get hold of you for an offence called ‘wrong parking’ of your car [even if you were rightly parked]; issue the ticket and just walk away without even having the courtesy to reply to your queries or your pleadings that you were not guilty. This has happened to me on a number of occasions, but then God has been immensely kind so far, since I have had a great admirer in the local traffic police office who just tears off the papers pertaining to all my so-called traffic rule violation cases even before they see the light of the day—-papers that would have certainly indicted me as the owner/driver of the car who allegedly committed an offence or my poor driver instead and would have surely squeezed out at least five to six hundred bucks straight away from my pocket officially and another two to three hundred as an informal fee!
   And the story does not end here. The immediate source of relief in such cases of arbitrariness under normal circumstances would have been the DC South [or North] Traffic or his second in command, but then the latter [who is always on the move or in mobility] is such a snobbish character that one simply keeps on wondering as to what would have really happened had he been an erstwhile PSP cadre officer from the Pakistan civil service—the elite service which had few parallels and was second to none at one point. Conversely, the gentleman under reference would neither receive your telephone call nor would he agree to listen to your pleadings or ‘fariyaad’ if by any chance you are somehow connected on the phone line through his PA or the police operator [999]. Being quite frustrated therefore, I finally picked up the phone, remembering vividly that the IG Police had indeed studied with me back in the university some 40 years earlier and we were always quite friendly, especially after he lost his army job in 1974 and was later provided with a police job by the late President Ziaur Rahman along with 22 others. But once again the question was, how would you reach the IGP Saheb after all? The PA [sorry, PO these days] would first ask for details—-like your name, all your available telephone numbers, the details of your profession, your house address and then customarily say, “Sorry Sir, my boss is in a meeting. Please call later.”
   Without even caring for what you have to say or answering your innocuous queries, he would just abruptly hang up! In a few cases, of course, the POs are carefully taught to assure you that you will be called later or in due time—-which perhaps only the Almighty knows when. Just imagine, how does one feel then? You would simply feel like breaking the telephone set at that point as a simple manifestation of your pent-up anger. But again, maybe on second thought, good sense may eventually prevail and you might give up the whole idea because, a damaged telephone set by any chance would cost you at least taka 2500/- even in the ‘chora market’ at Baitul Mukarram, since the T&T department does not supply any more telephone set(s) nowadays. The best option therefore would be to thank the Almighty from the core of your heart for your incurring manageable loss and then stay quiet as long as you can.
   Next comes the story of the “boss is in a meeting and the engineer saheb is at the site”. Those few words would be repeated each time like an irritating parrot or the modern day answering machine, any time that you may call someone, big or small, at the Bangladesh Secretariat or any other government/semi-government office. The reality, however, is that the boss—-a typical bureaucrat, maybe from the ’79 or even later batches—-the earlier ones having all gone with the wind—-must have been in the company of some big businessmen or a charming young lady [or ladies], enjoying deep fried ‘singaras’ from the secretariat cafeteria or maybe the ‘Mughlai paratha’ even. Who knows? The ‘PO Saheb’, as I said earlier, would never get you through to his boss even if his boss were sitting all by himself and doing nothing. There are however certain exceptions to the rule and one such exception is the tall, six footer incumbent Additional Secretary in-chrage, Ministry of—, who is perhaps also the most misunderstood person I have ever come across.
   A gem of a man, he is such a nice person to talk to and to listen to; a person who hardly cares for his job and is remarkably blunt at all times in his remarks and comments. That bold style has, however, certainly earned him more enemies than friends over the years, but simultaneously God Almighty has been kind enough so far and he has successfully weathered many a tornado with quite some ease. The irony is during the Awami League period, [from June 1996 till October 2001] he was explicitly identified as a BNP man and now it is just the reverse! I admire him all the more because he hates sycophancy in all its forms. Unfortunately, he is still to get what he actually deserves—his overdue promotion—since quite a few of his junior colleagues and people much less competent than him have already been promoted a couple of weeks back right in front of his eyes. However, his only drawback is he hates to toe the set line of his boss—the honourable Minister of State in-charge Ministry of—and—. Obviously the ‘chhota’ Minister Saheb now deals directly with all matters of importance through his most trusted subordinate officer serving under one of the affiliated organisations, holding the rank of a mere executive engineer. Guess who? Well, that is Bangladesh in action!
   The brief story of the ‘snobbish boss’ or the callous subordinates, however, does not end here so soon. On most occasions the subordinates are mostly briefed and tutored by their bosses to keep the public at bay by whatever means they can. In fact, one way of avoiding someone is to enthusiastically get his telephone or cell phone number and then assure him that “we would definitely call you as soon as possible,” which really never happens in 98 per cent of the cases that I have personally monitored. There are of course only a few good people left in society as a whole, who know real manners and etiquette and would certainly call you back if you happened to be so assured by his staff. And the case of the engineer saheb is even worse. He is both in a meeting and at the site at the same time! Please don’t ask me how that can happen. If a businessmen of repute [who can pull strings and has a heavy bank balance] is found looking for him then of course he is readily available, but not for the common citizens and over petty matters. And we all know the story of the files which either vanish for a brief period or do not move unless their path is sufficiently greased. The subordinate staff consisting of the PO, the dealing assistant, the dispatcher and even the assistant secretaries in many cases quietly gang up and dictate terms which sometimes cross all barriers of dignity. The poor public, in a majority of the cases, have hardly any say or options left but to succumb to the pressure which is exerted from all sides.
   What I have narrated above is just one part of the story. On a larger scale or on a smaller scale, the scene is identical all over, almost without any exceptions. The moot question then is: how long will the suffering public remain hostage to the social sharks who keep on sucking the common man’s blood without rendering the services for which they are meant and paid from the exchequer? Just go to the Rajuk office or to DESA or Titas Gas or any other government office for that matter and find out how far they can go. The problem with us is that the bureaucracy here is so politicised and so powerful that even ministers sometimes feel helpless! And they, i.e., the bureaucrats, also know how to get things done according to their set plans. For instance, if someone is posted in a rural area or even an upazila headquarters, he may not like the posting at all. But that should not be any problem or headache. They know exactly what is to be done. The best possible option in such cases is to defy the orders of the local MP from the very word ‘go’ or even ignore the local minister, create an uncomfortable situation and just sit tight for a few days. Our politicians and leaders, on the other hand, are so indiscreet and impatient in such cases that they at once react and get the individual transferred from his or her area as fast as they can.
   We need to have a system, a committed bureaucracy and an honest set of politicians, whose ethical lesson should invariably consist of one chapter dealing exclusively with patriotism and dedicated service to the nation. They should follow our forefathers who spent all their wealth and riches for the cause of the people and the country without even thinking of how to come by earnings through political office. Only then can we dream of and perhaps see a prosperous Bangladesh emerging. And I do not find any reason as to why we will not be able to achieve that.