Finance Adviser Dr. Salehuddin Ahmed on Sunday said Bangladesh is still grappling with the repercussions of corruption and flawed policies implemented during the previous ousted Awami League regime, which have deterred foreign investments and hindered economic progress.

“Corruption and various policy mistakes in the past have cost us,” he said while speaking as the chief guest at the launch of a report titled “Enhancing Saudi-Bangladesh Economic Engagement: Trends, Key Challenges & Long-Term Growth Prospects” at the foreign ministry here. 

The adviser pointed out that many foreign giant investors, including Saudi Arabia’s Aramco and South Korea’s Samsung could not make investment in Bangladesh due to policy shortcomings. 

“They approached us but were not received well and eventually (Samsung) moved to Vietnam. Those were policy mistakes. These need to be corrected now,” said the adviser. 
Dr. Salehuddin stated that the interim government aims to implement reforms during its brief tenure of one to one-and-a-half years. 

“We may be here for a short period, but we aim to leave behind a clear pathway for others to follow and build upon,” he added.

The foreign ministry hosted the report lunching ceremony, which attended by Foreign Affairs Adviser Md. Touhid Hossain as the special guest and Foreign Secretary Md. Jasim Uddin presided over the event. 

Saudi Ambassador Essa Yousef Essa Alduhailan and other officials also addressed the gathering.

Highlighting the multidimensional relationship between Bangladesh and Saudi Arabia, Dr. Salehuddin noted the importance of fostering stronger trade and economic ties.
 
“Saudi Arabia is a crucial partner for us, and our trade volume, currently at US$ 2 billion, holds immense potential for growth,” he said.

On securing funds, he revealed that Bangladesh recently received US$ 1.6 billion from various sources, with an additional US$ 700 million expected soon. 

“However, the challenge lies not in raising funds but in their effective utilization and ensuring repayment,” he pointed out.

Criticizing the stock market, the adviser said, “Some companies continue to see rising share prices despite their factories being shut down. Such anomalies must be addressed to ensure market integrity.”

Foreign Affairs Adviser Touhid said Bangladesh needs to do much more to attract economic opportunities to the country. 

“This is a reality we must accept. For a long time, we’ve claimed that our country is the most investment-friendly, but this is not always true in practice,” he said.
 
To address the issue, he said, the interim government is striving to change the scenario and make doing business easier for investors. 

“If Saudi investors come now, they will find a favorable environment,” he said, urging Saudi investors to consider investing in the country.

Reading the human resource sector, Touhid said, that the country’s workforce must become more skilled as not only abroad but even inside country there is a shortage of Bangladeshi skilled workers. 

“We lack skilled workers. This is not just an issue for Saudi Arabia, other countries as well, we are not producing skilled workers in line with demand. The more skilled workers we produce, the more they can contribute to the country.

 We need improvements in skill-based training to develop a skilled workforce,” he said. 

Saudi Ambassador Essa said that the world’s largest oil company, Aramco, is interested in coming to Bangladesh to establish an oil refinery in the Bay of Bengal. 

“If a refinery is set up here and oil products are manufactured, they could supply these products to Bangladesh and the region,” he said.  

If a maritime route is established between Chattogram and Jeddah or Dammam, it could bring transformative changes to Bangladesh and the region,” he said, adding that the refinery’s products could also be exported to China, India, and other neighboring countries.

 “We have some success stories. Our international company, Red Sea Gateway Terminal, is operating the Patenga terminal and is interested in working at the Matarbari deep-sea port,” the envoy mentioned.
 
The outgoing Saudi Ambassador also highlighted the obstacles to foreign investment in Bangladesh. 

“Between 2016 and 2018, Aramco sent high-level delegations to Bangladesh three times, but they were not received by anyone. However, we will not talk about the past.

 We will talk about the future,” he said. 

Foreign Secretary Md. Jashim Uddin, Foreign Secretary (East) Md. Nazrul Islam, and Policy Exchange Chairman Masrur Riaz also spoke at the event, emphasizing the need for coordinated efforts to attract foreign investments and foster economic growth.

MSH

Companies and organisations will be required to file tax returns on the income generated by employee welfare funds from the current fiscal year and pay a 27.5 percent tax on the earnings. 

The Income Tax Act 2023 incorporates the provision, lifting the tax exemption and amnesty on the compulsion to file returns for funds such as provident funds, gratuity funds and workers' profit participation funds maintained by the private sector.

The law, however, has exempted government-managed provident funds from taxation, raising questions.

TIM Nurul Kabir, executive director of the Foreign Investors' Chamber of Commerce & Industry, said there were many other avenues to collect tax.

"Employees benefit from provident funds after their retirement. So, the authority should not slap taxes on retirement benefit."

He said while levying the tax, the government has not treated provident funds of the private and public sectors equally.

"It is discriminatory," he said, adding that they would appeal to the tax authority for the withdrawal of the tax on income from provident funds.

Debabrata Roy Chowdhury, director for legal, regulatory and corporate affairs at Nestlé Bangladesh PLC, said the introduction of income tax on trust funds would lower the overall income from such schemes.

"This will have an adverse long-term impact on retired employees of private organisations."

Chowdhury urged the authority to address the issue in line with the spirit of the government's initiatives aimed at ensuring social security for private sector employees.

"The recent introduction of the universal pension scheme for private sector employees is a good example of that."

A senior official of the NBR, on condition of anonymity, said the income of government-managed provident funds was exempted in line with the Provident Fund Act 1925.

He said provident funds under the private sector had been historically exempted and there was no requirement to submit tax returns. As a result, it was unclear whether the funds were properly utilised.

"From now onwards, we will see proper disclosure."

The tax official said the contribution of payroll tax is about 3 percent of the total income tax although it should increase as the economy is growing.

Md Shahadat Hossain, a former president of the Institute of Chartered Accountants of Bangladesh, said income from investment in savings certificates, where people invest as a source of future earnings, is already taxed.

"From that perspective, the imposition of tax on provident and other employee welfare funds seems okay."

However, Towfiqul Islam Khan, senior research fellow at the Centre for Policy Dialogue, said social protection for private sector employees was low.

"Provident and other workers' welfare-related funds provide little social protection. The imposition of tax will increase inequality. But there can't be any discrimination in taxation between private and government provident funds."

Khan, citing the latest income tax law that replaced the Income Tax Ordinance 1984, said the NBR tried to find new avenues to increase tax collection and improve the nation's revenue-gross domestic product ratio, which is one of the lowest in the world.

"We can see the desperation of the tax authority to boost collection. This ultimately reveals the inability of the NBR to catch the tax evaders and illicit money makers."