Clean energy can save $16b on resources, subsidies in 2023-25: CPD
It sees silver lining amid economic woes as global prices start falling,and calls for tough policy steps
The government will be able to save over $16 billion worth of resources (fossil fuel) and subsidies between 2023 and 2025 with investments in and implementation of renewable energy solutions (solar-based irrigation facilities and rooftops), according to estimates by the Centre for Policy Dialogue (CPD).
The think-tank – during a dialogue, themed "Economy in crisis: What could be the action plan?" on Saturday -- came up with a short to medium-term energy mix scenario from a clean energy perspective and lauded the government's move to completely phase out diesel-based power plants and gradually shut down furnace oil-based power plants. It, however, did not specify how much investment is required to get dividends from the energy transformation.
A declining trend in global prices of a number of essentials after reaching their peak, and some benefits of import restrictions imposed by the government to reduce pressure on the forex reserves offer some sign of hope in the country's current economic situation, it also observed.
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Every sector of the economy is now facing different types of problems, said CPD Executive Director Dr Fahmida Khatun while presenting the keynote at the event, adding, "But, the silver lining is that the global prices appear to have peaked already, and are now coming down, as can be seen from the following global price trends of some of the key commodities for which Bangladesh is highly dependent on imports."
Commodities that have witnessed their prices fall in the global market include energy, fuel, and food products, as well as raw materials of ready-made garments such as cotton, she said.
"If this trend continues, prices of some products will decrease in the country and the demand for dollars for imports will also decrease," she maintained.
At the same time, there is a possibility of reducing the trade deficit, Fahmida said the various restrictions imposed by the government on the import of a number of commodities to reduce the pressure on the economy are yielding some benefits, although it is delayed.
"The rate of LC opening and settlements has decreased in recent times, this is a ray of hope for now," she said.
Wrong policy decisions
However, expressing some doubts about its benefits due to structural weakness, she said, "Over the years, mismanagement has been nurtured in various sectors including the banking sector, resource mobilisation, foreign exchange management, reserves, electricity, fuel and government procurement."
There is instability in the entire economic management due to wrong decisions sometimes taken on the basis of wrong assumptions and sometimes under the influence of some party, noted Fahmida. Prompt initiatives are needed to solve all these problems, she added.
The current income is not meeting the daily needs of the poor and middle-class people as commodity prices have spiraled in the domestic market keeping pace with the world market.
Even though the demand for subsidies in various sectors including power and energy has increased, the growth in revenue collection by the government is not adequate to meet the demand, she mentioned, stressing reforms in several sectors of the economy alongside establishing good governance to control the overall situation.
She also asked for reforms in the revenue management in the country.
CPD Chairman Professor Rehman Sobhan presided over the function, while Planning Minister MA Mannan was present as the chief guest.
Rehman Sobhan said the CPD has been talking about economic policy issues in parliament. Although there is a need for discussing all these issues in parliament, it is not seen in reality, he added.
In response to the planning minister's claim at the event that a lot of development is taking place in recent times, Professor Sobhan said, "It is true that many things are happening, but it is also true that there are many concerns at the grassroots level."
"We are not blind about the development activities of the government and we are not prejudiced about the development either. But we will continue to talk as long as people have concerns," he continued.
At the event, Planning Minister MA Mannan claimed that there is some mismatch between the statements of various civil societies, including CPD, and the reality on the ground.
The requirements of people living in remote areas are not similar to those of civil society, noted the minister, adding, "Villagers want water, bridges, and social security cards. There is no match between the needs of the people in the rural areas and the needs of the civil society."
The development in rural areas in terms of hunger, illiteracy, water and sanitation is unimaginable, he said.
The government is working on limited goals including eliminating hunger, improving transportation system, eliminating illiteracy, he continued, adding, "Although others see dark clouds, we see more silver lining."
He said that inflation has been decreasing for four consecutive months. At the same time wage rates are rising slightly. As a result, the area of suffering is somewhat reduced.
Roof-top solar panels can help
It also said the initiative to transform the existing diesel irrigation system to a solar-based one and install solar panels on the rooftops of all primary schools will help the country's transition to cleaner energy solutions.
The CPD, in a bid to make the country more energy secure, diverse and help to fight the ongoing crisis, has put forth several recommendations and policy changes to the government.
The think tank said a clean energy scenario in the power and energy sector can be resource efficient, can generate more power, and save subsidy allocation.
It also said that LNG-based power generation should not be encouraged further, emphasis should be given to gas exploration in domestic gas fields, dependency on long-term LNG contracts should be reduced, Bangladesh should not opt for LNG purchases from the spot market as this is a high-price situation, and other fuel solutions such as Heavy Fuel Oil (HFO) HFO and High-Speed Diesel (HSD) can be viable options.
The research institute also shed light on the overall economic situation in the country.
FDI faces roadblocks
Rupali Haque Chowdhury, managing director of Berger Paints Bangladesh, said businessmen make business plans for the whole year by talking to banks and related sector experts in addition to the budget document at the beginning of the year.
The exchange rate of the US dollar was between Tk86 and Tk88 at the time of budget formulation for the current financial year, but the rate has now exceeded Tk100.
"Businessmen in the formal sector are now unable to plan for the whole year. As a result, they have to move forward with quarterly or monthly plans. The question remains as to how sustainable the business can be in this uncertainty."
Businesses pay a fixed rate per dollar while opening LCs, but more money is charged at customs while accepting the goods. Due to the exchange rate, prices of goods are increasing as well as the customs charges, she said.
She pointed to the lack of coordination among various government departments that stand in the way of foreign direct investment inflow in Bangladesh despite a number of economic zones are being readied.
Nasser Ejaz Vijay, CEO of Standard Chartered's Bangladesh office, said the inflow of foreign direct investment (FDI) in the export sector is increasing due to the much faster decision-making process in Vietnam. Due to this, Samsung alone is able to export more than 60 billion dollars from the country.
"Re-export is a major source of FDI in Vietnam. In this sector, the government is providing various facilities in the country. All these benefits given by the government are in use, thanks to the availability of local raw materials and skilled manpower. Apart from that, the country has a large variety of export products."
Despite much talk about export diversity in Bangladesh over the years, the number of initiatives is low, noted Nasser Ejaz, adding that the biggest challenge facing the economy at this time is stagflation. Because on the one hand inflation is increasing, on the other hand, there is a risk of the GDP growth rate decreasing, he added.
Dollar unstable due to money laundering
Professor Abu Ahmed told the event that the increase in import demand is not solely responsible for the price of the dollar rising to Tk117.
The dollar has officially risen by 25% in a few months due to smugglers, debtors, and money launderers making extra profits from project contracts, he observed and added that if these are not stopped, the exchange rate will not be fixed and inflation will also increase due to increased expenditure on imports.
If a subsidy is to be given now, it has to be given on fuel because everyone has to use fuel, he said. "Fuel oil prices have been hiked by more than 40% without any consideration," he continued.
Barrister Shamim Haider Patwari MP who attended the programme as a special guest, said the country has been going through a stagnant economy for the past decade.
There were some problems like this before as well, but there was some balance due to discussions in the Bangladesh Bank, media, and parliament.
"We have been talking about this in parliament for several years but, there was no reflection of all these discussions [in policy making].
"High inflation pressure, dramatic fluctuation, dominating business with weak monitoring, declining regulatory position in the banking system are being discussed. None of these are related to Ukraine war. The main reason for these is defaulted loans. The East India Company did not loot as much money as the amount looted from our banking system."
Although the stock market collapsed several times, the perpetrators were not brought to the book, he alleged, adding, "Illegally earned money has been illegally smuggled. In addition to bureaucrats, politicians and nefarious businessmen are involved in this racket."
Even good entrepreneurs are not doing business because of the convenience of bank robbery through loans, he further noted.
