Investment Institutions (Sovereign Wealth Fund/Pension Fund/Superannuation Fund/Social Security Net/Infrastructure Fund) of Bangladesh and her policy 2021

[Joel Ahmed]

https://thefinancialexpress.com.bd/views/views/using-social-protection-as-a-tool-for-employment-generation-1630423280

Using social protection as a tool for employment generation

 Sayema Haque Bidisha | Published:  August 31, 2021 21:21:21

In a broad stroke, the course of action for an effective social protection plan entails first identifying the problems, then bringing transparency to implementation and developing long-term plans for creating employment, and finally, and most crucially, thinking outside the pre-existing notions of social protection to adapt to ever-changing challenges.

Many essential aspects are not properly taken into account in the current National Social Security Strategy (NSSS) of Bangladesh- inflation adjustment and increasing per capita allotment which is very important during a nationwide pandemic crisis. Instead of over a hundred programmes with lacklustre functioning, what we need right now is a few targeted projects with elaborate planning and strong execution. This approach has proven to be a necessity in ensuring improved livelihoods of grassroots people through social protection programmes.

In the current circumstance and for the future, a viable solution to the NSSS data shortage could be to divide large areas into zones and curate the programmes according to the specific needs of each zone. Zoning will enable us to easily locate the demographic we want to address, such as slum residents, by categorising Dhaka into several zones. Among the 120 programmes of NSSS, only 6/7 programmes are for the urban poor which account for around 1 per cent of the total budget. Zoning is necessary for both urban and rural areas. During the Covid-19 outbreak, those in charge of their zones will have to collaborate with non-governmental organisations until the crisis is under control. Furthermore, local government leaders must be held accountable for maintaining the welfare and food security of the residents of their zones.

Another approach towards strengthening the social security facility is the stimulus packages for the businesses given by the governments. These packages can be a tool to encourage factory owners to donate for the welfare of workers. Therefore, it is necessary to make them obligated by integrating workers' welfare as a condition for availing the stimulus package. If businesses wish to profit from the stimulus package funding, they must take certain steps to protect workers' interests. Enacting such rules may help to normalise a decent working environment and ease the hardships that our workers endure on a daily basis.

Moreover, it is currently imperative to develop specific stimulus packages based on various professions and sectors. Despite the lack of available data, we will have to make the best use of whatever information we have. A potential source of information can be unions and organisations of different professions such as shop owners' associations. They will have an idea about who was adversely affected and lost their businesses in the pandemic.

Aside from allocating stimulus packages, it is equally important to establish a separate monitoring and evaluation system to ensure their effectiveness. We need to assess who received the packages and who did not, how helpful it was for them, and the performance of everyone involved in the distribution every three months or so. The programmes can reach their full potential only if transparency is ensured by holding everyone involved accountable.

The sustainability of the social protection programme is defined by how successful it is in terms of creating employment in the long run. We must consider facilitating small capital for the affected persons in addition to food and cash assistance.  Forming small cooperatives of 4-5 women to obtain fund to work on small businesses, such as grocery stores, could be implemented as one of the innovative financial support methods. Our main goal is to create employment for people who lost their job in the pandemic, for which we will have to find who lost their job and create separate schemes for rural and urban areas. In the recent stimulus package announcement creating employment in villages through Palli Karma-Sahayak Foundation (PKSF) was mentioned. Similar programmes should be undertaken for vulnerable urban populations such as women living in slums.

Unemployment benefit is a phenomenon that is often talked about but never implemented. However, given the new wave of Covid-19 cases, some unemployment benefits should be distributed in the coming months even if it is of a small amount. As we can see from the recent stimulus packages, the government has some information about unemployed people. This existing data can be used to introduce an unemployment benefit plan and later we can think about how it can be extended.

The ultimate aim of our social protection programmes should be to eventually direct it towards being employment creation programmes. We need to give unemployed people the tools they need to create their own work. We need more skill training programmes for rural youth but it will not be enough.

We will also have to create job hotspots there to promote decentralisation. This is necessary for decreasing the pressure in big cities. If a young farmer in Rajshahi produces mangoes he needs more business linkage within the district to sell his products there. The regional social protection programmes have to initiate diversification by creating more small non-farm businesses. Similarly in the urban areas, we have to focus on creating a connection between the demand and the supply side to avoid a mismatch of skills. Youths of all educational levels must be trained in marketable skills. The ministry of youth has to expand its activities and provide technological skill-based training to all young job seekers.

By now it is evident to us that the only way for recovering from the economic crisis set by Covid-19 is a strong social protection programme. And in order to finance these programmes, we have to plug the leakages. The extremely slow growth of the Annual Development Programme and mega projects could be diverted towards social protection. We have a scope of introducing some form of Covid tax or progressive tax because persons on fixed incomes were not as affected as low-income people, further widening the chasm of inequality. The key to recovery is out there, but it calls for our dedicated and transparent initiative. 

[Joel Ahmed]

https://www.tbsnews.net/economy/have-savers-lost-appetite-savings-certificates-627942

Tonmoy Modak

07 May, 2023, 10:55 pm

Last modified: 08 May, 2023, 10:04 am

Have savers lost appetite for savings certificates?

 

While deposits in the banking system are increasing, savers are withdrawing more from savings tools than depositing despite lower interest rates in banks, shows the central bank data.

The Bangladesh Bank data shows that the withdrawal tendency continued along the FY23.

From the July-March period of the current fiscal year, the savings certificate saw a new deposit of TK62,658 crore and withdrawal of TK66,819 crore. In other words, people have taken out Tk4,160 crore more than what they have invested over the first nine months of the fiscal.

Bankers and economists say the appeal of the saving tools waned due to inflationary pressure, reduced interest rate and a limit to buy savings certificates.

In the same period of FY22, investments on the savings certificates increased by around Tk16,504 crore as people invested Tk81,327 crore against the withdrawal of Tk64,823 crore.

According to industry insiders, the prolonged dollar crisis of the country increased the import price of goods. So, people have to spend more money on daily essentials.

According to BBS data, food inflation rose to 9.09% in March, up from 8.13% in February, while non-food inflation fell marginally to 9.72% from 9.82%. Meanwhile, wage growth reached 7.18% in March from 7.11% in the previous month.

Inflation reached 9.33% in March, the highest in seven months, causing significant discomfort for consumers.

The government targeted to borrow TK35,000 crore from the national savings certificates in FY23. However, in the first nine months of this fiscal year, government borrowing from savings certificates is far less than that target. On the contrary, the government is increasing bank borrowing.   

Ahsan H Mansur, executive director of the Policy Research Institute, believes that lower-income people are forced to withdraw savings to manage everyday life expenses.

"In fact, the government does not want savings certificates to increase because the government has to spend a lot of money on its interest in the annual budget. This increases the pressure on the government," he said.

"We asked the government long ago to reduce savings certificates. Government officials also buy savings certificates after retirement. So, they also do not want it to stop completely," he said adding, "While the drop in savings certificate sales may not give immediate good results, it will give relief to the government in the next few years."

He also pointed out that the government will not face any additional crisis in meeting the budget deficit due to decrease of savings certificate sales.

Deposits in the banking system are increasing as the banks and NBFIs are offering good interest rates against customer deposits, said Ahsan H Mansoor.

"The government can also increase borrowing money from the banking sector if it wants. By taking loans from the bank, the interest cost of the government is much less," he added.

[Joel Ahmed]

https://www.tbsnews.net/economy/universal-pension-july-monthly-contribution-tk500-5000-648746

Abul Kashem & Shaikh Abdullah

12 June, 2023, 11:10 pm

Last modified: 13 June, 2023, 03:29 pm

Universal pension from July, monthly contribution Tk500-5000

Abul Kashem & Shaikh Abdullah

12 June, 2023, 11:10 pm

Last modified: 13 June, 2023, 03:29 pm

The government is set to launch the universal pension scheme nationwide in July, with individual contributions ranging from a minimum of Tk500 to a maximum of Tk5,000 per month.

Individuals aged above 50 will also be able to join the scheme, but to be eligible for the pension, they will need to make contributions for 10 years, according to finance ministry officials.

The scheme will initially target four categories – private sector employees, non-resident Bangladeshis, individuals from the informal sector, and insolvent individuals.

According to the officials, individuals living below the poverty line will be classified as insolvent and the finance ministry is currently analysing the methods for identifying them. Government beneficiaries who are very poor may also be included in this category. And their monthly contribution is likely to be set at Tk500.

Individuals from various professions, such as rickshaw pullers, domestic workers, street vendors, and hawkers, will be included in the informal sector.

The contribution for non-resident Bangladeshis and individuals from the informal sector will range from a minimum of Tk500 to a maximum of Tk5,000 per month.

The monthly contribution for private sector employees is likely to be set from a minimum of Tk1,000 to a maximum of Tk5,000.

The government will contribute 50% to the monthly deposits of the insolvent individuals and will have no contribution towards the rest.
Pension scheme-holders will receive interest from the government against their contribution.

Although the rate of interest has not yet been finalised, officials said the rate would be higher than that for bank deposits but slightly lower than the prevailing interest rate on savings certificates.

Finance ministry officials said the ministry is working on setting the interest rate. Also, it is being reviewed separately with chartered accounting firms. They said the interest rate would be finalised very soon.

The scheme covers individuals aged 18-50 years and above. The relevant law excluded people over 50, but later they were brought under the scheme with conditions by formulating rules.

According to the rules, individuals above 50 years will not receive pension benefits from the age of 60 like others. Instead, they will begin receiving a lifetime pension after contributing for 10 years. In other words, if someone joins the scheme at the age of 60, they will start receiving pension benefits at the age of 70 after making 10 years of contributions.

The officials said preparations are underway to launch the scheme on the first day of the new fiscal year.

Prime Minister Sheikh Hasina will inaugurate the universal pension, and the finance ministry has already requested her schedule for this. Once she confirms the timing, the universal pension scheme will be officially launched nationwide.

Finance ministry officials said this comprehensive pension scheme aims at providing financial security to a wide range of people, promoting social welfare, and ensuring economic stability.

"There is no piloting of the universal pension; it will start in full swing across the country from the day the prime minister inaugurates it. The premier will announce its launch by including two to three insolvent individuals and some people for other products in the inauguration ceremony by incorporating them into the scheme," said an official involved in the process.

About bringing people above 50 years under the scheme, a finance ministry official said, "Recommendations to include senior citizens keep coming from various levels. In view of that, provisions are being made to include those over 50 years of age in the universal pension rules. However, the senior citizens will get pension benefits after contributing for 10 years."

Those who will be included in the universal pension will initially only deposit the contribution in the state-owned Sonali Bank. For this reason, the pension authority, Finance Division, and Sonali Bank have finalised the preparation of signing a memorandum of understanding this month. Later, other banks will join this system.

In the beginning, strong efforts will be made by the government to increase the inclusion of expatriates in the universal pension scheme. The finance ministry hopes that the ongoing dollar crisis will ease if expatriates contribute foreign currency from abroad.

In the other three products, participants will contribute Bangladeshi currency, which the government will invest in profitable projects. The officials expect that the government's dependence on bank loans will be greatly reduced in the coming years.

They said the government will only receive money for universal pension contributions for the first 10 years and will not have to pay any money for this period. After 10 years, the money will start to be spent on pensions.

Ahsan H Mansoor, executive director of the Policy Research Institute, told The Business Standard, "The government will definitely have an opportunity to use money easily if the universal pension scheme is introduced. Because this scheme has the potential to accumulate a lot of money.

"But that won't happen in a year or two. It will take three to five years for the scheme to take shape. Once this scheme is started, the accumulated money should be invested for the long term. In that case, government bonds can be one of the means of investment."

The economist said the government can take the money through bonds to carry out various development activities. But it also has its risks. For this, it is necessary to set up the institution at the beginning, make strict rules and regulations. So that there is no misuse or wastage of the money deposited in the pension fund.

Md Habibur Rahman, chief economist of the Bangladesh Bank, told TBS, "A large amount of money will be deposited in the universal pension scheme at one time. The government can borrow from there. It will make the investment of pension funds easier, as well as the demand for government loans from the banking system will decrease."

He said, once the government wanted to borrow from savings instruments, people bought savings tools much more than that. As a result, the government borrows less from the banking system.

Universal pension funds will have a positive impact on development activities and currency markets, he added.

Finance ministry officials said that universal pension products have been developed for government employees and those working in autonomous institutions. The government is not launching these two products for now. Because government employees are currently getting pensions from the government, and the officers and employees of autonomous institutions and state-owned companies are getting gratuities and other benefits,

Finance Division officials said the universal pension is being introduced in such a way that even after joining, citizens can change the product or scheme if they want to. That is, after an expatriate joins by subscribing at the rate of Tk500, they can increase the subscription rate if they are interested later, and they can switch to private sector or informal sector products once they return home.

And individuals joining the scheme under the insolvent category can switch from both products and contributions once their financial condition improves.

The officials said during the inauguration of the universal pension in July, the finance ministry will announce when the two products will be introduced for the government employees and the employees of autonomous institutions and state-owned companies.

From that time on, those who enter government service or take jobs in autonomous or state-owned companies, will not be given pension benefits from the government. Those who joined the service since then will be included in the scheme like others and will receive pensions under the universal pension scheme.

Asked from which year the government employees will be included in the universal pension scheme, the officials did not give specific information. They said it will be finalised as per instructions from the highest levels of government. However, it may be fixed in 2031 or thereabouts.

The Ministry of Finance will appoint the authority chairman before next July for the smooth management of the universal pension programme. If it is not possible to appoint a chairman within this period, then an additional secretary of the finance ministry will act as acting chairman.

The Universal Pension Authority will sign memoranda of understanding (MoU) with various state agencies to introduce universal pension.

The draft of the MoU has already been finalised. A committee headed by an additional secretary from the finance ministry has been set up to sign these MoUs and speed up the functioning of the pension authority.

The Finance Division and the Pension Authority will also sign a MoU with the Bangladesh Bank to ensure timely deposit of pension contributions deposited in the bank into the government treasury.

Besides, an MoU will also be signed with the Election Commission and the Birth and Death Registration Authority. Citizens' information is stored in these two organisations. This MoU will be done to facilitate verification of various information, including age.

Besides, the Finance Division is preparing to sign a memorandum of understanding with the passport department so that expatriates can easily be included in this pension scheme.

[Joel Ahmed]

https://www.youtube.com/watch?v=cPrKCEzaBls