Economy: Sound politics imperative to get back on track

Experts at a roundtable on Tuesday emphasised the need for a sound political environment to get the economy back on track.

They said it is imperative to have a democratically elected government in power to facilitate necessary economic reforms.

Politics is the prime means that can bring about a qualitative change in the institutions through reforms. It determines the destinies of all other elements. Hence, the two major political parties should incorporate transition strategies into their electoral manifestos.

They came up with the statements at a roundtable held at Prothom Alo office in the capital's Karwan Bazar area on Tuesday. Noted economists, businessmen, former bankers, and university teachers attended the discussion, moderated by Shawkat Hossain, the head of Prothom Alo Online.

Their discussion revolved around the root causes of the prevailing economic crises, necessary reforms, the political situation, and strategies.

According to them, the prevailing crises did not emerge overnight and remain limited to some certain sectors, rather all the sectors felt the heat of the crises. They pointed out that revenue collection did not increase in proportion to the size of the economy.

Debapriya Bhattacharya, a public policy analyst and distinguished fellow at the Centre for Policy Dialogue (CPD), noted that Bangladesh is now in a transitional phase where the transition to development has collided with the democratic transition.

"On the one hand, we want an accountable and competitive economy with no waste of money, overvalued projects, division, discrimination, on the other hand, a political environment where people will not be able to practice their right to vote, there will be no democratic practice in the parties, there will be no properly functioning local government, and no democratic transition. It is quite impossible to ensure a competitive economy without a competitive political environment," he said.

According to Bhattacharya, politics is the prime means to bring about qualitative changes in institutions as it determines the future of other entities. The two major political parties should incorporate transition strategies into their electoral manifestos.

Mustafa K Mujeri, former chief economist of Bangladesh Bank, stressed the need for political will in economic reform. "There are questions regarding the elections in 2014 and 2018. We hope the next election will be credible and fair and will facilitate economic reforms."

Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said with several months before the election, it is too tough to implement large-scale fundamental reform in the economic sector. Hence, the government should undertake short-term initiatives for the next three months before the election.

He also said the next government, no matter whichever party leads it, will not be able to fulfill its tenure unless a reform initiative is taken soon after the election. In the current state, the economy cannot remain afloat for the next five years.

"No political government can survive if the economy does not remain on track, as we have seen in Sri Lanka, Pakistan, and many other countries," he added.

Ahsan H Mansur said the government should focus on reserve management and inflation control before the election. Under no circumstances, it should allow the forex reserve to dip below the threshold of $15 billion.

He is, however, pessimistic about getting new investments and reforms in the banking sector before the election. Hence, he suggested undertaking a short-term action plan for the next three months.

"For the time being, it is crucial to address three issues—inflation control, maintaining the dollar exchange rate, and increasing the forex reserve," he added.

Sayema Haque, a professor in the economics department at Dhaka University, said inflation and discrimination have become the primary concerns for low-income people. They do not speak out about discrimination, but perceive it.

Economic and revenue policies can be used to rein in inflation, but there are some invisible actors at play. She mentioned extortion as one of the invisible setbacks and said small entrepreneurs have to pay extortion while transporting goods, and they eventually shift the burden to consumers. Authorities should introduce a floating exchange rate as well as an interest rate to keep inflation under control.

Arfan Ali, former managing director of Bank Asia and chairman of Zaytoon Business Solutions, said the banking sector has long suffered from a lack of good governance. The board of directors makes decisions, but the bankers have to execute them and bear the responsibility in cases of complexities.

The central bank is formulating policies for repeated rescheduling of defaulted loans, and the commercial banks have to abide by the policies. Eventually, the bankers have to bear the responsibilities.

According to him, there should not be much expectation regarding good governance in the financial sector when around 70 per cent of lawmakers are businessmen.

Shams Mahmud, former president of Dhaka Chamber of Commerce and Industry (DCCI), noted the dominance of oligarchs in the private sector and said certain entities are controlling the entire system, including funding.

Besides, the central bank, in favour of certain business conglomerates, is facilitating repeated rescheduling of defaulted loans under political consideration.