We must go towards a new political settlement

We have heard a lot about Bangladesh's prospects, but we see now that the holistic interests are being diminished by vested interests in many sectors. Why has this happened?

Bangladesh was proceeding through a kind of progress. All sorts of things have been said about Bangladesh at various times. It had been heard just after the independence that Bangladesh is a bottomless basket. Now many are talking about the Bangladesh paradox. It has been said Bangladesh is a development wonder. But these comments have been made without considering economic and political indicators. Not taking in cognizance various economic indicators such as labour, capital formation, technology, and land management, or political indicators such as institutions, people's links with institutions and with the state – has resulted in the present predicament. The narrative of our development model has always lacked foundation.

If investment does not become the main instrument of economic growth or gross domestic product, that economy cannot sustain. Again, if institutions do not function properly, economy cannot sustain, and that is what we are seeing today.

We often want to look at politics and economy separately. But in an emerging economy like Bangladesh, is there scope to do so?

A country cannot advance unless there is coordination between its political and economic indicators. This is not problem of Bangladesh alone, but of all developing countries. It remains to be seen how or how much is the participation of the people in the policy making of the state and what is the nature of the contract between state and the people.

If all this is taken into consideration, we can see that progress of many countries has stalled because of the lack of a political settlement. The economies of countries that developed after World War II somehow managed a political settlement. That made institutions effective. Countries where institutions did not remain effective faced problems. This is as true for Argentina and Nigeria as it is for Sri Lanka. Everyone said Sri Lanka was a role model for education, health and social security in South Asia. This country is now on the brink because of the lack of political settlement.

If the process of political settlement doesn't have participation of the majority of the people, monopolism in the economy and oligarchy in politics is created. The economy will sustain if accountability is ensured and here is participation of the people. On the other hand, when sectarianism controls everything, all indicators of the economy will go in the opposite direction. And, that has exactly happened in Bangladesh. Here poverty alleviation slows, unemployed population rises, investment centric growth doesn't happen, and the degree of encroachment and pollution increases in the environment in widespread manner. If institutions do not function properly whether it is officially or unofficially, the opposite result will occur.

What are the economic challenges ahead for Bangladesh?

We have been undergoing four major challenges lately. First comes the energy security. In Malaysia those who got support in the energy sector did not just confine themselves in the sector, but also worked on innovations and added new dimensions.

Those who got support in our country should have worked on things such as attaining efficiency in energy exploration alongside capacity building. But that did not happen. On the contrary capital flight took place.

Secondly, the incentive provided in different sectors in our country gave rise to a culture of borrowing. The main reason behind this is incentive was not given based on performance. Only in the readymade garment sector the incentives were given following proper works and that’s why loan defaulter is comparatively fewer in this sector. The number of loan defaulters is more in other sectors. This proves that even in our country where the where proper policies and institutions functioned, growth took place.      

The third challenge is, export did not increase due to non-diversification of the economy whereas capital flight took place in the garb of import. This is the reason why our foreign exchange reserves drained so quickly.

Fourthly, the amount of domestic and foreign debt has increased exponentially. The country took twice the amount of loans in last several years than in a period till 2016-17 from the independence. As institutions don’t work, the estimation of Bangladesh Bank varies from National Board of Revenue (NBR). In every aspect, it is now seen that the development narrative that was propagated was not actually based on foundation. Rather, that foundation gradually eroded.

Clientelism is failing Bangladesh in two ways in the face of this challenge. It is hindering creativity in solving problems and not paving the way path for taking forensic-style minutely dissected decisions.

Are you saying there is no way out from the challenges that you mentioned?

There is a way out of the current challenges Bangladesh's economy is facing. There is no room for despair. But our political situation is standing in the way of solving it. These challenges cannot be met without a change in the political environment. Institutions in Bangladesh have fallen into a status quo. Not being able to move forward in a creative way. This problem is created because of the clientelism.  

We heard about trickle-down development policy, but now in most cases the benefit is enjoyed by those close to the power centre. We hear about the growth of GDP, per capital income but with income disparity, we have become an extremely discriminatory society. How would you explain this?

The Covid pandemic brought some issues to the fore. We realised our social safety net programmes are basically fragmented. Persons supposed to be included are not included, those not supposed to be included are included. Again, this programme is not oriented towards the full lifecycle. It is not compatible with the needs of anyone, childhood to old age. We have not learned from the Covid pandemic. We should have moved towards a social security programme based on universal education, universal health care.

We are observing a yawning gap between the achievement of labour and capital. Bangladesh has become a country of terrible discrimination. The economy is not circulating with the general people at the centre. Real wages did not increase in most cases.  And this price inflation is an insult to the injury.

The discrimination here is policy-oriented discrimination. The price hike of essentials also rose here for global price hikes. But the price is not lowering here despite the drop globally. We need to think about it in our own way.  Government revenue has not increased proportionally to GDP. Lack of lack of revenue has led to a lack of money. As a result, the government has to take loans. Our banking sector is already burdened with loans due to which the lending capacity has decreased. As a result, the central bank has to print money. According to the governor, if the central bank prints Tk 700 billion, then in the process of circulating the money, it is supposed to be 5 times and it is about Tk 3.5 trillion. As a result, there is inflation due to policy.

You said that the disparity in our country is due to policy. Can you elaborate?

The matter will be clear if we compare Bangladesh’s current budget with the budget just after its independence. You will see basic changes. The basic foundation of the Bangladesh state is equality, social justice and human dignity. Based on this, in the first budget, the allocation for the Annual Development Programmes was Tk 5 billion, and the allocation for revenue expenditure or operating expenditure was Tk 1.86 billion. Now everything is reversed. Debt and salary expenses are high in the budget.

The main point is, investment is stagnating, employment is not growing, poverty reduction is slowing and inequality is increasing. All this is happening because of policy. Policy is concentrated through power, power comes from the monopoly of political arrangement. As a result, Bangladesh's progress notwithstanding its immense potential has been reversed.

If the monopolism of political arrangement has led to this situation, what is the way out? Is it possible to break free from the trinity of power created by politicians, business persons and the bureaucracy, and then to create a new political arrangement?

Resource dependent syndicate has been created in the politics and economy of Bangladesh. Politicians, the executive, the judiciary, the law enforcement—all have built a society of unearned income through a culture of transactions. Similarly, they have again divided the boundaries among themselves. They want to maintain the status quo for their own sake. They do not make any changes, but become obstacles to change.

But the area od hope is that the history of Bangladesh indicates certain principles. During the British period, the people of East Bengal supported the Krishak Praja Party. Farmers were more in debt here than in other regions. The party said, if we come to power, we will set up a debt arbitration board. In the case of the liberation war, the statement was clear, why has Sonar Bangla has become a crematory? The statement of the nineties is also clear, the end of autocratic rule. No status quo is final. From the experience of history, new creative ways of overcoming obstacles have emerged over the ages. Now a geopolitical obligation is also being created with it. The science of internal and external pressure building up suggests that current challenges will be difficult to deal with without some kind of new political arrangement.

The importance of Bangladesh in geopolitics is rising and with it, all sorts of pressure. How far is it possible to take the economic opportunity by tackling the pressure?

There are four issues. The first is, increase cooperation with any neighbour. The question is, can the neighbours mitigate our demands of import-export trade and capital demand? If they can, that will be the best. The second thing is, whether we shall take sides in the battle of the superpowers. Imports, exports, labour, do not allow Bangladesh to take any particular side. The third question is whether Bangladesh will move ahead, balancing all the powers. The problem of such balancing is that the situation may reverse at any time. The fourth thing is, taking introverted position. That means, allowing all the outer powers play their roles. The point is to connect with or meet the core interests of the policy pursued by one of the powers.

The main consideration regarding this is, whether we are taking the decision spontaneously or due to pressure. If we take decisions due to power, there is the risk of falling. The adverse situation may be tackled with two conditions. Firstly, there should be consensus among all the political parties in the country on the question of our national security and foreign policy taken in national interest. Second, the government that remains in power must have a legitimacy. The common people should think that the government has legitimacy and that the bargaining they are doing with foreigners is conducted in public interest.

Recently Bangladesh has decided to join BRICS. Will this create economic opportunities? Or is this a political moe of the government?

We have history of joining regional blocs and and alliances. That history teaches us three things. The first one is, where we may mitigate our own and their needs. For example, SAARC is very important regionally, but it could not give us much. It was not effective as there was no opportunity of discussing political questions. The second thing is, under what conditions are we going there. Be it Indo-Pacific or BRICS—we have to see if we go there to diversify our production. It is also a big consideration whether the cooperation will be loan-based or capital investment based. Capital as debt is actually riskier for us. But in case of joint investment, the risk is equal for all. The third thing is, as I have said many times, our economy can be a trillion dollars in 2035-36. But to make this leap we will need technological capability along with diversification of production. We need to do enough homework to calculate that we will get the maximum benefit from joining which alliance. If we take a policy stand under pressure, we will remain as a receiving country and cannot ensure our own interests.

Ahead of the election, there is currently an uncertain situation in Bangladesh. The economy is also in crisis. What are the major concerns of this crisis? Any suggestions for the transition?

The perennial concern of our politics is that no political party has been able to hand over the power to another political party. Another major concern is that the political parties in power have never ensured accountability to the people for their economic policies.

The main condition for the reconstruction of Bangladesh is to ensure the participation of the majority in the political settlement. The current political environment is unable to contain the basic mantras of the struggle of the independent war. There is a need to ensure that the people can elect their representatives and that political parties can hand over the power to other political parties. The challenges we face in terms of politics and economics are putting us in a geopolitical proxy war.