Illustration: Amiya Halder
In a recent referendum held in the UK (United Kingdom) on June 23, 2016, 52 percent British people voted to leave the European Union (EU). They claim that they have gained independence from the EU. While I respect the English's decision to leave the EU, I do not know whether this notion that the EU was ruling them is right. No one is likely to rule the British people. The EU is not a ruler, but rather a group of institutions constructed for the betterment of the Europe.
Noticeably, The Prime Minister (PM) of the UK, David Cameron, has declared his adieu after championing a failed campaign. Theresa May, the new PM, has replaced him. This segregation from the EU of England may risk the mobilisation of trade and commerce carried out by both the UK and the whole continent as a whole with other countries, as evidenced by the recent sharp decline in the rate for pound to US dollar and partly in the rate for Euro too. If other member states follow suit, the EU itself could slowly unravel.
However, though it is true that it will take a good amount of time to officially settle Britain's withdrawal from the EU after instituting all legal proceedings, I opine that we should be prepared beforehand to encounter the challenges that are likely to be imposed on us as a consequence of the Britain's exit from the EU.
First, low pound rates will make imports expensive to the Great Britain, meaning that we are in trouble, as we have billion dollar exports with the English. They are likely to shrink imports to compensate for the money spent on purchasing the now more expensive Taka. However, we have good news also! We can harness the situation by less expensive imports from them. More than likely, Britain will be keenly interested in exporting to take advantage of its undervalued currency and to take control of the situation.
Second, our economy is partly remittance-based. A depressed pound will result in low remittance sent by our people living in the UK. What is more, immigration status, until the Brexit negotiations are completed, will be the same as before, but who knows what will become of our people once the Brexit is officially completed. Thus, the future of our people is somewhat uncertain.
Third, falling pounds valuation can cause inflation to the UK economy. The bank of England has a legal obligation to keep the inflation rate as close to 2 percent a year as possible. To this end, the Bank of England may raise interest rates, making pounds more attractive than before. Unfortunately, this step will enhance the cost of borrowings also. Thus, as a borrower, this measure, if adopted, may be a good reason for our headache.
Fourth, aware of the country's future performance, and if the rate for pound continues to fall, businesses and investors are very likely to move their money out of the UK economy. Under such circumstances, Britain's economy can enter into a recession, badly affecting the rest of the world including Bangladesh. The IMF (International Monetary Fund) expects that international trade and investment globally will shrink in response to the political uncertainty of an exit, especially one that may throw Britain into a sharp recession.
Last but not least, usually, every year a good number of undergraduate students go to the UK from our country to pursue better education. But, truth be told, undergraduates in the UK usually pay the highest tuition fees in the world. In order to avoid huge tuition fees, many pupils from our country choose to study at some other affordable European college outside the UK even after their admissions with the British colleges are complete. Up until now, such students as those are required to fulfill few formalities to this end. However, after Brexit, it is far from clear, what will happen to any such student. The likelihood is that students will face great hardship in terms of money and time to get into other European colleges. This can jeopardise the way to getting higher education for many students of moderate means.
The well known domino effect states that things are interdependent. Great Britain has always been a proven friend to us for long. So its depressed economy can affect us too. In order to stimulate its economy the UK may look for low-cost countries like ours to invest in. On the other hand, we seek to transform our economy to an industrialised one. So can there be a good deal for bilateral interest?
The writer is a freelance writer