Rising inequality may hamper social development | The Daily Star
12:00 AM, October 18, 2019 / LAST MODIFIED: 12:00 AM, October 18, 2019

Rising inequality may hamper social development

Say economists at Oxfam dialogue

The government should step up its efforts to rein in inequality as its upward trend is posing a serious threat to the country’s ongoing social development and hurting the economy, economists said yesterday.

“Income inequality is rising and disparity in many indicators is also rising in the society. If inequality continues to rise, our pride about social development would be diminished,” said Salehuddin Ahmed, a former governor of Bangladesh Bank.

“If inequality continues to increase, the GDP growth would not be sustainable,” he said.

Prof Rashed Al Mahmud Titumir, chairperson of research organisation Unnayan Onneshan, echoed Ahmed.

“If inequality is not brought down, the country’s social development would be hampered.”

AB Mirza Azizul Islam, a former adviser to a caretaker government, said when growth rate rises, inequality may rise for a few reasons, but the government should take steps to curb it.

Their comments came at a national dialogue organised by charitable organisation Oxfam at the Cirdap auditorium.

Gini coefficient, an economic term used to gauge income or wealth inequality on a scale of 0 to 1, in which 1 represents perfect inequality and 0 signifies perfect equality, rose to 0.48 in 2016 in Bangladesh, up from 0.46 in 2010 and 0.39 in 1991-92.

Ahmed said the belief that GDP growth leads to the achievement of development did not always prove to be true.

“Bangladesh’s development is being treated as a surprise but we should be careful so that it does not deteriorate like the situation Argentina has faced.”

The economy of the South American country expanded by 8 percent to 9 percent per annum from 2003 to 2008. It contracted in 2009 but recorded a double-digit growth the next year, according to World Bank.  

However, since then, Argentina has seen a precarious economic balance. Its GDP has contracted 2.5 percent in 2018 and another 2.5 percent in the first half of 2019, the WB data showed. 

Ahmed also said banks’ non-performing loans were rising but none was getting punished for it. “Moreover, they are free to move whereas good borrowers run business under huge tension of repayment of bank loans.”

Prof Titumir said the issue of inequality was a matter concern for the economy, therefore the government should take steps to tackle it.

He said the country was observing stark economic inequality and high degree of disparity in many socio-economic aspects, including inequality in access, outcomes and quality of education, health and judicial and public services.

In a presentation, Titumir showed how disparity was increasing in the context of rural–urban areas, regions, protein intake, gender, education, health, access to justice and policy support. These inequalities, along with income disparity, are slowing down the rate of poverty reduction despite steady economic growth, he said.

Speaking at the event, Planning Minister MA Mannan said the government was sincere about reducing disparity because it hurt the economy.

“The government is focused on removing hunger at first in line with curbing inequality and poverty.”

The minister hoped that Bangladesh would not face what Argentina had experienced and the country’s growth rate would be sustainable.

Islam said Bangladesh’s revenue was still dependent on the indirect tax which fuels income disparity, so the government should put emphasis on raising direct tax.

He recommend investing more on human capital, education and social safety nets along with reducing leakages in investments.

He said the government should focus on bringing good governance to the financial sector in order to reduce NPLs and scams.

“The financial sector has become a major source of disparity.”

MM Akash, a professor of the economics department at the University of Dhaka, recommend forming a land bank where land owners who do not want to farm can keep their land in exchange of an annual interest and the bank would lend the land to the landless.

Through the process, the landless will get land for farming, allowing them to increase incomes, he added.

Fahmida Khatun, executive director of think-tank the Centre for Policy Dialogue, said large-scale manufacturing enterprises were adopting modern technologies in line with higher GDP growth. As a result, they are not producing many jobs.

Though private investment creates jobs, it has been almost stagnant in the last few years because of a lack of confidence, infrastructural deficit and a lack of money in the banking sector, she said. 

Unemployment is one of the main reasons for inequality, she said.

Dipankar Datta, country director of the Oxfam, chaired the session where Prof Sadeka Halim, dean of the social sciences faculty, Muhammad Abdul Mazid, a former chairman of the National Board of Revenue, Rasheda K Choudhury, a former adviser to a caretaker government, and Harry Verweij, ambassador of the Netherlands to Bangladesh, also spoke.  

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