Captains of economy

THREE centuries ago, Adam Smith thought economy was a clock that would continue its motion once set. Almost three hundred years before the birth of Christ, Plato thought quite the opposite. He thought that the ship of the state would have to be captained by philosopher kings. Way back then, Plato didn't quite think that many centuries later, those ruling the public sphere would be the farthest from philosophy and social good would ultimately be non-existent. Instead of planning for public services, states and institutions today attempt manipulated erasure. Every time there's a scandal in the national scenario, almost every nation in the world tries erasing it in defence. That is natural even in the case of an individual. Think about a small village in France where a farmer spends all his life's savings trying to erase the debt of a distant cousin, a practice that is best known as “Passer l'eponge”, erasing liability from the chalkboard with a sponge. So in one form or the other, erasure is a practice that is either privately or publicly practiced.

But fortunately, not all can be forgotten. The infamous list of financial scandals that mark our national landscape includes Hall Mark borrowing 2554 crore from Sonali Bank; Bismillah siphoning 1100 crore from Prime, Jamuna, Shahjala Islami Bank and Premier; BASIC Bank's irregularities amounting to 1500 crore;  Imran Group stealing 101 crore from Bangladesh Krishi Bank, Destiny Group robbing 3800 crore directly from clients; Paragon Group defaulting on 146.60 crore in Sonali Bank; Ideal cooperative society siphoning 1000 crore from 70000 of its members; T&Brothers taking 609.9 crore, once again from Sonali Bank, and the last-but-not-the-least case of the director of Shahjalal Islami Bank, himself polishing off 140 crore from the bank he himself owns. In recent months, another example of Agrani bank going ahead with providing Tk. 2.38 billion and National Bank giving the group Tk. 600 to Moon Group could be called into question. The group has already applied to Agrani to reschedule its loan and has further declared that it would be unable to make any repayments before 2021. Even after 2021, Moon has requested for a loan repayment structure of three-monthly instalments over a period of 12 years, stretching till 2033. Agrani Bank has approved its prayers and has given it till 2028 while Bangladesh Bank has refused. But, Moon has not given up. It has been pressing the central bank for further consideration. There are more ironies to follow. One of the real estate sites that the group owns has a 20-storey building erected with the signboard 'Mizanur Rahman Medical College (proposed)' along with another building by the name of Razia Tower, having 160 flats, standing beside this. Apparently Mizanur Rahman has named the road in front of his building as 'Razia Road'. With both the buildings being mortgaged to Agrani Bank, the group has the audacity to even name the road that the group has no claims to! This can only happen in a country where rules of directorship in the board are blatantly flouted with authority, where political influence plagues the sector, and where there are suspicious ways of appointing board members and leadership.

Going by the fact that the share of percentage of classified loan to total outstanding loan has been going up every six months and that at the end of March 2014, the share of percentage of classified loan to total outstanding loan was 10.5% compared to 8.9% in December 2013, where, as of September 2014, the Non-Performing Loans was 28.76 % in state-owned banks, 29.39 % in specialised banks, 7.30 % in private banks and 6.02 % in foreign banks, one may only humbly suggest that the state today needs to immediately address issues like captured governance, oversight and the abuse of political power in the banking sector.

What then is the recourse for failed enterprises or toxic assets that continue to plague the economy? Briefly, establishing asset management companies and setting up more banks to bear the brunt of the nonperforming loans and also letting state enterprises fail are common practices in our part of the world. For example, in 1999, China established bodies to control four such failing big state-owned lenders and put them on stock market again after a few years. A similar rescue mission had been attempted in Vietnam where Vinashin, a state-owned shipbuilder was strapped with billions of dollars in debt in 2010. The Vietnamese government had then targeted another state-owned ship builder Vinalines to shoulder some of its rival's losses in spite of having similar debt issues. In 2012, Vinalines also nearly collapsed with about $3 billion in debt. As a result, last December, the former chairman and the general director of Vinalines were sentenced to death for corruption. Going by this example, one would assume that at the end, the buck has to stop somewhere, even if it's not the right place. The bad practices in the banking system and overall economy have indeed impacted growth and for the seventh consecutive year in a row, Vietnam's economy has been under 7%. Only 5.4% growth is expected this year.

What will happen to Bangladesh if we continue to shield the defaulters and look away from impending disasters that will finally hit the economy at some point? Can this land really afford so many financial scams?

A few realisations need to set in this minute. We need to come to terms with the fact that in general, we are more debt-ridden than ever before. We are living off borrowed money to a large extent. The cars we ride, the homes we own, the trips we take are all charged to our cards that give us the leverage of feeling rich. The more we own, the more difficult it is for us to live within what we truly earn. We seemed to have reached a point where the cost of wanting 'more' costs us more than not having enough, where 'plenty' is harder to handle than a crunch.

Roman statesman Cato the Censor was suspicious of comfort. Ironically, as a nation, we have grown too comfortable with borrowed prosperity. Just like Procrustes, the inn-keeper in Greek mythology who cut the limbs of the travellers who did not fit into his iron bed, we too have begun to tailor ethics and propriety as per our own convenience. As a nation, we need to decide if we can take chronic shocks like slow, consistent Chinese water torture method and prepare the citizens for irrecoverable, chronic damages that occur because of bad entrepreneurship and compromised governance. Or if this is time to cauterize Hydra's head and destroy recovery of bad practices, once and for all.

German toxicologist Hugo Schulz observed that small doses of poison stimulate growth. But by hugely pampering corrupt pockets and protecting the deviant in the economy to gain immediate prosperity is not sustainable. Long ago, Mithridates IV, king of Pontus in Asia Minor, got himself protected against poisoning. Later on, when he tried taking his own life, he failed and asked a military commander to deliver a blow with a sword. Fortunately we haven't still found a way to be mithridatised against the swords of sheer public wrath. When that happens, bad captaincy has no other route to succumb to than failure.

The writer is Managing Director, Mohammadi Group.