Takeover: Lessons to learn
Stock traders negotiate during the afternoon session at the Mercantile & Futures Exchange (BM&F) in Sao Paulo, Brazil on Friday. Once one of the most promising emerging markets, Brazil is now trembling from the effects of the global financial crisis after seeing nearly a third of the value of its currency wiped out in just two months. Photo: AFP
Western powers come down heavily on developing and least developed countries (LDCs) when they delay freeing state-owned banks from government control. Developed countries through the World Bank, Asian Development Bank or International Monetary Fund put pressure on them to speed up privatisation. The rich nations do not want to consider that these banks in the LDCs or developed states play a pivotal role in reaching credit to the poor and powerless.
Things seem to have changed.
The developed nations are taking over their crisis-ridden institutions to help avert the financial crisis. What the United States and its allies in Europe are doing now is termed 'nationalisation' in Bangladesh. The US and the EU may call it takeover or bailout step. Deemed to be socialist- or communist-like remedy, nationalisation has now been adopted by the western economies, the initiators of the free market economy. It seems that they have a little choice other than nationalising the troubled financial institutions.
Does it not reflect the double standards of the western countries? The rules of the game change for them, really.
Nationalisation can be adopted when people in the US or Europe need to be protected from losses. But the same move will be discouraged or even denied by them when an LDC like Bangladesh needs to do so to protect their citizens from similar kind of fears.
The nationalisation of banks in Bangladesh at least opened the way for ordinary people to use the financial system for small and tiny deposits. It paved the way for what is known as compulsory priority-sector lending. In other words, the banks have to provide a certain amount of credit to agriculture and rural areas. The private commercial banks lend only to sectors that offer assured and fairly high returns. But the nationalised banks have a social obligation to fulfil, and the directive to do so is met because the government runs those.
The Bangladesh government in consultation with its donor organisations and countries is going through rapid privatisation of its nationalised entities, including banks. Apart from banks, the government here has privatised most of its jute and textile mills without considering the joblessness of thousands of people.
Does it mean that nationalisation is being promoted?
“There are some lessons for Bangladesh from the global financial crisis,” said Prof Mustafizur Rahman, executive director of private think-tank Centre for Policy Dialogue (CPD).
“There must be sequence in implementing donor-driven policies. There should also be oversight institutions to monitor those activities," he said.
Rahman, who is also a trade expert and economic analyst, think the US economy tumbled down because of poor oversight.
Zaid Bakht, research director of state-run Bangladesh Institute of Development Studies (BIDS), echoed him.
Bakht urged Bangladeshi authorities to take lessons from the global financial crisis so the country can avert this kind of disaster.
Bakht however criticised the donors who impose policies on countries like Bangladesh from their own mindset.
“Donors should consider that Bangladesh's perspective is totally different than that of developed world,” the BIDS director said. He cited example of World Bank's stand on the country's agriculture sector.
The WB earlier said there is no need to subsidise the agriculture sector, but now suggests subsidies seeing the growing food insecurity.
He said the US's nationalisation and the Bangladesh's are totally different. “The US is nationalising its financial institutions on temporary and transitional basis,” he added.
He also said Bangladesh should be cautious in terms of implementing donor-pushed policies. “If the rural people miss access to bank finance due to privatisation of all government-owned banks, that will not be good for the country,” he said.
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