Facing the recession

THE government seems to be alert to face the ripples of the worldwide economic recession. It has already commissioned a National Task Force comprising ministers, eminent economists, politicians, and businessmen. Hopefully, the task force would review the situation, time to time, and suggest some policy prescriptions.
That the impacts of an economic recession outside have fallen on us is quite evident from the reported drop in export earnings and remittances. Some RMG industries have reported that their overseas orders have come down by 30-40 percent.
Admittedly, these indicators depict an upward trend in the face of economic boom in foreign countries, and the reverse, in the case of a recession. In a globalised regime, it is quite likely that the impacts are transmitted very fast to produce a panic.
However, the next three to four months could be crucial to arrive at a more accurate picture of things to come. But assuming that an all-time deep world recession is to affect Bangladesh, the doable need to be determined from now on so that the rot it minimised.
Let us start with some silver linings arising from recession. The recession has seemingly sounded a note of comfort in the areas of investments in technological upgradation and diversifying investment portfolios.
New equipment at cheaper prices could be sourced in to reduce costs of production and thus maintain competitive edge. Likewise, a fall in energy and commodity prices could be a blessing in terms of gearing up economic growth and consumption of essential items.
But that too depends on the "pass through" effects to be ensured via proper monitoring and guidance from the government. The economic recession should also teach us the lesson that our facilities pertaining to ports, customs, electricity, bureaucracy, interest rates, etc be fine-tuned to become more competitive and access overseas markets.
More important, perhaps, is the lesson that an aggressive economic diplomacy needs to be pursued for export diversification.
Meantime, business barons have already approached the government for a bail-out package, especially, pointing to the creation of a Tk.6, 000 crore "rescue fund." There is likely to be a pressure group that would take advantage of the situation and capitalise on government's concerns and commitments.
Creating a fund before the onslaught would amount to provisioning the medicine before the sickness. Rather, we suggest that the industries be taken case by case and examined whether, to what extent, and in which layer of the production and marketing process the assistance is needed.
If a cash subsidy of certain percentage is called for, the onus lies to look at whether it should be across the board or for particular item/industry. The role of the banks in the whole game needs to be assessed, too.
We should not forget the fact that worldwide economic recession means that our external sector has somehow, for a short or long period, become subdued. A two-pronged attack should be marshaled in this case.
First, address the external sector with an assistance package and economic diplomacy, and second, strengthen the internal sector with renewed interest. Quite obviously, the second element points to the perilous agricultural and rural sector as well as the import substituting industrial sectors.
The growth rate in the agricultural sector needs to be raised with proper investments in infrastructure and technology, in research and extension and in modernising production and marketing processes.
As far as import substituting industries are concerned, there seems very little justification in allocating funds for sick industries at the moment. Till the recession is over or a downturn in recessionary spiral is in the offing, these industries should wait.
Rather, right at the moment, domestic constraints including interest and tariff structure that bedevil economic operations of these industries, should be given more attention than before.
The present government is already burdened with a barrage of commitments to the people as reflected in its election manifesto. With deepening of economic recession and clamour for more assistance from different corners, domestic disturbances, the task of resource management is a big challenge.
The bottom line is that the government needs to come up with a new charter of economic governance, rolling back wasteful expenditures on the back burner and putting productive investments up front to minimise the impact of recession. This is an acid test for the government and our eminent economists should be well equipped to help.

Abdul Bayes is a Professor of Economics at Jahangirnagar University. E-mail: [email protected].