How do uncertain global events affect Bangladesh? | The Daily Star
12:00 AM, November 05, 2018 / LAST MODIFIED: 12:11 PM, November 05, 2018

How do uncertain global events affect Bangladesh?

My last column “Uncer-tainty and volatility in the coming years,” published on October 27, elicited some interesting feedback on social media. A reader from Dhaka commented on Facebook, “While you mention the three uncertain events that might influence the global economy in the coming months, it would be worthwhile to also address how these affect us, given our special circumstances.” The point is well taken.

In my op-ed, I had left out any references to Bangladesh for a number of reasons. For one, I was not able to see with 20/20 vision what the ramifications of the uncertainties I discussed in that piece, such as the US elections and the Brexit negotiations, would be for Bangladesh. However, the reader's observations were very genuine and he was sincere about his concern for Bangladesh which itself has elections coming up. So, here's my best shot.

Bangladesh is a small country, not only in terms of geography, but also in the special sense economists use the term in analytical discussions. The country faces external conditions over which it has very little control, and makes policy adjustments accordingly. Some of these external variables are prices of our exports and imports, exchange rate, and remittances from abroad, which are all vital for our economic well-being and stability. On the other hand, being a small country offers some advantages, in the current fluid state of trade relationships and economic realignment, which I will discuss towards the end.

Let us take a hypothetical scenario. If the coming US mid-term elections result in the Republican Party retaining control over both chambers of Congress, this will certainly signify mass support for President Trump as well as embolden the current administration. However, nothing much will change for Bangladesh. On the other hand, if Democrats get the upper hand, while many Bangladeshis around the globe will heave a sigh of relief or even rejoice, it is unlikely that some of the bread-and-butter issues for us, such as tariffs on our garments exports or US development programmes in Bangladesh, will change much at all. The US-Bangladesh bilateral relationship has been on an even keel for some time. This was reiterated at the meeting the outgoing US ambassador to Bangladesh, Marcia Bernicat, had with our prime minister, both of whom expressed satisfaction over the existing bilateral relations between the two countries.

US immigration policy has been of some concern to most Bangladeshis living in the USA, some of whom are undocumented. The Democrats have promised to scale back immigration enforcement, and that includes sanctions under Deferred Action for Childhood Arrivals (DACA) and deportation proceedings. DACA allows individuals who were brought to the United States illegally as children to receive a renewable two-year period of deferred action from deportation and become eligible for a work permit in the US. However, the number of Bangladeshis who benefit from DACA is small. Bangladeshis who aspire to study or migrate to USA, or are waiting in queue to be called in for an interview, will notice very little change. Broadly speaking, changes in US immigration laws take a long time to go through the legislative process, and certain rights, such as “jus soli” or citizenship by birth, are protected by the Constitution. 

Similarly, Bangladeshis who are already in the USA, and do not have valid papers, will not notice much difference in their present situation whether Democrats seize control over the Congress or not. In most cases, a foreign-born person who US officials consider deportable is not sent away from the US immediately, but first allowed a full hearing before an immigration judge. Obviously, there are some exceptions, but the Department of Homeland Security (DHS) has not made any changes to the process referred to as “expedited removal,” which is seldom applied to undocumented Bangladeshis.

As for the Brexit, it is certain that the UK will tighten its immigration policy as it relates to entry from EU countries. However, Bangladeshis currently living in EU countries, and those who entered the EU via soft countries such as Portugal and Italy, will no longer be able to move on to the UK. I met many Bangladeshis in these countries as well as in other Eastern European countries who would have loved nothing better than to move to the UK. This will be almost impossible after Brexit, even for those Bangladeshis who hold EU passports. However, EU visa-holders will be able to travel to Germany, Denmark and other Scandinavian countries for better opportunities.

Bangladeshis living in the UK will probably experience some benefits in the job market once the labour market tightens. This has to be weighed against the possible slowdown in job growth should the UK experience a slowdown in GDP growth. The UK will also welcome new immigrants with specific skills in the Tier 2 category.

Finally, how does the toxic tariff war between the USA and China affect Bangladesh? In an op-ed in July, entitled “What does the US-China trade war mean for Bangladesh?”, Nazmul Ahasan addressed some of the issues. By and large, a trade war is harmful for a small country like Bangladesh which will not only face higher average tariffs, but also find its efforts to achieve its SDG targets negatively influenced by lower growth in the global economy. In an assessment on “The Costs of Trade War,” Dr Mukhisa Kituyi, Secretary-General of UNCTAD, writes, “Countries like Costa Rica, Ethiopia, Sri Lanka, Bangladesh, and Turkey could face average tariffs of 40-50 percent.” 

One side effect of the trade war between the USA and China could be a surge in investment from companies which are located in China. A typical case, but not necessarily very common, is that of a headgear company in Hong Kong which found a “safe haven” in Bangladesh. In future, in the face of higher tariffs on China, European brands might look for facilities in countries like Vietnam, Cambodia, and Bangladesh. And we need to be fully ready for that.

Nonetheless, an escalating trade war will sour the global investment climate. Alice Fulwood of UBS, a Swiss financial services company, views the current US policy of raising tariffs and attacking, rather than cooperating and communicating, is counterproductive. They "tend to backfire, because they tend to reduce growth everywhere, and make everyone more defensive." An escalating round of tariffs, if it leads to reduction in global trade and economic growth, will hurt everyone including Bangladesh. That's the reason why we economists are keeping our fingers crossed and pray every day for the two countries to sit down at the bargaining table and work out their differences.

For Bangladesh, the most important short-term challenge is internal, i.e., to manage the upcoming parliamentary elections and ensure the participation of all parties. Regardless of what happens in the external world—US elections, Brexit, and the trade war—the most uncertain event in our horizon is the upcoming elections. Bangladesh can, and needs to, finally get the derailed democracy train back on its track and move ahead with elections held in a free and fair environment. I cannot even see how it can be any other way. The bedrock of our economic progress in the last twenty-five years has been our commitment to democracy, and despite some hiccups in the recent past, people's faith in our elected leaders is a vital asset for us and really our engine of growth.

Dr Abdullah Shibli is an economist and Senior Research Fellow, International Sustainable Development Institute (ISDI), a think-tank in Boston, USA. His new book Economic Crosscurrents will be published later this year.

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