Stability without democracy can't sustain growth
In the run-up to the national election, the international community is showing increasing interest in Bangladesh, which is due to the prevailing geopolitical landscape as well as its prospect of becoming a larger economy in the coming years. The country is going to graduate from the Least Developed Country (LDC) to the Developing Country category in 2026 by fulfilling the criteria based on per capita income, human asset index, and economic vulnerability index. It is currently implementing Sustainable Development Goals and has made progress in many areas compared to its peers.
Bangladesh's economic success has been due to its relatively steady growth compared to many developing countries. In the pre-Covid era, the average growth of the economy was over six percent for about a decade. But starting in early 2020 and after the Ukraine war in February 2022, the economy experienced some dampening, leading to slower growth. Still, while in FY2020 the GDP growth was 3.45 percent, it went up to 6.03 percent during FY2023. With accelerated growth, there has also been social progress. The poverty rate has declined, and so have child and maternal mortality, while life expectancy has increased. Bangladesh now aspires to be an upper middle-income country by 2031 and a developed country by 2041.
Often, the growth story is linked to the so-called stability narrative. It is claimed that since there are no political disturbances from opposition parties, the government could succeed in navigating the country forward.
Ironically, under the shadow of stability, the quality of economics and politics has been compromised. Economic growth has not been coupled with the expected outcomes. Urgent issues such as job creation for the youth, domestic resource mobilisation, efficient public expenditure, and higher private investment need more attention. Inequality continues to rise. The latest Household Income and Expenditure Survey (HIES) 2022 reveals that the Gini coefficient has increased. This implies that the rise in per capita income has not been distributed evenly across the population. And shocks such as the pandemic, natural disasters and inflationary pressure continue to push poor and low-income households further behind.
The manifestation of inequality is the fast-growing number of the superrich in Bangladesh. Wealth creation is good but only with an even distribution. Moreover, not all of this wealth is earned, as the wealthy include loan defaulters, beneficiaries of undue government support, and rentseekers.
Higher growth has also not created enough jobs. The Labour Force Survey (LFS) 2022 indicates that average unemployment has declined from 4.2 percent in 2016-17 to 3.6 percent in 2022. But the definition of unemployment is based on the conventional definition of the International Labour Organization's (ILO) unrealistic benchmark, which considers a person employed if that person has worked even an hour in a week. Moreover, unemployment among the young population is much higher than the national average. The LFS 2022 has not revealed the youth unemployment rate yet. However, the youth unemployment rate was 10.6 percent in the LFS 2016-17.
Despite stability, private investment has not been energised for long. And stability has not reduced unpredictability. On average, private investment has been hovering around 24 percent of GDP, which is inadequate for a growing economy. Due to low domestic private investment, there is slow foreign direct investment (FDI). Despite the fact that the government has been trying to attract FDI through favourable policies, there is still a lack of enthusiasm. Though Bangladesh is a growing economy, and the market size is expected to grow, it is yet to become a production hub for international manufacturers. The government has allocated land for special economic zones to both private and foreign investors, but the progress has generally been slow. Ease of doing business must be ensured by improving infrastructure, removing red-tapism, ensuring policy clarity, adopting technology, and improving human resource quality.
Stability has protected the nexus between capital and political power. Massive conflicts of interest prevail in the system since many policymakers have stakes in fiscal, monetary, trade and other sectoral policies. Many in the periphery of political power have also been rehabilitated and rewarded. Hence, they do not want any changes (or disturbances) in this stability. Of course, democracy would require accounting of all unearned money and transparency of public expenditure.
The unique location in the Bay of Bengal, coupled with its economic rise, has increased Bangladesh's importance in the region. Our stability has been supported by some international partners. As such, Bangladesh has been conducting a balancing act between two competing countries, China and India, quite well. Both China and India are important trading partners and have provided us with loans of various sizes. Naturally, they have an active interest in Bangladesh.
Bangladesh's geographical position has also increased its geostrategic significance for the US as the latter aims to contain Chinese influence in the Indo-Pacific region. The current US position is to deal with Bangladesh-related issues through the prism of India. Stability is important for the US, too, but not at the cost of democracy. The US has made this clear in its recent policies, which have been geared towards promoting democracy in Bangladesh.
Additionally, the EU Election Exploratory Mission is currently visiting Bangladesh. They will undertake an assessment of the political environment and electoral framework, in close partnership and consultation with all stakeholders.
These developed countries are important stakeholders as Bangladesh's economy is connected to them through trade, remittances, investment, education, science and technology, and much more. Therefore, it is natural that they would have a keen interest in Bangladesh's politics and election administration.
But, ideally, this should not have been the case. Bangladesh should have been capable of holding an acceptable, high-quality national election on its own. Unfortunately, the credibility of the past two general elections has been questioned. The stability of power has probably been consolidated, but democracy has weakened. A transition to democracy and the nurturing of the democratic process will be painful and difficult. And the upcoming polls will be a test for Bangladesh to prove its capability and willingness to hold a high-quality election that will not be questioned within or outside the country. A democratic culture is crucial for sustaining the economic growth the country has achieved so far, and for distributing the benefits of this growth among all citizens of the country.
Dr Fahmida Khatun is executive director at the Centre for Policy Dialogue (CPD) and non-resident senior fellow of the Atlantic Council. Views expressed in this article are the author's own.