"No, no, no, all rubbish. They are determined to bring Bangladesh down. They only find wrong in government policies. They don't see development in the country,” said Finance Minister AMA Muhith in a burst of anger when journalists questioned him on a recent report titled “State of the Bangladesh Economy in Fiscal Year 2017–18” by the Centre for Policy Dialogue (CPD). The reason behind the Finance Minister's explicit annoyance with the country's prominent think tank is that the report reveals the futility of one of Bangladesh government's most used marketing materials—the country's GDP growth. It also focuses on several other economic failures that may put immense pressure on the country's economy this year.
With the election season fast approaching, the ruling Awami League government is focusing heavily on the country's GDP growth to garner votes in its favour. It has pledged that it will increase GDP growth (which currently stands at 7.1) to 10 percent by 2021. What CPD has done is essentially highlight that this flashy figure is a misleading measure of Bangladesh's economic development.
To make their case, the researchers highlighted the rates of employment growth rate and poverty reduction. Comparing these two indicators with the current GDP growth shows that the steady increase of GDP cannot prevent poverty and inequality in Bangladesh at all. According to the report, between 2000 and 2005, Bangladesh's GDP growth was 5.1 percent, employment growth was 3.3 percent and poverty reduction was 1.8 percentage points. In the next five years (from 2005 to 2010), GDP steadily increased up to 6.1 percent; however, employment growth started to decline and reduced to 2.7 percent. With the reduced employment growth, the process of poverty reduction was also affected and poverty reduction decreased to 1.7 percentage points. And, in 2017, when Bangladesh's GDP growth reached its peak, the employment growth rate and poverty reduction reached their lowest. According to the report, between 2010 and 2016, Bangladesh's GDP growth rose to 6.5 percent; however, poverty reduction stood at 1.2 percentage points and employment growth declined to 1.9 percent.
According toTowfiqul Islam Khan, Research Fellow at CPD, “This data clearly shows that Bangladesh's increasing GDP is not invested in generating resources and employment in the country. The decline in employment growth rate means that wealth is being amassed unproductively and mass people are not benefitting from the increasing production.” He further argues that by accumulating the wealth, the rich will become richer and, due to increasing unemployment and under-employment,the poor will become poorer. If income inequality cannot be reduced at national, rural and urban levels, poverty reduction in Bangladesh will be more challenging in the coming years. As such, there is little point in celebrating our GDP growth until the wealth is adequately distributed among the people.
The report also highlights the government's failure to regulate commercial banks and provide adequate response during and after the floods. In 2013, nine new banks got licenses; most of these banks are making irrecoverable losses due to the excessive amount of non-performing loans. According to the report, 95 percent of bankers think that these new banks are redundant. Despite this reality, the government still gave the green signal to these banks—probably due to the fact that all of these nine banks—Midland Bank Ltd, Meghna Bank Ltd, The Farmers Bank, Union Bank Ltd, Modhumoti Bank Ltd, South Bangla Agriculture and Commerce Bank Ltd, NRB Commercial Bank Ltd, NRB Bank and NRB Global Bank Ltd—are owned by powerful political figures of the ruling party. It soon came to light that the banks were given permission without prior adequate assessment. For instance, the Farmers Bank has almost collapsed and the bank is even struggling to pay its depositors who are desperately trying to withdraw their savings from the bank.
In fact, none of these nine banks could fulfil the conditions set by the central bank. Instead, they are using their political connections to pressure the central bank into easing the conditions on issuing agricultural loans, running corporate social responsibility funds, operating branches in remote areas and enlisting in stock markets. State-owned commercial banks are also performing miserably due to the excessive amount of non-performing loans. The government has already spent BDT 15,705 crore of public money to re-capitalise state-owned commercial banks that have lost huge amounts of their capital to non-performing borrowers and due to embezzlement of public money.
The report also reviewed government interventions during and after the floods of 2017. This included the two successive floods, the flash flood in the haor area and the inundation of 32 districts by monsoon flood. The report found that the nine percent of Aman crop land that was inundated would have had a value of BDT 2,700 crore. Besides, 0.1 million and 0.63 million households were completely and partially damaged respectively, whose total cost of repairs stood at BDT 2,600 crore. However, according to the researcher, the government's flood relief activities and assistance were highly inadequate. Even several flood-affected areas remained outside the purview of government intervention. “There were inefficiencies in the planning of the government's agricultural support programmes; the logic of proportional distribution of crop input was flawed and there was no or insignificant assistance for the non-crop agricultural sector,” states the report. As a consequence, rice prices are still far beyond the reach of the poorer section of society, which may contribute to further decline in poverty reduction regardless of Bangladesh's increase in GDP.
Besides insignificant agricultural assistance, the report found that maintenance of existing infrastructure is not a priority for the concerned authorities. With banks collapsing one after another, the looming threat of new floods, dwindling food stocks and weakened infrastructure, there is no doubt that Bangladesh will face considerable pressure to keep its economy stable and running in 2018. Instead of labelling these findings and recommendations as “all rubbish”, our policy makers should either present counter-arguments or take pragmatic measures for the well-being of the nation.
The writer can be contacted at Shahnawaz.email@example.com