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Economic growth, mismanagement, wrong policies

Monwarul Islam | Published: 22:34, Dec 15,2019

 
 

SINCE the first budget of Tk 786 crore placed by the then finance minister of the country Tajuddin Ahmed in 1972, Bangladesh’s economy has swelled in its volume and scope. The 48th national budget for the fiscal year of 2019–20 of the country was of Tk 523,190 crore. The gross domestic product of the country has increased from about $7 billion in 1972 to about $288 billion in 2018. The country has been experiencing a high rate of GDP growth of about 7 per cent for the last few years indicating a healthy and active economy. The swollen figures surely are signs of economic growth and development that have been made possible by the toiling millions. 

The question, however, remains to be asked and answered whether the economic growth has benefitted all, whether it has ensured better lives, living standards and securities to all, or whether it has just been on papers for the majority. To begin with what economists repeatedly say that GDP or hefty annual budget reflects no one’s reality, and, in fact, these figures are often fairy dust that covers the hard and unpalatable reality that people live in.

Mismanagements, corruption and wrong policies more often than not stand in the way of the economic growth and its expected benefits to all. The clichéd saying that the benefits of economic development often go to a chosen few establishing a political, business and bureaucratic oligarchy which eventually grips the country and its economy to the detriment of the relegated majority is powerfully true in Bangladesh.

The costs of mismanagement, misdemeanours and wrong policies in the economic sector are heavy and the brunt is, as always, suffered by the side-lined majority. A glance into a number of recent studies and indexes conducted and published by local and foreign institutes or platforms can shed light on how the country’s economic growth is being rendered lifeless and meaningless and why and how the majority is left outside the boons of the growth, while shouldering the banes.

 

Marginalisation

BEING marginalised is a painful fate that no one or no community deserves. But the sad truth is that there are people and communities that, for one reason or another, are denied involvement in mainstream economic, political, cultural and social activities, and thereby pushed to the margins to live a life filled with the by-products of being marginalised — stress, anxiety, anger or depression. In Bangladesh, which we claim to be a country of harmony, there is a large number that live on the periphery and is denied access into the mainstream.

There are, different studies show, at least 30 million who are marginalised and discriminated against and are left out of the development process, economic and otherwise, in the country. These 30 million, that is, one in every five, are being marginalised due to economic status, working pattern, sex, disability, ethnicity and geographic location. Living with limited access to even the basic needs such as health and education, these people are virtually left outside the radar of development and growth that the country experiences. Most of these marginalised people are either poor or vulnerable to poverty as their consumptions are close to, and at times below, the poverty threshold marker of $1.9 a day, itself a disputable marker as it was set using 2011 prices which, no doubt, have increased significantly.

The macro narrative of development, which the government and its different agencies so often celebrate through development fairs every now and then, never alludes to these marginalised people, who are simultaneously the poorest and the most deprived section leading a discriminatory life and struggling for employment and inclusion into the development process.

While the constitution of the country assures that there would be no discrimination against people on grounds of gender, ethnicity, religion and profession and that fundamental human rights and freedom, equality and justice — political, economic and social — would be ensured for all citizen, the large chunk of marginalised people live a life of exclusion of varying degrees.

 

Lopsided development

WHATEVER development the country has seen is, considering the figure of the marginalised people, a lopsided development as it has failed to reach the benefits to all. A recent World Bank report, ‘Bangladesh Poverty Assessment’, emphasised the fact saying that Bangladesh’s higher economic growth in the last decade did not lead to faster poverty reduction. The report also mentioned that half of the total population are vulnerable to poverty in the country and that the country has seen a sharp divide in its poverty reduction mechanism as the number of poor increased in the western region. Uneven geographical distribution of investments, as the report suggests, has eventually triggered re-emergence of the historical gap of poverty between the country’s east and the west since 2010.

An earlier Oxfam global index on inequality reduction also shows that Bangladesh is performing poorly in reducing the gap between the rich and the poor. The socio-economic benefit of the government’s much celebrated economic model thus appears to have left half of the population behind because of a flawed economic policy that has failed to ensure an equitable distribution of wealth. The gulf between the rich and the poor, the urban and the rural area and the west and the east has only widened over the years. The high economic growth rate that the government always speaks of has failed to reach the poor and middle-income people and has mostly endowed the rich. The Gini coefficient of income inequality has remained static at an all-time high at 0.482 since 2016, up from its previous mark of 0.458 in 2010. The Gini coefficient is measured on a scale of 0 to 1; the closer it is to 1 the higher the inequality is in the society.

The Bangladesh Bureau of Statistics report on Household Income and Expenditure Survey 2016 shows that the gap between the poorest 5 per cent and the richest 5 per cent has but widened, while the World Ultra Wealth Report 2018 shows the number of ultra-high net-worth individuals in Bangladesh increased by 17.3 per cent, leaving Bangladesh at the top of the countries that saw quickest growth in ultra-wealthy people. The Global Hunger Index launched on December 9 reveals that 14.7 per cent people in Bangladesh are undernourished due to lack of adequate supply of food. South Asian countries Sri Lanka, Myanmar and Nepal have done better than Bangladesh in reducing hunger, according to the index published jointly by Ireland-based humanitarian agency Concern Worldwide and Germany-based non-government aid agency Welthungerhilfe. All these studies and statistics clearly bear the sign of a lopsided development which have left half of the population vulnerable to poverty.

 

Mismanagement and wrong policies

MISMANAGEMENT and wrong, or short-sighted, economic and development policies and programmes are leaving the country’s economy in, to say the very least, a very bad shape. From fund management to project implementation, from procurement to market monitoring, everywhere there is mismanagement and/or wrong policy. As a result, the commoners are pushed to embrace struggling lives where they cannot even afford the basic necessities.

Public money is squandered in one wrong way or another corrupt way. Issues of irrationally high prices in public procurement, for example, do not cease to make the headlines. To mention, in an incident reported in May, the authorities building blocks of flats under the Rooppur Nuclear Power Plant Project bought pillows for Tk 5,957 each and carried it up to upper floors for Tk 760 each; an electric stove was bought for Tk 7,747 and carried up for Tk 6,650; and an electric kettle was bought for Tk 5,313 and carried up for Tk 2,945.

Similar large-scale corruption, though a powerful minister termed these as petty theft, in public procurement at different government and public institutes made the headlines several times only in the last few months suggesting the rampant waste of public money.

Another major area of mismanagement that takes a heavy toll on the country’s economy is the chronic practice of delayed implementation of projects. Failure in completing development projects — big or small — on time and within budget has for long been impacting the country’s economy. The well-known and universally accepted development motto — faster project implementation is key to effective and efficient development — appears to be lost in Bangladesh as the country routinely fails to implement development projects on time and within budget. Even the fast-track projects, most of which are funded, partly at least, through external debt are not completed on time and within the initial budget.

Asian Development Bank officials rightly pointed out at a recent programme titled ‘Faster Project Implementation Week 2019’ that Bangladesh lags behind in completing most projects on time and within budget causing cost overruns and lowering the expected benefits from the projects. The implementation rates of the 10 fast-track projects including the Padma Multipurpose Bridge, Padma bridge rail-link and Dhaka Mass Rapid Transport are poor and sluggish, though the government put special focus on them by way of monitoring by a special committee of the prime minister’s office.

To take the Padma Multipurpose Bridge as a case in point, the deadline for the completion of the bridge construction has been extended for the fourth time to December 2019 while the project cost has been revised upward to Tk 39,258.13 crore, nearly four times higher than its initial cost of Tk 10,161 crore. Yet, it is highly likely that the revised deadline will not be met as almost 30 per cent of the construction work is yet to be done.

Delayed implementation, experts say, is the main reason behind the soaring costs of construction in the country. The World Bank revealed in 2017 that the road construction cost in Bangladesh is higher than any other country in the world, though the quality remains poor. With most of the development projects funded, fully or partially, through external credit — that too through suppliers’ credit and short-term borrowings at high interest rates — the country’s economy has for long been suffering from delay in implementation.

Another case in point of mismanagement and wrong policy having impact on the economy is the power sector. In the last 10 years Bangladesh saw the establishment of a power plant almost every month, mostly private, with the country’s capacity to generate electricity becoming far greater than the demand by now. A total of 120 power plants, at least 80 of them private, set up since 2009,  have raised the country’s power generation capacity to 17,840MW. Besides, the country imports 1,160MW from India.

As a result, many power plants sit idle because of lower demand. Although a comprehensive account of the power plants sitting idle is not available, the state-owned Power Development Board spends roughly 40 per cent of its expenditure in the sector as capacity payment. In the 2018–19 fiscal year, over Tk 8,000 crore was spent as capacity payment, according to power board statistics. The deficit of about Tk 8,000 crore that the Power Development Board incurred in that financial year would not have been so had it not paid the same amount as capacity payment to idle power plants.

Even when the power generation capacity far outweighs the transmission and distribution capacity, more private and public plants are under way; some more are in the bidding and contract process; and yet some more are in planning stages adding to the irony. Such wrong power policy and flawed measures will eventually cripple the power sector in the coming days and the brunt of that will fall on the consumers.

Another issue that deserves attention is the seeking of economic growth and development at the expense of environment. Disregard for environment is all but glaringly visible in all sectors of development in Bangladesh. Unplanned and imbalanced development policies and consequent actions relegate the environment issue to secondary considerations, which, needless to say, will cost the country and its people dearly in the long run.

Bangladesh, sadly, is not known for pursuing a development policy that gives priority to environment issues. The country, rather, has allowed many government and private industrialisation projects at the cost of environment. Drunk with the dream of exuberant and continuous economic development and rising gross domestic product, the government seems to have, very unwisely, deprioritised environmental issues. Case in point is the recent issuing of clearance to five air-polluting cement factories within six kilometres of the Sunderbans, the world’s largest contiguous stretch of mangrove forest, whose biodiversity is already at risk from the on-going Rampal Power Plant. Moreover, unplanned industrialisation in major cities, especially in Dhaka and Chattogram, has put many rivers and adjacent environment in jeopardy. The country has also been very poor in ensuring safe water, air and conservation of forests.

 

Bribery and corruption

THE country has been identified as the most prone South Asian country to bribery in the Trace Bribery Risk Matrix 2019, released in the second week of November by the US-based Trace International. The Matrix, which evaluated 200 countries with a combined and weighted country risk score of four domains — business interactions with government; anti-bribery deterrence and enforcement; government and civil service transparency; and capacity for civil society oversight — ranks Bangladesh 178th out of the 200 countries. Other South Asian countries, even the war-torn Afghanistan, are in better positions — India is ranked 78th, Pakistan 153rd, Myanmar 157th and Afghanistan 168th. Similar disconcerting and bleak picture of bribery and corruption in the country is evident in the Berlin-based Transparency International report, which ranked Bangladesh the 13th most corrupt country among 180 surveyed countries in 2018.

Bribery and corruption have been so institutionalised in all service sectors of the country that there has come to be a common perception that bribery is speed-money that brings speed to work. According to a 2018 survey report by the Transparency International, Bangladesh, an estimated Tk 10,689 crore was paid in bribe in 2017, which was 3.4 per cent of the national budget that year.

Studies show that at least 68 per cent of the rural and 65 per cent of the urban people experience bribery while seeking legitimate services from law enforcement agencies, road transport authorities, courts, land records and settlement offices, educational institutions, hospitals and other service sectors. Such widespread bribery culture surely gnaws at people’s legitimate rights to services for which they pay taxes and it has highly adverse impact on the economy and development.

 

Banking sector and default loans

ANOTHER indication of the sorry state of the country’s economy is the soaring figure of default loans which suggests a badly-functional banking sector, to say the least. The amount of defaulted loans keep growing although the authorities assured time and again that there would be no further increase in default loan. Recent media reports reveal that the amount of loans in default has swelled to Tk 1,16,288 crore in September from Tk 1,12,425 crore in June, excluding Tk 53,258 crore which has been written off and Tk 80,000 crore, the recovery of which has been entangled in legal process.

In the last few months, after the government announced in January an easy loan restructuring policy, there has been a noticeable increase in the amount of defaulted loan. Economists and bankers have rightly attributed the situation to the politically motivated move to reschedule the repayments in easy terms that instigated the borrowers, even individuals and entities with good repayment record, to refrain from repaying instalments to avail the new opportunity. Rescheduling defaulted loans for 10 year with one year’s grace period on two per cent down payment, appears only to have intensified the default loan crisis pushing the banking sector to the precipice. 

Leading international credit rating agency Moody’s Investors Service made a worrying projection in its report released on November 29 that the asset quality of banks in Bangladesh will deteriorate further in coming days unless poor governance and loan recovery status improve. The report also pointed out that persistent weakness in asset quality — a result of poor corporate governance, as well as weak laws and regulations — drove its ‘negative outlook for the Bangladesh banking system’.

Moreover, a sharp rise in the government’s borrowing from the banking system and sluggish business activities in the country push the banking sector to further woes. The government, economists and bankers say, has been sucking bank funds and thus squeezing the scope for availing funds from the banks by the businesses.

In the first four and a half months of the current fiscal year, the government borrowed Tk 43,411 crore from the banking system. The government’s borrowing, experts fear, could reach up to Tk 1.2 lakh crore in the 2020 financial year, whereas its total borrowing from the banking sector in the last 48 year since independence has been below Tk 1 lakh crore.

The overall performance of the banking sector in the country is, to put it mildly, dismal. According to the recent Global Competitiveness Report 2019, published by the World Economic Forum, Bangladesh’s ranking in soundness of banks is the lowest among the South Asian countries.

The report ranked Bangladesh 130th out of 141 countries in soundness of banks as the banking sector in Bangladesh is characterised by, the report says, weak monitoring, growing default loans, lack of good governance, lack of accountability and political influences in disbursing loans.

 

Capital flight

HIGH rate of capital flight is another crippling factor in the country’s economy. Despite positive assurances from the authorities, capital flight could not be stopped. According to the latest report of the United Nations Conference on Trade and Development, Bangladesh’s exposure to illicit financial outflows is very high among the least developed countries as the rate of such outflows was equivalent to 36 per cent of the country’s tax revenue and 3 per cent of gross domestic product in 2015.

Washington-based Global Financial Integrity’s report ‘Illicit Financial Flows to and from 148 Developing Countries: 2006–2015’ estimates that about $81.74 billion, or about Tk 6,93,490 crore, was siphoned off the country in 2005–2015.

Unless financial misgovernance and corruption are checked, capital flight would continue to bleed the national economy for sure.

 

Conclusion

SINCE the independence the country’s economy has undergone a roller coaster ride with many achievements and many more disappointments. There has surely been remarkable growth and there have also been crippling anomalies in the sector.

In case of any economic recession or depression — signs of which are believed by economists to be evidently present in the global economy and all indicators, except remittance, in the national economy are showing downward trends — Bangladesh economy, with so many anomalies, would undoubtedly suffer a serious blow that could dismantle the presumptuous and smug rhetoric of development and growth. One thing is for sure that piecemeal or too-little-too-late measures will not save the economy.

At the same time, if benefits of economic growth do not reach all, the growth will remain to be a source of injustice for the toiling masses on whose sweat the growth is made possible.

 

Monwarul Islam is an editorial assistant at New Age.

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