Economy: Turning around is not easy

Abu Ahmed | Published: September 12, 2018 21:44:21

Turning any economy from a position of extreme poverty to that of a growing economy is not easy, especially if that economy is a small one and remains isolated from the main stream economies of the world. Some small economies did good by remaining tied to the bigger economies both economically and strategically. The sources of capital for the poor and small economies are very limited. From within, they cannot collect that much of capital for investment, and from beyond, they receive less than the required capital, and even if they do, those are often subject to so many conditions. Not a single small economy grew on its own; for attaining growth either it needed favour in trade from the bigger economies or it was pumped with cheap capital by the bigger economies on strategic considerations. Bangladesh did not get any especial favour from any big economy. Whatever trade benefits this economy received like the GSP from advanced economies like the European Union, Japan etc were also available to other least developed countries.

Small and poor economies do not remain stable. Capital flight takes place from these economies on a regular basis to the stable advanced economies. Although Bangladesh did not have any especial favour from big economies on strategic grounds or otherwise, the social order it maintained helped it to graduate to what is known as the lower level middle income developing economy. That achievement was possible because of Bangladesh's continuous growth beyond 6 per cent per annum for around a decade. But still a very high percentage of its population live in poverty, and more than 15 per cent of them live in the extreme poverty.

It is not true that Bangladesh was able to offer all hopes and no despair to its growing middle class who constitute now roughly 20 per cent of its people. Still, the upper middle class is hesitant to take a decisive stake in the Bangladesh economy. Many of the people belonging to this class are taking their capital away from Bangladesh to other countries. Taking capital from Bangladesh is not easy, because capital transfer, though free for foreign investors, is conditional, and in some cases, very hard for the local people. The local rich people are thus resorting to illicit means to transfer their income abroad and although the government is sometimes seen eager to arrest the practice, no concrete action could yet be taken to stop illicit capital transfer.

One kind of social conflict exists beneath the surface which the upper middle class feel but they do not talk about it. They feel insecurity with their money. Many middle and upper-middle class people are sending their wards abroad simply because of such a feeling of insecurity.

Bangladesh as a country is over populated, one of the most density populated countries in the world. The population size is growing which is throwing the social fabrics into peril. Many people are afraid of thinking what will happen to Bangladesh due to the growing size of its population, say after a period of 50 years from now! Shall we have enough land for cultivation, will our cities be able to absorb the large number of people rushing to urban areas, will the social order be totally broken down! All these questions are haunting many minds. The only option this writer sees is that, for a better management of Bangladesh and for keeping its people hopeful about the future, the country has to achieve a continuous growth rate beyond 7 per cent. For that to happen, the economy needs huge investment both from within and without.

To assure our middle class that the country is safe and risks in business ventures are worth taking, we are to open all options of investments before them, including that of the stock market, commodity market and gold market. Although the option of stock market investment is there, two other investment options-- the one in commodity and the other in gold market-- are not there.

We are forcing our middle class to buy land from the poorer sections of the society. Buying land by the middle class in ultimate consideration is harmful for the economy. But policy support and opening up of the other options of investment will be needed to canalise middle class's investment to the more productive sectors. Also, Bangladesh needs to offer its people opportunity to sell their products abroad at competitive prices, which will only be possible if the economy could be tied to other bigger economies through FTAs and similar trading partnerships.

Abu Ahmed is Professor of Economics, University of Dhaka. abuahmedecon@yahoo.com


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