No capital outflow, ‘invest at home’

Malaysian economist urges Bangladeshis

FE Report | Published: September 09, 2018 10:42:41 | Updated: September 21, 2018 11:02:28

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The issue of inequality has an international dimension as the net capital flows from South to North, with the US being the largest borrower, a leading Malaysian economist has said.

The world's largest economy borrows half the global net capital flow.

Inequalities have increased between 20 poorest and 20 richest countries, with Bangladesh being in the former group, he said on Saturday.

He called for allocating more subsidies for the poor and reconsidering subsidies in fossil fuel meant for the rich.

Subsidies for the poor will ultimately turn into production as was evident in other countries, he argued.

"There's an international dimension of inequality that many people tend to ignore," said Professor Jomo Kwame Sundaram, former distinguished member of the Council of Eminent Persons in Malaysia in the UN department of Economic and Social Affairs.

Two-thirds of the inequalities are caused by international inequalities, he said, adding big increase in inequality took place two centuries ago.

He made the remarks while delivering the CPD Anniversary Lecture 2018 on "Assessing the Challenges of SDG Implementation: Food, Energy and Inequality" at a hotel in Dhaka.

The Centre for Policy Dialogue (CPD) organised the lecture marking its 25th anniversary.

About the outflow of capital, he said with most of its secret bank accounts, Singapore has surpassed Switzerland, which has become a problem.

Referring to the same phenomenon from Bangladesh to other countries, he said Bangladeshi people with money need to be encouraged to invest in the country's economy, especially in the areas of food and energy.

He laid emphasis on reducing emissions in rich countries and slow reductions in developing countries, investment led approach to address climate change and development goals, new mechanisms for developing countries and transfer of technologies.

Citing the example of a programme in Sub Saharan Africa, he said when people have their basic needs covered, any additional subsidy income goes into production.

The views that subsidising the poor will go all into consumption is wrong, he added.

Referring to the data of the United Nations Food and Agriculture Organisation (FAO) on the rising hunger in Bangladesh, he said in the US, "a bit more hunger" still exists, despite a huge increase in food supply.

The FAO indicator did not consider the increased food supply or availability alone; there are other factors like affordability.

Referring to Malaysia, Mr Sundaram said the Southeast Asian nation exports photovoltaic (PV) to the USA twice as much as China.

He wondered why Bangladesh could not export photovoltaic.

Acknowledging the fact that renewable energy is much more expensive, he said the cost of photovoltaic has come down significantly, which will go down further.

Public investment should crowd in private investment to sustain new development pathway, Mr Sundaram said adding there is a need for RnD and more flexible intellectual property rights.

He said the health ministry cannot alone tackle the malnutrition problem and the government should be more proactive in this regard, especially agriculture ministry in making the foods safe.

Noting there has been a complete restructuring of global competitiveness, CPD chairman Professor Rehman Sobhan said the capital of global surpluses has relocated to Asia.

He noted the European response to the global restructuring has been protective.

Led by China and India, the strength of Asian economies is substantial, said Mr Sobhan.

The surpluses of the world, which are underwriting the deficits of the United States, have emerged as a major resource, he added.

Mr Sobhan called for new statesmanship in Asia in order to respond to these changed circumstances, who will invoke these changed realities and reach out to other leaders of Asia.

The statesmen will try to recreate a new world order where the nations will no longer depend on the exclusive dynamics of power bases but can dictate their own agenda, he argued.


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