'Tarique’s comeback may leave positive impact on economy'

Tarique Rahman's return from wildness after 17 years draws intense political attention, but economists and business leaders say the more consequential test lies in its implications for Bangladesh's disheveled political economy.

The economic milieu, they note, has been strained by persistently high inflation, weak private investment, a fragile banking system and a subdued capital market.

Against this backdrop, the acting BNP chairman's homecoming after 17 years in exile in London is being viewed by markets less as a political event and more as a signal of whether the country is moving towards greater political unity and a smoother transition of power following a credible general election scheduled for February next.

"To my mind, the return of Mr Tarique Rahman is overall positive for the political economy and political unity," says Dr Zahid Hussain, a former lead economist at the World Bank.

"If such political developments reduce uncertainty and improve public confidence in a peaceful political transition, the economy will definitely benefit."

Dr Hussain notes the large public reception and conciliatory gestures - including symbolic acts at the airport and outreach to chief adviser Dr Muhammad Yunus -- as positive signals going out. "This week is better than last week, when uncertainty over the economy was particularly high," he remarks.

Dr M Masrur Reaz, chairman and chief executive of Policy Exchange Bangladesh, thinks Rahman's return was critical for restoring confidence and reviving stalled reforms.

"Over the past 15 months, reform momentum has been slow, the financial sector has remained weak and governance challenges have persisted on the economic front," he told The Financial Express on Thursday evening.

"I think this return is a positive signal for both local and foreign economic players," Dr Masrur adds, noting that investors look for long-term policy predictability and credible leadership.

He mentions that uncertainty has discouraged entrepreneurs, particularly small and midsize enterprises, and argues that stronger political leadership could help fill that confidence gap.

Masrur feels Bangladesh needs bold reforms in trade, investment and climate policy. And stabilising law and order would be essential for restoring investor confidence.

Private investment, a key driver of growth, has remained subdued for many years as businesses grapple with regulatory unpredictability, uneven policy enforcement and import restriction was slapped over depleting foreign-exchange reserves.

In the meantime, business leaders say long-term investment decisions had increasingly been delayed as there was lack of governance and everything was connected with politics then.

"A stable and predictable political environment is essential for investment," says Abul Kasem Khan, chairman of Business Initiative Leading Development (BUILD), a public-private dialogue platform for fostering economic reforms for private- sector growth.

Mr. Khan says much of the uncertainty has eased following Mr Rahman's return and cites his maiden speech in the city's 300-Foot Road area, where he spoke of having a "plan" for the country.

"We welcome such a plan," says the businessperson.

"He should engage with the plan with both economic and non-economic stakeholders to discuss it ahead of the February election.

"What businesses want is clarity - clarity on policy, taxation and enforcement. Without that, capital will remain cautious," he notes.

Financial markets are also watching closely.

"The capital market is highly sensitive to sentiment," says Saiful Islam, president of Dhaka Brokers Association.

"If investors believe political tensions are easing, that alone can improve liquidity and risk appetite."

He mentions that earlier confusion over Rahman's return and the timing of the election had weighed on the market.

"We now believe elections will be held in February and that an elected government will take stronger steps to restore the financial sector," he told the FE writer. He hopes after the elections market vibrancy may improve.

However, economists caution that expectations alone will not be enough.

Bangladesh faces deep structural challenges, including weak revenue mobilisation, rising subsidy costs and a banking system burdened by large volumes of non-performing loans.

"Political change can open a window, but economic reform must walk through it," opines an economist at a local policy research institute.

"Without tackling banking discipline, fiscal weakness, investor confidence will remain fragile."

jasimharoon@yahoo.com