Urgency of economic and institutional reform

The warning is dire for Bangladesh. Renowned economists of the country have sounded the alarm bell ringing not for nothing. At a book launching ceremony in the city, they have emphasised the urgency of undertaking economic and institutional reforms because failure to meet the numerous fresh challenges---internal and external---can prove to be an 'existential threat'. With the dwindling or disappearing privileges of LDC status such as concessional finance, preferential trade access and aid, the country will have to navigate a rough terrain of international trade and investment regime, if not a hostile one. In fact, some of the symptoms of what is to come have already been there with the bargain over the fourth and fifth tranches of IMF loan and the fallouts of an armed conflict between India and Pakistan.

If the Covid-19 and the Ukraine war that started at a crucial time of global economic recovery first exposed the vulnerability of countries like Bangladesh to external economic and trade-related shocks, their management of internal affairs is no less responsible for the economic downturn they now suffer. Bangladesh, in particular, has faced a double whammy with the oligarchic clique of the time looting huge amounts from the country's banking channel for laundering those abroad. So what has really gone awry could happen because of policy failure and a lack of institutional development. Lutfey Siddiqi, special envoy on international affairs to the chief adviser, finds a paradoxical arrangement between the capitalist or private sector-led economy the country is pursuing and the structure based on socialistic or communist planning model. This assertion certainly demands further explanation. True, the bureaucratic red tapes at several points hinder the freedom free market economy usually allows for business but this cannot be termed a communist system of centralised planning of economic system. The bureaucratic stumbling blocks had to be maintained in the interest of commissions on big-budget development expenditure and bribe for approval of trade-related activities.

It is good to know that the interim government has processed 150,000 permits under the new National Single Window system and soon all the 19 required departments are set to be integrated together. Well, this will spare the businesspeople and entrepreneurs the hassle and delay they had to suffer and ease doing business to some extent. But there are other conditions integral to the system like the law and order, particularly the rent-seeking environment still prevailing. If the parasites cannot be eliminated, businesses will never be transparent and orderly. The example of a garment manufacturer Siddiqi cited to show the vicious practice of rent-seeking speaks volumes for the business environment here. Operating in both Bangladesh and Vietnam, the garment manufacturer pays 40 per cent more to Vietnamese workers and still the operation there is more profitable.

So, law and order has to be drastically improved to make comparable payments for Bangladeshi workers conditional to their Vietnamese counterparts. In an environment of lawlessness, mere simplifying business procedures will not convince investors to lay their money. Better it would be to start the process at home. The state-owned enterprises proving white elephants can be disbanded or privatised within a given time frame. The bottom line here is to streamline manufacturing and business along with raising efficiency and productivity to stay in competition.