The underperforming economy

Maswood Alam Khan

The first half of the current fiscal year, that is a period of six months ending on December 31, 2009, has witnessed a downward economic trend in Bangladesh, as was observed by the Manila-based Asian Development Bank (ADB) in their latest Quarterly Economic Update (QEA).

Almost all the major economy-drivers like remittance, exportation of major products like readymade garments (RMG) and frozen fish and production in agriculture, industry and service sectors are expected to show growth rates which are feared to be lower this fiscal year than in the previous ones.

Lack of seriousness on the part of the government and recruitment agencies in exploring avenues in overseas job markets, notoriously slow and circuitous mechanism in routing remittance through banking channels and negative impact of global recession in countries where Bangladeshis usually go for work are the major factors responsible for the declining growth rate of remittance.

Declining growth rate of RMG is mainly due to global recession affecting the buyers, though mysterious accidents in garments factories, political intrusions into labor unions, fomenting unrest among garments workers by the outsiders and lack of empathy for garments workers on the part of the owners are also partially responsible for lesser than expected exports of RMG.

Insincerity of our entrepreneurs, lackadaisical attitude of the bankers, global recession and fastidious strictures imposed by importers on quality control decelerated exportation of frozen fish to Europe and America.

According to ADB, agriculture growth in the current fiscal is expected to be lower at 4.1 per cent than the 4.6 per cent growth in last fiscal because of the effects of weather on the summer and monsoon crops and farmers' supply response to lower farm gate prices after last year's harvesting season.

In their latest Quarterly Economic Update, ADB forecasts industry sector growth at 5.6 per cent this fiscal, whereas the growth in the same sector was 5.9 per cent in the last fiscal. Supply-side bottlenecks stemming from the country's fragile investment climate and acute shortage of power and gas have lowered the industry sector growth, according to the ADB update. Service sector growth, also affected by global recession, has been projected by the same ADB report at 5.9% in 2010, down from 6.3% in 2009.

With the impact of global recession still not over, the law and order situation in our country is fast deteriorating and the government not yet gearing up its activities with a firm view to boosting the economy, the observers fear that people in Bangladesh may have to live a tough life under incremental double-digit inflation in the coming months. This is a specter not unlikely with inflation, as shown in the update, rising steeply from 2.3 per cent year-on-year in June 2009 to 4.6 per cent in September, and further to 8.5 per cent in December 2009 -- a trend that augurs badly for people who are already frustrated with price rises of the essentials.

However, the silver linings that were glimmering in the ADB update are: still healthy 22.8 per cent rise in remittances, the lower deficit in the balance of trade, the balance of payments surplus rising to USD 2.1 billion as well as the current account surplus rising to USD 1.7 billion --all in the first half of the current fiscal year.

Though our government is confident about attaining 6.0 per cent growth, ADB, having based their assumptions on the economic trend, projected a growth rate in the current fiscal year at not more than 5.5 per cent which is lower than the growths made possible in 2007 and 2008, the two years when the country was run in a kind of autocratic style by a military-backed caretaker government. The ADB-predicted growth of 5.5 per cent, if confirmed on the 30th June of 2010, would be 0.70 per cent lower than the corresponding growth of 6.2 in 2007 and 0.30 per cent lower than that of 5.8% in 2008, the stupendous growth of 6.2 per cent in 2007, being mostly the fruition of what the democratic government preceding the autocratic government laboured for.

The decelerated growth is attributable to less investment and decline of exportation during the ongoing fiscal year. By the same token, the lesser growth under the present democratically-elected government is mostly attributable to autocratic caretaker government's excesses in respect of unnecessary police harassment on politicians and businessmen or whoever the caretaker government deemed an obstacle on the road to their goals---thereby scaring the potential investors and paving the way for capital flight away from our country.

The 'responsibility' share of the present government for the lesser investment is no less. The whole calendar year of 2009, the first year of the present government, is a witness to terrible happenings of killing, robbing, looting, politicizing, name-changing and what not, the very happenings that had their bearings on the investment potentiality. Many are afraid, in case such happenings continue unabated, these may also spark dire consequences on the future stability in the overall governance making the economy slide vertically down at a perpendicular angle.

In spite of all the glooms and dooms being prophesized by the pundits of multilateral bodies, Bangladesh, thanks to our citizens' resilience in the face of natural and manmade calamities, will continue to grow economically the way our economy has steadily grown 5.0 per cent to 6.0 per cent since 1996 despite political instability, poor infrastructure, corruption, insufficient power supplies, and slow implementation of economic reforms.

(Email: maswood@hotmail.com)