The growth and governance
Md. Joynal Abdin
The Independent on December 19, 2009
Globalisation trend pushes the concept of free market economy into liberalisation of trade and economy. But after the global financial crisis in the US economy, now economists are trying to rethink with the same. They are talking about the role of government to make and continue an efficient market. Because before every financial crisis (whether it is 1930s great depression or GFC-2008) all the market mechanisms were there but market did not perform effectively.
For example, the US economy was rising during last four and above decades without any downturn, even it was rising fast during the economic depression in the east during 1980s. They have the largest consumer market of the world, having sophisticated technologies, world’s biggest investors groups, efficient managers of the world. But why US economy fell into the greatest financial crisis in recent years? Because market mechanisms were not performing well, and there was a lack of regulatory check and balance activities. Today economists are rethinking that market should not be over freer, there should have a check and balance mechanism to ensure planned growth and this mechanism would be operated by the government. The state needs to intervene to sustain growth and development. In particular market failures would prevent the acquisition of advanced technologies.
In case of Bangladesh, our growth is running based on a single sector i.e. RMG. It is not a good sign that our economy is depending upon one sector to grow. Today or tomorrow a third power would enter into the RMG market and defeat us. Are we ready to tackle that disaster? No, off course not. After three decades of RMG’s rise, no other sector is coming forward. Without diversification of export basket, it would be tougher to sustain our current growth. There are many examples in the world economic history that, economies that rose for three or four decades with a significant rate but after saturation of that particular industry, those economies fell, never to comeback again.
Why a second sector is not rising in Bangladesh? It is simply because lack of government support and proper planning to grow a second one.
The government should take urgent necessary action to push forward a second sector for sustainable growth in Bangladesh. We have many other potential sectors like, leather and leather goods, pharmaceuticals, light engineering, handicraft, and recent ship-building industry. One or two sectors can be selected to earn foreign currency equal of the RMG within next five years, and it is possible.
To do so the government has to ensure efficient role of some trade related organisations along with Board of Investment, Bangladesh Bank, Joint Stock Office, NBR and others. The government has to ensure zero tolerance to corruption in these institutions. To root out corruption, Bangladesh must ensure that the income source of the political parties is legal. Currently political parties are running upon the funding of its members and some allied businessmen. As a result, the donors get special non-budget income facility whenever they are in power. So managing a legal source of income for the political parties would be the first step towards rooting out corruption. Bangladesh is offering too many special facilities to attract FDI but the rate of foreign investment is not increasing.
An one-stop business support centre is the demand of time to avoid harassment of investors to increase flow of FDI in Bangladesh. The current government came into power with a manifesto of reform, so for the betterment of Bangladesh economy some business reforms are mandatory like –
a. Stable property rights (specially in case of ownership of land): Because, to establish an integrated industrial state we are in lack of land. Today or tomorrow power, gas and infrastructure problem would be overcome, but we have a limited amount of land which is not expandable. So maximum utilisation of land is required. At the same time we have the most complicated cases regarding land ownership. So ensuring a stable property right and enforcement of IPR is important to ensure foreign investment in Bangladesh.
b. Rule of law: Without ensuring full security of entrepreneurs and their wealth it is not possible to expect higher rate in investment. Once it was said that civil servants are corrupted due to their low salary, but now salaries have increased through the announcement of recent pay scale up to a considerable level. In absence of an accountability mechanism to monitor their activities, the rule of law cannot be ensured.
c. Anti-corruption drive: You can hardly find anybody who likes corruption, but why corruption is not going down? Post 1/11 anti-corruption drives helped to reduce corruption in Bangladesh only for a limited period. Thanks to the efforts, we are now not in the list of top 10 corrupted nations. But with the political government taking over power, corruption scenario is changing. The post 1/11 anti-corruption drive was criticised due to their one-sided mission towards politicians and businessmen rather than bureaucrats. So anti-corruption drives need to be operated impartially irrespective of politicians, bureaucrats, etc.
d. Government accountability: Political parties come to power with so many good promises but after being elected they begin fulfilling their party agendas. As a result development is hampered. Development agendas should get priority rather than political gain and rivalry. An unaccountable government leads the nation towards corruption, which results in a stagnated economy.
e. Stable political situation: There is a measurable absence of tolerance and compromising attitude among our ruling elite. Without tolerance to opposition, political stability can never be achieved. This is very important for economic development.
In fine we would like to be optimistic that our government and political parties would try to build up two more new exportable sectors for earning foreign currency for sustainable development of Bangladesh. Good governance is a prerequisite for sustainable development and government planning and assistance is required to build up new sectors. Our ship building industry, along with leather and leather goods may be given priority and assistance so that these sectors can be flourished like RMG and save our economy from the danger of RMG saturation and ensure suitable growth of our economy.