Bangladesh has all the potential to move forward to achieve the goal of turning into a developed country if entrepreneurial talents of its population can be utilised properly. But there is no shortcut; the country needs right governance, right functioning democracy and egalitarian policies.
This is how Professor Rehman Sobhan, chairman of the Centre for Policy Dialogue (CPD) builds his hopes on Bangladesh's future and lists the issues to be addressed as he speaks to The Business Standard Editor Inam Ahmed.
Asked where he expects Bangladesh to be 50 years from today, the senior economist, who was on the team of planners that had crafted the post-independence development plan of the war-ravaged country, highlighted the entrepreneurial skills of farmers, women and remittance earners that helped the country progress so far. In the exclusive interview given on a virtual platform on 6 January, he also elaborated on problems that hold back the people's potential to progress further.
"I believe that you have got one of the most enterprising populations on earth, almost like the Chinese. Everyone in Bangladesh is an entrepreneur," he said as he discovered 'God-given' talents and dedication among farmers who managed a four-fold increase in crop, women who were the first in generations to move to Dhaka slums and work, or youths who sold family property and left for Libya to reach Europe by boat.
"So, who is not an entrepreneur here? Even thieves and crooks have become entrepreneurs. The way thefts are taking place," he said in a jesting tone, referring to the case of a chauffeur of DG Health office amassing Tk20 crore.
"If you have proper governance, everything is done honestly, if you are incentivising people and utilising their entrepreneurial skills, then getting to the developed country status should not be a problem at all," Prof Sobhan said.
"But you need an accountable system, an accountable democracy, you have to have competitive elections," he said, stating that an accountable system cannot be expected from an electoral process in which contestants spend money and use physical force to prevail.
"Then they will be accountable to their money and their force"—a state which, he said, is unacceptable for a society that aspires to be a developed one.
Given the God-given talents of entrepreneurship and dedication of people, Bangladesh can achieve the highest level and move well ahead of Vietnam if right governance, right functioning democratic process and construction of inclusive egalitarian policies are ensured in the vision of Bangabandhu's dream since his centenary is being celebrated, Prof Sobhan believed.
"But we are far removed from Bangabandhu's ideal of a just, exploitation-free society," he regretted.
He elaborated on uneven distributions of gains among farmers and workers, whose hard labour have contributed hugely to the reduction of poverty, and how flawed allocation of public finance and institutional inefficiencies lead to widening of social disparities.
Prof Sobhan elaborated on bank loan defaults by an "elite class of businessmen" and a culture of recapitalisation of state-owned banks. He also pointed to the opportunity cost in mega projects and rising subsidies for power generation.
When mega project costs escalate four or five times, it indicates serious deficiencies in the project planning exercise and rental element, the senior economist pointed out, asking for a careful investigation to track down who are the beneficiaries of this rent extraction.
"These are not modest escalations of 10% or 20% but multiples of four or five…this implies that those who are responsible for planning and designing the project have little competence in assuming such responsibilities," he said, suggesting that the opportunity cost, if saved, could be invested in health, education and social protection programmes.
Loan default has become a model of business
Referring to the persistent problem of loan default, the CPD chairman says a good part of this commercial bank lending is being defaulted by a class of mostly elite borrowers. "A default culture has now become institutionalised as a model for doing business in Bangladesh."
Unrealised loans have become a form of unrequited financial transfer to the defaulters via our financial sector extracted from the savings of millions of small depositors—a system, Prof Sobhan views, that is not only immoral and unjust but highly inefficient and undermines the competitive process in the financial sector.
He recalled a proposal he had received when he was a member of the caretaker government in 1991 about recapitalisation of public banks. "And this has been going on year after year. Just add all this up and this has come from the budget of the taxpayers and the people who are paying consumer taxes and that is transferred to the defaulters, which is essentially what recapitalisation means," he said, how built-in inefficiencies in financial sector penalises an honest businessman who regularly repays his loans to reward a person who first gets his debt rescheduled, then defaults and then gets written-off. Thus a certain absence of competitiveness has been created in the capitalist system where genuine businessmen are made to do their business in a class of crony capitalists.
Why is this happening?
He proposed to check how many of the people sitting in the parliament today are defaulters. He recalled his pleas repeatedly made to former finance ministers Saifur Rahman, SAMS Kibria and AMA Muhith for not continuing the provision of allowing defaulters to contest in elections.
On the eve of each election, defaulters are allowed to take part after making a 2% down payment and agreeing to make due payment in the given time, he noted.
"But this has not happened, so over the years you have got a whole group of defaulters sitting in the parliament," he said, asking why their seats would not be vacated automatically if they fail to repay loans after the election. He also regretted that no full-scale debate took place in the parliament over the default loan crisis in the last 30 years or so.
Small depositors subsidising elite businessmen
Prof Sobhan found faults with the non-performing loan figures and believed the actual "devil" would be much bigger if past cases of rescheduling, loan waivers and write-offs are taken into account. "So essentially what is happening is that the borrowed funds and savings of millions of small depositors are to actually subsidise the business investments and operations of a small number of elite businessmen. So this has become a huge resource transfer," he pointed out.
"You cannot become a developed country with such a weak financial system…. essentially you want to have a functioning capitalist system and it has to be a competitive market-driven system in which people will compete on a level-playing field."
Pointing to the culture of "neither repaying loan, nor paying taxes," he said Bangladesh has got one of the lowest tax recovery rates in the developing world-- below 10%.
"These are the challenges which I am saying need to be addressed as we move toward 2041 goals and if we are serious about competing with Vietnam and other countries."
Citing some other areas of unjust governance that accentuate social disparities, he stressed that the government needs to redesign institutions and allocate resources to reduce inequality and promote inclusive development.
[The full interview will appear tomorrow in the first section of our 2nd anniversary supplement.]