Influentials thwart Bangladesh's reform attempts: Economists
Terming Bangladesh’s power purchase agreement with the Adani Group as “strange”, Professor Rehman Sobhan urged further review of the deal
Reform initiatives are hindered in Bangladesh due to undue influences of the powerful quarters, said the country's top economists on Saturday.
They also expressed their doubt whether the government would be able to implement a set of reforms tagged by the International Monetary Fund (IMF) with its $4.7 billion loan programme and questioned the country's quality of growth
"The government and people are unclear about the objective of reforms," Selim Raihan, executive director of South Asian Network on Economic Modeling (Sanem) said at the 6th economic conference of the organisation at the Brac Centre Inn in Dhaka yesterday.
The ongoing challenges of Bangladesh came from structural weakness, decade-long ignorance and lack of interest in reforms, he said as he presented a paper in the annual conference.
"We have actors with high interest in reforms but they have little influence while there are some actors who have high influence with little interest in reforms," he said.
Hossain Zillur Rahman, chairman of the Brac and PPRC, echoed the same, saying, "Problem in Bangladesh is that people with high influence also have high personal interest. That is why they do not have any interest in reforms."
He said Bangladesh has had a lot of structural problems for many years and they spent many times discussing those. But the policymakers expressed little interest to solve those problems.
Zahid Hussain, former lead economist of the World Bank, Dhaka office, said, "The World Bank proposed gender reforms four years ago to increase female labour participation. The cabinet approved the child day care centre act in 2017 as a part of that reform but the government forgot about the implementation of the act. But the government amended the energy regulatory commission act rapidly even through presidential order to meet its immediate demand."
Prominent economist Dr Wahiduddin Mahmud expressed doubt about the implementation of reform initiatives proposed by the IMF with its $4.7 billion loan.
He said that the reforms following the condition of the IMF would be difficult without proper political commitment and action of the government.
Joining another session at the two day-conference, he said it is very difficult to reduce (Non-performing Loan) NPL in the banking sector and it is the same for enhancing tax-GDP ratio.
"Will the bad debt be reduced by signing the paper? It is a purely political matter. The IMF bureaucracy is happy by giving conditions to reduce bad debts, we are also happy," he said, adding that both parties know that achieving the target is impossible.
Economist Professor Rehman Sobhan said, "Whatever policies you may put on the table, they have to be implemented. How effectively they are implemented is profoundly related to the nature of governance, the nature of your institutions and above all, the nature of the democratic process, which is integral to the processes of accountability and transparency, the underlying pillars of good governance."
Terming Bangladesh's power purchase agreement with the Adani Group as "strange", Professor Rehman Sobhan urged further review of the deal.
"The government did not negotiate the issue very smartly, despite the country vying to become "Smart Bangladesh", he said.
"As far as I remember, Adani was supposed to build a power plant in Bangladesh. And the coal for that power plant was supposed to come from India. Industrial groups in India later invested in coal mines in Australia - which turned bad investment. Now the coal from those mines will be brought to India and Bangladesh has to pay the price of carrying coal lifted from Australian mines. It's a weird deal. The added cost of Adani's electricity imports is due to its source of coal," he elaborated, stressing that the deal should be renegotiated.
Professor Mustafizur Rahman, a distinguished fellow of the CPD, said at the event that the problems regarding lower tax collection and higher NPL have been identified for a long time. But such challenges remained due to negligence and the absence of proper reform initiatives.
He said the amount of NPL was around TK22,000 crore when the Awami League came to power. The amount of NPL now is now over 1.2 lakh crore.
He said that the seventh five-year plan of the government had the plan to take the tax-GDP ratio to 14% in FY16. Achieving the target would help to ensure proper allocation for all of the priority sector without any budget deficit.
He said that, quality of economic growth remained under question as the RMG exports and remittance remained the main driver of the growth. Reforms regarding export diversifications remained undone.
"Discussion about export diversification starts with a concept of moving away from the RMG sector. But there are several aspects to diversify the intra RMG sector. Strengthening the backward linkage of the RMG sector would increase the value admission and net export. But the government provided fewer policy support in this field.
Dr Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh (PRI) said that the policymakers blamed the Covid-19 pandemic, supply chain disruption at the recovery period and war between Ukraine and Russia as the primary reasons behind the ongoing pressure of the economy. But the ignorance on reforms also has an equal role behind the crisis.
He said that the Bangladesh Bank is projecting a stable Balance of Payments (BoP) based on reducing import cost. But about 16% reduction of imports may hurt the production due to shortage of capital machinery, raw materials and reducing the aggregate demand.
Other economists also anticipated that the immediate measures taken by the government to tackle the current crisis like reducing imports, load shedding of power, price hike of fuel and energy would hamper the economic growth. And the consumers will have to bear the ultimate burden of such initiatives.
Dr Shamsul Alam, state minister of planning , spoke as the chief guest of the inauguration session and said that Bangladesh achieved significant progress in socio economic sectors but remains some challenges in the economy due to global unrest.
He said that the government expenditure for education and health is very little in Bangladesh, but expressed satisfaction over huge private investment in these sectors.
He recognised the resistance of some influential groups as a major reason for little progress in reforms and said that "We need the parliament to be more functional and more accountable to solve such problems."
He also said that the government is very keen to ensure reforms in some priority areas. He said that the government withdrew the quota system for all of the first class public jobs.
He also said that the bureaucracy is nowadays more efficient, more trained and development oriented.