Structural recipe for the economy  

Structural recipe for the economy

The Financial Express  July 09, 2019


A high profile seminar held in Dhaka on Saturday and Sunday brought to the fore some of the pressing needs of the Bangladesh economy. The seminar was organised by the Bureau of Economic Research (BER) and the Economics Department of the University of Dhaka. The same day at another function for the launching of the `Banking Almanac’, prepared by the Association of Banks, Bangladesh (ABB), issues relating to the banking sector, and therefore the capital market and investment, and as such the whole gamut of the economy in a sense, were up for discussion. Both the programmes were addressed by luminaries in the field; and their doyen Mr Rehman Sobhan underlined some of the main duties for the policy-makers and planners. His observation that a key portion of the fiscal resources was given to a certain class through the banking mechanism tells many things about how banks are run. His remark that a social safety net was in fact created for the rich should make one sit up and take note.

Mention was made of the `other systems’ that generated income and determined distribution. Also wages that were low for the workers and paddy prices that did not cover production cost were rightly brought up. Rise in inequality, appropriate application of technology, green financing tools, and inclusive growth with the spirit of Sustainable Development Goals of the United Nations were focussed. Interrelation of the banks and the capital market, establishing strong financial institutions and the need for robust investment were stressed. In a word, all these call for serious structural reforms for the Bangladesh economy. Obstacles to the drivers of growth must be tackled. Job creation and increasing productivity are essential. Investment needs are enormous. We have heard over the last three decades about all such issues, but these definitely assume greater importance at this critical juncture of the growth paradigm the country is going through.

The two seminars could not have come at a healthier time. The BER and the ABB have opened the door to serious discussions at a time when the national economy is destined to grow at over 8.0 per cent annually and puzzling figures come out of the banking sector. Loan default, liquidity crisis, high interest rates and at the same time profit performance cannot go together. They appear bemusing. The observation that the banking sector increased social inequality is now accepted by all. Even the Planning Minister Mr M A Mannan conceded in the first-mentioned seminar that although overall poverty had reduced, inequality had increased. Mr Mannan is known for his straight talk. He told the gathering that the poor did not have scant rights over the state resources outside of the urban areas. The observations and assertions of the two seminars need serious introspection on the part of policy makers at the top. Due largely to the not-so-noble contribution of the state-owned banks, the agenda for private-sector led growth receives a setback. The Bangladesh Bank might need more reform and, maybe, powers to operate independently. It cannot play a second fiddle to the bureaucracy at the Ministry of Finance.  The capital market that brought ruin to the lives of young people in a cyclical order every decade has to be reformed, now that the Security Exchange Commission is in full operation with help from the development partners. The government may form a small core committee to take into cognizance the contributions of the two seminars. We have long heard about various solutions to our problems. The point is now to effectively apply them.

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