50 YEARS OF VICTORY Disparities, corruption mar economic progress

Bangladesh has recently celebrated the golden jubilee of its Victory Day amid mixed emotions among the people as income and wealth disparities, lack of good governance and rampant corruption have accompanied the country’s socio-economic progress over the past 50 years.

Economists and rights advocates have reaffirmed that goals of establishing equality and social justice in the country have inspired the people to join the nine-month-long bloody war of independence from Pakistan.

But signs of an equitable society and a welfare state are as elusive as ever, if not more distant, said former Bangladesh Bank governor Salehuddin Ahmed on the eve of the 50th Victory Day.

The topsy-turvy ride of agrarian Bangladesh began in 1971, with then United States secretary of state Henry Kissinger labelling the newly-emerged country as a ‘basket case’.

Going through a famine in 1974 and then a series of political upheavals before and after the 1980s, the poor country has seen a major economic policy shift with a dominant participation of the private sector in the economic sectors since the early 1990s.

Ever since, economic growth has accelerated and poverty has declined though large proportions of the population have continued to stay vulnerable as their incomes did not rise alongside the economic progress. 

‘Of course there has been economic progress, but inequality has also grown alarmingly,’ said Salehuddin.

The top 5 per cent of the people, economists pointed out, now own more than 95 per cent of the nation’s total income as the Gini coefficient increased in Bangladesh to 0.48 in 2016 from 0.46 in 2010.

The Gini coefficient that represents income or wealth inequality in a country was 0.42 in 2005 in Bangladesh.

The smaller the Gini coefficient value is the lower the income inequality in society is while bigger values indicate higher income inequalities.

The size of ultra-wealthy population in Bangladesh grew faster than in any other country between 2010 and 2019, according to a report of Wealth-X, a US-based research firm.

The number of wealthy people commanding $5 million and above in net worth increased by, on average, 14.3 per cent per annum in the country, said the report,  titled A Decade of Wealth, released in May 2020.

Policy Research Institute executive director Ahsan H Manusr said that the country’s economic growth had largely benefited the affluent mainly due to the income disparity.

He also said that the country’s tax-GDP ratio was one of the lowest in South Asia.

Improvement in the tax-GDP ratio is an imperative for the implementation of development programmes against the backdrop of rising short-term loans at high interest rates from bilateral countries in comparison with loans on easy terms from multilateral agencies.   

Economists also blamed the failure by successive governments to establish good governance and stop politicisation of the state organs as a root cause for the uneven and less-than-potential economic development of the country.

Former cabinet secretary Ali Imam Majumder sees an acute absence of political will among successive governments in ensuring good governance over the years.

Bangladesh has recorded over 6 per cent annual growth on average in the past decade, a 3.5 per cent growth even in the Covid pandemic in 2019–20, enabling the country to surpass India in 2020 in per capita income.

According to the International Monetary Fund estimate, Bangladesh’s per capita income was $1,888 against India’s $1,877 in 2020.

Besides, the country’s social development indicators such as gender equity, women empowerment, mortality rate and life expectancy also became better than India in the year. 

In 2015, Bangladesh topped the per capita income of Pakistan, a year after it graduated to the lower-middle income status as per the World Bank criteria. 

Thanks to a steady inflow of remittance from hundreds of thousands of expatriate Bangladeshis, buoyant readymade garment exports by entrepreneurs and the increasing food production by farmers, the dynamics in the economy has changed, creating solid classes of consumers and manufacturers in the country. 

In the fiscal year 1974–75, after the introduction of the Wage Earners’ Scheme in 1974, a paltry $11.8 million was remitted by expatriate Bangladeshis.

In contrast, in 2020-21, the country received $24.77 billion in remittance that helped the country boast a foreign exchange reserve of more than $45 billion, well above the comfortable figure needed for three-month import payment.

Recently, Bangladesh has disbursed to Sri Lanka $50 million, the first instalment of a $250 million loan package to the Island nation, in meeting its foreign currency needs.

The Maldives, another South Asian neighbour, has also sought credit from the country.

The RMG exports, which contributed only 4 per cent to the county’s total export income of a modest $811 million in 1983–84, accounted for over 80 per cent of the overall export revenue of $33.64 billion in 2019–20.

Farmers of the country have increased the rice output to more than 3.6 crore tonnes now, up from 1.2 crore tonnes in 1971, though it still has to import the item to meet deficits often caused by natural calamities such as floods.  

Against the backdrop of such growth, Bangladesh is expected to leave behind its least-developed-country status in 2026 as it met in February 2021 all three necessary conditions set by the UN in this regard.

But economists viewed that the increasing income and wealth disparities as well as others maladies like loan theft, capital flight, growing out-of-pocket health expenditure and shrinking space for freedom of expression should be addressed for having an equitable society.

Successive governments have failed to contain the menace of defaulted loans now around 1 lakh crore, more than 50 per cent of which is owed to the state-owned banks.

According to the Global Financial Integrity report released in January 2019, the illicit capital outflow from Bangladesh continued unabated as $5.9 billion, equivalent to Tk 50,000 crore, was siphoned off in 2015 while the total amount illegally transferred from the country from 2006 to 2016 was $81.74 billion.

GFI estimated that the illicit financial outflow or money laundering from Bangladesh ranged from $2.7 billion to $5.9 billion in 2015 and the amount was drained out through over-invoicing in imports and under-invoicing in exports.

Former caretaker government adviser M Hafizuddin Khan noted that the capital flight and corruption in the banking sector was worsening day by day.

The 2010–11 share market collapse, the 2013 enormous Hallmark Scam in sate-owned Sonali Bank and the 2014 massive loan frauds in state-owned BASIC Bank shocked all and sundry, he said.

Economists said that there could be a link between defaulted loans, loan scams  and capital flight in the context of rising number of Bangladeshis seeking ‘second home’ in Malaysia and the development of ‘Begum Para’ in Canada.

They also mentioned that the out-of-pocket health expenditure in Bangladesh, one of the highest in the world, had increased to Tk 68.5 in every health expenditure of Tk 100 in 2020 from Tk 67 five years ago.

The rising trend in out-of-pocket health cost demonstrates the lack of a universal healthcare system and of trust in the existing system, which became evident especially during the Covid pandemic, they said.

The pandemic has also unfolded deep-rooted corruption and inefficiencies in the country’s health sector as shady business of issuing fake Covid certificates and undue privileges enjoyed by people like the owner of the Regent Hospital have surfaced.

Corruption is also persisting in other areas, including public procurement, for which the present government drew flaks.

The authorities bought each pillow for Tk 5,957 and each electric stove for Tk 7,747 under the country’s most expensive Roopur Nuclear Plant project being implemented with supplier’s credit from Russia.

According to the Global Corruption Perception Index 2020, released by the Berlin-based Transparency International in January 2021, the country slipped two notches to rank the 12th among the most corrupt countries.

According to the World Bank’s ‘Doing Business 2020’ report, Bangladesh was ranked the 168th among the 190 economies considered in the overall ranking by ease of doing business.

Economists have also resented the deficiencies and disparities in the development of the capital city and other regions of the country over the years.

A study titled ‘Development: Dhaka’s Overgrowth is Harming Overall Growth’ presented by by Ahmad Ahsan, a director of Policy Research Institute said that some 31.9 per cent of Bangladesh’s urban population live in Dhaka as its population  increased by more than 50 per cent over the past 10 years. 

The overpopulation and excessive concentration of resources and economic activities in Dhaka city caused the country’s per capita income and GDP to be 11 per cent less than potential in 2017, said the study presented in the annual conference of the Bangladesh Institute of Development Studies during December 1-3 on the occasion of the country’s 50 years of independence. 

News Courtesy:

https://www.newagebd.net/article/158234/disparities-corruption-mar-economic-progress