Economic Prospects For South Asia In Coming Years – OpEd 

 January 16, 2023  Eurasia Review  0 Comments

By Kazi Anwarul Masud

An article written more than ten years back (FORBES Poverty and corruption) highlighted the nexus between corruption and poverty. The article stated “poverty invites corruption, while corruption deepens poverty. Corruption both causes and thrives upon weaknesses in key economic, political and social institutions.”

Trust—essential to financial markets and effective governments everywhere–is difficult to build in poor and corrupt societies. Poor people and economically strapped businesses have few economic alternatives, and where serious corruption is the norm, they are even more vulnerable to exploitation. In that sense, there is no such thing as “petty” corruption: all types of corruption help keep poor people poor. In poor societies, low level officials are often underpaid, when they are paid at all, and must provide a stream of payments to patrons at higher levels. In such settings, bribery, extortion and theft become matters of survival. 

But if we draw back from that isolated transaction, the deeply damaging dynamics become evident. A firm that pays up is telling those underpaid or unpaid officials that they can make money by dragging their feet, “losing” paperwork or contriving new requirements, forms and delays.” Such payments  flash quickly through an economy and a bureaucracy, particularly where legitimate opportunities are scarce, making for even more corruption. In corrupt markets and public bidding processes, inefficient firms and dishonest bidders have major advantages over honest competitors. Connections and cash, rather than innovation and excellence, become the ways to win contracts.” Such practice discourages investors leading to lack of employment and deepens poverty in the economy.  The victims are invariably the poorest of the poor and the beneficiaries are the political establishments in the country. The scenario remains unchanged in all developing and under-developed countries. 

POVERTY AND CORRUPTION NEXUS

Ebenezer Obeng-Afroki in his article  (The Nexus Between Poverty and Corruption Project Management| Political Analysis|  Published Feb 5, 2018) has given the picture of Ghana which can be replicated in all poor countries where the poor have to pay for services which should be available to them free of cost because illiteracy and gender discrimination forces the poor to go through middle men who have political connection and are basically front men of the powerful politician. It is an elite activity writes Ebeneger Obeng-Akrofi.

In Bangladesh when we read newspapers almost every day   we come across stories of stolen money from banks, financial institutions, and projects approved by the government with price escalation every few years. Many of these “governments” are run by armed gangs who refuse to tolerate any dissention among the people because the price of dissention, more often than not, ends in kidnapping and murder.  

CORRUPTION IN BANGLADESH

A review by (Transparency International Overview of corruption and anti-corruption in Bangladesh 07-11-22 ) gives a clearer picture of poverty in Bangladesh. The report says that though Bangladesh’s economy has steadily expanded in the last decade, with a 6% economic growth in 2010. It however remains one of the poorest countries in the world. Indeed Bangladesh has made significant improvements in a number of social sectors such as gender parity in education, reduction of child mortality etc. However, corruption, patronage networks, misallocation and wasted funds have slowed down the economy and prevented the country from making a developmental leap (Bertelsmann Foundation, 2012).  

Bangladesh is the 22d most corrupt country in the region.  Transparency International’s Global Corruption Barometer 2011: almost half of the respondents consider that corruption has increased in Bangladesh.  Consistent with these findings, the World Economic Forum’s Global Competitiveness Report 2012-2013 states that business executives perceive corruption as the second most significant obstacles to doing business in Bangladesh. According to the WEF Global Competitiveness Index, inefficient government bureaucracy has always been high up on the list of obstacles for doing business in the country.  

According to Transparency International’s Global Corruption Barometer 2011, 72% of the surveyed citizens admit having paid a bribe in recent years, with the police, the judiciary the registry and permit service and the land services being the top recipients. The household survey conducted by Transparency International Bangladesh in 2010 shows that the average amount of annual per household bribe is about US dollar $40, compared to $22 in 2007. The Transparency International report adds that Bangladesh is the 22d most corrupt country in the region, out of 35 countries. 

CORRUPTION AND INVESTMENT 

World Economic Forum’s Global Competitiveness Report 2012-2013 states that business executives perceive corruption as the second most significant obstacles to doing business in Bangladesh just after infrastructure. The Bangladeshi administration is burdensome and ineffective due to corruption, politicization and lack of resources (Bertelsmann Foundation, 2012).

According to the WEF Global Competitiveness Index, inefficient government bureaucracy has always been high up on the list of obstacles for doing business in the country, which encourages the use of bribery to speed up or “grease” administrative processes. According to Transparency International’s Global Corruption Barometer 2011, 72% of the surveyed citizens admit having paid  bribe in the to  the police, the judiciary the registry and permit service and the land services being the top recipients. The household survey conducted by Transparency International Bangladesh in 2010 shows that the average amount of annual per household bribe is about US dollar $40, compared to $22 in 2007.   

POLITICAL CORRUPTION

Political corruption is widespread in Bangladesh: citizens perceive political parties and the Parliament as some of the most corrupt institutions of their country (Transparency International, 2011). The main political parties’ internal governance frameworks are inadequate; there is a lack of internal democracy and their practices are insufficiently transparent. The principal political parties are further characterized by the dominating influence of a small number of families and their functioning has been qualified as dynastic (Bertelsmann Foundation, 2012). The legal safeguards guaranteeing the integrity of political party financing are not sufficient. A 2009 study on political party financing by Transparency International Bangladesh showed that while Bangladesh has a reasonable set of legal provisions to promote transparency in political finance compared to other regional countries, enforcement of the legal provisions is the weak.  

Although the electoral law provides that in course of nomination of candidates for national election, preferences of party leaders and supporters at the local level should be taken into consideration, the candidate selection system of the main parties tends to favor wealthy individuals who can buy their nomination through covert financial contributions to the party (Bertelsmann Foundation, 2012). According to Freedom House 2011, Bangladesh is an electoral democracy, and it has adopted universal suffrage and the right to campaign. The 2008 elections were considered free and fair (Bertelsmann Foundation, Overview of corruption and anti-corruption in Bangladesh 2012).  

BARTELSMANN FOUNDATION REPORTS

The Bertelsmann Foundation established in 2008, was created to promote and strengthen the transatlantic relationship. The foundation is an arm of the Germany-based Bertelsmann Stiftung. The Foundation is not an enemy of Bangladesh nor of poverty-stricken countries of the world. Like IMF. IBRD and Asian Development Bank the Foundation is dedicated to help poverty-stricken part of the world to hope for better future. Maria Gumerov writes in The Atlantic magazine the obvious truth i.e. that poverty remains a blockade in the path of Bangladesh transiting into a developing country.

As a low-lying country situated on the Bay of Bengal, Maria Gumerov explains Bangladesh is one of the most vulnerable countries to violent weather patterns that regularly destroy crops, homes and lives. Since agriculture supports almost half the population, the losses can be especially devastating.  Furthermore, lack of infrastructure stands in the way of growth.

Dhaka, the capital city alone, creates severe traffic that chokes more than three million hours of productivity in a day, which costs the country millions of dollars lost in GDP per year. Bangladesh is the 22d most corrupt country in the region, out of 35 countries. Bangladeshi citizens also perceive corruption as an increasing problem in their country.  Almost half of the respondents consider that corruption has increased in Bangladesh in the past 3 years and adding those who think that the level of corruption stayed the same bringing the number to 64%. Moreover, 72% of the surveyed citizens reported having experienced bribery in recent years. 

Consistent with these findings, the World Economic Forum’s Global Competitiveness Report 2012-2013 that states business executives perceive corruption as the second most significant obstacles to doing business in Bangladesh.    Forms of corruption are varied.  

The Bangladeshi administration is burdensome and ineffective due to corruption, politicization and lack of resources (Bertelsmann Foundation, 2012). According to the WEF Global Competitiveness Index, inefficient government bureaucracy has always been high up on the list of obstacles for doing business in the country which can encourage the use of bribery to speed up or “grease” administrative processes. According to Transparency International’s Global Corruption Barometer 2011, 72% of the surveyed citizens admit having paid bribe in recent past to   the police, the judiciary the registry and permit service and the land services being the top recipients. The household survey conducted by Transparency International Bangladesh in 2010 shows that the average amount of annual per household bribe is about US dollars $40, compared to $22 in 2007. Corruption in Bangladesh is all pervasive. People ask: is there a way out? 

WORLD BANK ON BANGLADESH RECOVERY

World Bank Report of April 12 2021 states that Bangladesh’s economy is showing nascent signs of recovery backed by a rebound in exports, strong remittance inflows, and the ongoing vaccination program.   After being severely affected by the COVID 19 pandemic—which slowed growth and for the first time in two decades reversed the poverty reduction trend—the economy is recovering gradually. Over the first half of FY21, factories reopened and exports rebounded. However, the economy faces elevated risks in the context of the ongoing COVID-19 pandemic. In Dhaka and Chittagong, the country’s two largest cities, recent surveys pointed to a recovery in the labor market in the first half of FY21. With gradual restoration of livelihoods, food security in poor and slum areas improved. In Chittagong, the percentage of adults working had returned to pre-COVID levels by February 2021.  

“Despite the uncertainty created by COVID-19, the outlook for Bangladesh’s economy is positive. Much of the pace of recovery will depend on how fast mass vaccination can be achieved,” said Mercy Miyang Tembon, World Bank Country Director for Bangladesh and Bhutan. “The World Bank will support a resilient recovery, helping Bangladesh achieve green, smart, and inclusive growth.” In FY21, growth will be supported by a recovery in manufacturing as export demand strengthens, a rebound in construction supported by accelerating public investment, and robust service sector growth as the vaccination campaign progress. inflation is projected to remain close to Bangladesh Bank’s 5.5 percent target, and the fiscal deficit is projected to remain at 6 percent of GDP. But risks to the outlook remain. 

A fragile global economic recovery could dampen demand for RMG products and limit job opportunities for migrant workers. The COVID-19 pandemic has exacerbated financial sector risks stemming from nonperforming loans and weaknesses in bank governance and risk management. Improving logistics performance could help accelerate the recovery and improve competitiveness. The report outlines opportunities to modernize the logistics system to ensure business continuity and build resilience. This can be achieved through a system-wide strategy to increase logistics efficiency; improve the quality, capacity, and management of infrastructure; improve the quality and integration of logistics services; and, achieve a seamless integration of regional logistics services. 

WORLD BANK ADVICE ON RECOVERY

 “The COVID-19 pandemic has led to an unpreceded global recession,” said Bernard Haven, World Bank Senior Economist, and co-author of the report. “Protecting households affected by the pandemic remains an urgent priority, while structural reforms can help accelerate the recovery.”

The Bangladesh Development Update is a companion piece to the South Asia Economic Focus, a bi-annual World Bank report that examines economic developments and prospects in the South Asia Region, and analyzes policy challenges faced by these countries. The Spring 2021 edition titled South Asia Vaccinates, launched in March 2021, shows that economic activity in South Asia is bouncing back, but growth is uneven, recovery remains fragile, and the economic outlook is precarious. Another World Bank report of April 13 2022 gives a hopeful picture. The report states that Bangladesh has made a strong economic recovery from the COVID-19 pandemic, but growth faces new headwinds as global commodity prices increase amid the uncertainty created by the war in Ukraine.  

In Bangladesh, a rebound of manufacturing and service sector activities led strong growth in FY21 and in the first half of FY22. In the medium term, GDP growth is expected to remain strong. Headline inflation rose to 6.2 percent in February 2022, driven by a rise in both food and non-food prices. The war in Ukraine and associated sanctions may lead to a higher current account deficit and rising inflation as global commodity prices increase. Public debt remains sustainable, and the March 2022 joint World Bank-IMF Debt Sustainability Analysis assessed that Bangladesh remained at low risk of external and public debt distress.

“Following a strong economic recovery from the pandemic, estimated poverty declined to 11.9 percent in FY21 from 12.5 percent in FY20, as per the international poverty rate,” said Mercy Tembon, Country Director for Bangladesh and Bhutan. “Going forward, close monitoring of inflation and the potential impacts of the war in Ukraine will be important for the country’s sustainable and inclusive growth. The World Bank stands ready to help Bangladesh address structural reforms to support recovery and strengthen resilience to future shocks.” 

A WAY FORWARD FOR SOUTH ASIA

The Update is a companion piece to the latest South Asia Economic Focus-Reshaping Norms: A Way Forward which notes growth in South Asia, already uneven and fragile, will be slower than previously projected, mostly due to the impacts of the war in Ukraine. The report projects the region to grow by 6.6 percent in 2022 and by 6.3 percent in 2023. The 2022 forecast has been revised downward by 1.0 percentage point compared to the January projection.

Countries in South Asia are already grappling with rising commodity prices, supply bottlenecks, and vulnerabilities in financial sectors. The war in Ukraine will amplify these challenges, further contributing to inflation, and deteriorating current account balances.

“South Asia has faced multiple shocks in the past two years, including the scarring effects of the COVID-19 pandemic. High oil and food prices caused by the war in Ukraine will have a strong negative impact on peoples’ real incomes,”said Hartwig Schafer, World Bank Vice President for South Asia. “Given these challenges, governments need to carefully plan monetary and fiscal policies to counter external shocks and protect the vulnerable, while laying the foundation for green, resilient and inclusive growth.”

The war and its impact on fuel prices can provide the region with much-needed impetus to reduce reliance on fuel imports and transition to a green, resilient and inclusive growth trajectory. The report recommends that countries steer away from inefficient fuel subsidies that tend to benefit wealthier households and deplete public resources. South Asian countries should also move towards a greener economy by gradually introducing taxation that puts tariffs on products which cause environmental damage.

“The introduction of green taxation can have multiple quantifiable benefits for South Asia, including improved energy security, environmental gains and increased fiscal revenues,” said Hans Timmer, World Bank Chief Economist for the South Asia Region. “These revenues could be utilized for adaptation against climate-related disasters and to strengthen social safety net systems.”

Another challenge the region faces is the disproportionate economic impact the pandemic has had on women. The report includes in-depth analysis of gender disparities in the region and their link with deeply rooted social norms, and recommends policies that will support women’s access to economic opportunities, tackle discriminatory norms, and improve gender outcomes for inclusive growth. This article demonstrates that the future for Bangladesh is not all bleak but rather flickering hopes of better days are to come.

I am conclude with a poem of Jalauddin Mohammed Rumi, more popularly known simply as Rumi (September 1207 – December 1273),  a 13th-century Persian poet, , theologian and Sufi mystic.  Rumi’s influence transcends national borders and ethnic divisions: including the Muslims of the Indian subcontinent.  

“I am so small I can barely be seen. How can this great love be inside me? Look at your eyes. They are small, but they see enormous things.“

Kazi Anwarul Masud is a former Secretary and ambassador of Bangladesh

 

Economic Prospects For South Asia In Coming years

BY AMBASSADOR KAZI ANWARUL MASUD · 24TH JANUARY 2023

 PDF Button

Poverty And Corruption In South Asia

An article written more than ten years back (FORBES Poverty and corruption) highlighted the nexus between corruption and poverty. The article stated “poverty invites corruption, while corruption deepens poverty. Corruption both causes and thrives upon weaknesses in key economic, political and social institutions.” Trust—essential to financial markets and effective governments everywhere–is difficult to build in poor and corrupt societies. Poor people and economically strapped businesses have few economic alternatives, and where serious corruption is the norm, they are even more vulnerable to exploitation. In that sense, there is no such thing as “petty” corruption: all types of corruption help keep poor people poor. In poor societies, low-level officials are often underpaid, when they are paid at all, and must provide a stream of payments to patrons at higher levels. In such settings, bribery, extortion and theft become matters of survival.  But if we draw back from that isolated transaction, the deeply damaging dynamics become evident. A firm that pays up is telling those underpaid or unpaid officials that they can make money by dragging their feet, “losing” paperwork or contriving new requirements, forms and delays.” Such payments flash quickly through an economy and a bureaucracy, particularly where legitimate opportunities are scarce, making for even more corruption. In corrupt markets and public bidding processes, inefficient firms and dishonest bidders have major advantages over honest competitors. Connections and cash, rather than innovation and excellence, become the ways to win contracts.” Such practice discourages investors leading to lack of employment and deepens poverty in the economy.  The victims are invariably the poorest of the poor and the beneficiaries are the political establishments in the country. The scenario remains unchanged in all developing and under-developed countries.

Poverty And Corruption Nexus

Ebenezer Obeng-Afroki in his article  (The Nexus Between Poverty and Corruption Project Management| Political Analysis|  Published Feb 5, 2018) has given the picture of Ghana which can be replicated in all poor countries where the poor have to pay for services which should be available to them free of cost because illiteracy and gender discrimination forces the poor to go through middlemen who have political connection and are basically front men of the powerful politician. It is an elite activity writes Ebeneger Obeng-Akrofi. In Bangladesh when we read newspapers almost every day we come across stories of stolen money from banks, financial institutions, and projects approved by the government with price escalation every few years. Many of these “governments” are run by armed gangs who refuse to tolerate any dissention among the people because the price of dissention, more often than not, ends in kidnapping and murder. 

Corruption In Bangladesh

A review by (Transparency International Overview of corruption and anti-corruption in Bangladesh 07-11-22 ) gives a clearer picture of poverty in Bangladesh. The report says that though Bangladesh’s economy has steadily expanded in the last decade, with a 6% economic growth in 2010. It however remains one of the poorest countries in the world. Indeed Bangladesh has made significant improvements in a number of social sectors such as gender parity in education, reduction of child mortality etc. However, corruption, patronage networks, misallocation and wasted funds have slowed down the economy and prevented the country from making a developmental leap (Bertelsmann Foundation, 2012).   Bangladesh is the 22d most corrupt country in the region.  Transparency International’s Global Corruption Barometer 2011: almost half of the respondents consider that corruption has increased in Bangladesh.   Consistent with these findings, the World Economic Forum’s Global Competitiveness Report 2012-2013 states that business executives perceive corruption as the second most significant obstacles to doing business in Bangladesh. According to the WEF Global Competitiveness Index, inefficient government bureaucracy has always been high up on the list of obstacles for doing business in the country.   According to Transparency International’s Global Corruption Barometer 2011, 72% of the surveyed citizens admit having paid a bribe in recent years, with the police, the judiciary the registry and permit service and the land services being the top recipients. The household survey conducted by Transparency International Bangladesh in 2010 shows that the average amount of annual per household bribe is about US dollar $40, compared to $22 in 2007. The Transparency International report adds that Bangladesh is the 22d most corrupt country in the region, out of 35 countries.

Corruption And Investment

World Economic Forum’s Global Competitiveness Report 2012-2013 states that business executives perceive corruption as the second most significant obstacles to doing business in Bangladesh just after infrastructure. The Bangladeshi administration is burdensome and ineffective due to corruption, politicization and lack of resources (Bertelsmann Foundation, 2012). According to the WEF Global Competitiveness Index, inefficient government bureaucracy has always been high up on the list of obstacles for doing business in the country, which encourages the use of bribery to speed up or “grease” administrative processes. According to Transparency International’s Global Corruption Barometer 2011, 72% of the surveyed citizens admit having paid bribes in to the police, the judiciary the registry and permit service and the land services being the top recipients. The household survey conducted by Transparency International Bangladesh in 2010 shows that the average amount of annual per household bribe is about US dollar $40, compared to $22 in 2007.  

Political Corruption

Political corruption is widespread in Bangladesh: citizens perceive political parties and the Parliament as some of the most corrupt institutions of their country (Transparency International, 2011). The main political parties’ internal governance frameworks are inadequate; there is a lack of internal democracy and their practices are insufficiently transparent. The principal political parties are further characterized by the dominating influence of a small number of families and their functioning has been qualified as dynastic (Bertelsmann Foundation, 2012). The legal safeguards guaranteeing the integrity of political party financing are not sufficient. A 2009 study on political party financing by Transparency International Bangladesh showed that while Bangladesh has a reasonable set of legal provisions to promote transparency in political finance compared to other regional countries, enforcement of the legal provisions is the weak.   Although the electoral law provides that in course of nomination of candidates for national election, preferences of party leaders and supporters at the local level should be taken into consideration, the candidate selection system of the main parties tends to favor wealthy individuals who can buy their nomination through covert financial contributions to the party (Bertelsmann Foundation, 2012). According to Freedom House 2011, Bangladesh is an electoral democracy, and it has adopted universal suffrage and the right to campaign. The 2008 elections were considered free and fair (Bertelsmann Foundation, Overview of corruption and anti-corruption in Bangladesh 2012). 

Bartelsmann Foundation Reports

The Bertelsmann Foundation established in 2008, was created to promote and strengthen the transatlantic relationship. The foundation is an arm of the Germany-based Bertelsmann Stiftung. The Foundation is not an enemy of Bangladesh nor of poverty-stricken countries of the world. Like IMF. IBRD and Asian Development Bank Foundation is dedicated to help the poverty-stricken part of the world to hope for better future. Maria Gumerov writes in The Atlantic magazine the obvious truth i.e. that poverty remains a blockade in the path of Bangladesh transiting into a developing country. As a low-lying country situated on the Bay of Bengal, Maria Gumerov explains Bangladesh is one of the most vulnerable countries to violent weather patterns that regularly destroy crops, homes and lives. Since agriculture supports almost half the population, the losses can be especially devastating.  Furthermore, lack of infrastructure stands in the way of growth. Dhaka, the capital city alone, creates severe traffic that chokes more than three million hours of productivity in a day, which costs the country millions of dollars lost in GDP per year.  Bangladesh is the 22d most corrupt country in the region, out of 35 countries. Bangladeshi citizens also perceive corruption as an increasing problem in their country.  Almost half of the respondents consider that corruption has increased in Bangladesh in the past 3 years and adding those who think that the level of corruption stayed the same bringing the number to 64%. Moreover, 72% of the surveyed citizens reported having experienced bribery in recent years.  Consistent with these findings, the World Economic Forum’s Global Competitiveness Report 2012-2013 that states business executives perceive corruption as the second most significant obstacles to doing business in Bangladesh.    Forms of corruption are varied.   The Bangladeshi administration is burdensome and ineffective due to corruption, politicization and lack of resources (Bertelsmann Foundation, 2012). According to the WEF Global Competitiveness Index, inefficient government bureaucracy has always been high up on the list of obstacles for doing business in the country which can encourage the use of bribery to speed up or “grease” administrative processes. According to Transparency International’s Global Corruption Barometer 2011, 72% of the surveyed citizens admit having paid bribe in recent past to the police, the judiciary the registry and permit service and the land services being the top recipients. The household survey conducted by Transparency International Bangladesh in 2010 shows that the average amount of annual per household bribe is about US dollars $40, compared to $22 in 2007. Corruption in Bangladesh is all pervasive. People ask: is there a way out?

Image: World Bank

World Bank On Bangladesh Recovery

World Bank Report of April 12 2021 states that Bangladesh’s economy is showing nascent signs of recovery backed by a rebound in exports, strong remittance inflows, and the ongoing vaccination program. After being severely affected by the COVID 19 pandemic—which slowed growth and for the first time in two decades reversed the poverty reduction trend—the economy is recovering gradually. Over the first half of FY21, factories reopened and exports rebounded. However, the economy faces elevated risks in the context of the ongoing COVID-19 pandemic. In Dhaka and Chittagong, the country’s two largest cities, recent surveys pointed to a recovery in the labor market in the first half of FY21. With gradual restoration of livelihoods, food security in poor and slum areas improved. In Chittagong, the percentage of adults working had returned to pre-COVID levels by February 2021.   “Despite the uncertainty created by COVID-19, the outlook for Bangladesh’s economy is positive. Much of the pace of recovery will depend on how fast mass vaccination can be achieved,” said Mercy Miyang Tembon, World Bank Country Director for Bangladesh and Bhutan. “The World Bank will support a resilient recovery, helping Bangladesh achieve green, smart, and inclusive growth.” In FY21, growth will be supported by a recovery in manufacturing as export demand strengthens, a rebound in construction supported by accelerating public investment, and robust service sector growth as the vaccination campaign progress. inflation is projected to remain close to Bangladesh Bank’s 5.5 percent target, and the fiscal deficit is projected to remain at 6 percent of GDP. But risks to the outlook remain.  A fragile global economic recovery could dampen demand for RMG products and limit job opportunities for migrant workers. The COVID-19 pandemic has exacerbated financial sector risks stemming from nonperforming loans and weaknesses in bank governance and risk management. Improving logistics performance could help accelerate the recovery and improve competitiveness. The report outlines opportunities to modernize the logistics system to ensure business continuity and build resilience. This can be achieved through a system-wide strategy to increase logistics efficiency; improve the quality, capacity, and management of infrastructure; improve the quality and integration of logistics services; and, achieve seamless integration of regional logistics services. 

World Bank Advice Recovery

 “The COVID-19 pandemic has led to an unpreceded global recession,” said Bernard Haven, World Bank Senior Economist, and co-author of the report. “Protecting households affected by the pandemic remains an urgent priority, while structural reforms can help accelerate the recovery.” The Bangladesh Development Update is a companion piece to the South Asia Economic Focus, a bi-annual World Bank report that examines economic developments and prospects in the South Asia Region, and analyzes policy challenges faced by these countries. The Spring 2021 edition titled South Asia Vaccinates, launched in March 2021, shows that economic activity in South Asia is bouncing back, but growth is uneven, recovery remains fragile, and the economic outlook is precarious. Another World Bank report of April 13 2022 gives a hopeful picture. The report states that Bangladesh has made a strong economic recovery from the COVID-19 pandemic, but growth faces new headwinds as global commodity prices increase amid the uncertainty created by the war in Ukraine.   In Bangladesh, a rebound of manufacturing and service sector activities led strong growth in FY21 and in the first half of FY22. In the medium term, GDP growth is expected to remain strong. Headline inflation rose to 6.2 percent in February 2022, driven by a rise in both food and non-food prices. The war in Ukraine and associated sanctions may lead to a higher current account deficit and rising inflation as global commodity prices increase. Public debt remains sustainable, and the March 2022 joint World Bank-IMF Debt Sustainability Analysis assessed that Bangladesh remained at low risk of external and public debt distress. “Following a strong economic recovery from the pandemic, estimated poverty declined to 11.9 percent in FY21 from 12.5 percent in FY20, as per the international poverty rate,” said Mercy Tembon, Country Director for Bangladesh and Bhutan. “Going forward, close monitoring of inflation and the potential impacts of the war in Ukraine will be important for the country’s sustainable and inclusive growth. The World Bank stands ready to help Bangladesh address structural reforms to support recovery and strengthen resilience to future shocks.”

Image source: Asian Development Bank

A Way Forward For South Asia

The Update is a companion piece to the latest South Asia Economic Focus-Reshaping Norms: A Way Forward which notes growth in South Asia, already uneven and fragile, will be slower than previously projected, mostly due to the impacts of the war in Ukraine. The report projects the region to grow by 6.6 percent in 2022 and by 6.3 percent in 2023. The 2022 forecast has been revised downward by 1.0 percentage point compared to the January projection. Countries in South Asia are already grappling with rising commodity prices, supply bottlenecks, and vulnerabilities in financial sectors. The war in Ukraine will amplify these challenges, further contributing to inflation, and deteriorating current account balances. “South Asia has faced multiple shocks in the past two years, including the scarring effects of the COVID-19 pandemic. High oil and food prices caused by the war in Ukraine will have a strong negative impact on peoples’ real incomes,”said Hartwig Schafer, World Bank Vice President for South Asia. “Given these challenges, governments need to carefully plan monetary and fiscal policies to counter external shocks and protect the vulnerable, while laying the foundation for green, resilient and inclusive growth.” The war and its impact on fuel prices can provide the region with much-needed impetus to reduce reliance on fuel imports and transition to a green, resilient and inclusive growth trajectory. The report recommends that countries steer away from inefficient fuel subsidies that tend to benefit wealthier households and deplete public resources. South Asian countries should also move towards a greener economy by gradually introducing taxation that puts tariffs on products which cause environmental damage. “The introduction of green taxation can have multiple quantifiable benefits for South Asia, including improved energy security, environmental gains and increased fiscal revenues,” said Hans Timmer, World Bank Chief Economist for the South Asia Region. “These revenues could be utilized for adaptation against climate-related disasters and to strengthen social safety net systems.” Another challenge the region faces is the disproportionate economic impact the pandemic has had on women. The report includes in-depth analysis of gender disparities in the region and their link with deeply rooted social norms, and recommends policies that will support women’s access to economic opportunities, tackle discriminatory norms, and improve gender outcomes for inclusive growth. This article demonstrates that the future for Bangladesh is not all bleak but rather flickering hopes of better days are to come. I am tempted to conclude with a poem of Jalauddin Mohammed Rumi, more popularly known simply as Rumi (September 1207 – December 1273),  a 13th-century Persian poet, , theologian and Sufi mystic.  Rumi’s influence transcends national borders and ethnic divisions: including the Muslims of the Indian subcontinent.  

Quote

“I am so small I can barely be seen.
How can this great love be inside me?
Look at your eyes. They are small,
But they see enormous things “Unquote.

 

On The Chinese Threat To Global Peace – OpEd

 December 26, 2022  Eurasia Review  0 Comments

By Kazi Anwarul Masud

American economist Geoffrey Sachs (Columbia University and an expert on economic development and poverty) considers geography of nations as a true driver of economic development “because it affects the profitability of various kinds of economic activities, including agriculture, mining, and industry; the health of the population; and the desirability of living and investing in a particular place…. As human-led climate change progresses, many regions could well be hit by devastating environmental shocks, such as heat waves, droughts, and floods, that are far beyond their control” (Foreign Affairs Sept/Oct 2012). 

Sachs counters monocausal theory of Daron Acemoglu and James Robinson’s (Why Nations Fail) that governments that protects property rights and represent their people lead their economies to prosperity and those that do not end up with stagnant and declining economies. State capitalism that promoted the economic development of South Korea   during Park Chung Hee’s military regime coupled with those of China, Taiwan, Vietnam belie the claim that only capitalism with Western values can lead the country to prosperity.

RISE OF CHINESE ECONOMY

 China today is the second largest economy in the world though its growth has been recently arrested by the outbreak of coronavirus disease that has virtually quarantined the country from the rest of the world. Given the fact that China accounts for 16% of the global output the disease is bound to have global impact in particular small Asian countries linked to China who do not have sufficient cushion to absorb the ill effects and may slide into recession. A Reuter report sounds an optimistic note (London 20th February) to the effect that epidemics normally have a severe but relatively short-lived impact on economic activity, with the impact on manufacturing and consumption measured in weeks or at worst a few months.       

Even pandemics such as the Black Death , Spanish influenza , Asian influenza  and Hong Kong influenza  that caused large numbers of deaths had a brief impact on the economy.       

China’s coronavirus outbreak should conform to this pattern of a severe downturn followed by swift recovery, provided it does not initiate a broader cyclical slowdown in the already-fragile global economy. China witnessed an economic growth of 6.1 per cent in 2019, the slowest in recent years. And the International Monetary Fund expects it to slide further to 6 per cent and 5.8 per cent in the next two years. The Coronavirus strike will impact consumer spending in China, which may further impact the economy and the trade pacts with the US.       

The Federal Reserve Bank chief Jeremy Powell considers China’s economy as very important in the global economy now, and when China’s economy slows down it is felt by the USA though less than countries near to China or those actively trading with China like some Western European countries.  Coronavirus aside one may question the efficacy of state capitalism as a strategy for economic growth. 

The recent Bangladesh government decision fixing deposit and lending rates by banks and post offices has been described as “financial repression’” (Financial Express 12-02-2020) that may cause significant drag on growth, according to a study, ranging between 0.4 to 0.7 % of the GDP. This repressive approach was justified by some governments on John Maynard Keynes’ argument to distinguish between investment for productive purposes and those for speculation. 

Such an approach has been criticized by another school of economists who opposes artificial imposition of ceilings to encourage investment and calls for market forces to determine the preferred rate of interest and encourage competition among banks and financial institutions. 

Joseph Stieglitz (The Great Divide 2012) has argued that inequality results from conscious political decisions which results in a world of super-rich, a vanishing middle class and growing poverty. 

Stieglitz also questions the efficacy of a government that embraces political capitalism—a system where the rich and the powerful influences government choices that in Hobbesian terminology ends up as being “nasty brutish” and ultimately selfish and protects the interests of their own class. 

Political capitalism can also be defined as an economic and political system in which the economic and political elite cooperate for their mutual benefit. Bangladesh has had the highest rise in its ultra- wealthy population, surpassing any other country in the world. If Bangladesh had 100 super rich in 2012, for example, the number should stand at 219-220 by 2017. 

In other words, the number of super-rich more than doubled in our country in just five years. At the same time defaulted loans despite easier payment terms accorded to the defaulters has not eased the problem of loan default. Billions of dollars are suspected to have been siphoned off to safe heavens abroad. According to Global Financial Integrity Report 2017, Bangladesh topped the list of least-developed countries in terms of “illicit financial flows”. 

Truly Joseph Stieglitz’s observation on “A banking system is supposed to serve society, not the other way around” appears to have fallen on deaf ears. Yet incontestably Bangladesh economy broke through a period of stagnation and even regression through robust export of garments and remittance of Bangladeshis working abroad and today has become the third fastest growing economy in the world. 

Bangladesh apparently is doing well. Yet apart from growing inequality in the distribution of income one would be well advised to bear in mind the dystopian pictures drawn by MIT husband and wife team (The Limits of Growth-1972) of the world facing an “over shoot and collapse” by 2100 unless the world took seriously the environmental and resource issues. According to them  to feed the continued growth in industrial output there must be ever-increasing use of resources. But resources become more expensive to obtain as they are used up. As more and more capital go towards resource extraction, industrial output per capita starts to fall – in the book, from about 2015.

As pollution mounts and industrial input into agriculture falls, food production per capita falls. Health and education services are cut back, and that combines to bring about a rise in the death rate from about 2020 (The Guardian 2nd September 2014). 

The emerging economies in particular those in South Asia should take lessons from these discourses. Inequality should not be allowed to fester. Growth that does not serve the interest of the majority of the population means only economic figures. The world — both the developed and the developing — should strive for gender equality. Climate change should be a central issue in international conversations. 

Political capitalism — a momentary solution of economic woes — cannot be the hall mark of economic growth. Social Darwinism, the popular theory in the late 19th century that life for humans in society was ruled by “survival of the fittest,” that helped advance eugenics into serious scientific study in the early 1900s has to be avoided at all cost because the world cannot afford another Hitler. 

One hopes that Chinese leader Xi-Jin Ping would not challenge the global stability that the world needs badly at this moment if Russian invasion of Ukraine. Already Sino-Russian front has been formed to face the Western and other freedom loving people of the world. History teaches us that illiberal regimes do not last for long replaced by more cruel regimes or one that does not care for global condemnation. 

Myanmar junta’s ignoring the world criticism of minority community in the country and atrocities committed against them is a case in point.  The recent developments are no less alarming. Donald Trump’s anti-Chinese rhetoric became ineffective because his “America First” slogan put many Western countries in particular NATO countries in uncomfortable position almost being abandoned by the American security umbrella over their heads since the Second World War. 

President Joe Biden in his one year in office is trying his level best to repair Trump’s damage yet giving no quarter to China. The best course will naturally be to bring down the temperature among adversaries. The news that talks between Russia and Ukraine to ease shipment of grains is a positive development. 

PUTIN’S RED LINE IGNORED BY THE WEST

A way out will be to accept Putin’s position that Ukraine and countries which were in the Soviet orbit would join neither the Russian side nor the NATO or the European Union. 

Added is the anti-Chinese formation of QUAD consisting of comprising, the 4 nations: The United States of America (USA), India, Japan, and Australia. This group first interacted in 2007 on the sidelines of the Association of Southeast Asian Nations (ASEAN). It is considered as specific nations coming along to find a common ground in being democratic nations and their interest of maritime cooperation through trade and security. 

The Quad’s origin can be traced back to the 2004 Tsunami, when India conducted relief and rescue operations for itself and neighboring countries, with the US, Japan, and Australia later joining in.  It was largely interpreted as a response to China’s growing economic and military might. It was initiated in 2007 by late Shinzo Abe, Japanese Prime Minister with the support of the Australian PM Johan Howard, the US Vice-President Dick Cheney and Man Mohan Singh, PM of India.

QUAD AND CHINESE THREAT

The Quad was viewed as retaliation towards increasing the military and economic power of China in the region. The participation of Australia agitated the Chinese as they helped Australia to drive out a defense agreement with the United States (outlined by Canberra Defense Blueprint of 2007). 

As a result, Australia announced not to participate in the second round of the meeting.  In 2010, Julia Gillard was elected as the New Zealand Prime Minister resulting in enhanced cooperation among interested parties. It led to the placement of Australia overlooking the Timor Sea and the Lombok Strait while US Marines stationed near Darwin. 

In the period between cessation and restart of the Quad, the joint naval exercises continued between India, Japan and the US at trilateral levels. In ASEAN Summits of 2017 held in Manila , Japan invited India, Australia and the US to hold a joint meeting to revive the alliance and counter China, both diplomatically and militarily, in the South China Sea. The meeting of the naval chiefs of India, US, Australia and Japan at the Raisina Dialogue, 2018 in New Delhi indicated the revival of the security structure of Quad. 

Following this, the four ministers gathered in New York and Bangkok in 2019 to discuss the reformation of Quad. In March 2020, the members of Quad had a meeting with the representatives from New Zealand, Vietnam and South Korea to discuss their approaches towards the coronavirus pandemic. 

This new grouping of Indo-Pacific states was named the “Quad Plus” as encouraged by the US. In February 2021, Indian Prime Minister  Narendra Modi addressed the virtual meeting of Quad hosted by the USA. 

In September 24, 2021, Indian Prime Minister Narendra Modi along with Japanese and Australian counterparts attended the first in-person Quad meeting hosted by President Joe Biden.  

It was believed that the grouping would act as “a force for global good” and would ensure prosperity and peace in the entire world. 

The leaders of the two largest democracies of the world, India and the US, met at the White House for the bilateral meeting and discussed many priority issues, such as trade, combating of Covid-19, climate change and Indo-Pacific. It was an “important” meeting held at the beginning of the third decade of the century. A joint statement was released  read that the grouping stands together for the rule of law, freedom of over-flight and navigation, territorial integrity of states and peaceful resolution of disputes Many analysts are underscoring the importance of the Quadrilateral Security Dialogue (QUAD) as a response to Chinese strategy in the region. The Quad is an informal strategic dialogue forum between India, Japan, the United States and Australia. 

With India’s ongoing tussle with China and in the light of Chinese assertive behavior in regions in South China Sea and Indian Ocean Region (IOR), this clearly would make sense.  

This ‘defense by denial’ capability needs to be strengthened by all the four countries and probably to some extent there has to be an integrated architecture of air and missile defense capability in IOR among the QUAD members to provide a credible deterrence against China. 

An integrated missile defense architecture means that the four countries have to take a responsible role to initiate the process. So far, the United States has not been successful in developing integrated missile defense architecture in the Indo-Pacific region owing to the Japan-South Korea disputes. The United States is also struggling to develop integrated missile defense architecture amid the Gulf Cooperating Countries (GCC). 

Even in the European Phased Adaptive Approach (EPAA), the United States is facing delays which is delaying the holistic integrating of the EPAA with NATO missile defense shield. Thus, how far the United States would be successful in integrating a missile defense architecture in which India would not be possessing the components of missile defense shield that the other three QUAD members would be possessing would be difficult to predict. 

QUAD PLUS AND CHINESE THREAT

The QUAD would be further strengthened to include South Korea too. QUAD Plus include broader framework to deal with the Chinese threat- with countries like Vietnam and South Korea. India has welcomed the QUAD Plus initiative, but this initiative would require a greater cooperation between Japan and South Korea. In short, while the QUAD is strengthening an arrangement to counter China, the arrangement requires to be a holistic one to provide for its full promise as part of a deterrent approach to China (Debalina Ghosal 09-01-2020). 

The most recent Indo-Chinese spat occurred on August 27  2022 slamming Chinese remarks on vessel visit.  In a strongly worded statement the Indian High Commission reacted   to recent remarks of the Chinese Ambassador to Sri Lanka, on the controversial visit of a Chinese military vessel in August 2022.    

Chinese Ambassador Qi Zhenhong wrote in Sri Lanka media about countries “far or near bullying Sri Lanka”. The Ambassador had also observed that Sri Lanka overcame “aggression from its northern neighbor 17 times”. He had also connected U.S. House Speaker Nancy Pelosi’s visit to Taiwan with the “successful” docking of Chinese satellite-tracking vessel Yuan Wang 5 in the southern Hambantota port, and argued for China and Sri Lanka “jointly safeguarding each other’s sovereignty, independence, and territorial integrity”. 

The Indian High Commission responded  that “Opaqueness and debt driven agendas are now a major challenge, especially for smaller nations. Recent developments are a caution. Sri Lanka needs support, not unwanted pressure or unnecessary controversies to serve another country’s agenda.” Such incidents are expected to arise from time to time. But given the fact that China is far ahead of India repeating such incidents would not serve global peace which the world in particular the less developed economies crave.