Economic Sovereignty: ‘When a government is very weak it cannot withstand any pressure’
Published in New Age Xtra on Friday, 20 December 2013. Dr Fahmida Khatun, an economist and research director at the Centre for Policy Dialogue, explains how political parties have compromised the country’s economic sovereignty by depending too much on external forces
Forty-three years after independence, Bangladesh still has some foreign countries meddling in its domestic affairs. Is this not interference to a country’s economic sovereignty, a principle for which the country fought against Pakistan in 1971?
Certainly, [but] if you look at the composition of the Bangladesh economy, over the years we have become more dependent on trade rather than foreign aid. Integration with the global economy has increased in terms of external trade, remittances, FDIs and higher exports. On the other hand, half of our budget of the annual development programme is financed by foreign aid. The economic sovereignty does not depend only on the composition or the amount of foreign aid, rather the extent of dependency on the principles. The economic policy, which we pursue, is prescribed by the development partners or donors such as World Bank and IMF.
The recent violence [and failure to thwart foreign intervention] is because of our own weaknesses in the fields of economic and political governance, in terms of lack of transparency, accountability and good governance.
Every five year when there is time for transition of power, our political situation becomes vulnerable. It has become a practice that they [the parties] have to fall back on the shoulder of foreign forces in order to be in the power or to come back to power. This [happens] because the inner democracy within the parties is so weak that their commitment to people is not fulfilled. To come to power they commit so much but once they come to power they do not deliver. Because of lack of delivery, they do not see their future through the mandate of people.
We do not depend on the mandate of the people. We depend on either the forces within the country or a force from outside. This ultimately will defect the economy of the country. If a government is not politically strong enough, they cannot formulate their own economic policies. If you come with the stamp of external forces, then you are vulnerable to accept policies, which will be subscribed to you from external forces.
The country’s GDP growth has been steady; there has been growth in export and remittance. Despite the progress instead of adhering to its own economic policy, why is the country so much inclined on policies formulated by external forces?
That has been one of the strongest links of our economy. That not withstanding political instability in our country or the external financial crisis or natural disasters, we have been doing very well for the last few decades. During the last decade the growth rate has been about six per cent, which means we have a robust economy. Even during the financial crisis we have been able to continue the growth rate, high export and remittance. There is obviously an enabling condition within the country. But look at who contributes towards these growths.
We are more or less self-sufficient in food. We have to import less than five per cent of our food consumption. The farmers of the country are contributing to the agriculture production, in the export sector there is the large labour force contributing for the readymade garments and then the remittance income which has [achieved] record high, [were amounts remitted by] low or semi-skilled workers. The backbone of our economy is within these three sections of people.
But these cannot sustain for long. The inner strength will automatically drive you through, but then if the situation deteriorates on a continuous basis, you cannot really go too far. We have already seen the impact of these. We projected a growth rate of more than 6.7 per cent but now this year everyone has projected the growth rate will be less than six per cent.
If the political turmoil continues at this rate, we will not be able to sustain, that is clear. The inner strength will not function. That’s why political strength or democracy is very important.
As you said that the backbone of the country’s economy are the three sections of people, which is not strong enough to sustain the economy. What needs to be done to sustain the Bangladesh economy without external interference and when do you think that will happen?
Firstly, I do not think that we do not have economic sovereignty. We have more than three months of foreign exchange reserve, six months equivalent of import requirements at the moment, we are exporting and the export rate is increasing quite fast, we have become a food self-sufficient country. You do not see such progress of the economy even in many developing countries and lower middle-income countries. Since 2007-08, we have been seeing that because of the financial crisis, many countries have lagged behind, particularly the least developed countries. You have to remember Bangladesh is a least developed country but within the least developed countries Bangladesh’s performance is stellar. Its GDP growth is far above than most of the other least developed countries.
Even after incidences such as Rana Plaza and Tazreen Fashions, we are being able to increase export at a high rate. But what we need is to diversify the export sector. In many LDCs including Bangladesh most of their exports are concentrated in one product. In case of Bangladesh it is readymade garments. If you look at the African countries, they have fuel and mineral products. This means that we are quite vulnerable, in the sense that if we cannot export readymade garments, we will not have another alternative [to keep the economy rolling].
We have not been able to develop a second important export sector. The second important export sector may be leather or frozen food but in a significantly low proportion. It’s only six or seven per cent of total export revenue.
What we need is to diversify and for that you will have to create enabling conditions in terms of creating stable political situation and trade facilitation, such as, making the customs rules and procedures easy and faster at the port, reducing the bureaucratic system and corruption.
Coming back to economic sovereignty, we are pursuing our economic policy but if we want to be free of any conditions or imposition of any policies, we have to have our own political will. We have seen that during the last five years or so, the IMF has given a loan for $1 billion but in condition to many objectives they want to pursue. I do not say that all the conditions are bad, but why can we not formulate and pursue those policies as an independent country as independent policymakers? In order to pursue independent economic policy you have to reform some of the economic institutions like Bangladesh Bank, National Board of Revenue and Anti-Corruption Commission. If they are strong enough to perform their duties independently then many economic policies can be pursued.
The West, we have seen, is intervening in countries where they have certain interest. Despite the United Nations being there to resolve disputes and concerns between nations, can individual countries intervene in other sovereign nations?
No country has that right. We are living in a civilised world and we have so many treaties, which talk about independence and sovereignties of countries. Even then we see that some powers are interfering in the domestic matters of other countries. I would say that it is also the countries themselves that invite these countries to interfere in their domestic matters. It is because of sheer self-interest of the political parties or the politicians themselves.
In South Asia, Bangladesh holds a geopolitical interest as a moderate Muslim country. The powerful nations would have interest to protect the country so that there is no upsurge of fundamentalism or terrorism. But what we see rather is their interference in micromanagement of issues such as who will come to power, whether the election will be held, and in what manner, which are very day-to-day issue for a country. When a government is very weak it cannot withstand any pressure. That is what it symbolises.
The political landscape in Bangladesh has not changed even as the economy attained some of the progress. The stakes of external economies in the meanwhile have increased in terms of trade and that developed their interest in the country further. What is the way out of the domestic political crisis?
Both parties [Awami League and Bangladesh Nationalist Party] have successes and failures. In a country like Bangladesh it is difficult to deliver many promises but when they have commitments people can judge at the end of their tenure how much they have delivered. It has been discussed widely for last couple of years whether we need to change the type of our politics, whether we need to change the leadership. The politics now is limited to within the objective of taking over power. If that is the only objective then you cannot think of welfare of the people. We have leaders but we do not have statesmen. Unless and until they think of the broader interest of the country and can rise above the small interest of their own, they will not be going anywhere further.
– Interviewed by Saad Hammadi