Beyond the Lines | Being Bangladesh: Hasina and The Heart of the Matter
Despite the economic woes, power crisis and unemployment, Sheikh Hasina isn’t on shaky ground
Molotov Cocktail Democracy
Ten years is a long time in the history of a nation. Around November 2013, sitting in the lounge of a hotel in Dhaka’s Gulshan Avenue, with the Bangladesh elections a few months away, I remember the anxieties on the faces of my local friends in the city about the upcoming polls. The elections that followed confirmed their worst fears in a forest fire of violence fanned by two warring national parties. Elections between the two national parties — Awami League and the Bangladesh Nationalist Party (BNP) — resulted in the worst election violence in Bangladesh’s history.
In 2014, hooligans carried out systematic bombings on religious minorities, singling out the minority Hindu community, who traditionally voted for the Awami League. The Opposition demanded the appointment of a neutral caretaker government system to oversee elections — a practice the ruling Awami League had abolished. Violence continued unabated in the elections. In Bogra, a BNP stronghold and a proud, landmark town of ferocious fighting during Bangladesh’s liberation war of 1971, political protesters engaged in a different kind of war — attacking polling booths at a number of locations using Molotov cocktails. Both parties tore into each other that election year, making 2014 a year of bloodshed.
The decade: Stability, growth and questions
Ten years later, the typhoon has long faded. Awami League is fully in charge of the country, having methodically dismantled and invisibilised the electoral influence of Khaleda Zia and her party, BNP, over the years. 2014 is a distant memory. The decade registered consistent economic growth along with an increase in per capita income and low inflation. Exports flourished led by the RMG sector that accounted for over 80 percent of it and became the flagship sector. As exports flourished, the cushion of dollar reserves grew. A good employment rate and dipping poverty levels made for favourable social indicators. Political stability gave it leverage in an unstable subcontinent.
With political stability in place, conversations for investors into Bangladesh focussed on parameters of policy efficacy, degrees of corruption, businessman-politician nexus, tricky corporate governance issues, fading of radicalised political entities, contractual sanctity, infrastructure issues, etc. These were expected investment-related questions in a regular, stable, developing economy. That was until mid-2022.
2022: The Disrupter
What has changed since then and why is it relevant today? Let’s examine. Bangladesh’s economic growth has traditionally relied on exports and remittances. This also increased its exposure to global events.
Last year, global uncertainties, a weak European market, and the war in Ukraine impacted Bangladesh, disrupted global orders in the RMG sector, and increased the prices of essential commodities. Food and fuel prices rose significantly in the global market. Energy prices hit shipping and import costs of goods. Weak orders unsettled the RMG industry in Bangladesh. A global economic slowdown and rising inflation in the US meant that the RMG sector — the very soul of Bangladesh’s growth story was not registering the windfall exports of previous years. Bangladesh is an energy importer. Increase in energy import costs affected its diminishing foreign currency reserves. The power crisis involving several blackouts in Dhaka, which added to the ire of citizens. Bangladesh is also slated to receive a $4.5 billion support package from the IMF to stabilise its economy. Suddenly, there was talk that Bangladesh would go the Sri Lanka way.
Bangladeshi Banks: Build, Borrow, Bust
An authoritarian democracy has its advantages of stability and growth but the downside allegation of crony corruption has dogged Bangladesh’s fragile banking sector which was beset with burgeoning NPLs and irregularities. Given the political-businessman nexus, embezzlement of funds, influential appointments to boards, and concentration of large loans with little borrower diligence marred governance and made the banking sector vulnerable. Today, Bangladesh has more banks than required for the volume of business transacted.
Eleven banks in Bangladesh collectively faced a capital shortfall of Tk 32,606 crore in September 2022, which highlighted their fragile health caused by years of irregularities. In four years from 2018 to 2022, the NPL of banks has risen 1.5 times. The Bangladesh central bank gave a special loan to the Islami Bank Bangladesh Limited (IBBL) — the largest Islamic bank in the country — after they faced a liquidity crisis and failed to maintain the required cash reserve ratio.
Recently, the mushrooming issues came to a head when citizens panicked after rumours of a liquidity crisis spread. That led people to withdraw BD Taka 500 billion from banks. Prime minister Sheikh Hasina had to issue a frantic statement assuring the public that their money was safe.
Political Outcome of an Economic Crisis
In the midst of a ballooning economic crisis, issues of kickbacks, politician nexus, and reputational governance became more noticeable amongst investors and incoming firms that have, for long, reviewed operational factors closely while investing and working with local partners in Bangladesh.
Sensing a slim political opening, unlike in previous lead-ups to elections, the opposition BNP exploited the opportunity in late 2022. The opposition seemed to have finally got the timing right, since Bangladesh is expected to go to polls in January 2024.
As price rise hit the common man, public frustration began to grow and protest rallies gathered more support, though the opposition had no particular solution to offer on the waning economy. Taking advantage of the overall public dissatisfaction towards the government, the BNP led opposition took to the streets in late 2022, putting pressure on the government.
The recent issues seemed to have pushed the ruling party out of its stupor, which it got into, especially because of its long, unchallenged rule. Given that the country may no longer have discussions around violence alone and eventually its economic governance scorecard — which ironically has led to a more aware electorate now than in 2014 — might eventually be one of the key factors on how her government is judged, she would need to address these sticky issues before the elections in 2024. This is also a wake-up call to the government to address challenges that will continue to bob up their heads post the elections. People often ask if Bangladesh will remain stable. I believe the country under Awami League will continue to be stable — but for Bangladesh to attract more international business and receive global acknowledgement of good governance in her fifth term (assuming Awami League is returned to power early next year), there are certain functional changes that would need to be made.
What could happen? Banks, RMG, Logistics…
The banking sector will need to be streamlined to ringfence greater disasters. Too many arbitrary appointments, frequent political influence, etc, have affected corporate governance in banks leading to high NPLs. Arresting the slide should be the concern of the government over the next 5 years. As Salehuddin Ahmed, a former governor of Bangladesh Bank says about the IMF loan linked banking reforms, “these reforms should not be just for the loan. They need political will. And these must be done for the sake of the country.”
In order for the RMG industry to achieve its next stage of growth — which is growth along with stability — it would need to diversify its client base and sophisticate its offering by incorporating the demands of a global economy that is increasingly conscious of climate change. The industry would need to channelize its offering towards developing sustainable and climate-neutral products. The government’s focus on necessary R&D would be a boost in this regard. Bangladesh will need to enhance its logistics and e-commerce infrastructure to expand its apparel industry. A senior Bangladeshi journalist says that lessons from the adversity arriving from declining global orders are proving to be a boon. Domestic firms such as Beximco and Smartex expanded their business in local markets, which helped address previously cancelled global orders. Besides, a booming e-commerce platform is helping with order turnarounds and volumes.
On the development side, logistics has been a major focus point of the government and the infrastructure projects under development would boost the economy. Economists say that infra projects underway could boost GDP growth by about 1.5-2 percent. The high profile 6.15-km-long Padma Multipurpose Bridge, and the work on Bangladesh’s first deep-sea port, the Matabari development, expected to be functional by 2025, are examples of development that Sheikh Hasina is likely to showcase before the elections. Issues of reputation however will remain a long-term niggle for her if those are replaced by the rhetoric of nationalism alone. For instance, after the World Bank withdrew from the Padma project citing corruption of government officials, Hasina self-funded the project and highlighted it as a symbol of national pride. In the coming years, for Bangladesh to take the next step as a developing nation, reputational issues of corruption built on political-business cronyism would need to be addressed.
Questions before the Gonotontro: Development and Democracy?
As the country gears up for a pre-election year, the Opposition may need less use of Molotov cocktails and more use of a heady cocktail of difficult questions instead, given the government had a tough 2022. A rejuvenated Opposition may have the questions but does it have the influence to swing votes? A political analyst in Dhaka says that the Opposition can put together a story but doesn’t have enough credibility or buy-in to make the story work. And despite the economic woes, power crisis and unemployment, Sheikh Hasina isn’t on shaky ground.
In developing nations, votes are often won by influence and math rather than issues and economics. Sheikh Hasina has the influence but will need to address the imperfections and imbalances to stabilise business governance and the economy, and help the country to advance from UN designated LDC (Least Development Country) to a developing country group by 2026. As someone who prioritises development over democracy, Sheikh Hasina’s development-led authoritarian democracy has been one of the few encouraging beacons of political stability and business growth in a volatile region.
The writer is the author of ‘Watershed 1967: India’s Forgotten Victory over China’. His fortnightly column for FirstPost — ‘Beyond The Lines’ — covers military history, strategic issues, international affairs and policy-business challenges. Views expressed are personal. Tweets @iProbal
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