2017, in all its grace, has been quite an eventful year for Bangladesh. Throughout the year, various events took place that rattled the country economically, financially, and socially.
The massive flash floods starting in late March inundated much of the low-lying northeastern Haor (wetlands) basins, causing severe crop and livestock damage. The calamity ruthlessly devoured a mammoth share of the year’s yield of rice crop, especially the ‘Boro’ kind -- around 20 lakh tons.
The sharp drop in supply hence propelled the price of rice sky-high, its value surging to Tk53 per kilo in September in comparison to Tk35 a year earlier. This hike sparked an upward trend in food inflation that had doubled by March, and reportedly hit a peak in September at almost 8%.
A food crisis emerged. Consequentially, the government had to take measures to relax import duties and reportedly imported more than 200,000 tons of rice from various countries in the latter half of 2017. The price of onions also experienced a temporary hike as was being sold at as high as Tk140 per kilo.
The Rohingya influx
By December, almost 700,00 Rohingya had fled to Bangladesh from Myanmar. While humanitarian aid has graciously been provided by various local and international agencies, the lion’s share of operational responsibility on Bangladesh has taken a toll on the economy.
Tourism in Cox’s Bazar is experiencing friction, forest resources are under pressure, and transport costs and prices of essentials in surrounding areas have shot up. Human trafficking around the camps is also becoming a major concern. The gravity of the situation is likely to ease up now that Bangladesh and Myanmar have finally reached an agreement for Rohingya repatriation starting from January 22.
Remittance inflow, the second largest earnings in foreign currency for, has been facing a gradual deceleration over the past few years. Regardless of the increasing count of manpower being sent abroad, a 0.89% dip in remittance inflow in comparison to previous year has been reported. This reflects an estimated earnings of $13.5 billion in comparison to $13.61bn in 2016, which, at that time, was the lowest in five years according to Central Bank.
Our economy has remained impressively resilient in the face of the assorted nature of challenges over the year.
GDP growth has been surpassed and maintained above 7%, a feat achieved by very few nations at the moment. Per capita income increased, and inflation remains contained despite hike in food prices, owing to an overall drop in inflation of non-food items. Poverty rates, although rattled mildly, has yet managed to remain positive.
Remarkable improvements have been witnessed in the ICT sector. A staggering $800m has flowed in through the sector’s exports this year, with a promising and achievable short-term target pinned at $1bn as claimed by the ICT division. While we also witnessed the emergency helpline 999 being launched countrywide.
Moreover, the government has expressed plans to launch 28 IT parks throughout the country, and even set up over 1,000 WiFi hotspots all over Bangladesh. Such development measures spur the hope of generating around 2 million IT jobs in the sector by 2021.
The general grit of Bangladesh has not stayed unnoticed. The UN’s World Economic Situation and Prospects 2018 Report has mentioned the outlook of Bangladeshi economy as promising, backed by the continuing robust growth.
A grim reality
The prospects of our economy is subject to a degree of efficiency and concentration with which our resources are to be utilised, better known as Total Factor Productivity (TFP). Contributions from private, public, and multilateral organisations -- from both the local and international frontiers -- is incredibly vital in this scenario.
The Bangladesh Development Update Report by the World Bank emphasised factors such infrastructure, human capital, openness, institutions, financial development, capital intensity/deepening, geography, and competition as the major drivers of economic growth for a developing country like Bangladesh, with innovation and R&D acting as catalyst bonuses.
Despite immense projects being undertaken in the ICT sector to promote technology and innovation, and Padma Bridge, Payra Seaport, Rooppur Nuclear Plant, and Rampal Power Plant in the transport and energy sectors, the presence of deeply-embedded ambiguity and fatigue in our core institutional governance is acting as a strong hindrance to sustainable growth.
Undesirable developments in the banking sector and chaos in the Supreme Court has put Bangladesh in an embarrassing situation and revealed cracks in overall capacity management. Transparency International Bangladesh has asserted that a “dual control system” managed by the Law Ministry and Supreme Court generates roadblocks in front of legal processing and causes uncertainty in maintaining compliance.
In addition to corruption, the tendency of making prompt and non-inclusive decisions on major policy changes also act as an obstruction to business. Take the non-implementation of the new VAT law for instance -- complex planning and investments go under progress following major fiscal decisions. Hence, when sudden significant policy reversals occur, it results in adverse effects on the operational efficiency of trade and investments as a whole.
The perpetual role of regulatory ambiguity is painted throughout the system in various degrees. Data obscurity, weak grievance mechanism, and unreliability of discretionary enforcements, all reflect embedded political risks and institutional vulnerability. Bangladesh has dropped a rank down in the Global Entrepreneurship Index (GEI), securing the 134th slot out of 137 countries covered, and ranking the lowest in Asia.
On the parameters of ease of doing business, we are placed at 177 out of 190 economies, reportedly owing to operational and financial complications while applying for initial licenses and permits.
These rankings alone speak volumes regarding our legal scenario. As we proceed into 2018, it is high time the authorities started deeply examining and correcting such imperfections.
Bangladesh hosts incredible potential for economic prosperity and rise in international competitiveness, but we cannot simply rely on the positive statistics while ignoring the dark side of the moon.
The longer regulatory imperfections are ignored, the more damage it will create, leaving no guarantee that the country would be able to manage even half as efficiently as now in the event of another flooding or another refugee influx.
Mamun Rashid is a leading economic analyst.