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Bangladesh and its powerful allies

2022 will be a difficult year for American-Bangladesh political relationships

Update : 22 Mar 2022, 10:31 AM

This is the third of the major international relationships that Bangladesh will deal with in 2022. The relationship with the United States is complicated and elsewhere I discussed this at some length. 

In 2022, the situation is something like this: There are moderate economic ties based on trade and limited foreign direct investment. There is a strong but limited USAID program that focuses on key development areas but no infrastructure financing. Bangladesh is currently not eligible for those programs that provide funding of budget support and infrastructure. 

The most important economic relations revolve around the RMG sector as the United States, along with the EU, are the two largest importers of RMG products. This area has involved issues with respect to labour rights and safety measures. These are areas of moderate disputes with Bangladesh resisting excessive and often unrealistic demands by the buyer’s diplomats. We will return to the overall picture of the economic relations later, here the very delicate issues of views on governance are briefly discussed.

A propensity to create disorder

I have observed and learned from many discussions over the years that the political and civil service leadership believe that there is, under the surface of Bangladesh society, a propensity to create disorder, as non-negotiable positions are taken and it often proves very difficult to reach a compromise. Issues that seem settled flare up again and again. 

This is not the behaviour of any particular party but the outcome of the socialization process of most families and schools. Along with this is a history of great poverty: The population of Bangladesh was largely rural during British rule and the area was on the fringe of the core areas of Bengali culture. 

The poverty meant many families were always on the edge of disaster. Defending assets and gaining financial advantage were critical to survival. These conditions continued during Pakistan times when growth and investment were concentrated in [then] West Pakistan. A cruel and bitter War for Liberation left Bangladesh shattered by the violence. 

The sense that the society lives on the margin of disorder is a realistic appraisal of the condition of the population. This belief became and remained a force driving the bureaucratic systems to maintain control, fearful of the chaos undisciplined political competition would produce. Thus were created political beliefs and a must-win philosophy that has resulted in the system that exists today. 

Whether this view of the beliefs of the civil service is correct -- I leave to the reader to decide. 

This approach to governance is often much criticized by foreign observers who do not bring the same concern and fear of disorder that the local bureaucratic systems fear so greatly. 

For example, I believe it is probably impossible for the Bangladesh economy to operate without considerable corruption. Those who believe that corruption can be significantly reduced do not grasp the forces at play in the day-to-day functioning of the economy and the government. 

It is also true that uncontrolled freedom of the media leads to false claims and accusations that make cooperation in governance difficult. Exit of an unsuccessful firm is never managed in an orderly way. Elections are never lost but only stolen. Insults and false accusations abound. Simple rules of behaviour essential for democracies are hard to establish in Bangladesh. With the growth of social media where there is unlimited room for false facts, insults, and invented accusations, even an experienced democracy such as the United States finds itself troubled. 

Current and historical conditions of the society are found unacceptable by Western democracies, leading to plenty of room for misunderstanding. Bangladesh seeks to achieve a rapid pace of development which requires that public order be maintained. The United States plays its role as promoter of the classic ideal of democracy while recognizing China as an enemy with the capacity to displace American economic and political leadership. 

The forces at work here are powerful and the outcome of their interactions unpredictable. In 2022, the United States will be more focused on China’s role in Bangladesh but will review the quality of democracy as a signal of which side Bangladesh is on. 

The economy is another story

The United States runs a very large trade and current account deficit with Bangladesh: In 2020/21 the US current account deficit was $7.8 billion. This was largely made up by the trade and services deficit of $4.8 bn [exports from Bangladesh $7.9 bn and exports from the US to Bangladesh $3.1 bn]. In addition there is a net outflow of interest and profit income of $0.6 bn and net outflow of remittance to Bangladesh of $3.6 bn. The inflow of new capital was $2.6 bn. 

[All of these numbers are from the Bangladesh Bank’s report on the balance of payments with the United States for 2020/21. In determining the capital inflow I have omitted the capital outflow from Bangladesh to the Federal Reserve where foreign exchange reserves are kept and the trade credits which cover the difference in timing of exports and receipt of payment.] 

The Bangladesh economy benefits tremendously from this current account surplus. This increases the Bangladesh economy by about $24 bn. The capital inflow is small. 

While India and China reduce the size of the Bangladesh economy due to large exports to Bangladesh and very small imports from Bangladesh, India has large remittances from Bangladesh while the United States sends significant remittance volume to Bangladesh. My estimate is that India and China together cause the Bangladesh economy to be $36bn smaller while the US increases the Bangladesh economy by $24 bn. 

The Bangladesh and US military establishments have had a close relationship over the years. Training and some equipment sales have characterized the boundaries. There has been cooperation in natural disasters. Notably the cyclone in 1991 and the storm Sidr where the US military provided major support through distribution of food and water. 

There is a large flow of immigrants to the United States and the children of some of these immigrants are very successful in American life. America’s multicultural society is benefitting from the substantial number of Bangladesh immigrants who have found an outlet where talent and work are the keys to success. Thousands of Bangladeshi students attend university in the United States. 

In 2022, Bangladesh has a limited relationship with China based on one way trade and a significant inflow of capital. With respect to India, the long cultural ties are fraying. Religious ties are growing worse. Few Bangladeshis are interested in living in China and only Hindus would go to India. But given the opportunity, most Bangladeshis would go to the United States to live. The thirst for freedom and for a society that rewards work and good behaviour is unquenchable. 

I conclude that 2022 will be a difficult year for American-Bangladesh political relationships. The complex growing political confrontation and the important economic relation from a confusing stew.

Forrest Cookson is an economist who has served as the first president of AmCham and has been a consultant for the Bangladesh Bureau of Statistics. This article is the third of four and is an expansion of an article “Prospects for Bangladesh 2022” published in the AmCham Journal October – December 2021.

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