In an article published in the December 4 issue of the Dhaka Tribune “The Economist and Lancet view on Bangladesh: What’s missing?” Hassan Zaman comments on the relative stability of GDP growth rates in Bangladesh over long periods of time. For this, he gives credit, at least partly, to the macro-stabilising stance of successive governments, and their shock-absorbing capacities, developed painstakingly over the years.
He is right. If we look at economies ravaged by instability, and sadly there are many, we would surely understand the value of such conservative brinkmanship. But is that enough? It appears that governments in Bangladesh are good at holding the economic steering wheel steady and reacting sharply to the rash driver in the next lane.
But have they been good at visualising what lies 100 miles ahead? Should the government develop an ability to push the accelerator harder while still keeping the car stable? Conservatism and reactiveness have served the country well so far.
But is it not time to develop bolder visions and take a more proactive stance? What will it take for the government to make a paradigm shift in this direction? Is there something in the conservative/reactive paradigm that the government can build on, or will this have to be a completely radical shift?
This is not to deny that there are instances where governments have indeed demonstrated long-term vision and pro-activism. As Hassan Zaman pointed out to me in a separate exchange, one could cite examples of policies which have had major long term implications, such as the industrial policy for the pharmaceutical industry enacted in the early 1980s which led to low-cost medicines and a few domestic manufactures becoming exporters, policies which gave the garments sector its early competitive advantage (bonded warehouses and back-to-back L/C), and the Conditional Cash Transfer program which raised girls’ enrollment in schools.
Dr Zaman also pointed out, in that exchange, that so-called reactive and proactive policies may also overlap. For instance, the central bank deals a lot with day-to-day issues but, as it does so, it also changes regulations, or takes decisions, mindful of the medium term outlook for the economy.
For example, its ongoing work on liberalising foreign exchange rules is driven by a long-term vision of how much more the Bangladesh economy will be integrated with the rest of the world ten years from now.
I agree with the above. However, I am not sure if there has been enough of this. First, on examples such as those cited above, it is important to distinguish between the following:
a) Policies which were not based on a long-term vision but ended up having a long-term effect
b) Policies based on a long-term vision but largely prompted by other stakeholders in society (ie government merely reacting)
c) Policies based on long-term vision and a result of government pro-activism (recognising that the line between b and c may sometimes be blurred since governments do not work in isolation)
I would argue that the policy on bonded warehouses or back-to-back L/Cs for garments epitomise type “a” while the pharmaceutical example could belong to either type “b” or type “c.” We need to know more about the history of that landmark policy to answer this question.
It is good that the central bank is now looking at foreign exchange liberalisation from a long-term perspective. But I can think of many other areas where the lack of a bold vision and proactive government action has held us back.
For example, long-term vision and pro-activism was needed 30 years ago in the area of land records modernisation (recognising then that land-related disputes will one day clog up the judicial system), 20 years ago in the case of industrial zoning (recognising then that some parts of the country were rapidly industrialising) and 10 years ago with regard to the environmental performance of the textile industry as Bangladesh was starting to ramp up backward linkage development in the RMG industry).
Towards the end of his well-written piece, Hassan Zaman writes: “Looking forward, there is no room for hubris for Bangladeshi policymakers as the challenges of maintaining, and ideally accelerating, these socio-economic gains are not straightforward.”
Indeed! And that is perhaps why a bolder approach is now required. We need not abandon the prudence of the past. In fact, the conservative, reactive stance of the past may itself have produced the ingredients of sophisticated risk-management capacities and systems in government that will enable it to take a bolder, proactive approach in future.
As someone had said, the purpose of good brakes is not to make cars stop, but to allow them to go fast! Comfortable in the knowledge that they can brake hard when needed, governments in Bangladesh should feel encouraged to drive a little faster.
