Thursday, June 23, 2005

Seven clues to the future?

What are we to make of the following events? How will they impact on the future of Bangladesh or at least its politics for the rest of the decade?

  1. The soap opera that might have gone under the banner headline "General loses a wife...... and with it goes his party ....... "
  2. The chinese oil company, CNOOC, is getting a $20 billion bid ready for UNOCAL. The boys at Chevron-Texaco are being trumped. Highly unlikely that the US polity will be too happy to have such a historic (and gas reserve) company go to its future strategic competitor. Shell suddenly announces that it is in the market for an oil company! But what if CNOOC does succeed? how will it view the gas in Bangladesh? Will it be even more gung-ho to sell it to India? Or will it do something completely different, given its hold over Myanmar?
  3. US ambassador, Harry K Thomas is apparently being promoted and can get to work more closely with Dr. Rice. Do we extend our congratulations? Perhaps. One wonders however why a renowned South Asian expert, having learned Bengali, having built up personal relationships with all power brokers in Dhaka, should leave at this most critical of times. Politics in bangladesh is taking a nasty turn. Certainly it will enter a volatile period. So why go now?
  4. A related question is: what is Nicholas Burns going to do in dhaka? We know he is coming to South Asia to push for a F-18 factory in India and more importantly play with the Group of 4 application to become permanent members of the Security Council. If he comes down hard on the iran pipeline, what will the compensation be? moreover, how does he propose to fill the void left by Harry..... where is Ms Rocca in all this?
  5. State Minister mosharraf - of KAFCO infamy &c countless other scandals - resigns over car provided by Canadian NIKO, one of the most unsuccessful Oil companies in the world. No one has yet asked the Canadian ambassador to refrain from discussing good governance while NIKO greases its way though the gas sector. Is the issue really the use of that jeep? Then most ministers would have had to say farewell by now. Do we believe ex-minister when he says he was set up? What did he do wrong? where did he mess up? did he upset TATA? Did he not realise that talking about exporting gas is political suicide for any regime? Had he not heard of Bolivia? Or did he screw up a deal? Or was his time up? Again, why be pushed right in the middle of the two biggest deals in Bangladesh's history?
  6. will there be an early election in December? Why are some people speculating about this? What is the logic? Scenario painted as: Ruling regime sees opposition in disarray, especially after collapse of Old Dictator party of Ershad. Opposition will try to spark a movement centred around electoral reform. This will not wash with ordinary people preoccupied with rising food prices and flood. Wrong issue, bad time. Regime announces resignation in September after temporary crisis created by reform campaign .... let's ask the people etc etc . Election pencilled in for December, during "old style' caretaker government set up to monitor the elections. Prominent figure in Caretaker government - prof Yunus....... Who gains from this scenario? Certainly not Ministers with unfinished "business". Certainly not small parties with hardly any candidates on the ground....... If the myanmar pipeline and TATA deals are not signed by September, then certainly not them either.... Only the BNP if they win at the polls...... Is that likely? If one were a betting man, one would say no. At best, too close to call. Of course, anti-India members of regime would not like to be around to pen any deals. Would much better prefer to delay. If they sign, then lose power in 12 months, they lose main issue. They become vulnerable to - thanks, but you are no longer needed brigade..... this could be all be just an unnecessary distraction, and we can forget it........
  7. What's all this talk of an extended Caretaker government? Now what is going to happen with that little chestnut? Answers on a postcard please since we are clueless here........... We cannot possibly believe that they might hang around for a little longer than currently mandated to complete outstanding tasks such as separation of judiciary, regulatory reform and all other activities connected to "improving the environment for business"..............

Stranger things have happened so far this millenium.

If a figure of the Frederick Forsyth mould (author making it big with "Dogs of War") is looking for some material for a paperback, he should come to Dhaka. On the other hand, he has probably got all he needs from Equatorial Guinea........

Monday, June 20, 2005

SIM cards become top priority!

The influential Centre for Policy and Dialogue (CPD) held a roundtable meeting of economists, Finance Minister and his colleagues and the obligatory donors.
They were there to discuss the budget.
Of all the quotes, the one by World Bank, Country Director, Christine Wallich is galling. She criticised the tax of SIM cards and how that would reduce "development" in the telecom sector.
So that lobbying by the four mobile operators in visiting her has worked. She has weighed in to represent the case of private companies.
It seems the rate at how mobiles are sold is really a "development" issue in one of the poorest countries of the world.
I was wrong. Big boys should cry. As long it is to the World Bank.
The mobile operators are not mentioning the smuggling of handsets into the country. They are therefore complicit in this as they benefit from cheaper handsets attracting buyers.
The finance Minister must think the world is going mad.
PS there may be something afoot as the big business houses all roundly criticise the budget.... Strange since they seem to have got what they wanted...... The budget may turn out to be more "political" than he realised.

Saturday, June 18, 2005

Why do you need christine? or Big boys shouldn't cry

The World Bank makes for an easy target. The IMF or WTO are even better. Many "activists" in co-opted NGOs earn their reputation (and money) by regularly vilifying these institutions. They do deserve their criticism, no doubt about that. But it has become a kind of industry, very similar to the Anti-Apartheid movement of the eighties.

Sometimes, the World Bank may be merely an innocent partner.
One such example is the fracas over the imposition of a $20 tax on new SIM card connections to mobile phones. The Finance Minister, 70 year old Saifur Rahman, slapped this on in his latest budget. All he has done is reduce the exact same amount of tax from mobile phone handsets and levied it on SIM cards. In other words, a new customer should see no overall difference in cost of obtaining service.
The Minister complained that 70% of handsets are smuggled and so the government never received its revenue.
The big four mobile companies are all foreign owned or have significant foreign partnership stakes. They have made a killing by ripping off customers.
Shedding crocodile tears, they have no real answer to the charge they have over-charged on call charges and unfair conditions on prepaid cards for years. It is pretty simple to compare the costs of mobile bills in neighbouring India to prove that point.
What the Finance Minister has failed to do is to provide teeth to the hopelessly out-of-their-depth telecom regulator.

The operators have been crying to the press under the guise of concern for the customer. If they were so concerned (they aren't) they would submit themselves to an audit of their pricing behaviour over the last few years. they might have to explain why prepay cards were valid for 21 days (instead of 30 days and really as now 6 months) and charges at Tk. 7 per minute or 12 cents in a country where per capita income is $450 per year! The costs of investment and network rollout is low given the low rentals, low cost of labour and the ridiculously good deal in leasing a fibre optic network from Bangladesh Rail (a government entity). The latter should renegotiate the deal and invest in making the raliway tracks safer.

It is only with the entry of the Egyptian Orascom operator that charges are at last declining. The Egyptians have done more than the rest put together in bringing down the cost of owning a mobile.
so what about the World Bank?
Well, on thursday the Operator MDs all trooped in to see Christine Wallich, country Director of the World bank to complain!
In other words, they are asking that the World Bank intervene. Let's spell it out. They would like the Bank to lean on the government of one of the poorest countries of the world to withdraw the tax!
Persuasion followed by blackmail, perhaps?
We rightfully complain that the International financial Institutions meddle too often. This is an instance of where they are being dragged into an issue that belongs in the domestic realm.
What will Christine do? I hope she thinks there are far more important matters at hand and tells the operators to fight their own battles. As the phrase goes, "big boys shouldn't cry". We shall see.

Hoo-haa about the budget

In one of the poorest countries of the world, where 80% go without basic necessities, the high and mighty find that the cost of mobile phone SIM cards is the subject that matters above all else. They can find no other pressing subjects to discuss. Here, we have to support the finance Minister when he retorts that the foreign mobile companies are fleecing customers with the highest call charges in South Asia. Indian operators charge a lot less. It shows how weak or non-existent our regulators are.
Everyman and his dog wants to comment on the budget. We feel disinclined to join the bandwagon. A budget is merely the financial mirror of an economic plan. If the economic strategy or plan is wrong, why get so worked up about the budget? Unless of course you belong to a business association and want to lobby for concessions.
By now, everyone will have said their piece and forgotten about this. Could they instead think about what strategic decisions need to be made. Once those priorities are decided, it is relatively straightforward to produce a budget.
Meanwhile, the general public can only see prices go up and the state of our infrastructure go down. In a land where at least one Taka in three is stolen, the budget is a tool for only three groups:
q Politicians to buy votes
q Big business to get benefits
q Contractors to overcharge on tenders
Oh, and economists to show us they really do know what is happening.

Tuesday, June 14, 2005

what does Vietnam mean to you?

To many North American folk, especially the 2 million war veterans, the word “Vietnam” signifies civil breakdown, shootings on campuses, GI casualties, conscription, military defeat and a loss of international prestige and blow to confidence. Today, to the Chinese, Vietnam may stand for “industrial competitor”. If you are a retired colonel in an Indian think-tank, you might look on Vietnam as a strategic ally to contain China. An American businessman going to Da Nang today may know that it was a huge military base in the sixties but is now more interested in it being the hottest East Asian hub for investment. He would be aware that in peacetime, one in five export dollars comes from American consumers.
A few weeks ago, April 30 to be precise, we may have noticed that it was the 30th anniversary of the ignominious retreat from Saigon. Who hasn’t seen the footage of the last helicopter on the last day of that long-running war starting from the forties? Two million dead, a devastated countryside strewn with mines, two generations who had known nothing but war, an infrastructure not worth mentioning and the usual post-conflict mess of liberators versus collaborators to come.

What is the view from Dhaka?
1975 was also an eventful year in relatively new Bangladesh. A flawed, non-performing democracy was shot to pieces in August starting off a fifteen year period of military rule, punctuated by over a score of coup attempts, economic stagnation and utter dependence on the aid consortium to keep the country barely ticking over. Last month, a Prime Ministerial delegation visited Vietnam, bringing the subject into focus. Comparisons have been made. They are not flattering. It would be instructive if we could look how the Vietnamese are progressing and find out where we are better or worse.

The record so far
For those first ten years, Vietnam was boycotted for political reasons. Hardly any foreign investment came in. Unfortunately, hardly came this way either. One would not be too wrong to say we were suffering an economic boycott of sorts, even though we seemed to have geo-political support.
There are 83 million Vietnamese to our 147 million, both historically belonging to rice-growing societies.
Vietnam’s per capita income stands at $542, compared to ours at just over $400. Their economic growth rate was 7.7% in 2004 and they are hoping to reach 8.5% this year. We hover just over 5% on average, looking like we could get to 5.7%. So they are go pull further ahead.
While we are finding it impossible to reach anywhere near $10 billion in exports, they are on $32billion and rising.
In 2004, Vietnam attracted $4.2 billion in foreign investment and expect to reach nearly $5 billion this year. They are gunning for another $20billion over the next five years. Bangladesh has received barely $2 billion in its entire history, the bulk of that for gas exploration in 1997. However, things may be changing.
TATA is going ahead with a $2billion investment in Bangladesh. Proposals are being made by an American energy firm – supposedly $1.5 billion, and there are hints of Arab investment of similar amounts. But in concrete terms, we have less signed and sealed foreign deals and it is not clear yet whether Bangladesh will be a “destination”.

How are we competing?
In industrial terms, we have always preferred to be a one-leg economy. For twenty years, we sang about the virtues of jute, immortalised in the phrase ”Golden Fibre”. Neglecting that sector, letting it rot in corruption and starving it of investment, we “celebrated” the closure of the largest such factory in Asia. We were not too bothered because we had replaced that leg with the one centred on garments. Now that leg looks a little wobbly (at least to foreign observers). Not to us. Even the Finance Minister was proudly recounting on TV his faith about the sector post MFA while the media was exaggerating the threats from China and India. And Vietnam. The threat is real and when the restriction on China is removed in 2008, all hell will break loose. But even if it doesn’t, for the sake of argument, how can we be so complacent? Have we not heard about the concept of diversification? Spreading the risk. And positively, one could say more “legs” mean more profits, economic growth and prosperity.
The Vietnamese have been late starters in many sectors. But they are catching up or overtaking us in every field. Why? Ignoring the political exodus of the ‘boat people’ post 1975, they had comparatively few people working abroad as economic migrants till 1999. They then got on the bandwagon of “manpower exports” and now have remittances of $2.5 billion annually. Admittedly, with economic realignment, the older Diaspora is also reinvesting in the country, especially property. The Vietnamese of Chinese origin have returned to take over the reins of business (we never had that type of entrepreneurial Diaspora). We receive double that amount, but we have had this going since 1976 and they have targeted remittances to reach $4 billion by 2010.
A similar story can be told in ready-made-garments. Starting late, they have already reached $5.2 billion exports per year, very close behind us.
Their export basket also consists of $1 billion for rice, $650 million for coffee, $1.6 billion for wood, $3 billion in footwear, $1.5 billion in electronics, $610 million in rubber. They are also looking to expand their exports of fruit and vegetables, and bicycles.
In other words, if their garments industry suffers, they have other sources of foreign exchange. If the same happens to us, we will only have our probashis to rely upon, which effectively means relying upon the stability of Saudi Arabia!
They are embarking on becoming a world-class manufacturer of motorcycles too.
Vietnam does have lots of problems. Not least environmental damage from industry, factory farming of poultry, leading to avian flu and also a sharp urban-rural divide in terms of income. They are also mired in corruption and have a massive black economy. Their state-owned enterprises lose money hand over fist.
Our clueless “civil society leaders” might ponder on this. All they can advocate is that they will or “rid us of corruption” and ensure the rule of law. What nonsense. No one wants corruption but we have to stop pretending we are going to get rid of it just like that.
Vietnam shows that an undemocratic political set up allied to a corrupt business system can still produce the goods. We are supposedly at the top of the corruption league and have an undemocratic democracy.
So what is the missing ingredient?
It is an elite that has a strategic vision and strong political will, which is then used to mobilise society. That is what is driving economic growth.
We like to spout hand-me-down prescriptions from donor agencies in endless seminars. However, if the donors and the elite in Bangladesh really want business to flourish here, our leaders are going to have to do some new thinking, open their eyes to what is happening in the region and talk some sense with their donor masters.
The donors know all this surely. So why are we still in this masquerade?

Monday, June 06, 2005

What does "'Non" and "Nee" mean to Asia?

There is a lot of froth around regarding the resounding the "no" votes to the EU constitution. In essense, this means a return to the original, smaller, Western europe project. A Franco-German alliance will gather a few countries such as Spain, (Italy only if Berlucsconi goes) and the Benelux countries. The Euro will eventually become stronger on the back of this powerful group.
British foreign policy has for centuries been all about preventing any single power becoming dominant on the european mainland. The EU could have been the worst of all nightmares since traditional competitors (French & Germans) were looking to act as one. Hence, the enthusiasm to widen the EU to include the Eastern countries, even contemplating Turkey. Being unwieldy, the "Anglo-Saxon" plan, with its very Atlantist orientation, would become a Free Trade Area, jettisoning the social contract and welfare state.
No more shorter working weeks and public transport & health systems.
That explained part of the voting. Despite the triumphalist overtones from the Murdoch owned media, that strategy went too far too soon and has been rejected. If the Eastern European countries are left out of a new "first class" carriage of the main Western economies (or otherwise known as a two-speed Europe), then those on the periphery will lose out. That includes the UK.
Of course, the Nice convention allows things to carry on as usualfor the time being. However, moves are no doubt being made to change the face of Continental politics by the next decade.
By then the US will have been in years of recession as it pays down its debt and the dollar no longer remains the world's reserve currency. Military over-extension, in the search for cheaper reliable energy supplies would add to the toll and produce a popular backlash to neo-con adverturism.
The UK is in similar danger of losing out by trying to have it both ways, while the debt-ridden economy starts to unravels within this new Parliament.

Things could get worse for them though.
Imagine a Franco-German alliance with Russia and by extension, China. In the short term, if the conservative CPD wins in Germany, that may be delayed. But ideas planted today would take five years to bear fruit by which time the Right would be voted out anyway.
The German orientation is the key. Their manufacturers may have benefitted by ditching high cost German workers for Poles at a third of the price. However, this has contributed to the worst economic crisis since the thirties. Big Business may have to return and move even higher up the value chain. Or they could go even further to the East towards Moscow.
Closer links to Russia may prove attractive in becoming top dog in Eurasia. That sets the scene for a head-on confronation (economic for sure) with the US. Russia would dearly love to sell energy at high prices to Europe, lap up German technology and investment and become a modern resurgent economy, and by extention, miltary power to be reckoned with once again. History shows that whenever Russia goes up, German power diminishes. And vice versa. But if history were so linear, no one would have predicted France and Germany working together so soon after three wars (1870 to 1945). So why rule out closer German-Russian links?
If US grand strategy is mainly about controlling Eurasia, it therefore cannot accept what it would see as European meddling. The successes of placing friendly regimes in Ukraine and the Caucusus would be short-lived.

If the US overextends or comes a cropper in Iran and Iraq, it may well be in no position to oppose. A developing vaccum would be too tempting for others to fill.
Western Europe is looking to counterbalance the 60 year dominance of Washington. It also knows that the future points to Asia. The US is peppering the Black Sea and Caspian Sea regions with bases and building pipelines. But will they be able to hold on? I doubt it.
The "Project for a New American Century" recognises the imminent rise of rival powers. Hence the rush. But recognising danger does not always mean you can avoid it.

I am expecting a sea change in five years or so. The French people may have tilted the balance of power for the next decade in ways unforeseen and for far more parochial reasons.
If the European elite can have so arrogantly got it wrong and be so out of touch with their people, why do you suppose that the US has got all so right?
Garrisoning the world does not enhance security. Riding roughshod over European sentiment means that millions are waiting for the giant to stumble.
Oh and there could be another miscalculation. Some zealots may see the No vote as an opportunity to roll back the entire EU project and remove the Euro as a threat to the dollar. If they want to bring the whole house crashing down, that is exactly what they should do. Regardless of short term strength, the days of Dollar supremacy are numbered. The Emperor has no clothes.

After the drama

Politics took a turn towards the bizarre and, true, to the media age, it was all captured on camera. While we remain fascinated by the drama of it all, there may be far more important fallout for the political scene. The Jatiyo Party of Mr. H.M. Ershad, military ruler during the eighties, had been looking like the kingmaker of any future regime. It does not garner many votes but its power comes from the concentration of those votes in particular northern constituencies. The local people are eternally grateful for the economic largesse bestowed on them from the coffers of central government. JP has been looking like they could make an impact in the next election, with the critical mass for the smaller parties and individuals to coalesce around.
The regime’s main fear is the possible formation of an Awami League-Jatiyo party alliance. The arithmetic of votes and seats look pretty frightening on paper.

Realignment?
Of course, this could now go the other way. JP could be persuaded to join up with the BNP. The union of two military-born parties makes electoral sense. They can unite on a nationalist platform, or perhaps thinly disguised anti-India platform. They can either ditch or keep the Islamic component of the alliance. The only reason to ditch the Jamaat would be to seek “the blessing” of some embassies. Sacrificing Jamaat would not be too difficult, as the Islamic forces have no other place to go to, electorally speaking. Whether in or out of any alliance, the small Islamic vote bank would have to support a BNP-Jatiyo combine.

Missing the real issues
All this speculation is fine for living room gossip and we can amuse ourselves with endless combinations and permutations. No doubt, there will be more drama ahead of us, though perhaps with a bit more dignity and poise.
This farce has to end. While this has played across the newspapers, millions in the capital have been going without water and electricity. The government has made no statement about the two crises and not shown us what they are doing about it.
While the leaders and sycophants are playing electoral politics, the people are being denied basic services. Food prices are going through the roof and will prove to be a major issue at the polls.
One has to question whether the leadership of the Big Two parties in Bangladesh have the finger on the pulse. I am not convinced. They are not doing anything that points to the contrary. The opposition has no clue on how they are going to turn the economy around while the government is diverted by electoral machinations.
If one real issue is the day-to-day struggle of its people, the other big issue is the position of Bangladesh on the global scene. As Singapore Telecom shows, there are quite a few multinationals having a peek at the potential of this 150 million strong economy (even if many are only interested in 15 million with the necessary spending power). Foreign companies and their donor colleagues are more than a little exasperated by the small-minded politics on display. They can spot an opportunity and cannot believe that the Big Two cannot get their act together. Their constant refrain is for the politicians to join Parliament, and make a show of a functioning democracy. Plus provide the stability through ombudsmen, a separate judiciary and enhanced property rights. Politicians would still be able to make money but without killing the golden goose.
This neat analysis has been played a thousand times through their sponsored seminars. The propaganda has worked since a few people seem to think this is all that is needed to reach 7% economic growth and be branded an economic tiger – and, um, provide 2 million new jobs a year, every year, and cope with 80 million people jamming the cities in ten years’ time! If it were only that simple.
What is the growing influence of foreign business and how will they push their agenda?

Out with the old and in with the New?
Are we witnessing the last few years of Old Politics? If there is another election, will it be decisive? Or will it lead to weak coalitions, falling apart at the onset of the first crisis? Whatever the combination or alliance, they will not get the true mandate of the people and will not get the basics right, once in office. After all, the politics of money dictates that the criminals need a payback after the election.
Too many people are getting carried away with the election cycle and are likely to be mightily disappointed with any new administration. Surely we are not expecting the same ageing political leaders to suddenly change and provide mature leadership? Their track record suggest otherwise, even if they have memorised the words to the song “Good Governance”………..
All the current talk of a national consensus seems hollow given that no “Big Idea” is being offered and the proponents are all from the old school. We do need unity and we do need direction. But where will it come from?
Something has to give.

Monday, May 23, 2005

should India do more business than politics with Bangladesh?

Indian Big Business may be at odds with the traditional approach of its political leaders towards Bangladesh. Could this herald a sea change in the way the two foreign establishments interact? Or is this merely a temporary smokescreen, a phoney entente cordiale, to sign some deals before reverting to the ‘normal’ adversarial state of affairs? As it is, border clashes and the erection of a fence are raising the temperature. This ham-fisted policy may be populist but will be ineffective. It provides yet another exploitable issue. Against this background, is Big Business telling the External Affairs Ministry to “cool it” and smooth the ruffled feathers of its neighbour? Is that one reason why India is suddenly anxious to come to the SAARC summit?
The conventional view holds that relations were somehow better under the current opposition, rather than the present regime. If one ignores the posturing, it can be argued that it is actually the other way round. After all, the big industrial and energy deals are closer to fruition under the present government. There may have been more empathy with the previous government, for historical reasons, but hard business negotiations are more likely to lead to actual signatures on agreements under this administration. In other words, is it possible that, politically, relations are at an all-time low but that, in terms of business, relations are the warmest for a generation? Can this dichotomy continue? “Big Business” India operates under its own steam and may not always work in tandem with its foreign ministry.

Friends again, for now?
Somewhat surprisingly, given the controversy over gas, the Bangladeshi government has been able to agree in principle with the Indian and Myanmar governments to a pipeline to transport gas from Myanmar to India, via Bangladeshi territory. The agreement has not been signed yet and border casualties and perceived sleight, on both sides, can still scupper the deal.
Moreover, TATA Steel has just completed its feasibility study on setting up a 2.4 million tonne steel plant, and power & fertiliser complex in NW Bangladesh. This 100-year-old company is taking a $2 billion gamble that it will be able to utilise Bangladesh’s gas or coal for over a decade to produce low cost steel flat slabs. TATA will not be making this decision lightly and must have made a long-term forecast. It no doubt expects stability in fuel supply and an export exit for its steel products for years to come.
Indian Big Business therefore will have two enormous stakes in seeing a stable relationship between India and Bangladesh. The resurgent economy of West Bengal will be the prime beneficiary of the gas pipeline and will not want any disruption to supply.
Thus, one could say, India’s politicians are temporarily being forced to look for a more amicable state of affairs to ensure that its economy can move forward.

One-off or more to come?
At present, no further Indian investment proposals are officially in the pipeline. TATA Steel is aiming to be a 15 million tonnes producer by 2010 and planning a 6 million tonne project in iron-ore rich Orissa. The 420,000 tonne Bangladesh project may be the biggest industrial venture of all time in Dhaka, but is dwarfed in comparison. Since steel production is an energy intensive operation, cynics may see this as merely a clever way of sidestepping the issue of gas export from Bangladesh. If the gas won’t come to us, we will come over instead. Perhaps.
So what will it take for India’s major conglomerates to take a different slant on the investment climate in Bangladesh?
Apparently, Reliance has seriously considered entering the booming Telecom market in Bangladesh. Is it inconceivable that it, or its competitors, might follow Egypt’s Orascom Telecom in buying into this sector? A clutch of private fixed line licenses has been dished out. Hardware equipment supply agreements were signed with the Chinese, during Prime Minister Wen Jinbao’s recent visit. Is it impossible that some experienced Indian Telecom Operators would be invited to transform Bangladesh’s expensive call market into the low cost mass-market Indian equivalent?
Agro-processing is another potential sector. The abundance of sugar, jute, rice and vegetables might suggest a ready supply in the minds of some entrepreneurs. Finally, there is the issue of ‘transhipment’, i.e. using Bangladesh’s road and rail infrastructure to move goods and services to the almost land-locked Northeastern states. Would India merely utilise the dilapidated infrastructure, weakening it further? Or would it be prepared to invest in the highways and rail-track needed to handle such volumes of traffic?
It will be fascinating to see whether “Political-India” or “Big-Business-India” prevails in setting the parameters.

Wednesday, May 18, 2005

Why economists should look back to 1964

In 1964, in undivided Pakistan, the then dictator of West and East Pakistan, General Ayub Khan began a dialogue with the leading economists of the eastern wing. History tells us that East Pakistan became an independent nation seven years later. But that was all far away and unthinkable at the time. Ayub Khan had grabbed power in 1958 at the height of the Cold War. Needless to say he made Pakistan one of the most loyal allies of the USA and was in supreme confidence. A sparkling new capital, called Islamabad, was created in the middle of nowhere. The export dollars from East Pakistani jute were ploughed into industries in the Western wing. East Bengal or Pakistan was relegated to the status of a farm. A hinterland with useful cash-crop farmers and grain producers. The traditional link of East Bengal’s rural economy to the centre of India’s industry in West Bengal had been broken in 1947 with the departure of the British.
Now, the plan was for West Pakistan to become industrialised and take the place of West Bengal. The economic relationship or exploitation was shifted a thousand miles to the west. Things were stirring in Dhaka or Dacca, as it was then known. The Language movement had not died down from the massacre of 1952. The middle class Bengali saw there was a glass ceiling to advancement in the professions and business. The intellectuals had cottoned on to the economic injustice in this neo-colonialist structure. They wanted a better deal.
Bengali economists therefore were at the vanguard of this thinking by default. It was their specialisation. They were supposed to understand how this all worked. In those days, lawyers monopolised politics. They didn’t have strong links to business or finance. Development planning was in vogue all round the world, even in Western Europe. Economics was still unscarred by its failures in the 1970s. Most Third World countries still had hopes of a prosperous future.
It was against this background that Ayub Khan decided that he needed the cooperation of Bengali economists in his strategic thinking. He wanted to meet the leading economists on an individual basis, influence a handful of them and use them as spokesmen for the current economic policy. He met an unusual wall of resistance from the then ‘East Pakistani Economic Association’ who would meet as one or not at all. Divide and rule did not work. Reluctantly, Ayub Khan went ahead and met them. The economists united on one point: each wing of the country would develop its economy on the basis of the resources present within each province or wing. In other words, East Pakistan would use it resources to invest in East Pakistan. The same would go for the West.
The logic was simple. But it wasn’t too simple. The implication was devastating to the existing political set-up. No longer could resources be siphoned out from the East to feed the West. If each wing were economically autonomous, then there would be an inevitable move to political autonomy. Looser links would then weaken the overall political entity and could even lead to ‘secession’. The economists were therefore indirectly talking politics. Geo-politics.
An attempt was made to move the debate to less contentious issues but the economists refused to discuss any other matters until this vital issue was resolved.
This success in nationalist terms then turned into failure several years later. This had been a massive breakthrough in consciousness in the mid 1960s. It could have then led Bengali nationalist economists to produce a coherent economic plan and vision. Politicians would then have known what kind of society and economy was in store for them. The leadership would have been ready not just for an autonomous province but an independent country or state.
We now know that across the board the leaders of the new nation of Bangladesh were unprepared to lead 75 million people to prosperity. The debate had remained confined to the politics of identity and language. Slogans about self-reliance were not backed by concrete plans on how this would be implemented. The major sectors such as agriculture and land, water, education, health and industrialisation were untouched. The movement had not been made aware of what needed to be done. Moreover, it was preoccupied with the (then) seemingly impossible task of liberation. Economics could wait.
Of course, it couldn’t. After liberation, some economists did tell the new leaders in clear and graphic terms about radical economic changes needed but by then the politicians were not prepared to listen. More than forty years later, the number of people living below the poverty line today is equal to the entire population in 1971. Kind words from donor agencies about ‘successful indicators’ cannot mask the failure to provide the very basics in literacy, health, jobs and security to the people. The propaganda won’t wash anymore. Now there is no visible over-arching enemy to aim for. There is no single, external exploiter to justifiably blame out troubles on. The problem lies within our borders.