Saturday, April 30, 2005

Will the UKay be OK after the election?

The UK general election now enters the final straight. Consensus forecasts expect a 80 seat majority and a return of the Blair-Brown team. Since campaigns are so regimented and risk-free, barring a Madrid 3/11 incident, no one will be surprised if on Friday May 6th they awake to a "I-feel-humble but grateful" speech from Mr. T.
Expect to hear a lot of cheering if instead there is a late swing or low turnout that reduces the majority to only 20. Unlikely? Yes but would it not be just? That famous 'bloody nose'. Despite the access to information, the electorate seems remarkably un-informed. Perhaps it takes time for them to accept new realities.
The debt and housing troubles are about to start. Hence the timing of this election. If the election had been held in 2006, then things could have been different. But it isn't next year, it's now .
So the worst "Tony" can expect is see the already written victory speech drastically re-edited on thursday night, becoming "I hear the British people loud and clear. I will therefore not see out the whole of this term...and I am truly humbled.". But he will remain PM next week, next year and the year after that.

Whatever the size of the majority, there will be a host of New Labour aspirants who will be worried about their future. Will they be the "right-man-ten-years-too-late-Michael Portillo" of the Labour Party?
Is 2005 for New Labour what 1992 was for the Tories?
Then, the grey now-forgotten Prime Minister John Major was at the helm of an economy deep in recession. In this cycle, it may be a year or so before it begins. Unlike the US system, the British Prime Minister can choose the date of the election. It is being called over a year early. Why? With a three-figure majority in Parliament and no new Big Idea, there is no urgent need to seek a fresh mandate from the people. It is a case of "cut and run".
The economic figures so far in 2005 bear out all the worst fears of the administration. Retail sales are down as consumers realise they are heavily indebted. House prices are on the wobble and also on the way down. How far, no one knows but the go-go years are definitely over.
So whoever wins and by how much, Blair (& equally responsible Brown) will be handing over a poisoned chalice to the next generation of New Labour hopefuls.

The 2005 election to date has been dull in the extreme. In fact, extreme is probably the right word to describe a Tory Party which has nowhere else to go. After all, the economic philosophy is shared by both major parties. They can only spin out a yarn that they are radically different from each other. In economic management terms, we have seen 'coalition government" for about 15 years.
But with race (it's not about immigration) the Tories have shown they are capable of crossing a bridge too far.
It will be to no avail. This time round, only the Liberal-Democrats could have benefitted. Unfortunately for them, they seem to lack the ambition and (probably) will miss the opportunity. The Tory Party should soon be searching for a new leader and will accept their status as the "blue-embittered-little-england" look alike of the UK Independence Party. Depending on their performance, perhaps they will even merge with UKIP.

What about the legacy?
The New Labour project will not be reviled because it will not even be remembered. How many people remember Y2K or the e-economy or dot-com? As they are fast fading from our collective conscienceness so will the Third Way ideal. In fact, when do you last hear about the Third Way? Ten years from now, we will still recollect that a certain Margaret Thatcher set us all off on a crusade. Hated, seldom liked, she was nevertheless respected. That was indeed a kind of revolution. Its impact is being felt in the Third World today as state entities become privatised and free markets spread globally.
New Labour stole her ideas but will always remain "the Pretender".
The next New Labour government will be in a state of permanent crisis. The inevitable housing collapse will hit the consumer-driver economy for six from 2006 onwards. The downturn will last for the rest of the decade. US Federal Reserve's Alan Greenspan cannot build another global credit bubble to get us out of this one. By 2008, expect to see another "once-a-generation-sterling-crisis". At the same times as the bubble bursts, investors will no longer perceive sterling as a petro-currency as the decline in North Sea oil production coincides with Britain becoming a net oil importer. Technically this point was reached in 2004, but the gap between production and import will widen significantly and be noticeable.
Once again (as in the early 90s), tens of thousands of supposedly wealthy Britons will be forced to sell their holiday homes in Spain and Greece. Even some of the more expensive French properties may go too.
We should keep an eye on what the big financial institutions do. After all, the London Economy is supposed to reach as far as Northern England's humberside. Will the City permanently shed 50,000 more jobs under cover of this gloomy environment? Will they see this a chance to export jobs to India in the higher value back office occupations of research? A lot of money shuffling activity in the second decade of this century may no longer occur in London, staffed by commuters from Essex or the Home Counties. In other words, though the City always culls, as its profits go down and hires new blood a few years later, will they fire but forget to hire this time?
These scenarios have been prematurely predicted before but now telecommunications, the Internet and a ready supply of educated Asian graduates has made this possible. Change may always be technically possible but it takes a decade or more for it to become normal. We have now passed most of that decade. The historic shift of manufacturing industry to Asia is now an expected fact but also seemed impossible in the seventies. Replaced by a high-value services industry (it was not all about Big-Macs!), society was cushioned and was able to enjoy another bout of prosperity. There were casualities as many manual workers were not able to adapt, but the majority did not notice.
The Finance Minister, Gordon Brown, did state recently that the big challenge is the inevitable rise of China and India. This is what would expect to hear in an intelligent election campaign. Of course, this is the last thing any one wants. This debate will only come once a crisis knocks out the collective complacency and people can think the unthinkable.
Still, London will remain a financial centre for years to come> They will have the front office but need less employees as they shift the back office abroad. There will also be inward foreign purchases of property - domestic prices will dip by 30% while sterling's drop will account for another 20%. It will be very cheap if you hold yen, yuan or Swiss Francs.

It will be a different picture for "Middle England". So dramatic, that it could change the face of British Politics.

Is the future black?
In the election of 2010, the result should be a minority government. With the implosion of New Labour, will come a series of unstable party coalitions. There will be no overriding project, not even a european vision, that will be able to take centre stage. Old Labour will never return since it was based on manufacturing labour - the original working class. That "description" ceased to exist years ago. New fads such as Respect will go by the wayside and never enter the mainstream. The Right will always be there but remain a minority magnet for Little England and never reclaim the "natural government" of the Conservative Party. Possibly, regionalism will be the likely beneficiary of this vacuum.

Most of this week, we will have our eyes on the election of 2005. In the minds of the ambitious, the next campaign starts on Friday, May 6th. A British Prime Minister once said "a week is a long time in politics". How right he was.

Thursday, April 28, 2005

Border troubles

Can a fence stop migration that easily? One doubts it. Desperate people want out and will look for greener pastures. They need to survive. The border security forces are jumpy. Innocent people are getting killed. The siuation is still in relative control, as this is not new. Nevertheless, it calls for cool heads and a look at the big future. It is exploitable for cheap political gestures.
Solution lies not in short term populist gestures to placate an "anxious" electorate but in getting the economy of Bangladesh, especially of the rural areas, to grow and provide jobs. That should be the medium term aim for both governments and the basis for cooperation.

Sunday, April 24, 2005

Clean for only 15 days!

The Dhaka City Corporation is in the middle of a 15-day cleanliness drive. On top of the 7,000 regular cleaners, they have hired another 5,000 to work in the morning for three hours. When asked, residents have stated the obvious that they want a clean city for 365 days, not a couple of weeks. The authorities say they are trying to educate the public to use dustbins etc. However, the idea of civic sense will disappear within a month.
How much would it cost to keep this extra workforce employed for the whole year? A half a day’s labour costs around 1 euro ($1.3). That translates to E30 a month or about E350 a year. So 5,000 extra part-time workers would need a budget of E1.7 million or US$2.3Million per year. After all that wastage of money on “beautification”, do we really believe that the City cannot manage to find just over $2million to keep the capital clean? If there are any donors reading, think about this one. From cleanliness, we can move to mosquito control (very similar work) and restore civic pride and produce a decent environment to live and work.

Wednesday, April 20, 2005

The small investor screams as prices go down!

A group of vociferous small investors protested at the decline in the Dhaka Stock Exchange. They have seen a drop of about 15% in the value of their portfolio. Part of the reason is that lots of shares were purchased before companies declared dividends. Now that they have collected their dividends, those same "investors" have sold off the shares.
The DSE stock market casino is reputedly rigged by a select group of traders, manipulating prices and creating artificial booms. It has very little to do with good solid companies raising finance for capital investment to expand capacity and create jobs. Ignorance and greed prevail. We have not reached the mania of 1996 when the index reached 4,000. We are now at 1,750, having jumped from 1100 in less than twelve months.
Nevertheless, a significant number of savers in old Dhaka are going to be mightily disappointed. They will have to grin and bear it. Similar protests have occured in the Karachi Stock exchange, where there has been a much bigger boom and drop.
As they say, "only for the brave. Not for widows and orphans".

IMF are back to their old tricks again

Interest rates are on their way up. The banks are being squeezed by the central bank, Bangladesh Bank, on the "advice" of the IMF. Big business is up in arms, showing remarkable unity. They have criticised the IMF for deficient analysis and misunderstanding the nature of inflation in this country. In their view, extortion, supply shocks, rise in administered prices of fuel and electricity, depreciation of the Taka cause inflation.
Unfortunately, the IMF is merely relaying the global message from the world's financial markets that interest rates have to go up to curb the enormous asset bubble in the US and Europe.
Things have got out of hand as real estate prices are at ludicrously high levels.
We fully understand that compulsion. But that has very little to with Bangladesh where interest rates are at 12 to 15%, not 3%!
It is the case of the old IMF philosophy once again: One size fits all.
On top of all the political problems, do we need economic destabilisation too? 2006 does not look too good.

Saturday, April 16, 2005

risking other people's lives

A nine storey building collapsed in the suburbs of Dhaka. The death toll continues to rise and will be in triple figures. The building housed a garments factory where a few hundred workers were engaged in completing a shipment. The rescue mission is desperately trying to find survivors with sniffer dogs but after nearly a week, it is going to be about extricating bodies.
Like many buildings, the owners constructed a ramshackle entity on soft ground. It is common for developers to fill water bodies with soil and sand and build up. Land prices are shooting up and lethal buildings are sprouting up in all directions. In a few years' time, there will be an earthquake. The death toll will run in the hundreds of thousands, partly because of such criminal negligence.
The business association, BGMEA, has an opportunity to take action, leading from the front. They must insist on a safe working environment for employees and management. In a post quota world, it is unlikely to happen. The garments industry is likely to lose out big time from 2007 onwards as buyers establish supply chains elsewhere. In the meanwhile, profiteers will put people in risk, knowing that there will always be takers for $1 a day or even 50 cents a day jobs.....

Wednesday, April 06, 2005

Searching for a Model?

Those of an independent bent like to parade the example of Mahathir and malaysia. I used to, and I still admit an admiration for their marvellous progress (except on the environmental front).
Recently, I have has to conclude however that they may be out of reach for at least a decade or two. In other words, we can make Bangladesh a success but even if we started today to bridge the gap from $1900 PPP per capita income to $9,000 of Malaysia would take years.
Instead, why have we stopped looking to the West?
Only 30 minutes flight away is a territory which some used to laugh at, but which is going to be THE next investment destination. West Bengal.
While you are trying to contain your laughter, let me ask you to dump the "City-of-Joy-and-Communist-Union-strikes-mother-Teresa-blackouts" picture, that is still the brand image of Kolkata and the State of W. Bengal.
True, they have severe problems, including malnutrition. At least they admit it. But there is a sense of purpose that seems to be lacking here.
They are trying to copy the Chinese model and building their economy, taking into account the present global environment. Don't be surprised when they compete head-to-head with Bangalore in IT and regain their industrial pre-eminence of the sixties.
Within ten years, they will be streets ahead of us. In industries, infrastructure, education, IT, health and security.
We need to learn about their mistakes and successes, and understand the similarities with us in terms of agriculture, weather, culture, location etc and develop our independent plan. Their experience is a lot more relevant than South-east Asia.
We still have a lot of advantages over them - I will leave that for another day.
But first we should do a bit of research, shouldn't we?
The real problem is that the middle classes in dhanmondi cannot bear one thing and that is a resurgent West Bengal...... Well, they had better accept the fact. It is happening and we need to pull our socks up. And quick.

what will you do when you get into power?

This is the question we should be asking. There is a media frenzy about the issue of how the next election will be conducted. In Bangladesh, we have a unique process where a "caretaker" government comes in for 90 days and ensures a "free and fair" election. You see, no one trusts the other, so only a retired judge or some such elderly non-partisan figure can preside over the charade.
While everyone gets excited about this latest wheeze, can someone tell me what the plan is for those lucky to get into power?
Or "what will you do when you get into power?"
What is your programme? By programme, i do not mean a 6 point demand or a 21 point demand etc etc.
I mean a PROGRAMME that is realistic i.e will not be torpedoed by the Bank yet has some semblance of national sovereignty to it.
After all, the PRSP is meant to (at least officially) be prepared by us. We know it isn't. Still, we could actually work on one, couldn't we? One that isn't produced by some co-opted economist but a range of political and social forces.
Could any new government to be let us know how they are going to take us into a 7% economic growth trajectory and the same time slow the migration from villages to cities as the rural economy implodes?
You know what will happen. The politicians will wave their X-point demands and promise to eradicate corruption, but really concentrate on how to win the election (on their terms) ....... if there is to be an election...... Now that's a thought......