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Volume 5 Issue 09| September 2011



Original Forum

Readers' Forum

The Onus is on India to Deliver
--Brig Gen Shahedul Anam Khan

Rise of Bangladesh:
Lessons in economic diplomacy from India

-- Jalal Alamgir
Conflicts over land and maritime boundaries

---- Syeed Ahamed
On Public Indebtedness
-- Jyoti Rahman
India-Bangladesh Relations:
A Forty-Year Retrospective

-- Ziauddin Choudhury
Photo Feature: The Crime of Negligence
Who is 'Indigenous?'
-- Wasfia Nazreen

Road Kill
-- Syed Zain Al-Mahmood

Combating Highway Terrorism

-- Devasish Roy Wangza

Popular Culture as a Safeguard
against Extremism

-- Fahmidul Haq

Reading Matir Moina: 54
From text to social context
--Zakir Hossain Raju

Muktir Gaan: 59
An End to Revisionist History

-- Naeem Mohaiemen


Forum Home

Rise of Bangladesh:
Lessons in economic diplomacy from India

We must place economic statecraft above domestic politics, states JALAL ALAMGIR.


Bangladesh aspires for an economic milestone: the “status” of a middle-income country. If the country reaches that status around 2020, and continues on the growth path, then it will become the 22nd largest economy in the world by 2050, just two spots shy of a new G-20.

Unless you are stuck in traffic or political jams, you can see that this status is in the making: there is a palpable sense of turn-around in the country, an urge to thrust ahead.

This impulse is similar to what India felt 20 years ago, when it set itself on a path to reclaim its lost glory.

Between AD 1 and AD 1500, India (including the Bangladesh region) was the largest economy in the world. It contributed between one-quarter and one-third of the world's output. In 1973, India represented barely three percent of world GDP. Oppressive colonialism and inward-looking postcolonial policies had together relegated the world's largest democracy to a marginal economy.

In 1991, a small group of maverick leaders -- Prime Minister Narasimha Rao, Finance Minister Manmohan Singh, Commerce Minister P. Chidambaram and Finance Secretary Montek Singh Ahluwalia -- decided that enough was enough: India's economy must be unshackled from the iron fists of the Indian state.

These leaders felt that the economic route taken by the first generation of Indian leaders had failed. Yes, living standards had been improving, and India's economy had been growing, but this was at glacial pace, at the so-called “Hindu Rate of Growth” of 3.5 percent per year. India was falling behind relative to the world outside.

The new imperative for India was not “poverty alleviation”, a concept that focuses internally, but “global leadership”, to regain its rightful share of global power. India's economic policy would be successful only if it enabled India “to stand on its own feet, to compete against everyone in the world on an equal footing,” said Finance Minister Manmohan Singh in 1995.

The opportunity
Bangladesh's aim is not as global as India's. But Bangladesh too courts foreign investment and foreign trade, and Bangladesh too is influenced by a powerful external referent: getting into the ranks of middle-income countries.

This cannot be done without solid economic diplomacy, an area in which Bangladesh is weak. In fact, Bangladesh has experienced India's proactive economic diplomacy first hand, from India's offer of large loans and energy investments, to its push for transit facility, to its reticence in expanding meaningful duty-free access. Traditionally Bangladesh has been more proactive on security issues, such as enclaves, boundary demarcation and border killings. On the economic front, our position has been formulated reactively, more or less in response to India's offers.

A strong footing in economic diplomacy would strengthen our overall foreign policy not just vis-à-vis India, but with other key countries. It would ensure that at the WTO we can speak the right language, that we grasp the full implications of economic arrangements into which we have become a party. It would ensure that trade negotiations are done more in our favour. It would ensure that we go beyond development banks and understand new opportunities in high finance, and are able to fund projects through innovative equity structures with global private partners. It would allow us to walk the walk and talk the talk.

In the last 20 years, India has thoroughly transformed its economic diplomacy. India is now one of the key sovereign players in international finance and multilateral trade negotiations. Indian diplomats organise sparkling conferences and presentations to lure foreign investors in droves. The government has fully supported Indian companies to expand abroad. Going far beyond the conventional orbit, it has scoured Africa and South America to supply the country's growing needs, from energy to agriculture. Alongside, it has conducted a sophisticated marketing campaign to redefine India's image as a world-class investment and travel destination. “Incredible India” billboards and advertisements are seen across the globe.

Bangladesh's political leaders should take ample notes from India's rise. There are four areas in particular from which we should draw lessons.

Achievement, not entitlement
First, we must realise that we have to earn diplomatic respect; it will not be given to us simply because we think we deserve it.

For the first 40 years since independence, India was under the illusion that it deserves power because of its identity as the world's largest democracy. India's 1962 war with China shook Nehru out of that belief, and India began to invest in military strength. And when India's stagnation became apparent compared to China's growth, Indian leaders realised that without economic strength, India, regardless of other credentials, would remain of marginal importance to the world.

Similarly, in its first 40 years, Bangladesh's foreign ministers relied on promoting entitlement rather than achievement. Economic diplomacy, centred on aid, was based on showcasing poverty and natural disasters.

More recently, we craved diplomatic attention based on our identity as a “moderate Muslim democracy”. That label got tattered during the violence of 2001-2008; and now our foreign ministry not only disclaims that label but is trying to forcefully mainstream indigenous groups. No consistent achievement here, either.

But in between, the achievement for which Bangladesh became widely known was its innovative outsourcing of development, through a network of NGOs. When closer scrutiny of the sector began to display problems of mismanagement, the government attacked the NGOs instead of helping them reform through constructive support.

So, while we rightly want to jettison an entitlement-based foreign policy, we've made it difficult to advance an achievement-based argument by publicly negating the achievements for which we have become well-known.

India's rise suggests that economic diplomacy must begin with recognising two things. First, economic diplomacy, like diplomacy in general, must be thoughtful and measured, and not reactionary. Second, economic respect does not come from rhetoric; it must be earned by building upon the country's demonstrated advantages.

Statecraft above politics
India's domestic politics is very messy. In the 1990s India's government changed five times. But India's commitment to global economic diplomacy remained intact. The Congress Party began the course; BJP accelerated it further. India's diplomats ditched Nehruvian high rhetoric and focused on the job: getting Indian companies abroad and enticing foreign investment to support India's best-known sectors.

Bangladesh's foreign ministry should proceed on a similarly constructive strategy: we know development, so let's help our development agencies, both state and non-state, work globally. Then let's identify the best known sectors, brands and connections of the country, and help world investment come in on the back of these existing strengths.

The maxim is simple: put politics aside and play to your strengths.

To follow this maxim, the groundwork must be done by politicians, not diplomats. Indian politicians made a decision -- the most important since 1947 -- that the state, regardless of party, needs to provide all-out support for India's global leadership. Bangladesh's politicians should recognise that to compete effectively, economic statecraft must be placed above the messiness of domestic politics. If a country as tumultuous as India can do it, we certainly can, provided we have a forward-looking vision.

Competitive spirit
Indian statesmen motivated diplomats with a singular competitive spirit: “catch up with China.” I have talked with many Indian policymakers. Their observed success of China and East Asia spurred them to action. In Indian media and academia, China continues to provide economic benchmarks and targets for India. In almost all sectors of the economy, China's ongoing performance serves as a continuous gauge of India's own progress.

We need such benchmarks; we need to instil such competitive spirits. Bangladesh does not have a singular rival as India does. While this might convey relative peace, it also means diplomatic complacency, especially in a fast-moving world.

We can construct rivalries by sectors. Obviously, India, our biggest trading partner, is too big to rival; but we compete for the same regional investment pool, especially in services, such as business process outsourcing or call centres. We can also set our targets vis-à-vis Vietnam and Sri Lanka.

India also provides examples of internal competition. Indian states and cities compete against one another to offer economic incentives to both domestic and foreign investors.

Although Bangladesh does not have a federal structure like India does, the country needs to decentralise urgently out of its Dhaka-centrism.

Our divisions need greater support from the central leadership to develop their own competitive targets for investment and growth. They need to be given resources and rewards. They need to be encouraged to initiate economic diplomacy within the country.

The “software” of foreign policy
Setting the vision and competitive targets provides the start; execution, however, requires developing the skill-set and expertise, the “software” of foreign policy.

To stand tall with the world's best diplomats, India invested significant resources in upgrading its foreign service, especially in building the capacity for economic diplomacy. Well-trained Indian diplomats are a regular feature at Wall Street events and at leading global universities. In consultation with other experts, they devise innovative strategies from providing bilateral aid to investing abroad to securing trade concessions across the world.

Of necessity, the centrepiece of Bangladesh's diplomacy has to be economics, whether it is reflected in labour, garments, food trade, energy investment, or infrastructure development. So economic diplomacy is crucial.

But the capacity to enhance the software of statecraft has been weakened by political machinations. First, as discussed before, policies are often formulated ad-hoc, without a central long-term strategy.

Second, some of the political appointees placed in ambassadorships have embarrassed the country publicly. This has been the case under every government. Economic statecraft, or statecraft of any sort, cannot proceed without competent appointments. The government must leave amateurs out of the professional circuit.

Third, like India, Bangladesh needs to involve expert networks more substantially for policy analysis and advice. Here, too, politics has overridden statecraft. Other Asian countries outcompete us if we keep on vetting our experts by first investigating their political affiliation and their family history rather than their intellectual and implementation capabilities.

Bangladesh and India have a lot of parallels -- in history, social formation, culture, institutions and political trajectory. There is no reason why our rise cannot parallel the rise of India from a stumbling giant to a powerhouse. Placing economic statecraft above domestic politics is a key ingredient toward that end.

Jalal Alamgir is a Visiting Fellow at the Institute for Governance Studies, Brac University and author of India's Open-Economy Policy (London: Routledge, 2009).

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