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     Volume 7 Issue 13 | March 28, 2007 |

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Cover Story

Making the Most of Productivity

Garments have become the biggest growth sector

One of the fundamental principles of the country when it was created through a bloody war in 1971 has been social and economic justice. In the last 37 years, though our economy has experienced a boom, thanks to the export of ready-made garments and the remittance of the migrant workers, the toiling masses have remained outside the benefit of this growth. The number of poor has increased despite the fact that, on an average, the last decade has experienced a steady growth of 5 percent. Independence we have achieved, but how far away are we from achieving economic freedom, or from establishing a society based on justice and equality where development will be democratic, where honesty and goodness will prevail?

Ahmede Hussain

One of the major achievements that we have made over the last decade is the reduction of the rate of poverty, which from a galloping 70 percent in 1973 has come down to 40 percent, according to a Household Income and Expenditure Survey. The survey, which measures the upper poverty line, states that the absolute poor are those who cannot even have the minimum nutritional requirement of 2112 kilocalories for survival.

But, MM Akash, economist and professor of Dhaka University, wants to take it with a grain of salt. "This is a remarkable feat, there is no doubt about it," he says, "But at the same time if you take a closer look at it, you will understand that the number of poor has actually increased manifold over the years because our population at that time was 7 crore, which has doubled over the years. If you count the number the picture will not look good because 40 percent of 15 crore is much higher than 70 percent of 7 crore."

It means an average of now 40 people in 100 go hungry every day. He says, "What kind of a society is this where 6 crore people cannot even get the basic food they need? Imagine 6 crore people, the size of a country, going hungry year in and year out."

Poverty has actually reduced one percent every year since 1990, after democracy was established through a mass upsurge. "A parable can obviously be drawn between democracy and economic development. During the eighties, under a dictator, the country's economy faced stagnation even though billions of foreign aid was pumped into it. Benevolent dictatorship is an untested hypothesis in our country; Ershad was very much a plundering dictator," Akash says.

Over the last 37 years, the gap has only widened

The biggest accomplishment that the country's economy can boast of is perhaps the steady rate of growth that it has kept over the last one and a half decades. "Up to 1975-76 there has been a high growth, even more than 5 percent, it was because the base was low, after the Muktijuddo we were trying to rebuild the nation. The growth that we had from mid 1975 to 90 was always around three to four percent. We experienced a low growth rate, but after 1990 we touched the 5 percent level and we sometimes crossed it. Add to this the fact that the population rate has come down from 2 to 1.5/1.8. Per Capita income growth rate has increased significantly," he says.

For most Bangladeshis getting enough to eat is still a huge challenge

Both successes have their limitations. This growth, which loitered around 5 percent, has also bred inequality. "It has not limited itself to income alone, there are inequalities in consumption, educational opportunities, health opportunities, which has been reflected in informal and formal sectors, rural and urban areas. The real result, the real fruit of this growth has been undermined. In fact, this inequality has created two separate islands, and no communication exists between the two islands. The poor survive on different safety net programmes such as VGF (Vulnerable Groups Feeding) cards and micro-credit; there is no high technology or large-scale industry, agro-processing industry on this island. There is no formal organised sector," he says.

The credit of the growth should be given to the farmers who, despite the fact that the amount of arable land has halved, have been feeding people twice the number of mouths it used to a few years ago. Our farmers have made this miracle possible. As this is agriculture-driven, the rural poor has a purchasing power, which is not spent on imported luxurious commodities, it is rather spent on domestic mid-level commodities that our small-scale capitalists are producing. The small and medium enterprises (SME) have responded to this growing demand.

Another factor is at work here too: from mid-eighties we have gone into labour-intensive exports like the garment sector in which three fourth of the capital actually come from the buyers themselves. "And because of it many capitalists," Akash says, "some of whom are national capitalists, not plunderers, have come forward. Because they are different, when the quota system was introduced and many predicted the doomsday for this sector, the industry has survived; wage is also a big factor. Plunderers remained commission agents."

MM Akash, economist and professor of DU

The country's telecommunications sector, meanwhile, has witnessed a significant boom with big foreign companies joining the market, pumping millions of dollars into the country's economy although much of it also goes back to the foreign investing company; the contribution that it has made is mostly intrinsic in nature for it is not a labour intensive industry, but it has surely helped in technology transfer, along with building a highway of virtual communications. Of late, the country's banking sector has witnessed a major boom; two stock exchanges look steady and vibrant. Huge investments from non-resident Bangladeshis have seen the country's airline and real estate industries grow, creating a multiplier effect in the economy at a moderate scale. The country's money market is stable. Several Bangladeshi pharmaceutical companies are exporting their products to markets in Europe and Africa. Power plants owned by local entrepreneurs have been set up, but scarcity of power remains one of the biggest hindrances to industrialisation. Textiles and the Internet may become two important sectors in the days to come. Foreign investments have come to different export processing zones of the country, the country's natural gas sector has seen phenomenal foreign investment, more in coal and other mineral resources are believed to be in the offing.

Another major stakeholder in our development are the wage earners, who, according to a Bangladesh bank report, have sent 4, 809.1 million USD in the year 2005-06. The flow of remittance, which after mid nineties has surpassed foreign aid, has remained the most neglected sector of our flourishing economy. " Look at the contrast: People, your own citizens, who diligently send money home, you treat them bad; on the other hand, you bow to everything that the donors say. The situation has reached such an extraordinary level that even the business lobby is questioning the point of blindly following the World Bank and the IMF's dictums," Akash says. He thinks our aid-dependence has decreased but policy-dependence has increased. He suggests establishment of specialised banking and training service for the wage earners. "Their skills have to be upgraded; they also should come under a labour contract company, which they themselves should own so that no one can exploit them," he says.

Remittances from wage-earners abroad amounted to over 4 millionUSD in the year 2005-06.

The idea of poverty reduction has become shambolic as instead of reducing poverty the government policy has put more focus on managing it. "The standard of education that the poor get, after it trickles down to the villages, is very bad. We can call these poor people a reserve of labour power; they are being allowed to live so that they can be used in the future. The garments sector was developed on this reserved labour. Always there is a reserve army of the landless who are 70 percent of the population," he says.

Over the last 37 years, the gulf between the rich and poor has widened. On the other hand, some dishonest businessmen in connivance with crooked politicians and bureaucrats have established an economy of plunder and corruption, a system that thrives on inequality, corruption and exploitation, Akash says, "The primitive accumulation that started after independence continued throughout the rules of Zia and Ershad, it has never been invested in the productive sector, instead these plunderers put all their money into politics. In a normal economic process you set up an industry and run it, which to these people are hazardous, risky. It has ups and downs, has managerial problems.

"On the contrary if you pay a crore to a political party and become an MP, you treble the amount you have invested by abusing power. Bangladesh has fallen into this cycle. So a nexus is made among the dishonest businessmen, politicians and bureaucrats. It has continued after the 1990s. And when their business interests have started to be scrutinised the whole economy came to a standstill because the progress that has been made is actually a by-product of the plundering economy. Because the 500 takas that the poor receive during the elections do reach them, giving them purchasing power, which in turn has led to the growth of the informal sector. There are two ways to capitalism, one is the Prussian path another one is the English path. The latter is bottom up while the former is top down. The Prussian path is painful; here you will come across distributive inequality, compromise and foreign influence. The democratic development on the other hand is the one which has more checks and balances."

Whether Akash admits it or not a burgeoning consumer base has been created over the decades, helping to develop small and medium scale local industries. Standard of hygiene and health-care facilities in rural areas, and in the country in general, has increased. From the bottomless basket that it was dubbed immediately after its independence, Bangladesh, in real economic terms, is on the way to becoming a middle-income economy. But, the way ahead remains slippery. Akash believes the country must cope with the immediate challenges that it is facing. "The immediate future depends on the production of boro crop. Even though the production is good, the rise in cost of production will drive the price of rice and vegetables high," he says, "Those who earn a dollar a day will be heavily affected; if the price of rice reaches 25 taka a kilogram, these people, who consist of half the total population will not be able to buy even three kgs of rice. The extreme poor consist of 25 percent of the population, who earn 25 taka or less than that. What will they do? How will they survive?" he says.

The government has taken the right initiative of giving ration to those who live below the lower poverty line. Akash thinks a democratic environment is also a must for sustainable development. "Nowadays when we talk about development we do not only mean material development. We also mean social freedom, cultural freedom, political freedom Development is an extension of human choice and human capability. We have had high growth after democracy was established. Now if we can get rid of plundering and bring democracy we will get even higher growth."

The ray of hope lies in agriculture and agro-based industries, which can fuel a massive industrialisation in the growth centres. It should be a democratic growth, agriculture-driven, import substituting, SME-driven. "We have achieved five percent growth against all odds, imagine what we can do if systematic reform is carried out. Instead of following a pro-plunderers policy, we need to have a pro-productive economic system, a participatory, broad-based growth that will not by-pass the majority, the trickle down rate of which will be higher," Akash says. The growth rate that we have achieved over the years must be strengthened, along with which the economy needs to be purged of corruption to make development more meaningful. The country's economy, like its politics, is at a crossroads now. Only proper planning and pro-productive policy will take us to the road to freedom and economic development that the three million martyrs of our glorious war of liberation dreamt of.

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