Xian Zhu, World Bank Country, Director and Sandeep Mahajan

The recently published World Bank report, Bangladesh: Strategy for Sustained Growth, raises an important and consequential question - how can Bangladesh become a middle-income country (MIC) in the shortest amount of time? The answer to that, of course, lies in how fast the country manages to grow. For example, if GDP growth picks up to a sustained rate of 7.5% - something only a select few countries have achieved in recent history - Bangladesh can become an MIC by 2016. If average growth falls to the 3 percent rate seen in the 1980s, the MIC aspiration will have to wait for another five decades!

This report argues that Bangladesh is well poised to become an MIC within a decade or soon thereafter. Thanks to a combination of sound economic policies and the tremendous grassroots energy for which Bangladesh is globally renowned, GDP growth has averaged over 5% since 1990. The average income in the country today is more that 75% higher than in 1990. Remarkably, despite its vulnerability to natural calamities, Bangladesh has not allowed its per-capita income to fall in a single year since 1990, even in years in which there were severe floods. There are few countries in the world - developed or developing - that can match this record.

Farmer of Bangladesh
photography: Mohammad Khan

At the same time, a rapid transition to MIC status would demand an even deeper level of political commitment. With many of the first-generation reforms soundly in place, a new set of challenges is likely to emerge, requiring far more complex policy innovations. Any of the emerging structural issues - critically weak governance, urban congestion and mismanagement, overburdened port, power, and transportation facilities, and acute skills shortages - can easily become a binding constraint to growth. Slippages in macroeconomic discipline or inability to judiciously harness the vast potential from globalization can derail this transition by several years. Neither would continued lackluster performance of agriculture be conducive to the MIC aspirations.

It is a fair question to ask why we care so much about growth. Shouldn’t the focus be on tackling poverty instead? The answer is straightforward. We care about growth because across the world it has proven to be the most effective instrument in the fight against poverty. Benefiting from strong growth, China and other dynamic East Asian economies have successfully lifted millions of their citizens from the clutches of poverty. At the same time, the fate of the poor in many Sub-Saharan countries has worsened in recent decades simply because of their very weak growth records. Let’s just consider Bangladesh, where the most success in lowering the poverty rate came during periods of strong growth. Most notably, the poverty rate fell by a remarkable 9 percentage points over 2000-2005, a period over which GDP grew at just under 6% a year.

An important channel through which growth impacts poverty is employment creation. And for that, solid growth of labor-intensive manufacturing activity is particularly important. This sector is the most likely source of employment generation at a scale that can absorb a large number of unskilled workers, many of whom would come from poor backgrounds and rural areas. It is instructive to consider the remarkable impact of the rapidly growing garment sector in Bangladesh. Starting from an insignificant employment base, the sector today employs close to 2 million workers, mostly women from under-privileged backgrounds. The money these garment employees send back to their villages further lifts several others from abject conditions. Imagine for a moment if there were several other such dynamic sectors in the Bangladeshi economy!

How to ensure rapid growth of manufacturing? It is clear from the example of the garment sector, as well as from many of the successful East Asian countries, that deepening the integration with global goods and capital markets will be essential. Many have argued that Bangladesh should first respond to the demand of its own domestic market, before thinking about opening up and relying on exports. The benefits of having a large domestic market are clear, but that should not detract from the tremendous opportunities that access to global markets offers. What if the garments sector had only relied on the domestic market? Moreover, the transfer of technology and managerial skills that accompany foreign direct investment (FDI) are vital to efficiency improvements and to being competitive in global markets. Again, the example of the garments sector is instructive.

Finally, even if we accept the importance of export-led manufacturing growth, can we reconcile that with the state of urban management in Bangladesh? After all, such activities mostly thrive in urban environments which offer them important agglomeration benefits. In Bangladesh, Dhaka has been the engine of growth. But the growing congestion pressures in Dhaka and overstretched state of its service provision clearly indicate the current urbanization model will not support the kind of strong employment-generating growth Bangladesh seeks.

Dhaka, surely, will have the major role for future growth, and, for that, far-reaching improvements in its management and infrastructure are essential. However, in a country of Bangladesh’s size, it alone cannot carry the burden. Creation of dynamic and diverse urban centers is essential. To summarize, successful management of three transitions would be key to achievement of Bangladesh’s MIC aspirations. (1) A shift in the economic structure from agriculture to labor-intensive manufacturing. (2) Deepening of integration with global markets wherein internationally competitive Bangladeshi firms would be plugged into global supply chains. (3) Unleashing the growth potential of the major urban centers, Dhaka especially. Reform measures essential to these objectives include continuing macroeconomic stability; deepening financial sector and external trade reforms; and rebalancing the policy focus toward hitherto neglected structural areas - economic governance, urban management, infrastructure (especially power sector, ports, and transportation), and labor skills. The next part of the OpED discusses these challenges in more detail.

The World Bank’s report does not offer any silver bullets for sustained high growth. It only presents a framework underpinned by solid analysis that can potentially help the country set its longer-term development vision. For the Bank, success of the report will be measured by its contribution to a stimulating national debate and, eventually, some sort of consensus on the set of priority reforms needed to ensure Bangladesh’s place amongst MICs in 10 years. If a broad consensus is reached, authorities and the people of Bangladesh would need to be mindful that some of the associated reforms will not be painless. Complexities and short-term costs notwithstanding, it would be useful to keep in mind that the longer-term goal itself is worth striving for.

(’Bangladesh: Strategy for Sustained Growth’, and Senior Economist, South Asia Region, Wolrd Bank)

It is highly misleading that Bangabandhu Sheikh Mujibur Rahman government pardoned all the war criminals and he did nothing during his ‘war ravaged reconstruction period’. The fact shows otherwise. In fact, Bangabandhu Sheikh Mujibur Rahman government started prosecuting the perpetrators of ‘crime against humanity’ or ’war criminals’ immediately after independence and he also passed the Collaborators Act (1972) and the International Crime Act of 1973 that barred re-entry of any collaborators to Bangladesh. Sheikh Mujib promulgated the Special Tribunal Order on January 24, 1972 (PO No 8 of 1972) after 14 days of his return from Pakistani jail to try those Pakistani collaborators/Razakers/Al-Badrs and other stooges of the Pakistani army. Under this order he arrested 37,000 collaborators amidst of strong opposition by left-leaning journalist like Enayetullah Khan [see his write-up titled ’75 million Collaborators’, the Holiday, 1972]. Out of them as no grievous criminal charges were filed against 26,000, therefore they were pardoned and released in a general amnesty. However, nearly 800 cases were completed and given jail sentences. Another 11,000 were in jail including Nizami, Abbas Ali Khan of the Jamat-e-Islam Party (JI), and their prosecution was at various stages of completion. In addition, those that were involved in ‘crime against humanity’ and against Bangladesh, they were denied of Bangladesh nationality and passport.

On November 4, 1972 all religion-based politics were abolished as per sections 12 and 38 of the Bangladesh Constitution of 1972.

Unfortunately, when General Ziaur Rahman, a valiant Mukti-judda emerged as a ‘strong man’ in 1975, he abrogated the Collaborators Act and released all the prisoners including those that were sentenced. For political/ personal reasons he allowed religion-based parties to operate and started reinstating and rehabilitating them. No wonder, those who were guilty of ‘crime against humanity’ and collaboration with enemy (Pakistan) state started returning from abroad especially Pakistan and Saudi Arabia and they were given Bangladesh citizenship and passport. Example, Golam Azam of the JI Party.

On those days I was working with the Bangladesh government and many individuals and their relatives that had no Bangladesh passport approached us for consideration. However, once General Zia took over, all of them were issued Bangladesh passport or ‘travel documents’ to return to Bangladesh.

It is sad that few vested quarters including Abdul Mannan Bhuiya, the ousted BNP Secretary General and current Law Advisor Barrister Moinul Hussein are misleading the public and the nation by stating that Sheikh Mujib pardoned them or shifting the responsibility by blaming why they did not prosecute them. In fact, Sheikh Mujib started the prosecution and he pardoned only those that did not have criminal cases against them. He did not pardon those (Razakers, Al-badr or Al-Shams) that had ‘criminal cases’ and those that committed ‘crime against humanity or war criminals’ such as rape, murder, and the like. Thousands of criminals were in prison during his time; however, many were absconding abroad including Golam Azam, the leader of the JI party and they were involved in anti-state activities abroad. He did not get time to complete the prosecution because of abrupt massacre.

After the massacre of Sheikh Mujib and his family plus his closed associates; Prime Minister Tajuddin Ahmed, Acting President Syed Nazrul Islam, Secretary General AHM Qamruzzaman and Home Minister Monsur Ali, the founders of independent and sovereign Bangladesh in 1975, one after another civil-military-technocratic or cantonment-based governments ruled the country basically till 1996. In 1996, when pro-people and pro-liberation government of Sheikh Hasina came to power after 21 years with marginal votes; it neither could reinstate the Collaborators Act nor could revive the original constitution of 1972. Secondly, it followed ‘judicial process and rule of law’ and therefore, it did not set up any ‘kangaroo court or special tribunal’ to prosecute the criminals. One can debate that as a weakness of the Hasina government or not.

Therefore, it failed to punish the war criminals and the culprits. But that does not justify that the criminals of ‘crime against humanity’ or war criminals should not face justice. It would be unfair if they are allowed to go free or untouched. Fortunately, now is an opportune moment to revive the clause that ‘no religion-based political party can register or contest in Bangladesh election’ and those found guilty of ‘crime against humanity’ to be fully prosecuted. Unless the criminals and murderers are fully prosecuted, you can neither establish ‘rule of law’ nor can stop political killing in Bangladesh.

More importantly, the International Crime Act of 1973 of Bangladesh is still active and Article 47, Section 3 of the Act allows trial of war criminals. Therefore, the military-backed government of Fakhruddin Ahmed that has started many essential reforms can try the war criminals and punish them provided it has the mindset and commitment. It is unfortunate that its Law Advisor is trying to guillotine the golden opportunity.

Secondly, Islami activist S. A. Hannan, a retired bureaucrat following the JI party line of argument tried to mislead the public by stating that there was ‘no genocide’ in East Pakistan in 1971.

Genocide is the deliberate and systematic destruction of an ethnic, religious or national group. While precise definition varies among genocide scholars, the legal definition of it is found in the 1948 United Nations Convention on the Prevention and Punishment of the Crime of Genocide (CPPCG). Article 2 of the CPPCG defines genocide as “any of the following acts committed with intent to destroy, in whole or in part, a national, ethnical, racial or religious group, as such: killing members of the group; causing serious bodily or mental harm to members of the group; deliberately inflicting on the group conditions of life, calculated to bring about its physical destruction in whole or in part; imposing measures intended to prevent births within the group; [and] forcibly transferring children of the group to another group."[1]

In 1971 the Pakistan occupation army plus their collaborators like the Jamat-e-Islam, the Islami Chatra Sangho (currently renamed Islami Chatra Shibir) and their militant killing squads; the Al-Badr and the Al-Shams tried their utmost to apprehend and kill those that demand an ‘independent Bangladesh’. Since majority of Bengali speaking East Pakistanis (Sheikh Mujib got 167 out of 169 seats in East Pakistan) or ethnic group favored an independent Bangladesh, they waged a war with intent to destroy that ethnic group. The Pak army systematically opened fire on un-armed masses of Bengali ethnic group on the midnight of March 25th 1971 indiscriminately resulting which, as per various reports 19,000 to 25,000 Bengali ethnic people died on that dark night alone and over a period of 10 months, 3 million reportedly killed, 30 million were dislodged from their homes and 10 million had to take refuge in neighboring India due to cleansing operation, fear and repression. As per global ranking, Bangladesh genocide is second to that of Nazi genocide of Jews.

In order to cripple the whole ‘bangali nationalism and nationhood’ the Pak army in collaboration with the Jamat-e-Islam and few other such parties and their affiliates systematically and calculatedly murder the Bengali intellectuals, writers, doctors, journalists, educators and their political leadership. In addition, in order to cleanse the society of Hindu population, the Pak army and its collaborators calculatedly killed and/or uprooted them. No wonder, over 10 million East Pakistanis (out of 75 million) mostly Hindu minority took shelter in the neighboring India. When army captured me on April 20, 1971, they tested me whether I could recite ‘kolema’ (the 1st pillar of Muslim faith) and then they checked whether I had my circumcision, a symbol of being Muslim in the subcontinent. In addition, when the army forced us to lead them in their operations, they repeatedly asked two questions; find ‘Mukti’ (liberation fighter) and Hindu. If such are reported, they would immediately open their fire, weapons and mortars. Such is a testimony of cleansing of a religious group, a clear evidence of genocide.

Abdul Momen, Boston, October 29, 2007

The cost of investment in Bangladesh is falling, although some hidden expenses threaten to erode the country’s competitiveness, a new survey reveals.

The 17th survey of investment-related cost comparison said Bangladesh has emerged as “the cheapest place” in Asia in terms of nine cost components, including legal minimum wages, social security burden ratio and charges of utility services.

“The relative position of Bangladesh against the components like salary of mid-level manager, legal minimum wage, rate of increase in nominal wage, telephone installation fees and call charges, mobile phone subscription fee, monthly basic mobile phone charge, cost of general use of per cubic meter gas, and cost of diesel has improved,” noted the survey, conducted by the Japan External Trade Organisation (JETRO).

Jetro conducted surveys in 30 Asian cities according to the 32 cost-components.
But some hidden costs, which are abstract by nature but exist in matters related to legal, policy, procedural system and infrastructure, have been playing a vital role in case of elevation of cost of investment, the report noted.

It said the poor law and order situation, delay in the settlement of letter of credit (L/C) payment, sudden changes in government policies, inadequate infrastructure facilities, and problem related to Chittagong port need attention of the government to reduce the hidden cost of investment.
According to the survey, it is found that the mean order of all the components has switched to 2.44 from 2.49, indicating a very small elevation, which means Dhaka has become a little more cost-competitive from the viewpoint of investment costs.

“Therefore, the government should remain vigilant in case of any change of cost-components in other countries and has to continue its effort to achieve greater competitive edge by adjusting the cost,” the report pointed out.

“The cost related to the usage of mobile phone has gone down because of internal stiff competition among the mobile operators which belong to private sector,” the survey noted.

“Due to the emergence of several new private cell phone operators, the new connection fee for mobile phones has become cheaper and it is anticipated that the call charge and monthly basic charge for mobile phone will further go down as new operator Warid Telecom of Dhabi Group commenced their operation in Bangladesh recently", the survey noted.

The wage for workers, salary of the mid-level managers, legal minimum wages, social security ratio, cost of land area of an industrial estate, telephone installation fee and call charges, electricity and water costs, and corporate taxes are among the other cost-components.

Bangladesh is, however, less competitive in the areas like cost of industrial estate land, monthly basic payment for broadband internet service, new connection fee for fixed telephone line, container transportation cost, and rate of corporate taxes.

Particularly, the monthly basic payment for broadband internet service in the country remains one of the highest in Asia.

Regarding telephone service, the charge per call in Bangladesh stands around the middle range among the Asian countries, but the new installation fee is quite high.

Regarding the container transport, the survey has been made for the routes from 30 Asian cities to the ports of Yokohama and Los Angeles and the result shows that even after offsetting the proportional cost due to geographical longer distance, the cost of transportation from Chittagong Port is higher than that from Mumbai Port.

“This is due to the fact that large container ships cannot come to Chittagong Port due to its shallow draft and, therefore, transshipment of containers becomes necessary either at Singapore or at Colombo,” according to the survey report.

The survey mentioned corporate tax in Bangladesh, being 40 per cent for non-listed companies, is one of the highest in Asia.

The rate is also highest among all 30 cities considered in the 17th cost survey. During the budget of 2005-06, the tax holiday period for certain industry has been extended until June 30, 2008 for four and six years depending on the location.

“That means, the enterprises which have been enjoying tax holiday so far will have to pay the corporate tax after June 2008, causing disadvantage to the investors,” the report noted.

The Jetro recommended further expansion of tax holiday system for attracting foreign investment.
“Bangladesh may lose its competitiveness if tax holiday facility is not extended further, while the facility exists in other countries,” it mentioned.

In addition, the survey report said that the government would have to take care of the existing foreign investors to attract more investment.

If the existing investors are not satisfied, then the probability of getting new FDI will gradually decrease in course of time and the prospective investors will go to other countries, the report warned.
The Jetro suggested that the government should conduct occasional surveys among the foreign companies on the degree of their satisfaction and try to resolve any existing problem for further improvement.

Financial Express Report