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ISSUES AND PRIORITIES FOR THE NATION—III

Longer-term Planning is Needed for Economic Recovery

The strategies and programmes to be fruitful will have to be sustained over a period of time. A consensus is needed because everyone must support the programme heart and soul, and change of government should not change the course of programme.

by A. M. A Muhith Special to The Daily Star
A PROMINENT economist commented a couple of decades back that Bangladesh Is an tronomk mistake. The difficult development problems of Bangladesh defy stereotyped solutions So many people living In so small a place, with so little resources Indeed □resent a formidable picture. The war of liberation brought death and destruction tn a very Impoverished country In the first two years of 1970s. the economy suffered a decline ol 20% Since then the performance has been both uneven and unsatisfactory. Investment during the rest of the decade wus a paltry 10.36% of GDP and in the decade of 1980s. It was a little better at 12.64% Population grew tn the 1970s at an annual rate of 2 6% and in the 1980s at 2.6%. Output growth in the last eight years of 1970s was an annual rate of 4.9% and in the decade of 1980s it has been only 3.77%. The economy has depended very heavily on external resources for nearly all Its investment.
In the 1980's Bangladesh Introduced a number of open economy measures Prlvatisa tlon. market determination of prices and liberal trade policies marked this effort. But a sustained effort has been impedial quite often because of the nature of the regime The interests of self seeking power groups and the need to bribe and satisfy the comprador class that an illegitimate regime had to cater for stood in the way of the reforms As a result, the fruits of the healthy reforms could not be realised tn terms of accelerated growth in investment and output or availability of social services. The reasons for failed development can be listed as follows
(*) Successive military rule and transfer of power from dictators through violence have never allowed political stability in the country. This does not inspire healthy economic activities and specially foreign direct investment. In fact despite good incentives investment has been very low in the country throughout (Even lower than the rate prevailing in die 1960 s). Rent seeking and trading naturally have attracted all economic actors.
(2) An autocratic and illegitimate regime derives Its support by bribing special groups. Current expenditure has spiralled and large scale expansion of the bureaucracy and the military has taken place thereby withdrawing resources from productive use or Investment. Dictatorship also meant reckless public expenditure on luxuries.
(3) Unaccountable regime engendered high level corruption and capital transfer. This hurt the economy in various ways. It left the honest economic actors tn the lurch. Conclusion of stinking deals invariably costtime and quality. Commission for brakes and kickbacks generally Inflated the cost of projects without adding to the benefit stream. Delay in project implementation and low return on investment have been very common in the decade of 1980's.
(4) In programmes Involving large masses of people as tn universal primary education, family planning, health care, agricultural development and flood protection, social mobilisation and decentralised programme execution are sine qua non for success. An illegitimate and corrupt dictatorship, which Is by nature centralised In operation, failed to handle any of these programmes with some degree of success because it could not undertake social mobilisation nor carry out effective devolution.
(5) Above all illegitimacy and corruption that characterised the regime destroyed the vitality of development administration. Development indeed is as much a result of investment as of commitment of economic actors. This very Important element "commitment” was banished from Bangladesh under Ershad regime. As a result, implementation of all development activities were very adversely affected. Nepotism and militarisation also lowered the quality of development administration and exacerbated
inefficiency and ineffectiveness.
The economy is highly dependent on foreign aid because the level of current government expenditure is unsustainable and domestic saving has been moving between 0 and 5% of GDP. This aid flow is conditional to both policy commitments and also administrative management and financial reforms Al) multilateral aid now has policy conditionality and many bilateral programmes are also tied to it. For example, tn the agriculture sector conditionality covers subsidy on sale of irrigation equipment, role of BADC. price of fertilizers, organisation of extension system and performance in respect of agricultural credit (specially loan recovery). Energy sector conditionality is not only related to energy pricing but also covers system loss of power sector, retailing of electricity, organ! sation of gas companies and Investment In power generation In trade and Industrial policy there is a comprehensive set of policy conditions relating to Import liberalisation, tariff system, exchange rate adjustment, lending rates for capital industrial sanctioning procedure, taxation rates, bonded warehouse facilities and export incentives
In macro economic management freer play to market forces Is the gospel and it governs
policies relating to exchange rate, interest rate, import liberalisation, export orientation and investment promotion. What ft means is that there is very little scope for new policy initia fives or Independent action. The scope for new initiatives is limited in the area of investment as well. Ongoing projects, mostly aided, cover nearly three years programme of the fourth five year plan period Any change in the course of the economy except tn respect of economy and efficiency of expenditure and accountability of actions cannot be foreseen tn the near future or in the short term.
Economic development targets and strategy to be meaningful call for a longer time horizon In Bangladesh It Is necessary to make a feasible projection of major economic parameters for the next twenty five years and then set up a few targets such as for employment creation, poverty alleviation, urbanisation, food production. export promotion, population stabilisation, investment level, literacy and numeracy promotion and availability of social service. Within this over all perspective medium term sectoral strategy, social service programme and investment plan should be drawn up. (In other words time bound economic plans should be formulated.) Budget should be an Instrument for realising or executing such plans. Ideally the budget should deal with three aspects of the social and economic plans in an Integrated manner. The cost of carrying out a service will provide the recurrent expenditure to be shown In the budget. The cost of maintenance of a service or facility will provide the second element of budget statement. And the third and final entry will be about investment for expanding both availability and quality of services or supplies. In such a scheme of things.
utllisation and Improvement of existing capacity will receive emphasis. There should also be a deliberate attempt to shrink government operation so that government functions only tn regulatory and support services while private sector and local communities take up a great deal of activities specially in the economic field.
A study of the manifestos of the major parties Indicate more of convergence of ideas on economic objectives and management than differences which are highlighted in public speeches by leaders and in the rhetoric of propaganda. In social service and provision of Infrastructure in Bangladesh a large role for the government Is universally envisaged. In production and trade government role is essentially regulatory.
So Is the case with finance and insurance although the nationalised institutions are quite strong In this field There is a great deal to do to streamline, simplify and simply recast regulations. and in real life the approach of the major political parties to deregulation is not very different. It is of utmost importance that a national consensus is reached on an economic and social plan for the country. The strategies and programmes to be fruitful will have to be Sustained over a period of time. A consensus is
needed because everyone must support the programme heart and soul, and change of gov ernment should not change the course of the programme.
The interim government undertook a survey of all economic sectors and set up twenty-nine task forces on diverse problems and issues. Except for the export sector, all Important sectors of socio-economic life of the nation have been dealt with by the task forces. Their reports provide a statement on the current situation, discuss the various strategies and programmes under implementation or consideration and highlight the problems putting forward alternative options for their solution. These reports need be considered nationally tn conjunction with the draft fourth Five-Year Plan The wealth of materials available in these documents can be the starting point for consensus building.
The circumstances today are Indeed rather propitious for a consensus. The party manifestos are not so different. The options are very limited. The overall democratic climate permits consideration for others. The economy is stagnant but not under unusual strains. Jhe end of the Gulf war has removed the threats of energy crisis and reverse flow of wage earners. The agricultural outlook does not present a crisis. There are three fundamental problems where concerted action Is a must. Employment creation is a major problem. Poverty alleviation Is another major problem and it is integrally related to the other major problem. Finally, there Is the problem of accelerating investment specially by mobilising domestic savings.
The elements of a national consensus can be the following:
1) A programme for universal primary edu-
education (a focal level, of intents of primary education aJd^^S mobilisation at grassroots level.
graaor. with primary health care
tlon. While the programme will be nation^fr coordinated from focal level plans, its execution will be largely decentralised The various elements of the programme will be building of embankments and roads, construction of
.nd impM. .elMn
dredging of major river ways, social afforestation or »etUng up of large villages a.
tv) A special programme for expanafon of ■creage under high yielding variety of aman rice l*ke wheat, boro rice, oilseeds. pulses and cotton: This will call for research efforts, irrigation expansion, effective extension service, assured supply of Inputs and a dynamic as well as expanded credit
v) A programme for diversification of agri Duck and poultry farming. pisciculture.
■flbrejtatlon and oilseeds and puLe production must be emphasised
vl) Support to selected lines of Industry Agroprocessing and agricultural supplies industries need attention Industries requiring high labour input like garments electronics, food products, or consumer conveniences as aril as export industries like fertilizers should
vll) A vigorous export programme where necessary with cash subsidy for a predetermined but limited period of time: The growing non-traditional items like frozen food and garments should be expanded Capacity should be developed tn Items like fabrics, electronics, fertilizers and fruits A vegetables. Manpower export covering all levels of skills should also be emphasised.
vai) One of the most difficult areas for consensus is reduction tn current expenditure of the government: There are three major Items of expenditure which have to be drastically cut down. There is large salary bill of the bureaucracy which can be reduced by trimming the size of public employment and limiting the functions of government. There is the huge security expenditure which must be reduced tn a away The third item is the debt repayment and tt has to be brought down by cutting consumption and avoiding non-concessional re-
Ix) A determination to trim expensive and luxurious projects: To avoid over designing of projects, to impose credit discipline specially tn industrial investment and crop financing and to control kickbacks and commissions from development projects. An open government, accountability tn a democratic system and example of integrity at high levels will be of great help tn this respect.
Immediately the budget for 1991-92 ts to be prepared and 1990-91 budget is to be revised. The exercise should be carried out with a view to creating a climate for consensus. The reports of the Task Forces should be made public and they should be widely discussed. As soon as the budget exercise is over, preparation of consensus plans and strategies should be undertaken The Assembly should be the final forum for adopting all plans be it the perspective plan or the Five-Year Plan or a public investment programme or the policy framework (technically called the PFP).
(This is the Concluding Part-of the three-part scries.)