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Commentary

Private sector should use aid

By Abu Ahmed Guest Columnist
Bangladesh has received an assurance of 2.2 billion dollar foreign aid for Ihe comtng financial year In a recently concluded World Bank led consortium meeting al Parts. The amount is larger compared to last year, and has also gone contrary to the expectation of a lower quantity this time In the face of stiff competition for aid world over. The enhanced aid pledge has offered the present government an opportunity to say that the donor countries and agencies support Its economic poUck-s.
However, what we know from the past experience about the aid money receipt Is that the donor countries do not have much dispute over our economic policies but they have It over the non-cxccuUon of the pokek* formulated by us A point should be noted that the aid pledged this year is not larger than that of the last year when inflation adjustment factor is taken Into account There Is also little room for complacency on the part of the government for the enhanced pledge as the aid club did not withhold or reduce the aid amount even when there was not a demo cralir government In Bangladesh.
The aid club has Its own equation and when It secs policies and conditions arc set in right order it pk-dges aid An important thing Is that pledge for enhanced aid Is not a difficult thing for the donor countries to make as they know very well that Bangladesh will not use (f) all the aid money II Is asking for and only needs the re routing of the already stock piled amount Io be pledged again Practically. Bangladesh has not been receiving all the nid money pledged by the donor countries over the past years TUI 1900 91 Bangladesh received aid commitments of about 28 bl Ikon dollar bul actually received 22 billion dollar in the way of disbursement. 4U btl lion dollar less from the pledges The difference between aid pledge and actual disbursement Is becoming wider and wider over lime as the donor agencies arc allaching more and more conditions to the pledges, whic h arc now popu lady known as structural adjustment conduton-alttlcs
This years 2.2 billion dollar aid pledge has also been tied with conditions which Bangladesh will find difficult to fulfil In view of Its past performance 1n this regard Hoa>cvcr some of the conditionalities attached to the- aid pledge seem to be Just and should have been accepted by us on our own much earlk-r for the sake of outing unnecessary Isaacs and wastages In our economy. and also to avoid harsher conditions later
For example, wc knew that the stale-run or gantzatlons Me BJMC BTMC Railway turned Into losing concerns but wc did not do anything to revamp them either through privatisations or by trimming the execs* employees In the organizations. The Irony Is that w kept those organisations going by pumping public money a* sub sidy Into them which on one hand, reduced the compclltivcrcess of the organizations, and on the other, reduced the ftwrnrwnl s capacity to allocate fund for development through annual budgetary provtaton.
Hesitancy and political expediency cost us dearly tn the past It to high lime the authorities take an Immediate move to retrench the cwcm rmpkijici from the various slate-run orgnntta-ttona and plarc those ones under private sector which are deemed foaalblc But this is unfortunate that we are taking too tong time to derid tog how to prteattac Ihe slaU owncd project*. Now the whole privatisation programme ha* been stalled tn uncertainly tn the face of oppose UM from labour unions
i ne foreign aid has a cost. It entails interest and other conditions which many a time go against the interest of the recipient countries. Bul still the poor aid-hungry countries have to accept It as they cannot manage their own econ omy without aid money After the agreed-upon grace period foreign aid becomes foreign debt.
How to service foreign debt? From the export earnings In foreign exchange Already Bangladesh has started spending one-fifth of Ite export earnings towards paying the foreign debt. At present the ratio of aid to grant is about 50:50 in the disbursed aid money though the ratio was not Hke this when the aid was Initially disbursed Many donor countries In later stages converted aid Into grant considering Bangladesh s economic hardship Thus the grant is «n act of pity and there Is, therefore, nothing to foci proud of about It.
The best thing to to do away with the aid. As long as wc lake aid we have to ensure that the money be used in productive purposes Currently foreign aid Is financing our inefficiency and corruption.
Aid money to to be used tn conjunction with the local funds. But where from the local funds are to come? Either from government* budgetary surplus or from the money and capital markets As the government has pronounced the policy of Its reduced role In economic activities we should not depend too much on the surplus from the government budget as a source of the counter funds rather the market should be used for this purpose.
Bul what to disconcerting l» that wc are depending on the government-owned financial In tlltutlona like BSB, BSRS for the counter funds This dependence goes against the spirit of the market economy On the other hand, development through these institutions has proved ex pensive for the nation as a default culture has grown among the borrowers which the nation Is finding difficult to axe.
The foreign aid that would be received In fu lure should be diverted to the market and should not be allotted to the organizations mentioned above. How to achieve this objective M a point for the government to ponder The market must also be allowed to work without any inter ruption for the best possible use of the aid But empirical evidence shows that the market to not properly working a* It to not allowed to work or enough measures have not been taken to re move the hindrance* In the way of it* working. A market economy controlled by vested interests perform worse then ■ controlled economy and in such an economy foreign aid only benefit* few though the price for It to paid by ail.
The government reshaped It* industrtallaa tton policy in recent year* giving private sector the main rote to perform the job. but the private sector was made dependent on the government-owned bank* for tongterm bridge fund a* well a* shortterm working loan Smooth capital market operation to a sine qua non for a healthy a rote by the private sector Lei the private sec tor bargain directly for the foreign aid. This will make the borrowers more accountable In loan u*c Foreign aid. if given on enncesslonal terms It I* given to the nation but the private borrowers of the foreign aid through non bank financial inatltulions won t have the right to ask ths same concessions. Internally a borrower must pay the market price of the foreign aid and that can be ensured when aid money is channeled through market.