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Is Bangladesh on sale or free for all?

DR. MUSTAFIZUR RAHMAN
***Our nationalised commercial banks (NCBs) which have almost 25 percent of market share are being forced to collapse or be privatised on the pretext that they are making losses, though the reasons and remedy for this are very much known. In contrast, Japan used $80 billion of public funds to salvage her troubled banking system and the borrower industries. Don't we know what we will have to do with our NCBs and the banking system for our own economic health?***
THE people of Bangladesh naturally think that the head of the government is in charge. At least the PM's inaugural speech gave that impression. People had high hopes that this time she would do something positive to put the country on the right track to longterm national development. Contrary to rhetoric, the signs are at the best ominous.
The concerned MPs think they are virtually kept out of the decision making, or even law making process, and are hostage to Article 70 of the constitution. Most of the ministers who are supposed to be individually and collectively responsible for all decisions and actions of the government feel they are not consulted on national issues and comprehensive policies. Privately, they don't like to own many of the government decisions. Despite a big question about the decision making process and the quality of policy decisions of the government, the Prime Minister cannot but own all government decisions -- good or bad -- for the people, the nation, and for that matter, the party as well.
From the general impression the PM still wants to give, it is hard to believe that she is taking or endorsing all of the decisions in recent times that have destroyed the industrial backbone, weakened the economy, opened the gateway for draining out foreign exchange for untimely service sector, devalued Bangladesh currency, indulged disgraceful condition-
ality on external borrowings, encouraged losing PSC for gas, rendered the public institutions dysfunctional, closed down industries that were so encouraged by Ziaur Rahman, and created unemployment and resulting social disorder, none of which is good for long-term national development and welfare of the people.
Unlike Ziaur Rahman, she is virtually shielded from good coherent advice in the national interest. Time is running out, but if she has by now realised that things are not going the way she wants, there is still some opportunity to reverse the trend. She can take the initiative and control decision making based on the wisdom the nation can still offer her, provided she can take the people to trust. Finally, it is our own people who can and will build this nation. The position of Prime Minister is powerful enough to fatally ruin the prospect of a nation alone, but a nation cannot be built without taking the people into confidence.
Corruption and investment: Local private sector investment in productive and creative industries that are essential for building the foundation of national economy, is disadvantaged by multifarious corruption or rent seeking nets. Though corruption is a discouraging factor for serious local or foreign investment in manufacturing industries, this provides fertile ground for foreign investment, particularly in service sector with lesser stake for corrupt economic game. In the name of foreign investment, foreign banks or other companies capable of influ-encing political and policy decisions enjoy economic boom.
Our nationalised commercial banks (NCBs) which have almost 25 percent of market share are being forced to collapse or be privatised on the pretext that they are making losses, though the reasons and remedy for this are very much known. Instead of bringing them to profitability an international accounting firm with a mixed track record is mysteriously engaged for some Tk. 100 crore to
prepare the four NCBs (Agrani, Rupali, Sonali and Janata) for privatisation.
In contrast, Japan used $80 billion of public funds to salvage her troubled banking system and the borrower industries. Don't we know what we will have to do with our NCBs and the banking system for our own economic health? One can easily understand what this accounting firm and its patrons and agents will do. Privatisation or collapse of NCBs will be tantamount to disarming the government and the country of the economic maneuverability and leeway essential for industrialisation and economic restructuring at government initiative. The government must have institutional, financial, and policy leeway to implement its decisions.
There is now a strong lobby to pressure the government to establish a micro-credit regulatory body which will permit small banks in the villages and upazilas outside the control of Bangladesh Bank. Unless strict control over interest rate, say, at up-to about 2 percent above bank rate is enacted in the parliament, such banks in thousands will make Bangladesh a so-called free-for-all Kabuliwala -state 1
(historical high-interest lenders), sucking blood of the poor, but still chanting the slogans of PRSP (Poverty Reduction Strategic Paper) or MDGs (Millennium Development Goals). It is doubtful whether the PM will be briefed properly before getting her nod prior to establishing such an institution.
Laws may be updated and institutions may be revamped to detect and act against any abusive corrupt practices by foreign financial institutions, money lending NGOs, and other organisations that are thriving on corruption and poverty in this country. People want to believe that our government is in charge and shall protect the interest of the people, and shall not allow the country to be free for all who carry a bag of alms or kickbacks.
Isn't deindustrialisation economic sabotage? Some people say that Bangladesh is poor and that it has to rely on foreign loans and grants. We know that many countries take loan for priority industries at critical time, but no country takes loan for deindustrialisation as in Bangladesh. We are closing down our factories we fbuilt and ran for over 50 years, like
Adamjee Jutes Mills, Chittagong Steel Mills, among others, on the pretext that they are making loss, putting over 30,000 people out of productive job. We did not investigate why the industries were losing. They either needed product diversification and improvement or deep cuts in the work force dumped there for political purpose rather than requirement for production. The rhetoric of huge investment and employment in EPZ is a hoodwink. The British technological giant, Rolls Royce and US Chrysler, among others, facing financial crises, were not allowed to go bankrupt. They were salvaged. It is easy to destroy but wiser to rehabilitate and strengthen.
Sale of national property: The history of sale of Alaska to the US and lease of Hong Kong and Macau to Britain is well known. All countries are now conscious of the ill effect of selling concession to foreign companies in any package of foreign investment.
India completely shut off foreign inward direct investment until 1990s. Now it controls it through sector-wise guidelines and forbidden list which includes: 1. Arms and ammunition, 2. Atomic energy, 3. Railway transport, 4. Coal and lignite, and 5. Mining of iron,
manganese, chrome, gypsum, sulphur, gold, diamond, copper, zinc.
A company with more than 24 percent foreign equity cannot invest in small-scale industry. For certain telecommunication services, foreign equity is restricted to the limit of 49 percent. Guidelines for approval are applied to any undesirable foreign investment. Scrutiny includes evaluation of the level of technology to be offered.
South Korea has a prohibited list which includes, among others: manufacture of tobacco products, electricity, gas and water works, transport and communication, financial and business services, savings bank, real estate appraisal, training school, hospitals, etc. Restricted projects include, among others, projects which cause extensive pollution and projects which endanger the livelihood of farmers and fisherman. The technology inducement contracts whose main purpose is only to utilise a monopoly sales right or only to sell raw materials, parts or accessories are not acceptable.
We are not equipped with institutional and legal tools to evaluate technology involved or cost and benefit of incentives, and the total economic effect, etc. As we are a land-scarce nation, we must not sell land to any foreign interest.
Three proposed Tata projects are distinctly separate and may be considered separately on individual merit. Steel is a low-value added and low-tech industry. We cannot rely on supply of raw materials from specific source. We may not allow foreign investment in power plants which our people can finance and build. We already have many fertilizer plants in operation and we can build more when we will find them profitable. There is no point leasing 6500-hectre (16,055 acre) Phulbari coal mine with 288 tons confirmed reserve. With coal value of about $13 at the site and $50 in the market per ton, what do we really gain at 6 per cent royalty? If open pit method is applied, we don't need foreign investment. We may at best hire one or two engineering consultants to help us. We are not in a hurry. We can acquire experience by doing, and do the job for more than 30 years or so.
A lot of undesirable complications may arise if we enter into contract with an Indian company with any ambiguity and unpredictability which will embitter relations with our neighbour. We may design our economic relations on clear commercial terms after studying all implications patiently. The figure of $2.5 or 3.0 billion should not make us mad. It is also peanuts for a nation that wants to develop economically and technologically. This is not the right time to commit something wrong in haste.
The concession for coal mine may be a give-away offer with all the liabilities and pollution left with us at the end. People might even someday accuse those involved as traitors.
There is big talk about a 2500-acre Korean EPZ. Bangladesh already has an EPZ. Buying land must not be treated as a desirable foreign investment . The decision was wrong from the beginning. South Korea can invest in permissible manufacturing industries without problems. If we allow a Korean EPZ today, a Japanese EPZ tomorrow, an American EPZ the day after, what will happen to our small country with a population greater than that of Japan?
Though we have been making policy mistakes since independence, we must come to a realisation now before we lose everything. Let us learn to trust our own people.
Mustafizur Rahman, PhD, is Chairman, Institute of Development Strategy, Dhaka.