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Economic Analysis of AL's Polls Manifesto

Mix of doable, pragmatic and lofty things

Inam Ahmed and Sharier Khan
Politics had been uninspiring for quite some time. It made a turnaround when the Awami League unveiled its election manifesto Friday. More than a list of promises to lure voters, it is an economic document for development with clearly set goals, some achievable and some quite lofty, to hold the party accountable if it is elected to power. The problem with the manifesto, however, is elsewhere -- in the question of implementation and financing.
In setting short-term goals, the AL has obviously kept curbing of inflation as the number one task and it has laid down some economic mechanisms such as increasing domestic production (details of which has been elaborated to some extent later in the document).
making imports easier, market monitoring, dismantling monopoly business cartels, and setting up authorities to control prices. The party in power after the December election, whether it is AL or its archrival BNP, will definitely enjoy the blessings of global commodity price downturn to tame inflation. Oil price also looks set to remain low, which might even fall to $25 a barrel. And that means, with the proposed mechanism and the global price level, tackling inflation should not be a tough task.
But more than that, the AL manifesto has been quick to come out of the domestic circuit to grab the global realities when it acknowledges the global financial meltdown as a prime concern. The realisation that an information depository is of utmost importance, is evidence
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that the AL feels the urgency that the world events should be followed closely for taking effective measures. Mention of global warming as an issue for Bangladesh also reflects its better understanding of the globalisation process.
Its target for an 8 percent GDP growth by 2013 in medium term and 10 percent by 2017, reduction of poverty to 25 percent from the current 45 percent in five years, massive social safety network, village level rationing, employment schemes for the jobless— all sound good. But as said before, die problem lies with implementation and financing. Looking at the total manifesto, a part of it needs political will and a part — economic acumen. The AL showed its political will in the past by signing the Ganges deal and the Chittagong Hill Tracts Peace Treaty. It will need such wills again for realising the intentions of joining the Asian Highway and Railway, and building the deep seaport.
Bangladesh has been striving for an 8 percent growth for quite some time, but that dream figure is yet to be achieved. Besides corruption and lack of infrastructure, what has held Bangladesh back from arriving at the figure is the lack of investment. Investment in the past was at best around 24 percent of the GDP. To reach the 8 percent figure, it will need an investment of at least about 32 percent of GDP, a big jump and a daunting task. This will need a bigger Annual Development Programme (ADP), which should not be a big issue. The hurdle would be to improve implementation capability, which despite years of efforts remains dismal. A tumbling ADP would also mean a crumbling GDP growth. And in a time of deepening global economic crisis, 8 percent still
might look lofty.
Although poverty has been a favourite buzzword for both development organisations and political parties, fighting it still remains an elusive game. In the 1990s, poverty dropped at a snail's pace of 1 percent while the economic growth rate averaged 4.8 percent. From 2000 to 2005, poverty dropped at a faster rate of 2 percent with an average growth rate of 5.4 percent. The AL's vision spells out, it wants to cut poverty by 20 percent in five years, an annual reduction of 4 percent. This by any measure is a huge challenge. The question is - can an 8 percent growth do the miracle? The critics would take the promise with a rather large pinchofsalt.
The other interesting proposal the manifesto makes, is the composition of GDP. The • AL envisions a rise in industry's share in GDP from 25 percent to 45 percent, a fall in service sector's from 50 percent to 45 percent, and of agriculture’s from 22 percent to 15 percent. This shift of gear is natural if an economy has to graduate to a better position. More industrial development means more employment, as the party sets specific employment goals as well. A lesser emphasis on the service sector means less stress on modernisation, but also less stress on growth without employment But if agriculture slows down, that would throw a real challenge to employment and equality. Others might look at it from a different angle. As the economy becomes bigger and bigger, the agriculture even with a better growth as promised in the manifesto, might lose its share.
The manifesto makes a number of ambiguous and difficult policy choices such as an expanded safety net programme such as rationing and free education up to the
undergraduate level. First, these options call for mustering a huge public finance. The tax-GDP ratio has been almost stagnant around 11 percent for the past few years. There should be a strong framework to convince others that it would see a magical improvement. At a time of difficult global outlook, with foreign financing uncertain, ambitions and targets can easily get beaten down.
Perhaps the most timebound target set in the manifesto is the power production included in the top five priority issues. The party-categorically says by 2011 power production would be increased to 5,000 megawatt (mw) and by 2013 it would be further increased to 7,000 megawatt.
Such a goal seems uninspiring in light of the Power System Master Plan (PSMP). PSMP aims at 7,000 mw power generation in 2011 and around 8,500 mw in 2013, in order to ensure power for all by2020.
But given the fact that the BNP-led four-party alliance government miserably failed to add new power generation between 2001 and 2006 other than a piffling 350 megawatt, the AL's goal appears doable.
By achieving this goal, the country will still not have a power surplus scenario - but it will cover the main power demand of the country.
The present power demand is around 5,200 mw while the Power Development Board (PDB) is providing only 3,800 mw while its actual capacity is around 4,200 mw.
The AL speaks of a three-year crash programme that covers new large and small power generation, plus power import from neighbouring countries, and repair and overhauling of old power plants to increase power production.
This is perhaps the first
time a political party is talking about power import -- most likely from India or Bhutan. India has plans for a large hydropower project in its eastern part.
The AL also promises implementation of Rooppur Nuclear Power Project, prioritising oil and gas exploration, increasing gas and LPG supply, and arranging gas supply to the north and western regions of the country. It also speaks of formulating a coal policy safeguarding national interest Special initiatives are promised to ensure economic use of the coal assailable so far, and also to develop coal-based •Qp^er plants.1 Priorities are'set tor exploration and exploitation of new coal fields and other mineral resources.
These are the burning issues for both oil and coal sector investors as well as for pressure and rights groups, who are all now waiting for a political government's decision. The manifesto seems to have taken this interest into cognisance.
The manifesto rightly identifies power and energy as one of the five priority sectors for the country and accordingly emphasises framing of a comprehensive long-term policy for electricity and energy - binding renewables like solar power with traditional coal, gas and oil. If such a policy' is framed, it will greatly improve efficiency in energy usage, trigger investment, and effectively contribute to economic growth.
The manifesto makes a raft of promises of infrastructure development, all of which are very important for the economy's take off. Finance for many of them would not be a big deal with private investment sloshing around. But many others would need a great deal of government's role, and that would pose a real challenge if the AL comes to power.