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Bangladesh needs a new economic order
Mamun Rashid
BANGLADESH’S development potential has drawn positive attention across the world. This positive attention has been based on its young and active demographic profile and overall economic performance in die past.
While we can take pride in our achievements, we cannot avoid die very basic fact that we have been underachievers in terms of our true potential. If we reexamine the history of our economic management, we shall find that we have been consolidating our effort toward wealth creation only cautiously.
Sometimes the cautiousness has cost us monumental opportunities. Our effort towards systemic wealth creation by gradually introducing market forces in overall economic management has been halted by periodic mistakes. Each mistake not only created barrier for further wealth creation, but also persuaded us to take backward steps where we had to unnecessarily reassess our path towards advancement and development.
The grossing focus on Bangladesh has presented an opportunity which we } cannot afford to miss. To actualise the potential, we need to establish new economic and development management models — a new economic order. This new economic order has to be endorsed by all the major players - the govern-
ment, the regulators, the private sector, and every other stakeholder.
The major theme of the new economic order is that we need to clearly Know and understand how we deal with the apparent conflict of wealth creation and distribution process.
We have adopted competitive marketbased economic model for our economic development and we should not look backward. While it cannot be denied that several market failures have happened, with disastrous consequences, we need to clearly accept the fact that closing the door for wealth creation in response to market failure only worsens the distribution process further. If wealth is not created at all. nothing can be distributed.
Markets can often get it wrong, but even after that, markets are the best equaliser, which would ensure growth and development for all of us. That is why it is quite inappropriate to revisit the market economic principle after every mistake we have made or make.
Every time we have found that even after all the mishap of a dysfunctional market behaviour, there is no better model to ensure growth and development for everybody. So we need to ensure that the wealth creation process is not hampered at any expense. At the same time we need to understand that sustainability of wealth creation is strongly dependent upon effective distribution process.
If we examine the cases of market failure, we shall find that the key thing was the absence of good governance, which resulted in exploitation by the few powerful by restricting their access to most economic opportunities.
All of us need to understand that good governance is not only a moral virtue, but actual real capital for growth. Absence of good governance may provide short-term opportunity for gains for few of us, but will deprive all of us from sustainable economic growth and development even in the future.
In the new economic order, the private sector would be the engine of growth for the economy. This induction puts lot of responsibilities on the private sector's shoulder. They would have to be selfmotivated, creative, and visionary. No longer can they continue to demand the benefits of open market and the protection from the government at the same time.
As they reap the benefit of free market, they need to develop capacity and vision to be competitive with anyone in the world. The government may help them strategically and with logistics, but the vision for future growth has to be developed by the private sector itself.
The private sector must realise that if it expects the government to spend money on developing infrastructure and other logistics support, it will need funds. Unless the private sector improves its overall internal governance level and pay more in taxes, it would be impossible for the government to fund these projects.
In the new economic order, three major issues need to be clearly addressed: subsidies, privatisation, and state-owned enterprises. They are often linked and have to be dealt with simultaneously. Resources would have to be deployed according to the best available return and therefore there is no scope for protecting the inefficient at the expense of the more
competent.
We may initiate a transition process which would move the inefficient sector to integrate with the more productive sector, but mere protection of the ineffi cient with taxpayer money would be completely unacceptable.
Subsidy is only justifiable when the qualitative benefit of protecting the poor for the purpose of equity of the distribution process outweighs the economic loss. Even in those cases, we have to make sure the subsidy is properly targeted and is not significantly distorting the market discovery process.
The government is not expected to perform any commercial activities. Even if it does, the rationale has to be strong enough where the greater social benefit of the government's commercial role significantly outweighs the economic cost.
Based on this broad principle, the privatisation process needs to be strongly driven forward. The performance of state owned enterprises will have to be ruthlessly monitored. The accountability for the usage of taxpayer money needs to be strongly established.
Regulators and civil bureaucracy would be required to be more responsive to the private sector and should have the capability of driving the changes. The era of licenses and approvals ought to be limited to the bare essential. When the regulators want to control something, the rationale for control should be logical, transparent, and effective. Unless they are trained and developed properly, they would not understand the global economic trends and issues.
The time is right for Bangladesh to fully enter the 21st century and for the policy-makers to give serious consideration to a new, more efficient, and more competitive economic order.
Mamun Rashid is a banker and economic analyst He can be reached for comment at mamun1960@gmai.com.
***In the new economic order, the private sector would be the engine of growth for the economy. This induction puts lot of responsibilities on the private sector’s shoulder. They would have to be self-motivated, creative, and visionary. No longer can they continue to demand the benefits of open market and the protection from the government at the same time.****