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The economic losses of a man-made disaster
Bangladesh has once again experienced a major crisis, which has apparently ended with the announcement of a major reform in the quota system for public jobs. The whole country was locked down for almost two weeks—first with the “Bangla Blockade” and the “Complete Shutdown” movements of students which were later joined in by others, including political activists and extremists, and second, the country-wide curfew with the support of the army to counter the vandalism inflicted across the country. Although the government tried to defend that the quota reform is a legal issue to be resolved in the High Court and the Appellate Division, students had little confidence in this process. In fact, the crisis revealed several new realities regarding emerging popular demands (e.g. policy reforms), such as people’s—particularly young people’s—way of uniting and raising their voices, silent intrusion of different political and extremist elements in the movement, limitations of political methods of handing people’s demands, weakness of the parliamentary system to address such major reform issues, and an increasingly low level of trust on the prevailing system to address policy related concerns. Unfortunately, in the backdrop of all these new realities, the economy has once again experienced a ‘man-made’ disaster which caused a lot of losses to the economy and the society.
The economy has experienced three types of losses: (a) “micro level” losses (at individual and organisation levels); (b) “messo level” losses (at sectoral and cross-sectoral levels) and (c) “macro level” losses (across the economy). While the micro and messo levels of losses are immediate and short term, macro level losses would be medium to long term. Hence, a clear accounting of all these losses is immediately needed to undertake necessary initiatives to reduce the damages caused by the crisis.
At the micro level, the country experienced at least 10 different types of losses. First and foremost, the loss of lives—a total of at least 146 people died, many of them students. This is not only a major loss, but also ruined future economic prospect of these families. Second, the loss of public property due to arson and vandalism at different public offices, vehicles, leading to the damage of important documents and other related assets. Different primary estimates indicate that the losses will be in the range of several thousand crore taka. For example, the Power Division indicated a loss of Tk 1000 crore; the ICT ministry a loss of Tk 500 crore; Dhaka North City Corporation (DNCC) a loss of Tk 205 crore, and Bangladesh Council of Scientific and Industrial Research (BCSIR) a loss of Tk 5 crore.
Third, loss of properties of private companies because of arson on motorcycles, buses, trucks and cars in Dhaka, Narayanganj, Madaripur, Gazipur, Chittagong and other districts. Fourth is the loss of income of people who work and earn on a daily basis in various jobs in informal sector including day labourers, transport workers, rickshaw pullers, small vendors, self-employed, SMEs and shop owners and other service providers. Fifth, loss of income in large and medium scale enterprises which are mostly export-oriented enterprises including RMG, textiles, food processing, light engineering, pharmaceuticals, leather and footwear and other industries.
Sixth, loss of income of large-scale service-oriented enterprises including transport, banking, entertainment, and healthcare, etc. Seventh, loss of income of internet-based service providers especially freelancers. According to BASIS (Bangladesh Association of Software and Information Services), the loss of their member companies is approximately Tk 400 crore in five days. Eighth, loss of income of the tourism sector mainly in major tourist spots located in Cox’s Bazar, Sylhet, Kuakata, and other places. Ninth, risks in loss of jobs of overseas migrant workers if they could not return to their workplace on time due to the shutdown. And finally, tenth, the farmers and rural agro-based farming households were affected due to the collapse of the domestic supply chain of perishable products including vegetables and fruits.
At the messo level, the losses are mostly sectoral and intersectoral in nature. The collapse of internet-based communications within and outside the country caused major damage to the confidence of the buyers of goods and services. Such complete failure to provide even minimum online communication with the outside world may damage future business deals. This may happen in case of freelancing, online-based businesses, and exporters of different types of goods. Other than that, the damages to the data centre under the DPDC as well as the collapse of internet services have caused major troubles for internet-based public utility services including pre-paid bill payment system of electricity and gas.
Even banking and financial transactions through ATMs and MFS were hindered because of the shutdown of internet services. However, the government has tried to restore the internet-based communications and services by taking measures to repair the system. On the trade side, the collapse of the economy for over a week has damaged major supply chains based in export and import of different goods. Similar collapse of supply chains happened in case of domestic goods mainly those of perishable goods including vegetables, fruits, and other food items.
At the macro level, the losses may or may not be exposed immediately. Due to collapse of the supply chains, supply of goods in retail markets have reduced, which resulted in a price hike of goods. The inflationary pressure would further rise given the situation. On the other hand, the recovery of different public and private properties requires the import of valuable machineries and equipment which needs allocation of foreign exchanges on an urgent basis. Allocating foreign exchanges for such import will put the dwindling forex reserve into further pressure.
On top of that, the upcoming months may experience slow-down in inward flow of remittances due to adverse effect on export and workers outflow, which would put the forex reserve in further pressure. A consequent adverse impact is the further weakening of exchange rate of the Bangladeshi taka against the US dollar, which would make imports costly. Such political unrest may weaken the confidence of foreign investors to invest in the country as well. Finally, unless the economy returns to normalcy immediately and if there is tension that prevails among business communities, such a situation would have an adverse impact on overall macroeconomic performance.
The restoration of the economy from such a crisis, which is man-made in nature, depends not only on providing financial support, economic incentives and benefits, or identifying and taking actions against extremists involved in the arson and vandalism of public and private properties, but more on healing the wounds that were caused in the process of addressing people’s demands.
Several weaknesses were revealed in discussions and decision-making processes regarding the core issue of quota-reform. In fact, the quota reform movement highlights the needs for many other reforms in public policies, plans, acts and operations which have been long due. These include banking reform, capital market reform, regulatory reform, reform in public services, reform in state-owned enterprises, reform in public procurement system, and institutional reform of public entities, etc. These reforms are either being done partially or by-passed by the incumbent government in successive regimes.
In the absence of such reforms, deprivation, inequality, discrimination and disparity have been widening in the society. Given the dynamic nature of the economy and the changing society with a more open and globalised outlook, Bangladesh’s future journey would be faltered and may face similar types of crises unless necessary reforms are undertaken over the next few years.
The incumbent government needs soul-searching to address the crisis. It needs major reform measures to upgrade the economic system into a competitive, inclusive, transparent and market-oriented structure. An open mechanism of discussion and debate both within the parliament and outside the parliament is needed regrading various reform-related issues. A trust-worthy legal, judicial and administrative mechanism needs to be established where disputes and grievances of the people can be solved. Such a mechanism would work as a shield against any type of extremist activities. An effective operation of such a system will build confidence among local and overseas investors, large, medium, and small enterprises, self-employed, employers and employee of formal and informal sector, local and foreign buyers of goods and services, bankers, financiers, multinational development banks, local and international commercial banks. It is expected that the government during its current regime will be able to establish such a system in the country.