Set the numbers free

Jyoti Rahman

Published in the BDnews24 on 22 June 2011.

This piece discusses the challenges faced by the Bangladesh Bureau of Statistics.

Forecasting is difficult, particularly about the future — the saying goes. Figuring out how things had been in recent past ought to be easier. Not so it seems when it comes to statistics in Bangladesh.

Take the national accounts for example. Early every summer, the Bangladesh Bureau of Statistics releases provisional national accounts for the current financial year. This involves estimating a year average from the available data for the first nine months of the year. Then, a year later, the final accounts are released. Obviously, the final estimate reflects revisions to the provisional account.

In its provisional estimate for 2009-10 (FY10), the BBS had the economy growing at 5.5 percent, with the agriculture sector growing by 2.8 percent. The agriculture minister publicly scolded the BBS officials for these estimates. The government was spending a lot of money on cheap credits and subsidies to the farm sector, therefore any suggestion of less-than-stellar crops must have been wrong (or worse, ‘politically motivated’). Then, the 2010-11 Budget explicitly rejected the BBS estimate, claiming that the agriculture sector would have grown by 4.4 percent, and the economy 6 percent, in FY10.

In its final estimate, released recently, the BBS says the economy grew by 6.1 percent in the year, with the agriculture sector growing by a whopping 5.6 percent. To put it in context, in the past two decades, agriculture sector grew faster only once, in 1999-2000, when the sector rebounded from a devastating flood. Back then, the bumper harvest was reflected in low and steady food prices. Not so presently, of course. Indeed, the agriculture sector growth looks incredible when one considers that the crop production has supposed to have grown by 6.1 percent, while cereals (which account for 60 percent of crops) have grown by only 3.1 percent.
And then, according to the preliminary estimates, we are expected to see another bumper crop in 2010-11 (FY11), even though the current year’s aus and aman crops face downside risks from lower acreage sown and inadequate rainfall.

According to the BBS’ preliminary estimates, Bangladesh’s economy is growing by 6.7 percent in FY11. Not only is this growth rate exactly what the 2010-11 Budget projected, this would also be the fastest growth on record, surpassing the 6.6 percent achieved in 2005-06. The finance minister has good reasons to be pleased if this numbers come to pass.

Indeed, even if the final estimates show a somewhat slower growth rate for FY11, the Minister should still be pleased. Whatever the precise final estimate, it would almost certainly show that Bangladesh has been growing at a brisk pace of above 6 percent despite adverse conditions in the developed world, slowing remittance, higher commodity prices, and stock market volatility.
Things could certainly have been worse, far worse.

And if someone quibbles over details, the minister should welcome a discussion, not lash out in the infantile manner in which he is reported to have reacted to a recent report by the Centre for Policy Dialogue.

In its State of the Bangladesh economy in FY 2010-11 (second reading), the Dhanmondi-based think tank argues that the economy is likely to have grown by around 6.3 percent — a robust pace, one must note.

Their first argument is based on the observation that while the economy has accelerated, investment has not. As a general rule, economic accelerations are either accompanied by investment boom or strong productivity gains. Everyone agrees that investment remains hobbled, and it is hard to explain a sudden burst of productivity. Given investment trends, a 6.3 percent rate seems more plausible.

Now, this would be true in general, but not necessarily so in specifics. During the mid-2000s, Bangladeshi economy grew pretty consistently at over 6 percent a year. Then in 2007-08 and 2008-09, the economy slowed slightly, first as a result of the post 1/11 uncertainty, and then because of the Great Recession. If Bangladesh’s ‘trend’ growth rate is somewhere around 6¼ percent, then a couple of years of slower growth can well be followed by a couple of years of faster growth without any additional investment or productivity.

Instead of calling the CPD’s report ‘rubbish’ and ‘politically motivated’, the finance minister could have simply pointed out this possible caveat to the CPD’s argument.

Indeed, the think-tank acknowledges this possibility. However, they are on far safer grounds when it comes to details of the BBS revisions and estimates.

If for FY10, the agricultural production looks incredibly high, for FY11 it is the manufacturing. Manufacturing production is expected to be 9.5 percent this year, up from last year’s 6.5 percent. This may well be possible given the booming exports sector. But look closely and things appear odd. Small manufacturers (who produce about a third of total manufacturing output) actually saw productions fall sharply in late 2010. And the energy crisis has not been exactly conducive to a manufacturing boom.

So there are reasons to be somewhat sceptic about the BBS estimates?

Now, let me stress the word estimates. Almost all economic statistics are estimates, and therefore subject to revision. As these things go, an initial figure of 5.5 percent revised up to 6.1 percent, or a figure of 6.7 percent revised down to 6.3 percent is not really a big deal.
What makes them big deal is the outlandish reaction of politicians to these technical questions. The current finance minister saw ‘political motivation’ behind the CPD report. The agriculture minister sees conspiracy behind unfavourable BBS estimates. And not just national accounts estimates, but also population, prices, or poverty figures. And not just the current ministers, but also those from the previous governments.

Instead of seeing conspiracies and showing outbursts, politicians would do well to strengthen the BBS.

Compared with neighbours, the BBS languishes in terms of performance. For example, Indonesia suffers from many of the same institutional problems as Bangladesh. But its statisticians still produce quarterly national accounts, and revise the methodology regularly to improve inflation, production, or trade data. Not only does the BBS not produce quarterly national accounts, its annual national accounts are produced in an opaque manner. The IMF has questioned the inadequate coverage of its inflation data. Its industrial production data is based on samples where a number of firms have stopped operating years ago!

But why should we blame the statisticians? They can only do what successive governments allow them to do.

It is not only the current government that has shown a disdain for figures. The then government saw ‘waste of money’ in several BBS surveys like regional GDP estimates, which were abandoned in 2002. Meanwhile big revisions to GDP estimates saw the ‘credit’ for being the first finance minister to achieve 6 percent growth go from one deceased politician to another.

When it comes to ignoring the statisticians, it seems that we have had no ‘good guys’.

The BBS is run by bureaucrats, not technocrats as is the case elsewhere. And in 2002, the bureaucrat in charge of the agency saw a downgrade, with the Statistics Division abolished, and the post of Director General of the agency relegated from secretary to additional secretary. In India, by contrast, there is a state minister in charge of the Ministry of Statistics and Program Implementation, and the country’s chief statistician is a technocrat secretary. An autonomous and powerful statistical commission of professional statisticians and academics assist the Indian statistical agency by identifying and resolving methodological issues confronting the needs of a rapidly growing dynamic economy.

On the other hand, Greece provides a clear example of what happens when a country ignores cold hard data.

The current government has moved in the right direction by reviving the Statistics Division. If it is serious about its Vision 2021, there is no substitute for a robust and transparent BBS.

Mr Muhith has a clear chance here to do the right thing. If he chooses petulance, a Greek tragedy may await us all.

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