Jyoti Rahman and Rumi Ahmed

Published by the Daily Star on 5 October 2009.

ACCORDING to American political philosopher John Rawls, a society should be judged on the welfare of its most vulnerable. In this regard, macroeconomic survival of the global recession or buoyant foreign reserve is not enough to understand the quality of our social life. Since children are among the most vulnerable in any society, a good test using the Rawlsian framework of how the Bangladeshi society is faring would be to look at how our children are doing.

Let’s start at the birth. In 2007, less than a fifth of births in Bangladesh were attended by a skilled health professional. Although this is an improvement over the less than a tenth a decade earlier, child birth in Bangladesh remains a far more hazardous event than in our South and Southeast Asian neighbours (Chart 1).

In 2007, 47 children in every 1,000 died at infancy in Bangladesh (Chart 2). This is a significant improvement from over 151 per 1,000 infants lost in 1975. Bangladesh is also doing better than its major South Asian neighbours. But 47 is still a very high number, especially compared with Southeast Asian countries.

Bangladesh tends to do a lot better when it comes to immunisation of those who live beyond infancy. As Table 1 shows, Bangladeshi children aged 12-23 months are relatively more likely to be vaccinated against diseases such as measles or diphtheria. This certainly proves that despite manifold problems in Bangladesh, it is possible to provide services that make clear improvements to living conditions.

Of the children who survive their infancy and live to the age of five, nearly half are short for their age, while nearly two in every five are underweight. Of our major neighbours, only India has a worse prevalence of malnutrition (Chart 3).

The prevalence of child labour is relatively low among Bangladeshi girls, but it is striking to note how high it is among Bangladeshi boys (Chart 4). Over a quarter of Bangladeshi boys aged between 7 and 14 years are economically active, higher than in similar countries in the region. About 63 per cent of economically active Bangladeshi children do not go to school, compared with only 15 per cent of economically active Indian children. Coupled with the low prevalence of child labour in India, this means that many more Bangladeshi children have to work compared with their peers in our neighbouring country.

Over three-fifths of working Bangladeshi children are employed in agriculture. This may well reflect the still agrarian characteristic of our society. About an eighth of children who work do so in manufacturing. The rest — over a quarter of boys, and slightly less than a fifth of girls, who work — are in the services sector.

Why do parents send their children to work instead of school? Recent studies suggest that child labour falls, and schooling rises, when families escape the subsistence level. This suggests that direct philanthropy can, at the margin, improve children’s welfare by taking them away from work and putting them into school. But philanthropy cannot be realistically expected to make a serious and sustainable dent into poverty.

However, beyond philanthropy, the affluent classes in Bangladesh — that’s us, dear reader — can still make a difference. We need to square up to the fact that the whole culture of live-in child domestic worker is a form of slavery. Perhaps some, maybe most, slave owners are “good,” because they (we) feed child domestic workers three times a day, buy them clothes two times a year and, at the end of the month, hand out a modest sum to their parents. Perhaps, we let them sit on the floor and watch some TV shows, and make them a bed to sleep on the floor.

Maybe, in return, we don’t ask much of these workers — nothing like the factory sweatshops, or working in the mine shaft. They cook three meals for the whole household, make all the beds, sweep the floors and clean the bathrooms, wash all the clothes, go to local grocery for the errands, carry our little ones on their lap, or be the servant to our children who are often older than them. Beyond philanthropy, we, the slave owning class, can own up to the unpleasant reality of our culture.

Cat Stevens wrote three decades ago: I know we’ve come a long way, We’re changing day to day, But tell me, where do the children play? Bangladesh has come a long way from its precarious beginnings. But we are still far from a good society, judging by the way we treat far too many of our vulnerable children. Poverty and underdevelopment are complex issues for an individual to tackle. But one can make a difference to the child domestic worker who is slaving away as this piece is read.

Mridul Chowdhury and Jyoti Rahman

Published by Forum on 7 September 2009.

 Microcredit hardly needs an introduction. From its inception about three decades ago, it has attracted billions of dollars of funding reaching millions of customers, garnering a Nobel Peace Prize and the highest civilian award of the United States for its most visible proponent, Prof. Muhammad Yunus.

It has turned around the misconception that poor people are not bankable. The breaking of this myth has had a revolutionary impact on the development discourse, spurring a whole new dimension of development activity that did not exist before. Microcredit has also had a notable impact in giving development practitioners new means for providing support to poor women. It cannot be denied that there are possibly very few who have had more global impact on the practice of development than Prof. Yunus.

However, in the euphoria surrounding microcredit, we often tend to ignore its limitations in offering a comprehensive and sustainable solution to the complex and dynamic problems of poverty. By emphasising the individual borrower’s responsibility to repay the loan, and by encouraging them to build businesses, increase incomes and exit poverty, microcredit avoids the multi-generational poverty traps that bedevil the welfare dependants in the rich world.

According to Prof. Yunus, “5 per cent of the Grameen borrowers get out of poverty every year.” And yet, it turns out, we don’t actually know much about how microcredit has impacted on people’s lives when it comes to statistical evidence.

Microcredit and poverty reduction
An example would explain why it is very difficult to find convincing evidence of microcredit improving living standards. Suppose that a study finds that borrowers from a microcredit program have better health outcomes. Can we say that it is microcredit that has caused the better health outcome?

Could it not be the case that those who tend to be relatively healthy — perhaps because they are not malnourished, that is, not the poorest in the village — are the ones who actually borrow?

Shafiq Islam/Driknews

Or, perhaps it is something else that drives both the borrowing and the better health — perhaps those who borrow have some prior education (formal or otherwise) that make them more entrepreneurial and health conscious simultaneously?

Economists have devised statistical techniques to get around this kind of “chicken or egg” problem (endogeneity, in technical parlance). David Roodman of the Centre for Global Development and Jonathan Morduch of New York University replicated some earlier works on the impact of microcredit in Bangladesh using such techniques.

One of the studies replicated is a 1998 classic that found that for every 100 taka lent to a woman, her family’s annual consumption increased by 18 taka. Extrapolation from this finding forms the basis of the claim that 5 percent of the borrowers exiting poverty per year. Another exercise, also replicated, found that microcredit reduced consumption volatility among the recipients — that is, it helped the recipients survive bad times such as the aftermath of a flood.

Surprisingly, the authors find that there is little statistical evidence to support any of the earlier findings. They do not conclude that microcredit is harmful. Rather, they argue that the econometric strategies adopted in those earlier works to untangle the cause and effect relationship between credit and consumption is at fault.

Using a path-breaking statistical methodology called “randomised evaluation,” Abhijit Banerjee, Esther Duflo, Rachel Glennerster and Cynthia Kinnan of MIT randomly chose 52 slums in the Indian city of Hyderabad where a microfinance provider was asked to provide microcredit. For comparative purposes, another 52 slums were chosen with very similar demographics and other characteristics where no microcredit was provided.

This kind of comparative evaluation is increasingly accepted as one of the most unbiased methodologies for evaluating impact of a particular development intervention. Dean Karlan of Yale University and Jonathan Zinman of Dartmouth College carried out another “randomised evaluation” at the level of the individual borrower in the Philippines.

What do these papers find?
It turns out, neither finds any conclusive, statistically significant evidence that microcredit reduces poverty. They find no significant effect on average household consumption, at least in the near term (within 18 months of the experiment). The Manila experiment tries to measure, again without success, whether microcredit lowers the probability of being under the poverty line and raises the quality of food eaten rises.

Limitations of microcredit
Let us apply our general knowledge about the way microcredit actually works to make sense of these results (or lack thereof).

Limited effect on aggregate economic growth: In Bangladesh, the birthplace of the modern version of microcredit, the phenomenon has flourished and expanded rapidly for nearly three decades. But there is still little discernible effect at a macro-economic scale — there is little statistical evidence of its impact on per capita income, which has remained one of the lowest in the world.

Activities made possible by microcredit, such as poultry raising and household manufacturing of handicrafts, have limited growth potential. Most micro-borrowers do not have the capacity of expanding operations and absorbing more than a small amount of loan. Often, the immediate welfare effect of microcredit loans is not sustained for long due to mitigating factors such as rapid growth in the family size, poor harvests, and natural disasters. Further, microcredit loans are mostly catered towards self-employment, which does not create jobs for others, thereby further limiting the economic effect at a broad level.

Limited ability to reach the poorest: It is also generally accepted that microcredit largely fails to reach the hard-core poor of the society — it is generally the “middle and upper-income poor” who have benefited. The poorest of the poor are often left out, partly because they are often homeless and mobile — during times of natural disaster or lean seasons (monga), large-scale temporary migration occurs in certain poor regions of the country. Plus, even if the ultra-poor are lent some funds, they are often forced to spend much of the loan on basic necessities such as food and housing rather than on income-generating activities.

Tackles only one piece of the poverty puzzle: The causes of poverty are complex and dynamic, and lack of access to capital is only one aspect of poverty. With the over-emphasis of microcredit on only one piece of the poverty puzzle, there is danger of simplifying a problem that needs multi-dimensional approach for a solution. The fact that microcredit has relatively little effect on the production side of the national economy is perhaps a curb on its ability to bring about visible positive contribution to economic growth.

A H Ahad/Driknews

New policy agenda for microcredit
The above observations do not mean that there are no positive effects of microcredit. For instance, evidence from Hyderabad suggests that the “upper-income” poor who typically receive microcredit cut down on consumption of tobacco or alcohol and buy durables such as kitchen utensils that can be used for a roadside business. More generally, microcredit allows the enterprising poor to overcome the barrier posed by start-up costs and lack of formal credit.

This means that even if microcredit has no discernible impact on poverty in the short run, there may well be some effects over a longer time-frame if these businesses prosper. This longer term effect can be magnified if such businesses are lent even larger sums so that they can expand and employ more people or adapt better technology.

Dubbing it a “partial marvel,” The Economist sums up microcredit’s benefit thus: “By being willing to take a risk on entrepreneurial sorts who lack any other way to start a business, microcredit may help reduce poverty in the long run, even if its short-run effects are negligible.”

Can microcredit do better than being a signaling device?
We believe it can, but only if we move to a new paradigm. The agenda of development through microcredit should move from “microcredit-as-the-goal model” to “microcredit-as-the-means model.” The latter essentially looks at microcredit as the means to other development goals that can generate long-term economic growth.

How can this be done? We suggest three steps.
First, microcredit should be better linked with activities that are production-related or those that generate employment or use a new technology. Instead of operating in silos, microcredit programs should be linked with other development interventions that aim for employment generation or rural production enhancement

Shaikh Mohir Uddin/Driknews

Second, microcredit should focus on related human capacity development in addition to access to capital — targeted training programs can be a prerequisite to become eligible for certain kinds and amounts of loans. Although some microcredit programs have such initiatives in a limited scale, the big players such as Grameen Bank do not and the Grameen approach is generally the one taken by most microcredit organisations across the world.

The notion of Prof. Yunus that “everyone is a born entrepreneur and knows how best to utilize money” is hard to support. It is a well-understood fact that people need skills, access to market and other support structures to make good use of money. Ignoring those factors leave the power of microcredit under-utilised in many ways.

Third, microcredit should be explicitly linked with other sources of small loans that help more successful borrowers expand their business. Currently, some microcredit providers do have such schemes in limited scale, but these are not sufficient.

Other banks and similar financiers should come forward to fill up the gap of the small and medium sized “missing middle” — those whose operations are too big for the support of microcredit organisations and too small for the support of commercial banks.

Current efforts by SME-focused banks such as BRAC Bank and the government-controlled SME Foundation hardly focus on the micro-enterprises that employ 1-9 people. This is a sector that makes up a significant portion of Bangladesh’s economy and represents a huge untapped potential that neither microfinance institutions nor SME-focused entities address adequately.

The road ahead
From a policy perspective, microcredit should not be given more than its due share of

AFP

emphasis and resource allocation. Other poverty alleviation tools such as building up of rural infrastructure, human capacity building, micro-enterprise development, health and demographic planning should be given adequate priority in order to create an environment where access to financial capital can add much more value than it is currently able to.

It is clear that, for microcredit to be an effective tool for poverty reduction, it needs to evolve to a new level with new inter-linkages, based on the lessons learnt during the first three decades of its operation. It also needs to be better integrated into a broader agenda for poverty alleviation and economic growth, since by itself, it is not as powerful a tool as some claim it to be.

But ironically, the success of the first wave of microcredit seems to be impeding its own evolution to an improved, broader, and more integrated instrument for change. It is a crucial responsibility of the policy-makers from different quarters to realise the limitations of microcredit in its current form and approach and act accordingly for the very purpose of harnessing the power of microcredit to its fullest.

Institutionalised microcredit is beginning its fourth decade. For Prof. Yunus’s dream of consigning poverty to museums to come true, it is clear that microcredit as it is currently practiced has to evolve and become better integrated with other development instruments and financial interventions.

We hope that Prof. Yunus himself takes a lead in taking microcredit to the next level — it will not undermine the concept of microcredit that he painstakingly developed into the giant global program that it is today, but it will help the world to critically look at the gaps that microcredit leaves behind and encourages linkages that address those gaps.

Let the coming decade be the time when microcredit really lives up to its promise.

Jyoti Rahman

Published in the Forum on February 2009

“We will have to … reduce price hike and improve people’s living standard,” said the prime minister at her first news conference after the landslide election victory. Since then, she and her senior ministers have repeatedly stressed that bringing down the prices of essentials within people’s purchasing power is a priority task for the government. This is not surprising given the importance most voters accorded to high prices in the lead up to the election.¹

The Awami League capitalised on voters’ concerns by pointing to its better record on this issue. Prices of essentials — the proverbial rice, lentil, cooking oil and salt — either remained virtually unchanged or fell between 1996 and 2001, while all prices rose under its rival (Chart 1). To put the price rises in context, a male farm labourer earned an average daily wage of 48 taka in 1996 (with which he could buy 3.1 kg of rice), 67 taka in 2001 (buying 4.3 kg of rice) and 95 taka in 2006 (buying 3.7 kg of rice).

It is no surprise, then, that the voters have overwhelmingly turned to AL for lower prices. But will AL be able to bring prices down, or at least stem the rate at which prices have been rising? And in the longer term, what does the government need to do to achieve food security — defined by the Nobel laureate Amartya Sen as access to food products, particularly by poor people.²

There are grounds for optimism as far as the near term outlook for agflation — food price inflation — is concerned. But drivers of agflation and food security are complex and multifaceted. This piece stresses that for food prices to stabilise, if not fall, and for us to achieve food security over the medium term, a lot more than “cracking down unscrupulous business syndicates” will be needed.³

What has been driving agflation in Bangladesh?
It is not only Bangladesh where agflation has been a problem recently (Chart 2). Whether we are talking about the developed world, major emerging economies, or our neighbours in South and Southeast Asia, the rate of agflation picked up considerably in the past few years, and then abated somewhat over the recent months.

As agflation is a global phenomenon, it follows that it has global drivers. One major driver has been the sustained rise in the pace of economic growth in large emerging economies over the past decade. This resulted in material improvements in the living standard of tens of millions of people. As people became more prosperous, their diet changed towards more poultry and meat, raising the price of those products. Of course, livestock has to be fed too, and as farmers switched to producing grains for the animals, prices of all grains rose. In addition, increasing demand from the energy-starved emerging economies such as China is a major reason why energy prices shot to record levels by mid-2008. And higher energy prices translated into higher prices of farm output through increased fertiliser and transportation costs.

The increasing prosperity in the emerging economies is a gradual process, whereas agflation sharply increased around the world in 2007 and into 2008. Much of the rise in the global agflation in 2007 was a result of strong demand for subsidised corn-based ethanol as a fuel for cars.⁴

As oil prices rose sharply in recent years, the search for alternative fuels became a policy priority. American policymakers’ alternative fuel of choice has been ethanol, whose production is subsidised by legislation. The artificial expansion of ethanol production created an increase in the demand for its main input corn, driving up its price. American farmers reacted by diverting productions away from other crop, raising their prices as well. Over half of the world’s unmet need for cereals in 2007 could be accounted for by the American ethanol programme.

By early 2008, various governments faced political heat from agflation, and one way they tried to tackle it was through restricting food exports. Ironically, these export bans then led to a shortage of food products available in the global market, raising their prices again. Indeed, export restrictions played a large role in the dramatic rise in rice prices in late 2007 and early 2008. The initial acceleration in rice prices began when India, the world’s second largest rice exporter, imposed export restrictions on rice. Similar restrictions were then imposed by Vietnam, China, Cambodia, Indonesia, and Egypt. This in turn, sparked fears among importers, such as the Philippines, over the reliability of their suppliers, causing countries to increase stockpiles. As a consequence, rice prices rose rapidly, reaching over $1,000 a ton in April 2008.

In Bangladesh, agflation started rising in 2003, much earlier than the rest of the world, suggesting that in addition to the global reasons, local factors were at play. The most important domestic shocks to food prices have been natural disasters — floods of 2004 and 2007 and Cyclone Sidr. While natural disasters result in sharp rise in price levels, absent other reasons, as the crop production recovers, prices tend to return to their previous levels. For example, this was the case in the aftermath of the 1998 flood.

But prices did not fall after recoveries from disasters in recent years. In addition to the natural disasters, two other factors have affected our domestic agriculture markets in recent years. Much has been made of the collusive behaviour of business syndicates and hoarders under the last elected government. In the early months of the caretaker regime, demolitions of local bazaars under the auspices of anti-corruption drive also pushed up food prices, particularly damaging the food security of the poor. While both syndicates and demolitions would have raised prices to levels higher than would have been the case otherwise, absent some other mechanism, it is hard to see why they would have resulted in continuously increasing agflation, as has been the case in Bangladesh for the past half decade.

One such mechanism is the taka-rupee exchange rate.⁵ One Indian rupee cost 1.20 taka in late 2002. Taka depreciated to about 1.50 taka per rupee by early 2005. As the taka started depreciating in 2003 and 2004, Indian imports — including food imports — became more expensive in Bangladesh. In 2007, taka depreciated again, to be near 1.75 taka per rupee by early 2008. This set off another spike in imported food prices above and beyond the price rises in the Indian market.

Underlying all these is the role market expectations play. Various participants in the market — distributors, wholesalers, retailers — expect prices to rise, and they try to increase their stock as much as possible before higher prices set in. Of course, this behaviour itself raises price.

After skyrocketing earlier in the year, agflation abated across the world towards the end of 2008. As the global financial crisis hit and the world economy entered what is being feared as the worst recession since the 1930s, commodity prices tumbled globally. Meanwhile, taka appreciated to about 1.40 taka per rupee by the end of the year. And our farmers harvested back to back bumper crops throughout the year.

Chart 3 shows the rate of agflation in Bangladesh in recent years, with stylised descriptions of when various factors may have become important. It is important to note that syndicates are only one part of a multi-faceted story.

What is needed for food security?
In the near terms, the outlook for agflation is benign independent of any policy measure adopted by the new government. No one is expecting an imminent recovery in the world economy, so global economic outlook is of falling inflation, if not outright deflation. And the exchange rate is something the Bangladesh Bank can affect. So there is no cause for worry? Hardly. For one thing, rice prices are still high at the global market (Chart 4). And when all is said and done, we remain at the nature’s mercy.

Government policies have important roles to play when it comes to food prices, or more broadly food security. Governments typically rely on a number of measures to ensure food security when faced with adverse shocks. Some of these measures are, however, better than others.

Governments try to directly lower food prices through price controls, or indirectly try to affect retail prices through export taxes or reduction of import tariffs. Price controls are typically difficult to administer, and usually lead to black markets and breed corruption. Taxes or subsidies, on the other hand, are easier to administer. That’s why many developing countries resorted to these methods when agflation rose in late 2007.

But such government interventions have unintended consequences. As we saw in early 2008, attempts to reduce prices by stopping exports led to an increase in rice prices in the global market. Even for food surplus countries, export restriction that lowers the domestic price can result in lower production and increased demand at a time of shortage, hurting poor farmers at the expense of urban consumers who may be far above the poverty line.

To the extent that Bangladesh is — and given our extremely high population density, will likely to remain — a net importer of food products, liberalisation of trade in food products benefits us. This is not to say that we should forget about increasing farm productivity or stop investing in agriculture. Of course we should seek to boost our own agricultural output. But there are limits to how much we can produce, and regardless of our output, trade in agriculture benefits us.

Ensuring a functioning global market in food products should be a priority in our foreign policy. While global liberalisation of agriculture trade may be a long drawn task, our government can engage in two specific initiatives. Bangladesh should lead a global campaign against the damages wrought by inefficient subsidies to the bio-fuel industry. In this, the government can enlist the help of activists at home abroad. Plus, Bangladesh should explore an Asian agreement on rice trade that stops counterproductive export bans. In 2007, nearly three-quarters of global rice exports came from Thailand, India, Vietnam, China, and Pakistan. We have friendly relations with all these countries. An Asian Rice Trade Agreement should therefore be an achievable objective.

In the meantime, the unfortunate reality is that the global food market is likely to be beset by government interventions, self-defeating or otherwise, in the medium term. Given this, what else can the government do to ensure food security?

The government can try social-safety-net approaches such as cash transfer, food for work, food ration/stamp, school meals for the poor. This can, in principle, be targeted to those most in need. Further, safety nets can help whether or not the problem arises from domestic or international causes. Of course such safety nets cost money, and in the context of a large budget deficit, these safety nets would have to come at the expense of other tasks.

Another approach would be to use public stockpiles. This however requires a well-oiled administrative mechanism. For example, the government would need to know about the quantity of stocks required and the amount to release at any stage. Importantly, food stocks in the granary are not by themselves enough to ensure food security — the key is ensuring that poor people have access to food.

As it happens, the previous AL government, building on the work of its predecessors going back to the late 1970s, did successfully use both social safety nets and public stockpiles to reduce food prices after the devastating flood of 1998. Like much else, these programs suffered under the last elected government (with tacit donor encouragement), and restoring them to working condition should be a priority for the new government.

What about the syndicates?
How much of the above analysis is reflected in the AL’s election manifesto? The relevant part of the manifesto is as follows.

Measures will be taken to reduce the unbearable burden of price hike and keep it in tune with the purchasing power of the people. After giving the highest priority to the production of domestic commodities, arrangements will be made for timely import to ensure food security. A multi-prong drive will be made to control prices along with monitoring the market. Hoarding and profiteering syndicates will be eliminated. Extortion will be stopped. An institution for commodity price control and consumer protection will be set up. Above all, price reduction and stability will be achieved by bringing equilibrium between demand and supply of commodities.

The manifesto appears to put a lot of emphasis on price control and busting of syndicates. This may well be a popular political rhetoric, but unless implemented in a well thought out manner, syndicate busting or other law-and-order approach to food security will likely to prove counterproductive. After all, the caretaker regime’s attempts at similar approaches as part of its much-touted anti-corruption drive did end in higher agflation.

This does not mean that there is no need to worry about “unscrupulous businessmen.” There is. Adam Smith, the founder of market economics, noted this over two centuries ago.

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. … though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.⁶

There is a clear need in Bangladesh for a government agency to regulate the supply side of the market in the form of competition policy that ensures new businesses can enter the market, and demand?side interventions, in the form of consumer policy, that protects the consumer from substandard products and services. This is an important task. And the government should establish such an agency.

Sheikh Hasan/ Driknews

However, it is important to realise that this agency, by itself, won’t reduce prices of essentials to the purchasing power of individuals if other factors are ignored. Food security is a complex, multifaceted issue. “It is all due to syndicates (or foreigners, or some other villain)” may be politically popular rhetoric. But with the election behind us, it is time to deliver, and one hopes that the government will take “multi-pronged” actions to honour its promise.

1. According to a Daily Star/AC Nielsen poll, for example, 41 per cent of those surveyed noted high prices as an important issue facing the incoming government. For details, see here: http://www.thedailystar.net/ suppliments/2008/opinion%20poll/o_poll.htm.

2. Sen, Amartya, 1981, Poverty and Famines: An Essay on Entitlement and Deprivation.

3. The newly appointed finance minister talked at length about price control and syndicates in his first meeting with journalists after taking office.

4. See Rahman, J., Of food and fuel, Forum, February 2008.
5. See Rahman J., On agflation, Forum, November 2007.
6. Smith, Adam, 1776, Wealth of Nations, Book I, Chapter X

Mridul Chowdhury

Published in the Forum on February 2009

In the lead up to the 2008 election, Sheikh Hasina and Khaleda Zia seemed to be on a race to promise a Digital Bangladesh to the citizens. Khaleda went on to promise the “delivery of a Digital Bangladesh” much before 2021, the AL-proposed date, as if the concept is something tangible like a bridge or a highway! All this war of words indicates two things:

• Even if those leaders do not really know what they mean by Digital Bangladesh, it is a positive sign that they are thinking that this term associates them with modernity and progressive-thinking;
• There is a growing public demand from at least the educated section of the society to see their government place more strategic emphasis on the use of information technologies (IT) for national development.

Even after the election, the AL government has continued their rhetoric about Digital Bangladesh, albeit never clarifying what it is that they really mean. What is the threshold beyond which a country can be dubbed “digital”? What exactly is AL aiming to achieve by 2021? Granted that these are not easy answers, we, the citizens, can surely demand to get an intelligible clarification of their use of the term, and also demand to know what the AL plans to achieve in the next 5 years to realize their 2021 vision.

This piece outlines some thoughts on the concept of Digital Bangladesh and some pertinent policy issues.

Why Digital Bangladesh?
Before getting into specific issues concerning Digital Bangladesh, it is important to review the basic premises. We have difficult challenges in every sphere of our economic and social lives, and use of technologies will not necessarily make them go away. Technology is not a silver bullet; it is useful in some areas, mandatory in some and overkill in some others. The purpose of Digital Bangladesh policy-making should be to make clear distinctions between those three areas, and sometimes make hard choices if needed. The questions surrounding Digital Bangladesh are real and often politically sensitive. Should the government implement a mid-day meal program to attract students or pay for a computer in a school (a Tk. 20,000 computer can feed 15 students for a year!)? Should the government build a new bridge or computerise the Roads and Highways Department?

When resources are severely limited, these are valid and difficult questions. But these should be answered in the context of a rapidly changing world. Over the course of the last few centuries, the world has shifted from agricultural to industrial based societies, where efficiency in manufacturing has determined global economic influence. Over the last few decades, the world has been shifting from industrial to knowledge-based societies, where proficiency in creating and disseminating knowledge has been an increasingly predominant factor for national growth.

The phenomenon is well reflected through the shift in national goals of Malaysia, a country widely perceived to be on the forefront of transition countries. In 1991, the then leader Mahathir Mohamed declared that Malaysia would become a fully industrialised country by 2020. However, over the next decade, the national Vision 2020 was updated to reflect Malaysia’s aim to become a “knowledge society” rather than a fully industrialised nation.

During these phases of global transition, countries which have been able to ride on the bandwagon of inevitable change have succeeded, and those which have not been able to, have fallen behind. Bangladesh government’s decisions on its priorities during this on-going global transition will determine whether we will be in the category of “emerging economies” or “laggard economies.”

What is Digital Bangladesh?
The concept of Digital Bangladesh should be centered around the creation of what is popularly termed as a “knowledge-based society,” in which creation and exchange of “knowledge” becomes an increasingly key factor of production, and in the process reducing the relative importance of traditional factors of production such as land, labor and capital. Information and communication technologies (ICTs) are a critical component for building this knowledge-society. So, Digital Bangladesh, in that sense, is the crucial platform, the enabler for such a vision.

There are various dimensions to building a Digital Bangladesh, all of which are equally important pillars. A Digital Bangladesh may constitute the following:

Governance: A government that has the capacity to deliver services to citizens through the Internet, radio and TV and also to make its internal operations more efficient and transparent through the use of ICTs.

Education: An education sector that utilizes information technologies and communication networks for dissemination and exchange of knowledge.

Health: A health sector that makes use of ICTs for connecting relevant healthcare service providers and for connecting doctors with remote patients.

Commerce and industry: An industrial sector that uses ICTs for marketing and promotion of its products, for producing internal efficiencies, and for communication and transaction between entities.

Software and hardware industry: A vibrant ICT-based industry that is part of the global supply chain for ICT products and services, while serving as the platform for enabling the above goals.

Communication infrastructure: Last but not least, a communications infrastructure that allows ICT-based services to be deployed equitably throughout the nation.

Tanvir Ahmed/ Driknews

Measurement of change
Rhetoric and promises are all good, but unless they are translated into sincere efforts towards change, it means little. In order for the government to hold its own feet to the fire, what is needed is some measurement of change in the various components of Digital Bangladesh, without which the Prime Minister can hardly keep track of real changes and demand specific actions from the relevant government bodies. Activist organizations such as Jagoree (jagoree.org) will develop its own metrics of Digital Bangladesh and keep tab of change and make policy recommendations whenever appropriate. However, it is important that the government has an internal mechanism as well this is too dynamic a sector for traditional government bodies such as IMED (Implementation, Monitoring and Evaluation Division) to keep track of.

The Malaysian government has created something called the Knowledge Imperative Index, which keeps track of “the level of change in the formation of an information or knowledge society, arising from the impact of contemporary Information and Communication Technologies.’ Although Bangladesh may not be in an advanced enough stage to develop a Knowledge Index, we can surely take the first step in developing indexes for impact of ICTs or level of ‘digitization’ on society to keep account of our progress towards the grand vision of Digital Bangladesh.

Administrative structure
It is apparent from the components of Digital Bangladesh listed above that we will require a holistic approach that will address all of the components systematically. An important implication of that is that the government’s administrative structure should be re-organised to handle such policy-making that spans across different sectors.

The ICT Ministry and its subsidiary Bangladesh Computer Council (BCC) need to be strengthened and empowered with greater authority to make that happen. During their last tenure, the BNP government left these entities rather weak, with the ministry headed by a minister who had little political and administrative clout. The government’s e-governance efforts were coordinated by the Planning Ministry and the line ministries had their own ICT-related efforts, which were often uncoordinated and unplanned. It would be a grave mistake if the AL government does not learn from the mistakes of the past BNP government.

The activities and planning of the ICT Ministry and BCC need to be well integrated with other relevant ministries such as Post and Telecommunication, Education, and Health. The ICT minister has to have enough political clout over other ministers to be demanding and sometimes directing initiatives to harness information technologies optimally. The minister also has to have enough knowledge and progressive mindset for envisioning the nature of Digital Bangladesh or the capacity to choose capable advisors. The Prime Minister’s Office itself has to be closely involved in the supervision of efforts towards Digital Bangladesh — otherwise, this issue will not get enough importance from the perspective of rest of the administration.

The government has in its control the instruments of regulation, policy and strategic financing to encourage the growth of the ICT sector, none of which the last two governments had been able to take particular advantage of. Critical policies regarding issues such as Right to Information, online payment gateways and community radio were not enacted. The Export Promotion Bureau funding for encouraging software exports was largely misused, and so was the R&D budget of the ICT Ministry. The AL government needs to seriously take stock of the shortcomings of the past administrations in order to avoid repeating mistakes.

Azizur Rahim Peu/driknews

The government may also consider creating a high-powered advisory body for realising the vision of Digital Bangladesh — a body of technocrats from different relevant areas who have the requisite expertise and vision. The Indian government, for instance, has created a high-powered advisory body called the National Knowledge Commission that reports directly to the prime minister. It is chaired by Sam Pitroda, a former advisor of Rajiv Gandhi widely regarded as one of the architects of the telecommunication boom in India, and its membership is composed of academics, entrepreneurs and top bureaucrats.

Role of NGOs and grassroots organisations
In its vision to create a Digital Bangladesh, the government has to recognise that NGOs and grassroots organisations are a critical stakeholder. Development of telecommunication infrastructure is almost meaningless if there are not adequate locally relevant content to pass through it. Knowledge has to be disseminated in Bangla, sometimes distilled in a format that is easily accessible and comprehensible. These are critical tasks for the creation of a Digital Bangladesh, which some NGOs such as D.Net and Amader Gram already have a head-start in. Another critical function of NGOs is to serve as watchdogs of the government and to voice demands from citizens about ICT-based services and relevant policies. In that light, the government should seriously consider partnering up with relevant NGOs for joint planning and execution of ICT-based initiatives rather than treat them as adversaries or competitors.

Role of the private sector
The sooner the government realises fully that creation of Digital Bangladesh is very much a collaborative effort, where the private sector is a key player, the better. There have been past successful models of outsourcing some non-critical government services to the private sector for efficiency and reduction of corruption and citizen harassment, in areas such as railway ticketing, tracking of Hajis etc. This effort has to be continued and expanded drastically. Services such as utility billing, which are amenable for ICT-based delivery, should be outsourced to the private sector. While development of the ICT industry is a noble goal and generates employment of knowledge-based workers, it has to be kept in mind that it does not directly impact the creation of a Digital Bangladesh. The ICT sector has to be utilized for efficiency in domestic organizations, particularly the government, which will ultimately lead to better services for citizens.

Digital divide?
The million dollar question which I am sure is lurking in the minds of many readers is whether a Digital Bangladesh will really benefit the disadvantaged of the society or will it further widen the difference between the haves and have-nots. It is a valid question and our approach to Digital Bangladesh will determine which direction it will go. To ensure that the benefits are equitably shared, the government should keep in mind at least the following considerations.

• Priority should be given to automating government services that benefit a large section of the population, such as land record digitisation.
• A common pitfall to over-emphasise on technologies such as computers and the Internet should be avoided. It is apparent that these technologies will be out of reach for much of the population in the near future. Instead, emphasis should be placed on other communication technologies such as community radio and mobile devices such as handhelds and mobile phones.
• Development of web, radio and TV content that is comprehensible by large sections of the population should be emphasised and encouraged.
• Special incentives should be given to the private sector and NGOs to develop ICT-based services specifically targeted towards the under-served.

The government has to realise that Digital Bangladesh is a vision that can be turned into reality only through joint efforts by all sectors — if they think that it is something that the government will deliver to the people on their own, they will start from the wrong premise and Digital Bangladesh may always remain nothing more than a politician’s game of words and hollow promises.

Jyoti Rahman

Published in the Forum (June 2008 )

As part of a program marking the International Women’s Day, the government announced a National Women Development Policy on March 8. The announced policy was condemned by a section of Muslim clerics as un-Islamic. Specifically, the clerics objected to any possible change to the inheritance laws such that women could get equal inheritance rights as men. On March 11, the government announced that it had no intention of passing any law that is “anti-Islam.”

On March 27, the government formed a 20-member committee to identify inconsistencies in the policy as per Islamic rules and suggest steps to remove any such inconsistencies. While the committee deliberated, the clerical opposition continued.

MUNIR UZ ZAMAN / DRIKNEWS

Following the Friday prayers on April 11, violent protests broke out in Dhaka’s Baitul Mukarram area. On April 17, the committee recommended that the government amend the announced policy, replacing any commitment to equality between the sexes with “just rights” for women.

Let me state here an unequivocal commitment to equal rights — irrespective of age, gender, ethnicity, or faith — of all citizens, including equal property and inheritance rights for men and women.

This piece is not about commitments to these rights. Nor is it about theological discussions about what Islam has to say on the matter. Rather, it is about some lessons to be drawn from the developments described in the first paragraph.

Lesson 1:
Political imperatives reign
Was there any hidden political reason behind the Women Development Policy? The cynical chattering classes have been busy guessing. Maybe this was about some powerful quarter’s way of hoodwinking and co-opting the progressives? As if the progressives are that strong. No, it’s more likely that this was an issue to divert attention away from war crimes trial. As if the Islamists are that influential. Perhaps this is really the perfidious west and its local collaborators’ way of hurting Islam?

Or perhaps it is none of these. Perhaps the Women Development Policy is just what it claims to be — a commitment to women’s rights in every sphere of life. After all, this was the stated objective of women policies of the two previous governments, too. No one claimed that those governments had some ulterior motives.

Let’s give the government benefit of the doubt. But even if there were no ulterior motives, events have shown that as soon as there was an organised political resistance against the policy, the government compromised.

The Islamists, of course, have their own agenda. They oppose the very idea of gender equality on ideological grounds. And they saw an opportunity to project their strength, and gain “control” of the streets through their protests.

And even if there was no ulterior motive behind the policy as such, the government has other agenda — a peaceful election at the end of the year and the handover of power to an elected government is the stated one. And this stated agenda is more important to the government than the Women Policy. Political imperatives are always more important than specific policies.

Politics is supreme, that’s the lesson here. Anyone naive enough to think that a technocratic government will “do the right thing” without paying heed to political calculations should get their head out of sand.

Lesson 2:
No substitute for political coalition building.
If we want a durable Women Policy that gives the sexes equal property right, then we have to build a political coalition that supports the policy. There is no short cut here. Indeed, this is true for any policy. Whether we want to try the war criminals, protect the Sundarbans, or repeal the Enemy Property Act, we have to build political coalitions. It is only a political coalition that can garner the support of the majority that will make the policies stick.

Seminars and roundtables organised and attended by the elites in Dhaka’s posh locations are no substitute for political coalitions.

Lesson 3:
No substitute for public consultation
Let’s think about the possible reasons for apprehension that many Bangladeshis may have about the proposed policy. Many people might be under the impression that the proposed policy is indeed anti-Islamic. Under many standard interpretations of the Quran, gender equality might indeed be seen as un-Islamic.

So long as a substantial number of people follow such interpretations of the Quran, there will be many with apprehensions. The only way to assuage such apprehension is through open dialogue and active consultation that stresses that the proposed policy would not in any way stop anyone from practising their faith.

MUNIR UZ ZAMAN / DRIKNEWS

Lesson 4:
Political deficit means legitimacy deficit
When a technocratic government believes that it can formulate solutions to complex social, economic, or foreign policy issues based on good intentions and implement text-book prescriptions, they find out the inadequacy of that approach the hard way. If they push through their program in face of strong opposition, the program loses legitimacy in the eyes of the general population.

Specific to the case of Women Policy, let’s not make any assumption about the government’s popularity or forecast how the current political situation will unfold.

Instead, let’s consider this: if the current emergency ends in a political crisis, the successor government will feel compelled to move away from the policies enacted by this government, regardless of the policies’ merits as such.

As long as the opponents of the Women Policy remain organised and vocal, and the supporters remain confined to the seminars, the successor government will find it very easy to scrap the policy to distance itself from this government.

Indeed, even if a popularly elected government pushes through a controversial policy without appropriate coalition building and public consultation, the policy will probably be rescinded by some successor government.

While the above lessons apply to any major policy in Bangladesh and beyond, the following lessons are more specific to the current Bangladesh.

Lesson 5:
Mainstream parties need reform.
This may not appear to be related to the Women Policy. But think about it. The government announced a policy that is against the Islamists’ agenda. Islam-pasand parties organised, and forced the government to backtrack. The same government arrested leaders of the country’s largest political parties, and there was little protest. Again, the point here is not the rights and wrongs of the politics of Islamists, Awami League, or BNP. The point is that the decay that has set in AL and BNP is real, and these parties need genuine reforms.

STRINGER/ DRIKNEWS

Lesson 6:
The Islamists are organised.
And chattering classes are not even sure who the Islamists are. There is a tendency among the self-styled progressive circles to lump all the bearded and cap wearing folks as Jamaatis. We know that Jamaat was involved in the violence that swept the country in late October 2006. We know that Delwar Hossain Sayeedi, a senior leader of Jamaat, has been vocal against the Women Policy. But we also know that a major leader of the anti-policy protest is Fazlul Haque Amini, whose politics differs from that of Jamaat on major doctrinal and organisational grounds. While the mainstream politics remains under embargo, what kind of realignment is going on in the Islam-pasand spheres?

Lesson 7:
Finally, while Awami League and BNP are rotting, and the Islam-pasand parties are getting organised, in the political vacuum that is the emergency, who benefits from political violence? The ingredients for violent protests are there — food prices, water shortages, power shortages, rising cost of transportation, a downturn in the manufacturing sector: this could be one long hot summer. But in this summer of discontent, cheering on the mayhem of April 11 as the first shot of a people’s uprising — as columnists like Farhad Mazhar have done — appears to be a rather naive thing to do. The last lesson then, is to beware the anti-imperialism of fools that Mr. Mazhar and his comrades prescribe.

1. An example of such a conversation can be found here: http ://rumiahm-ed.wordpress.com/2008/03/09/a-fight-we-can-not-afford-to-lose/

Amer Ahmed

Published in the Forum (Feb 2008) 

The failure of communism in the twilight of the 20th century seemed to vindicate the champions of the free market — be they Chicago libertarians or Washington Consensus neoclassicists. However, even as command economies fell, the world came to witness new crises in the fledgling free markets. From the disastrous privatisation of Bolivia’s natural resources to the violent upheavals in the former Soviet Union, capitalism and the free market failed time and time again to provide sufficient conditions for sustainable growth. The promised virtuous cycle of economic and social development often did not come to pass.

Moving past blind faith, economists have now come to realise that liberalisation, deregulation and privatisation by themselves cannot guarantee that a market will truly be functioning, free, and able to provide the social services necessary for sustainable development. A key ingredient for functioning markets to be able to deliver an environment conducive to development is a strong institutional framework, which many developing countries like Bangladesh lack. Into this abyss of institutional failure enters a new player — distinct from both the state and the traditional profit-seeking businessman — that provides the social services that governments negative externalities associated with the protracted presence and growth of so many NGOs for so long.

Among many criticisms is the idea that the NGO sector has been permitted to grow beyond being a complement to the public sector to become a competitor. This compe- tition has perhaps been the most currently may not be. This player is the social entrepreneur.

Azizur Rahim peu/ DRIKNEWS

When governments fail to provide key public services, the business community — guided by the invisible hand of the market — often steps in to fill this void. However, as recognised by economic theory, the traditional entrepreneur is primarily motivated by private profit. Indeed, executive officers of limited companies are responsible, by law, to maximise the returns to their shareholders. That’s their bottom line.

What may differentiate the social entrepreneur from the traditional entrepreneur is the idea of a triple bottom line. While the traditional entrepreneur has only the objective of private profit to pursue, the social entrepreneur’s mandate is broader and includes the pursuit of private profit, social, and environmental objectives. Instead being beholden to just the interests of the shareholder, the social entrepreneur’s responsibility is towards stakeholders in the firm’s activities. In early 2007, the UN’s International Council for Local Environmental Initiatives recognised the triple bottom line as the primary standard for full cost accounting in the public sector.

While Bangladesh can boast many virtues, a strong public sector delivering quality social services and a development-friendly institutional environment are not among them. In response, individual citizens and organisations — our social entrepreneurs — have stepped forward to create opportunities that promote sustainable development. In the Bangladeshi context, these social entrepreneurs have often taken the form of NGOs.

Indeed, NGOs have played an important role in the provision of services that our public sector has consistently failed to provide enough of, especially in areas like women’s rights advocacy, education, healthcare, and sanitation. It is also an unfortunate fact that the consistent inability of our country to develop the public sector has created a continuing need for NGOs since the early years of our nation’s birth, despite the ex-post evidence that there are some apparent in the interactions of the better-funded NGOs and the less-attractive government sector in the labour market, where the latter has often lost out on our best and brightest to the former. However, on balance, NGOs have done more good than harm to our country, increasingly in their roles as social entrepreneurs.

Even though NGOs like Brac and other community groups like the Grameen Bank are well recognised as massive social entrepreneurs, each with millions of stakeholders, there is a multitude of smaller initiatives throughout the country that are much lower profile and with smaller budgets, but that are doing equally important work. For example, since the 1990s, the Dhaka based organisation, Phulki, has been active in the protection of the rights of female migrant workers, predominantly those employed by the garments industry. Among its many accomplishments has been the development of community-based daycares for the children of working women. Parallel to its advocacy and social work, Phulki provides paid services such as monitoring services for the Fair Labour Association, and consulting for management of factory-based childcare services. It is safe to say that Phulki, as a lower profile organisation, has done well, certainly achieving the dual objectives of profit and social development that define a social enterprise.

However, there are countless other small social enterprises in Bangladesh that have not been able to grow as much as Brac, Grameen, or even Phulki. One commonly occurring constraint to their growth has been a lack of access to commercial sources of finance. Recognising social entrepreneurs as valuable partners in sustainable development, and aware of their financial needs, private organisations are, in turn, responding. One such organisation, Drishtipat — a non-profit organisation of primarily expatriate Bangladeshis — sponsors an annual program called the Drishtipat Challenge (http:// drishtipat.org/ dpchallenge) that aims to fund or supplement the funding of budding social entrepreneurs. The Challenge, soon to enter its second year, invites the general public to submit innovative proposals for social enterprises. After an initial screening, the successful proposals receive seed financing loans of up to $5,000. While it may seem a modest amount, small injections of funds like this are all that are needed to kick-start the next great idea.

TANVIR AHMED/ DRIKNEWS

Social enterprises are by no means a silver bullet for the myriad developmental challenges that a country may face. However, in Bangladesh, where the institutional framework is not robust enough to provide the necessary social services needed for balanced socio-economic growth, the power of the free market can be an important ally in the struggle for sustainable development, providing positive benefits to the rest of society through advocacy, training, education, empowerment, and conservation among other things. Our country cannot afford to turn down any help it can get.

Jyoti Rahman

Published in the Forum (Feb 2008)

Politically, Bangladesh stands at a cross-road in 2008, with credible elections and sustained democracy being a realistically attainable choice. Yet, it is an economic issue that can overshadow all socio-political developments. Rising food price inflation — agflation — is arguably the greatest problem facing the country today. And while there are domestic factors at play, the global nature of agflation makes it difficult for the policymakers to stem its rise.

Although agflation started picking up in 2003, it has gathered pace in the past few months (Chart 1). Food prices rose by 11.7 per cent during the 12 months to October 2007, to be over 50 per cent higher than their 2002 levels.

There are many reasons for high and rising agflation. While the impact of Cyclone Sidr is not visible in the chart, it does show the impacts of the floods in the summer of 2007. As it was, prior to the flooding, there were already disruptions to the supply chain caused by various demolition drives and anti-corruption operations earlier in the year. The anti-corruption drive was, at least in part, a response to alleged market collusion that may have fuelled agflation before 2007. In addition to these shocks and microeconomic reasons, the depreciation of the taka against the Indian rupee also fuelled agflation in Bangladesh since late 2003.¹

However, even if these domestic reasons were absent, it is likely that we would have to contend with high and rising agflation. This is because agflation is a global problem, as shown in Chart 2, which compares agflation in Bangladesh with international averages.

And the global agflation is set to continue into 2008, as a recent Financial Times article reports:
Global food prices will come under further pressure today as benchmark prices for cereals at much higher levels kick in, making it almost inevitable that a second wave of food price inflation will hit the world’s leading economies. In Chicago wheat and rice prices for delivery in March 2008 have jumped to an all-time record, soyabean prices are at a 34-year high and corn prices at an 11-year peak. Knock-on price rises are set to hit consumers in coming months, raising inflationary pressure and constraining the ability of central banks to mitigate the slowdown in their economies. A first wave of surging cereal prices hit the wholesale market during the summer and has fed through the supply chain and contributed to rising inflation.²

There are two major reasons behind this. The first — rising income in the emerging world — is a welcome development that the world will need to cope with. Rising income in the emerging world means that millions of people in these countries can now afford to have meat and dairy items on a regular basis. This has increased the price of farm and poultry produces. But animals are fed grain, so prices of cereal crops also rise.

The emergence of China, India and other such economies is not a sudden development. And it’s not only food prices that have increased recently as a result of increased demand from the emerging economies. Prices of oil and various metals have also been at historic highs in recent years.

That said, changes in diet and food consumptions that have come with rising prosperity have been gradual, whereas the rising global agflation is a much more sudden phenomenon. The more recent global agflation is a direct result of strong demand for subsidised corn-based ethanol as a fuel for cars.

With oil prices rising to around one hundred dollars a barrel, it is not surprising that consumers are looking for alternative fuels. The alternative liquid fuel that is the current favourite of American policymakers is ethanol, whose production is currently subsidised by legislation. In the United States, the grain of choice for ethanol production is corn, unlike the sugarcane used by Brazil for its ethanol. The US corn market, like for the rest of US agriculture, is already distorted by subsidies and interventions that are playing havoc in the world cereal markets. The artificial expansion of ethanol production has created an increase in the demand for its main input corn, driving up its price. American farmers have reacted by diverting productions away from other crop, raising their prices as well. According to the Economist:

This year the overall decline in stockpiles of all cereals will be about 53m tonnes — a very rough indication of by how much demand is outstripping supply. The increase in the amount of American maize going just to ethanol is about 30m tonnes. In other words, the demands of America’s ethanol programme alone account for over half the world’s unmet need for cereals. Without that programme, food prices would not be rising anything like as quickly as they have been.³

The Economist’s assessment is supported by the IMF. The director of its research department says:
In the IMF staff’s assessment, a significant part of the latest jump in food prices can be traced directly to biofuels policy.⁴

The US ethanol program has its origin in the idea of “energy security” — an end to American reliance on imported fossil fuel. But the way biofuel subsidies interact with other policies can actually produce more demand for fossil fuel. For example, production of “flexible-fuel vehicles” (that is, vehicles that can use both ethanol as well as fossil fuels) are subsidised. Because the fuel-economy credit is biggest for the least energy-efficient models, manufacturers concentrate on sport utility vehicles and light trucks. Yet almost all the drivers of these vehicles use ordinary petrol. The result is greater consumption of petrol, not less.⁵

Biofuels are subsidised in Europe as well. In both sides of Atlantic, climate change is another reason cited for the subsidies. But if that reason was genuine, then surely the most environmentally efficient sugar-based Brazilian ethanol wouldn’t have been prohibited from entering American and European markets through tariff.

Shafiq Alam/ driknews

Whatever the stated reason is, according to Global Subsidies Initiative, a Geneva-based think Initiative, a Geneva-based think tank, biofuel subsidies are really “farm programs masquerading as answers to energy insecurity and climate change.”⁶

And what is the real price of this subsidy? Two statistics are widely quoted. According to studies by Gary Becker, a Nobel laureate from Chicago, a one-third rise in food prices reduces living standards in poor countries by a fifth. And according to the World Bank, the grain needed to fill up an SUV would feed a person for a year.

What would a more rational biofuels policy look like? The IMF recommends free trade in biofuels while levying a carbon tax on all fuels to reflect emissions costs, and promoting research and development of renewable energy. But the realistic chances of scrapping this farm subsidies program in favour of a more rational policy are perhaps not high during an election year.

Raj Aniket/ driknews

It is self-evident that our policymakers will have to manage the adverse impacts of food prices through macroeconomic and microeconomic policies in the short term. It is also clear that agricultural productivity needs to rise to increase food supply in the medium to long term. But agflation is going to continue to pose a problem for us, and the world, so long as American ethanol subsidies and similar interventions that distort the market place remain in effect.

So what should we do?
Our government needs to act through intergovernmental channels. But activists around the world need not wait for the governments. Global campaigns on issues ranging from Aids awareness to the third world debt have changed government policies. The time has now come for one against the ethanol subsidies. The grain needed to fill up an SUV would feed a person for a year — how can the world conscience not move?

Jyoti Rahman is an applied macroeconomist and a member of the Drishtipat Writers’ Collective.

1. Rahman J., On Agflation, Forum, November 2007.
2. Blas J., Giles C. and Weitzman H., Food price inflation poised for new surge, Financial Times, Dec 17, 2007.
3. Cheap no more, The Economist, December 6, 2007.
4. Johnson S., The (Food) price of success, Finance and Development, Dec 2007.
5. Wolf M., Biofuels: A tale of special interests and subsidies, Financial Times, Oct 30, 2007.
6. Steenblik R., Biofuels — at what cost? Government support for ethanol and biodiesel in selected OECD countries, Global Subsidies Initiative of the International Institute for Sustainable Development, 2007. An alternative perspective can be gained from Tyner W., Biofuels, energy security and global warming policy interactions, Purdue University, 2007.

Asif Saleh

Published in the Forum (January 2008)

I carry a Newsweek from last year that has on its cover a profile of a confident young sari clad woman and a caption that blazes: “New India.” My dream is to have Bangladesh on that cover one day, flashing: “The Resurgent Bangladesh.”

In January this year, like most of the populace, I had hoped that we could begin that journey towards resurgence. But it didn’t take long for that bubble to burst. There have been a lot of negatives and positives in the past eleven months. Mistakes have been made, credibilities have been dismantled, moral authority has been lost.

But it is not too late to start to get that Newsweek cover out in 2009 — after our election. If our current power holders can assess where they are now and be innovative about the next few months towards the election, it is still possible to bring back that positive aspiration that has now all but disappeared.

Lessons for the caretakers
The four most important lessons that the government should take from the past few months are:

• The capacity of this government is much more limited compared to the tasks they have taken.
• The political forces are a reality in Bangladesh and they will not just disappear without a fight.
• A policy is a bad one if it does not take into account its macro impact.
• With no direct mandate or moral authority, its not possible to forcibly make drastic changes in the rules of the game without disastrous side effects.

As the government started implementing a more expansionist agenda with increasingly less transparency, its acceptability has gone down and its legitimacy has been questioned. Its response to these events have caused a further down-ward shift in popularity. The moral authority with which the government came to power has slowly eroded over the last eleven months, making it more vulnerable to various internal pressure groups. That pressure is only going to increase if there is no drastic change in how the caretaker government is approaching reform and the upcoming election, and chances are the government may resort to harsher measures to stop the dissent.

There are twelve months left to the election. For a government whose legitimacy is now increasingly under question because of the sweeping changes it is trying to make, that is a long time for things to go as per plan. They must understand that it will be impossible for people to have complete faith in their end game without restoring their moral authority to previous heights. Ultimately, the big question is will the status quo work and what is the best way to move forward keeping the big picture in sight.

In order to see whether the existing set up will work, one must look at the issues that are currently facing the government.

Moral authority
When the government came to power, it was told that it would be purely judged by its actions, and its acceptability and legitimacy will solely depend on their being able to continue to carry the moral authority they came to power with. Unfortunately, the moral authority has somewhat eroded due to certain actions. Unquestionably, the government scored its biggest points by taking on the untouchable high almighties. However, widely reported human rights abuse cases still remain unpunished. The result is that there is a growing number of people who feel the justice is not so blind towards the neo-ruling class.

Transparency
With a goal towards setting a standard for good governance, along with coming up with a lot of good measures, the advisers themselves have not been able to stand out. As politicians are getting jailed for lying in their wealth statements and government officers are being asked to provide their own wealth statements, the advisers themselves and the our top power brokers strangely seem out of the whole process, not having to furnish their own wealth statements. Most importantly, the government seems to be taking fundamental policy decisions, claiming mandate without bothering to justify it.

Precedence
The current caretaker government has set a precedent in dealing the politicians who have established reputations in corruption or have been perceived to be corrupt. The efforts were initially seen as cleaning up the politicians’ mess. But it is setting a dangerous precedent for the future. Similarly, the amount of policy decisions they are taking without clear constitutional legitim- macy is setting an alarming precedent that our constitution can be ignored as long as you can claim the people are with you.

Acceptability
The government has tried to engineer the reform process and break up the political parties. With the falling popularity of the government, these reformers are increasing being seen as the latest in the turncoat politicians that the country has seen. In the process, the government has successfully managed to completely disengage the majority of the parties and their grassroots workers.

Given the issues of legitimacy, this government will simply be unable to govern without addressing the issues above. Nothing short of a wholesale change in government policy will actually do that.

Lessons from Iraq and Nepal
The current political mess in Iraq began when the United States banned all members of the Ba’ath party from the new government, as well as from public schools and colleges. Under the previous rule of the Ba’ath party, one could not reach high positions in the government or in the schools without becoming a party member. So by excluding the Baathists, US designed ways to block many experienced and able people to participate in the new government. By the time, they reversed this policy, it was far too late and the political vacuum was filled by far more dangerous extremist elements in the country. The present regime in Bangladesh, has successfully portrayed politics to be a dirty word and decided to leave the politicians out of the process of cleaning up their “mess.” But the end result of this might not be a new set of clean political leaders, but possibly rather sporadic violent protests and the political land grabbing of opportunists like Jamaat-e-Islami,

As the government claims that conspiracies by the “evil-doers” from the political parties caused the unrest a few months ago, it is also tacitly accepting that the political parties are capable of shutting the country down completely as well.

Is nation building for the supposed new era possible without the millions of people that support the mainstream BNP and Awami League? Without venues for expressing dissent, the response from these groups is bound to become increasingly violent if they are not brought in as stakeholders in the process. Similarly, political parties must try to engage in meaningful conversation with the powers that be. In this context, a meaningful national dialogue is in the best interest of the country to come up with a roadmap towards a functional democracy with all the key parties having a stake.

In order to make the political parties stakeholders in the process, we can suggest that the caretaker government should be revamped within the framework of the constitution to include politicians. Some of the advisers from the current lot should be replaced by members of key political parties. The trust between the government and the parties must be brought back. The main political parties along with all the stakeholders in the current government need to come together and sign a national accord to agree on keeping some of the existing reform agenda to be pushed after election by whoever is in power. We have examples of such agreement where in 1991 both BNP and AL agreed to revert to parliamentary democracy in 1991 after the election.

The national accord among other things can discuss having an election like the Nepal model to elect an assembly that may be in place for two years with a room to review the constitution and make amendments as necessary based on what worked and did not work in the past 16 years. Nepal is heading to election to elect a constituent assembly for two years, that will decide the future of monarchy in the country among other things. Not only they are resolving the long-standing Maoist problem by bringing them into the political process, they also are forming a truth commission for all the minority communities to come together and form a constitution where the rights of all these groups are well protected.

Similarly, Bangladesh also can elect a constituent assembly which will be responsible for implementing solutions for the long-standing issues that have plagued our country. This will implement further reforms agreed to by all the parties and further strengthen reform and institution building for the following two years with a much needed legitimacy in their actions.

Post 1/11, the country looked forward to a new kind of politics. Unfortunately, due to some poor decision making, the country is headed for the same old confrontational politics and election boycotting. It is time to throw the challenge back to all the groups to show some vision and far-sightedness.

On one hand we need to admit, the politics and democracy practiced in the last fifteen years had flaws and on the other hand we must acknowledge politicians are key stakeholders in our future progress and bypassing them forcibly will only bring more chaos and unwanted results. So let’s have national unity and regeneration as the key goal towards any future settlement in order to see that Resurgent Bangladesh that we all envision.

Amer Ahmed

Published in the Daily Star (26 September 2007)

With its runaway growth over the past few decades, Dhaka has become a 12 million citizen strong mega-city and the center of Bangladesh’s political and economic life. Unfortunately, the city’s leadership has failed to establish a comprehensive strategy for dealing with this rapid urbanisation and urban poverty. Its failure in the former has continued to systematically exacerbate the latter, to what may soon become a breaking point.

This need for a comprehensive response to urban poverty is the point driven home by the June 2007 study: “Dhaka: Improving Living Conditions for the Urban Poor.” This report (DILCUP from here on) responds to this gaping hole in policy and provides a comprehensive examination of the state of urban poverty in Dhaka, and follows up its multidimensional analysis with policy recommendations that can form the foundation of a strategic response from the Government of Bangladesh.

The DILCUP is divided into five sections. The first section provides a detailed profile of Dhaka’s poor. The report analyses the characteristics of the different strata of society in the city at the household level, and thus compares the metrics of a typically “poor” household against those of a typically “rich” household. The stories these data tell should be shocking, but are unfortunately familiar to most Dhaka-dwellers: most of the poor live in slums, the richest fifth of society consumes five times more than the poorest fifth, and about one in three city-dwellers live in poverty.

Moving beyond statistics, the importance of the findings is highlighted through a series of maps that show the slums in the context of various environmental and institutional parameters, such as their nearness to rivers, their legal relationship with the Dhaka City Corporation, and the distribution of land ownership.

The four subsequent sections of the study provide more details on the primary components of urban poverty: employment, shelter for the poor, access to services, and crime in the slums. While these issues are presented as separate topics, it is apparent that they are inseparable from each other.

The study reports that, with about a fifth of the poor households underemployed and a third of the household’s income coming from child labourers, employment is an important component of urban poverty. In the near future, this will only get more important as rural-urban migration continues at a maddening pace.

Unfortunately, rural-urban migration has implications that go beyond employment. The dearth of secure shelter forces the hordes of newcomers into the slums, where access to services — sanitation, health, and water — is severely constrained. The service provision constraints are due to a variety of reasons, but can be traced back to the fact that most slums are not built on legally recognised land. Services in Dhaka are provided by a complex network of local and central agencies, each with varying jurisdictions and responsibilities. Since the slums have no legal standing, the bureaucracies do not recognise the slum-dwellers’ rights to service access. To compound this problem, the slum-dwellers are susceptible to slum evictions/demolitions. Given the possibility of an eventual demolition, NGOs are disinclined to invest in infrastructure in the slums and fill the gap left by the government.

To fill the institutional vacuum left by the government, criminals step onto the slum scene as alternative providers of services. These criminals also operate in a vacuum in law enforcement,, where there are almost no consequences for extortion, drug use, domestic violence, and other crimes.

The various dimensions of urban poverty in Dhaka are closely related, and a holistic policy response is necessary. The DILCUP provides a series of recommendations for each main aspect of urban poverty, with a detailed breakdown of what bureaucracies and institutions should be involved and in what manner.

While detailing all the policy recommendations the study makes is beyond the scope of this review, a brief description of its suggestions with regards to shelter may be illustrative.

To address the shelter situation, the DILCUP endorses the implementation of the National Housing Policy as “an enabling framework for addressing land and housing markets in Dhaka, and enforcing basic property rights.” To achieve this, the study recommends the formation of an inter-agency committee involving the LGED, the National Housing Authority, the Ministry of Land, and Rajuk, mandated with the authority to make the necessary reforms. The authorities would do well to reflect on the recommendations before commencing further slum demolition drives.

To the extent that they rely on a flawed government and bureaucracy for implementation, the veteran Dhaka-dwellers, jaded by many years of poor governance, may be sceptical of the recommendations. However, the DILCUP’s recommendations provide our leadership with an excellent perspective on how urban poverty looks, what makes it tick, and where to begin unwinding its worst excesses.

Reference:

World Bank (2007) “Dhaka: Improving Living Conditions for the Urban Poor,” Bangladesh Development Series Paper 17, The World Bank Office, Dhaka.