Published in the Daily Star on 12 June 2009.
THE 2009-10 budget has been announced amid much fanfare. Thanks to the media and initiatives from various business groups, wide scale pre-budget aspirations of people received much air time. The reality, though, is that even the best of budgets and policy initiatives can fail due to issues beyond the control of the finance minister. The devil will not be in the details, but in implementation. So it’s important to get the potential road-blocks identified.
Order, order, order
The government has to do considerable amount of work in bringing back people’s faith in our judicial system. At least this was part of this government’s election promises. The ripple effect of this lack of confidence is reflected in the economy through buoyancy and morale of businesses, investors, and the citizenry at large.
Citizens who feel “there is no justice” and feel unsecured in the country will naturally be hesitant in saving or turning the savings into investment. Our domestic saving has been stagnant at around 20% of GDP during the last five years while total investment slowed down marginally.
When both local and foreign businesses express that there is no legal infrastructure to support the investment they make in this country, promoting the proposed public-private partnership will be even harder.
Notwithstanding the government’s general positive approval ratings, it is getting failing grades in maintaining law and order. Given the dismal 2001 election performance which was squarely blamed on degrading law and order situation, the AL should not need a reminder that even the best budget in the world will not mean much unless the trend is reversed on law and order.
To implement the proposals of the announced budget, the role of an efficient bureaucracy is undeniable. So the relationship and understanding between the political leadership (who makes the budget) and the public servants (who implement it) has to improve. And a guaranteed way to jeopardise the relationship is to appoint and promote on the basis of party loyalty rather than qualification.
It’s not enough to just criticize the present status quo as inefficient and corrupt, as the finance minister did a few weeks ago in a pre-budget meeting. Rather one should also recognise that the kind of “people-oriented” public service that Mr. Muhith wants to see has hardly been rewarded by various past governments. Should this government also decide to award high level government posts (both in bureaucracy and in semi-government institutions) as political patronage and cast a blind eye towards efficiency and competence, disenchantment is bound to spread.
In the election manifesto, the AL promised to make each union the hub of development and administration and each upazila the centre of industrial growth. However, the recent changes giving MPs the power to vet each decision made by locally elected leaders are directly contrary to the spirit of the manifesto pledges. At the least, they are bound to create conflicts, and such conflicts may well doom any development effort.
Understandably, the MPs want some financial muscle to show their clout. But it should not be done through curtailing the local leader’s power but through creating a transparent legal framework where an MP can have jurisdiction over allocation over some funds in his/her constituency. The social safety net programs announced in the budget for rural and agricultural development and for the creation of new jobs at the local level will not be successful without strong local leadership.
Decentralised industrial growth
Similar to development, the focus towards industrial growth needs be decentralised as well. It needs to focus on creating special economic zones outside Dhaka. There is also a false sense of satisfaction into thinking that by removing the barriers of access to finance, local small and medium industries will thrive. Without the infrastructure, access to markets, focused market oriented approach and some level of hand holding, the small and medium sector industries in various sectors will not be able to realise its full potential.
Significant policy reform is needed in our regulatory framework to implement most of the proposals made in yesterday’s budget. While the business lobby group managed to get some of their recommendations through the Better Business Forum, voices of the small and local entrepreneurs remains mostly unheard. The development projects of the budget will do little to reduce poverty and inequality in the society if the regulatory reform of land, judiciary and administration remains unresolved,
While having a development budget supported by the political will is important, it is equally important to identify the institutional bottlenecks and impediments that will make it difficult to implement these budget proposals. We hope this year’s budget will be complemented with subsequent initiatives to remove these obstacles.