Tanim Ahmed

THE finance adviser to the military-controlled interim government, AB Mirza Azizul Islam, on Tuesday acknowledged that the economy 'is under tremendous pressure', in the process contradicting his own observation a few days ago. On February 13, he dismissed the observation by economists and experts that the state of emergency was creating an unstable environment not conducive for business or investment. Mirza Aziz said he could not perceive why the state of emergency could create an unstable environment. He played the same card that was played at the time of the declaration of the emergency rules coinciding with the military-supported assumption of the current government and said an unstable environment would come about if one party opposes the results of an election and continues to agitate in protest.

The same day, as was reported in the media, Khondkar Ibrahim Khaled, a former deputy governor of the Bangladesh Bank and now chairman of the Bangladesh Krishi Bank, said the economy would witness a turnaround with the suspension of the state of emergency. He said it should not be expected that the ongoing anti-corruption drive would contribute to reviving the economy as it is habitual of businesses and industries to come about in a flexible regime and often exploiting benefits from the government. But the state of emergency suggests the most stringent application of laws. He pointed that there was hardly a country in the world going through transition that did not witness corruption and given the reality, it would have been wiser for the incumbents if they allowed business quarters to operate in exchange of monetary penalties.

Ibrahim Khaled also said the economy was in trouble for reasons that went quite beyond the realm of economics and, therefore, he reasoned, no matter how hard the central bank governor tries, he will continue to fail to meaningfully revive the economy. He said the economy would do much better under a regular government with the application of regular laws.

At the same programme, Atiur Rahman, a professor of development studies at Dhaka University and head of the non-governmental organisation Unnayan Samunnay, said the economy was going through stagflation as there was low investment, low growth coupled with high unemployment. Atiur said it was imperative to ensure a predictable and consistent policy regime to ensure investment and business dynamism. But the military-controlled regime's position and policies were neither predictable nor accountable nor transparent.

Akbar Ali Khan, a former finance secretary and adviser to the previous caretaker government who now heads the Regulatory Reforms Commission, spoke on the state of the economy on the same day. He said the state of emergency, which is considered more of a political one, would soon turn into an economic emergency if the government did not act quickly. He said although inflation was officially just over the double mark, it was almost 30-35 per cent for the poorer sections of the people. Rising prices of food essentials, he said, was killing the poor people. Akbar called for immediate measures to ensure food for the people disregarding budget deficit or risks to fiscal discipline that the incumbents appeared overly concerned with. A healthy foreign reserve and a reasonable economic growth, which would perhaps end up at over five per cent, should not be mistaken as positive signs that the economy is faring well.

Indeed, the state of the economy has turned out to be the biggest challenge of the incumbents. Ever since they took office in January 2007, most of the indicators, especially those that signify the well-being of the masses, have dipped, some more markedly than others. To reiterate, investment, employment, growth and exports have dipped while inflation, unemployment, food shortfall and trade deficit have soared. Stagnation of the economy, which seemed on the verge of attaining a consistent seven per cent growth, may be ascribed to the incumbents' unpredictability. Despite reassurances from the key figures of the current regime about elections being held in due time with the necessary political reforms in place, the ever-decreasing investment figures quite clearly shows that they fail to quell tensions among the people or even the businessmen.

There is a growing uncertainty over the political outcome of the elaborate exercise that the incumbents are engaged in. The fate of the incumbents' self-declared agenda to curb corruption, establish rule of law, meaningful separation of the judiciary and the Election Commission, implement political reforms still remain uncertain. While these remain undecided, it is still not clear as to which of these agendas the interim government places most importance.

The roadmap of the Election Commission is also falling behind its announced schedule which in turn implies a delay of elections. In the meantime the commission continues to take on its plate much more than it can chew and digest in time for elections to be held by the end of this year – delimitation of the constituencies and holding of municipal and local elections for instance.

To make this sense of uncertainty even more complex there are the speculations and rumours that certain forces are bent on keeping the two former prime ministers outside politics on the one hand, and trying to break up the main political parties along reformist and conformist lines. The notion of a national government creeps up continually suggesting the possibility of an even longer tenure of an unelected regime.

As the former deputy governor pointed out, it is characteristic of businesses and industries to flourish exploiting the flexibilities of successive governments. It is also characteristic of large investments to draw funds, at least partially, which are at best grey, if not entirely black. The current drive apparently to root out black money precludes those possibilities. As has been suggested a long-term plan envisaging a gradual transformation would have been much more effective.

The concept of truth commission, although mooted, has not seen any material advancement and remains rather controversial among different sections of the citizens. Its manner of work and effectiveness is still in doubt as are the outcomes of the trials of high-profile corruption suspects that include two former prime ministers.

Uncertainties continue to remain over the nature of the government as well. While there is an increasing pressure, natural and organic in cases of any authoritarian rule, to suspend emergency, there is little indication of when exactly it will be lifted. Neither is there any guarantee whether such a suspension might be followed up with an even more martial regime taking over. Both national and international quarters continue to reassure the people that everything is heading towards a healthy end. But the nagging suspicions remain.

A report of the Economist Intelligence Unit, an affiliate of the UK-based periodical Economist, speculated that this state of emergency is likely to remain till the elections but failed to conclude the outcome. What it did conclude, or rather suggested by way of conclusion, however, is that the political uncertainty that Bangladesh currently faces will continue for sometime to come.

In such a situation, it is likely that large investors, both local and foreign, would refrain from opening shop, except perhaps for such operations as mineral extraction that stand to gain the most in a volatile situation. But industrial units involving large numbers of people either through direct employment or indirect benefits would hardly come about.

The economy will only begin to stabilise when an end to the current political instability is in sight. Since their assumption of office the incumbents have failed to ensure that. They must realise that without addressing one side of the problem, all attempts to streamline and revive the economy would amount to little more than cosmetic measures. And such an attempt, if sincere, would have to begin with the suspension of emergency swiftly followed by credible elections.