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Imbalance in economy and politics of Bangladesh

  • Published at 06:59 pm December 24th, 2018
File photo RMG workers Mehedi Hasan/Dhaka Tribune

How does the RMG industry tie in with the elections?

As Bangladesh heads to parliamentary elections to be held on December 30, only a risk-loving gambler would bet against the governing party returning to power. In its latest country report, Economist Intelligence Unit (EIU) expressed the conventional assessment that the rulingparty will retain power easily. 

The analysis powerhouse based this expectation mostly on the strong economic performance of Bangladesh in the last decade under the current regime. Over the last ten years, GDP growth in Bangladesh averaged well over 6% and is projected to be even higher in the next few years.

Foreign exchange reserve has increased more than fourfold, and the currency has remained steadfast against hard currencies. In the last decade, Bangladeshi currency has lost only 20% of its value against US Dollar while the Indian Rupee lost 31% and Pakistani Rupee 41%. 

Not just in economy, Bangladesh has made great strides in social development. By World Bank’s estimates, national poverty rate dropped from 40% to 24% in the 10 years preceding 2017. 

Bangladesh government estimates, by 2015 the country had already achieved many of the MDGs, for example in nutrition, primary education, child mortality, maternal health etc, far ahead of most other LDCs. 

These growth and developments were not urban-centric either, rural household income increased by 40% from 2010 to 2016. 

However, the ongoing pre-election period may baffle an outside observer because, despite strong economic growth and widespread expectations of a win, the regime is carrying out an unprecedented campaign of repression of political opponents. 

Not only the ruling party is visibly controlling every facet of the administration, including the election commission, but the party is using these state organs to directly thwart, attack, arrest, harass opposing candidates countrywide. 

This would not surprise regular observers of Bangladesh affairs because, along with the remarkable economic growth, the last 10 years were also marked by clear democratic backsliding and authoritarianism. 

German research group Bertelsmann have been keeping tabs on democratic development in the world since 2005 -- status of democracy in Bangladesh has been rapidly deteriorating since the non-competitive election of 2014 and in 2018 Bangladesh was downgraded from a highly defective democracy to a moderate autocracy.  

The level of repression before the election suggests that the rosy economic and development numbers may not be providing a faithful representation of the economic well-being of the general people. 

A recent report by ILO said that, youth unemployment in Bangladesh grew by 7% from 2010 to 2017, one of the worst unemployment growths in developing countries. 

In a pre-election assessment of the economy of the last 10 years, CPD put forward the calculation that one-third of the educated youth are unemployed. In recent years, the country has been rocked by several urban youth movements demanding more access to government jobs, for many the only avenue for upward mobility.    

At the same time, several Bangladeshi sources say that as many as half million foreign nationals, mostly Indians, work in Bangladesh in skilled/white collar jobs. This lack of educated and skilled Bangladeshi workers is greatly explained by the dismal state of higher

Economists argue that a country’s long-term economic growth comes mainly from, investing in human and physical capital. We have seen that human capital development in Bangladesh has been significantly below par to its neighbours and in investment, the picture is not much better either. 

The previously mentioned CPD report showed that in the last ten years both private investment and foreign direct investment growth in Bangladesh were anemic. Rather than investments, much of the “miraculous” economic growth of Bangladesh have come from exports, consumption, and government spending.  

Export growth, in particular, has been spectacular; more than doubling from $17bn in 2009 to $37bn in 2017. However, if we look at the composition of export, a stark imbalance appears -- more than 85% of the total exports is just from one product category: RMG. 

Any development economist would say that such high-level export dependence on just one product is alarming for any country and any product. RMG may be an especially bad basket to put in all the eggs.   

RMG is a low-technology, labour-intensive industry that mostly depends on ready-to-export, turn-key factory units. Although the industry employs a great number of factory workers, lack of learning and upgrading in jobs mean that workers have short shelf-life and are unceremoniously terminated after the end of productive years. 

The mature technology of RMG means there is little effort for innovation -- thus, there is a lack of need for skilled and technology workers, which means that the industry provides little demand for the development of human capital and technological capabilities in the country. 

A particular feature of the RMG industry is it has very little input-output relations with other major export industries. This means that development of garments industry does not spill over to development of other more value-adding industries. 

Despite frequent boastful proclamations from regimes and entrepreneurs, industries like pharmaceuticals, electronics, IT services, chemicals etc, are prominent in the Bangladeshi export basket by their insignificance and absence.

“Countries become what they make” -- the RMG industry, dominating Bangladeshi economy for a long time, has not only dramatically shaped the society but also politics. This is a strikingly unequal industry with a few dominating large firms and many small firms servicing those large firms; lacking mid-sized and diverse firms. 

The industry creates a narrow business elite that can easily collude with the government for preferential treatment. The regime, in return from this privileged treatment of the industry, obtains assurance of steady and increasing revenue which it invests in building up the bureaucracy and infrastructure. 

This growing public investment not only helps boost the GDP but also provide the political regime with means to buy off loyalty of bureaucracy and civil society. Regimes then use the RMG-fueled state and civic power to suppress political opposition and stage “managed” elections. 

We have witnessed these intimately related events again and again in recent years, most notably in Cambodia, another RMG dominated country, where the ruling regime just staged an election in 2018 where it “won” 100% of the seats.

Writer Yuval Noah Harari in his new book 21 Lessons for the 21st Century mentioned Bangladeshi RMG industry as a prime candidate for severe incoming disruption from automation. 

Development of new automation technology, changes that are now within a realistic realm, can wipe away advantages of cheap labour at a stroke and render millions of garments workers jobless worldwide. 

The spectacular growth of the RMG industry in Bangladesh explains the source of the dominating power the ruling party has over political opponents. At the same time, the uneven economic and social development from this industry and the very precariousness of the industry’s future, help us understand why there is simmering discontent among aspiring citizens. 

The puzzle of repression during times of plenty, is not so baffling after all.

Shafiqur Rahman is a doctoral candidate in University of Oregon. His main area of research is the comparative political economy.