The timing of creation of a special economic zone for the Chinese investors was announced unheralded and as a coincidence recently. And now is the time to woo beleaguered Chinese businesses.
Side by side the careful but much maligned management of the country's record forex reserves has been vindicated. In a country where capital flight, given the chance happens in the twinkling of an eye thereby having an enervating impact on the economy, it must provide those of faith immense self-satisfaction. Instead of the panic selling of forex by China and Russia, Bangladesh Bank continues to buy the U.S. dollar from the market to keep the appreciation at bay. Imports are therefore cheaper and exports resilient enough to grow.
According to media reports, Atiur Rahman, governor of Bangladesh Bank knows that everyone wants the taka at 70 against the dollar but he prefers the Tk 77 number thereby allowing the dollar to find its own position. And it is this resoluteness of the world's 35th largest economy that is drawing investor interest. So much so that Mr. Rahman has been emboldened to seek a $1.0 billion bond sale in the U.S. That will be converted into taka for funding infrastructure projects. A pound sterling bond is also in the offing. His confidence is a manifestation of the faith gleaned from the fact that Bangladesh has never defaulted on its payments no matter the jitters it has been through.
On the contrary according to guesstimates China has sold $ 3.4 billion dollars to plug the gap emanating from withdrawal of capital by nervous investors. It is a minuscule number against the multi-trillion dollar reserves the country has but it is small opportunities like these that help developing countries with the resolve to thrive. Buoyed by a 26% rise in exports in August with all collapsing around it, Bangladesh is resilient beyond expectations.
Nor is it the first time that the banker to the poor has taken calculated risk. Shortly after taking his responsibility, he paid caution to the winds by employing graduates to survey and ensure farm loans reache marginal farmers. And because he has been there and do it, the once milk-selling man has seen success. Holding firm to push interest rates down he has forced natural forces push down lending rates without strictures or orders. The cost has been lowered—his responsibility. The procedural bottlenecks remain—not his fault.
To the extent to alienating businesses, he also resisted attempts to have his zealously guarded forex allocated for investments abroad. Again, he was correct. The private sectors managed on their own. If only he would look pragmatically at changing guidelines to allow non-banking financial institutions to provide mobile financial services, he might just power a new thrust on private business.
Brazil, Russia and now South Africa are in recession. The main reason is a significant slowing down of ore imports by China. Luckily Bangladesh exports value added commodities thereby not dependent on activity slowdown. Indeed, it must be satisfying that world's second largest garments' exporter has seen exports to the largest exporter rise by 16%.
China will rebound, no question about that. It is how well the interim period is seized upon, in the meantime, is the question. A ramp-up of cheaper goods, especially capital machinery, could be the here and now opportunity.
(The writer may be reached at
mahmudrahman@gmail.com)
