Who should get what in case a recession hits us hard?
Sunday, 26 April 2009
Maswood Alam Khan
A few weeks back as I was roving around Kolarua in Satkhira on an official visit, I felt amazed by the dizzy pace of the businessmen in churning out from furnaces of dozens of new and old factories thousands of decorative clay tiles which were neatly baked, packed and stacked in hundreds of warehouses, all ready for exportation to Europe, especially to Italy.
Any patriotic citizen must feel enamoured thinking how by a strange twist of fate people in Kolarua are rushing towards a golden future the export industry has opened up, thanks to Ruhul Amin, a Bangladeshi expatriate in Italy, who about six years back in November, 2003 had initiated the export of these earthen tiles from Murarikhali, a tranquil village in Kolarua upazilla of Satkhira district of Bangladesh to Arrezzo, a bucolic city set on a steep hill located in Tuscany of Italy.
I was also happy and content. But I had felt a little dizzy when I came to learn that the gummy soils used in manufacturing these tiles are not those which are replenished by alluvial deposits periodic floods carry from the Himalayan. The special soils that make our Satkhira tiles internationally famous had taken perhaps thousands of years to be transformed into adhesive from their non-adhesive character constituting most of the topsoil of the localities. Topsoil is the uppermost layer of soil having the highest concentration of organic matter and microorganisms where most of the Earth's biological soil activities occur.
Once all the sticky earths, including the topsoil, will be shaved from the grounds for exporting the decorative tiles the Satkhira people will have to abandon their tiles manufacturing jobs as those gummy raw materials will no more be available. Shorn of these valuable viscid loams the once valuable lands would thus one day become as barren as forlorn deserts not suitable even for any plants or trees to grow on. Ultimately the Satkhira people may in future have to abandon their jobs of cultivation too.
Bricks, like clay tiles, have also been devouring topsoil of most of the countries for hundreds of years and Satkhira people are not the only habitants on this Earth doing this suicidal job of selling their topsoil. Thousands of poor farmers who for ready cash had to sell soils of their own lands to the owners of the new tea gardens in Panchagar in the Northern Bangladesh now find no other alternative but to earn their livelihood as day-labourers in the same tea gardens which were dressed and nourished by the topsoil shaved from their own agricultural lands now made barren due to absence of topsoil.
Selling topsoil however is not suicidal if the value of the sale proceeds enhances the quality of life of the seller in the long run. What is important to note is whether a man is selling opium to buy milk or selling milk to buy opium! Whether we are exporting clay tiles with a view to importing junks and radioactive wastes to dump on our soil or scientific gadgets and organic materials that may transform our unused barren lands into fertile agricultural lands! What should bother our government is whether our girls now working in readymade garments factories would suddenly be worthless, if they are not timely trained in any other alternative vocations, in case garments factories have to be closed for any unavoidable circumstances.
Ironically, we export jobs to other countries that can produce their products at a cheaper price and we carry on retooling and retraining our labour forces; we export clay tiles robbing our earths of topsoil and import luxuries that make our people addict. In exchange of our labour and goods exported we the exporters get some paper currencies called Dollars or Euros or Sterling Pounds, none backed by any precious metal. In the event of a severe global recession, reduced value of these paper currencies will make the exporting countries like us paupers who have saved those so-called hard currencies as reserve funds.
The US dollar is the world's premiere currency, with approximately two thirds of world official foreign-exchange holdings in dollars. Moreover, many countries appear willing to run sustained trade surpluses with the US, supplying everything from t-shirts to Porsches in return for additional dollar holdings. This willingness to exchange valuable resources only for paper IOU (I Owe You) notes represents a form of dollar hegemony. For the US, one major benefit of the dollar's reserve-currency role is that it increases the demand for US financial assets. This drives up prices of stocks and bonds and lowers interest rates, thereby increasing American household wealth artificially and lowering the cost of their borrowing money, a vicious trend that has actually sparked the ongoing financial meltdown affecting the whole world.
A dependence on exports is therefore very dangerous if we are myopic in viewing what awaits us in the long run. And always patronising only the exporters without simultaneous efforts for mobilising domestic resources is suicidal at the end of the day. Taiwan was once the leading exporter of shrimps. Due to super-intensive shrimp culture Taiwan has become barren for shrimps and is now a leading importer of shrimps. Bangladesh is now a leading exporter of unskilled human resources, readymade garments, shrimps, and clay tiles. In case demands for Bangladeshi goods and services fall in the world market what tools do we have to recoup our investments in the export sectors? Who should be rehabilitated first: the exporters or the people who would be losing their jobs?
Financial miseries of the late 1990s have taught the Asian tigers a precious lesson: "Sink your teeth more firmly into reducing your reliance on the USA". In case heavy waves of global recession hit our shores it is high time we restructured our corporate sectors, especially our domestic financial institutions, with a view to creating an economy that is not heavily dependent on exports, an economy that will rather generate local employments and spur our domestic consumers to be spendthrift.
We should remember that the main culprit behind an economic recession is not the poor economic capacity of the industries or the government; it is the confidence of the people which becomes too weak to spend money. Consumer confidence of Bangladeshi people will exist only when domestic resources, not exportable resources alone, are better mobilised for a sustainable economic expansion. In times of recession exports are bound to plummet, even if exporters reduce prices of their products down the floor. The only escape door that remains open for a country hit by a severe recession is the domestic market where domestic consumers should feel safe to consume their necessities and luxuries.
Talk of the town is who should get how much of the 'stimulus package' being offered by our government in the wake of global recession. Readymade garments owners are claiming they deserve to be the main beneficiaries. Our government also seems to have been cowed under the pressure of the exporters of the readymade garments.
The question any conscious citizen may ask how an exporter buttressed by government-offered financial aids can survive a recession in the present context. The RMG industrialists will answer: "survival of the export industry means survival of thousands of wage-earners working in those industries and their dependent families". In search of an answer to this question if we dissect a probable situation of a worst recession, when no aid would help an exporter survive, when the export industry itself must die, we would find that giving any cash incentive directly or indirectly to exporters, instead of investing the same cash for future provisions of the thousands of garments workers who would be losing their jobs, would be a tragic and total drainage of government funds. Patronising a sure-to-die industry is almost like 'flogging a dead horse'. We should rather think about the uncertain future of garments workers, not owners, when the garments factories, may God forbid, will turn into lifeless haunted houses with doors of exports to recession-hit countries fully or partially closed.
Our readymade garments industries will not be dead horses anytime soon, for sure. What in the worst scenario may happen is a greatly reduced order list. The question is: in case orders from overseas buyers go down will our garments industries refrain from retrenching their workers on the strength of the subsidy they are expecting from the government in the form of 'stimulus package'? One can bet his last bill of dollar to answer: "NO". Why then should the government be moved by their crocodile tears? Our readymade garments industries, compared to their counterparts in many corners of the world, are far better off, thanks to low-end products we manufacture which will continue being consumed by the shoppers in the West, though at a little lower price and at a little lower quantity. When the financial crisis hits hard in developed countries, consumers turn to lower their level of consumption, to buy cheaper stuffs rather than the more expensive ones.
Let our garments industries fend for themselves for the time being. The present incentives that they are now enjoying should rather be reduced to save some fund to be invested for the succour of the garments workers who would be losing jobs in the wake of reduced orders from the buyers.
The government must invest its time and energy on how the millions of jobless can be employed in productive sectors that will keep our economy running with our consumer confidence boosting. What is needed most is enhanced investments in our agriculture, health, and education sectors. Whatever stimulants our government can afford to dispense should go to these three sectors only. The jobless and those to be fired from jobs in factories that are now exporting readymade garments or shrimps or clay tiles and those wage-earners who will be returning home after losing their jobs abroad have first to be retrained by vocational institutions under a crash programme so that they can jump-start small or medium enterprises in rural areas near their homes.
On a war footing, state-owned banks, especially Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, and Karma Shangsthan Bank have to be reformed and restructured as far as possible so that outlets of these banks with sufficient manpower and logistics in each and every union can rush to the jobless with necessary seed money. Before it is too late we should mobilise all our internal resources to sustain as much as possible our agriculture, health and education for our survival -- keeping those export-oriented sectors on the back burner for the time being.
The writer is a banker. He can be reached at
e-mail: maswood@hotmail.com
A few weeks back as I was roving around Kolarua in Satkhira on an official visit, I felt amazed by the dizzy pace of the businessmen in churning out from furnaces of dozens of new and old factories thousands of decorative clay tiles which were neatly baked, packed and stacked in hundreds of warehouses, all ready for exportation to Europe, especially to Italy.
Any patriotic citizen must feel enamoured thinking how by a strange twist of fate people in Kolarua are rushing towards a golden future the export industry has opened up, thanks to Ruhul Amin, a Bangladeshi expatriate in Italy, who about six years back in November, 2003 had initiated the export of these earthen tiles from Murarikhali, a tranquil village in Kolarua upazilla of Satkhira district of Bangladesh to Arrezzo, a bucolic city set on a steep hill located in Tuscany of Italy.
I was also happy and content. But I had felt a little dizzy when I came to learn that the gummy soils used in manufacturing these tiles are not those which are replenished by alluvial deposits periodic floods carry from the Himalayan. The special soils that make our Satkhira tiles internationally famous had taken perhaps thousands of years to be transformed into adhesive from their non-adhesive character constituting most of the topsoil of the localities. Topsoil is the uppermost layer of soil having the highest concentration of organic matter and microorganisms where most of the Earth's biological soil activities occur.
Once all the sticky earths, including the topsoil, will be shaved from the grounds for exporting the decorative tiles the Satkhira people will have to abandon their tiles manufacturing jobs as those gummy raw materials will no more be available. Shorn of these valuable viscid loams the once valuable lands would thus one day become as barren as forlorn deserts not suitable even for any plants or trees to grow on. Ultimately the Satkhira people may in future have to abandon their jobs of cultivation too.
Bricks, like clay tiles, have also been devouring topsoil of most of the countries for hundreds of years and Satkhira people are not the only habitants on this Earth doing this suicidal job of selling their topsoil. Thousands of poor farmers who for ready cash had to sell soils of their own lands to the owners of the new tea gardens in Panchagar in the Northern Bangladesh now find no other alternative but to earn their livelihood as day-labourers in the same tea gardens which were dressed and nourished by the topsoil shaved from their own agricultural lands now made barren due to absence of topsoil.
Selling topsoil however is not suicidal if the value of the sale proceeds enhances the quality of life of the seller in the long run. What is important to note is whether a man is selling opium to buy milk or selling milk to buy opium! Whether we are exporting clay tiles with a view to importing junks and radioactive wastes to dump on our soil or scientific gadgets and organic materials that may transform our unused barren lands into fertile agricultural lands! What should bother our government is whether our girls now working in readymade garments factories would suddenly be worthless, if they are not timely trained in any other alternative vocations, in case garments factories have to be closed for any unavoidable circumstances.
Ironically, we export jobs to other countries that can produce their products at a cheaper price and we carry on retooling and retraining our labour forces; we export clay tiles robbing our earths of topsoil and import luxuries that make our people addict. In exchange of our labour and goods exported we the exporters get some paper currencies called Dollars or Euros or Sterling Pounds, none backed by any precious metal. In the event of a severe global recession, reduced value of these paper currencies will make the exporting countries like us paupers who have saved those so-called hard currencies as reserve funds.
The US dollar is the world's premiere currency, with approximately two thirds of world official foreign-exchange holdings in dollars. Moreover, many countries appear willing to run sustained trade surpluses with the US, supplying everything from t-shirts to Porsches in return for additional dollar holdings. This willingness to exchange valuable resources only for paper IOU (I Owe You) notes represents a form of dollar hegemony. For the US, one major benefit of the dollar's reserve-currency role is that it increases the demand for US financial assets. This drives up prices of stocks and bonds and lowers interest rates, thereby increasing American household wealth artificially and lowering the cost of their borrowing money, a vicious trend that has actually sparked the ongoing financial meltdown affecting the whole world.
A dependence on exports is therefore very dangerous if we are myopic in viewing what awaits us in the long run. And always patronising only the exporters without simultaneous efforts for mobilising domestic resources is suicidal at the end of the day. Taiwan was once the leading exporter of shrimps. Due to super-intensive shrimp culture Taiwan has become barren for shrimps and is now a leading importer of shrimps. Bangladesh is now a leading exporter of unskilled human resources, readymade garments, shrimps, and clay tiles. In case demands for Bangladeshi goods and services fall in the world market what tools do we have to recoup our investments in the export sectors? Who should be rehabilitated first: the exporters or the people who would be losing their jobs?
Financial miseries of the late 1990s have taught the Asian tigers a precious lesson: "Sink your teeth more firmly into reducing your reliance on the USA". In case heavy waves of global recession hit our shores it is high time we restructured our corporate sectors, especially our domestic financial institutions, with a view to creating an economy that is not heavily dependent on exports, an economy that will rather generate local employments and spur our domestic consumers to be spendthrift.
We should remember that the main culprit behind an economic recession is not the poor economic capacity of the industries or the government; it is the confidence of the people which becomes too weak to spend money. Consumer confidence of Bangladeshi people will exist only when domestic resources, not exportable resources alone, are better mobilised for a sustainable economic expansion. In times of recession exports are bound to plummet, even if exporters reduce prices of their products down the floor. The only escape door that remains open for a country hit by a severe recession is the domestic market where domestic consumers should feel safe to consume their necessities and luxuries.
Talk of the town is who should get how much of the 'stimulus package' being offered by our government in the wake of global recession. Readymade garments owners are claiming they deserve to be the main beneficiaries. Our government also seems to have been cowed under the pressure of the exporters of the readymade garments.
The question any conscious citizen may ask how an exporter buttressed by government-offered financial aids can survive a recession in the present context. The RMG industrialists will answer: "survival of the export industry means survival of thousands of wage-earners working in those industries and their dependent families". In search of an answer to this question if we dissect a probable situation of a worst recession, when no aid would help an exporter survive, when the export industry itself must die, we would find that giving any cash incentive directly or indirectly to exporters, instead of investing the same cash for future provisions of the thousands of garments workers who would be losing their jobs, would be a tragic and total drainage of government funds. Patronising a sure-to-die industry is almost like 'flogging a dead horse'. We should rather think about the uncertain future of garments workers, not owners, when the garments factories, may God forbid, will turn into lifeless haunted houses with doors of exports to recession-hit countries fully or partially closed.
Our readymade garments industries will not be dead horses anytime soon, for sure. What in the worst scenario may happen is a greatly reduced order list. The question is: in case orders from overseas buyers go down will our garments industries refrain from retrenching their workers on the strength of the subsidy they are expecting from the government in the form of 'stimulus package'? One can bet his last bill of dollar to answer: "NO". Why then should the government be moved by their crocodile tears? Our readymade garments industries, compared to their counterparts in many corners of the world, are far better off, thanks to low-end products we manufacture which will continue being consumed by the shoppers in the West, though at a little lower price and at a little lower quantity. When the financial crisis hits hard in developed countries, consumers turn to lower their level of consumption, to buy cheaper stuffs rather than the more expensive ones.
Let our garments industries fend for themselves for the time being. The present incentives that they are now enjoying should rather be reduced to save some fund to be invested for the succour of the garments workers who would be losing jobs in the wake of reduced orders from the buyers.
The government must invest its time and energy on how the millions of jobless can be employed in productive sectors that will keep our economy running with our consumer confidence boosting. What is needed most is enhanced investments in our agriculture, health, and education sectors. Whatever stimulants our government can afford to dispense should go to these three sectors only. The jobless and those to be fired from jobs in factories that are now exporting readymade garments or shrimps or clay tiles and those wage-earners who will be returning home after losing their jobs abroad have first to be retrained by vocational institutions under a crash programme so that they can jump-start small or medium enterprises in rural areas near their homes.
On a war footing, state-owned banks, especially Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, and Karma Shangsthan Bank have to be reformed and restructured as far as possible so that outlets of these banks with sufficient manpower and logistics in each and every union can rush to the jobless with necessary seed money. Before it is too late we should mobilise all our internal resources to sustain as much as possible our agriculture, health and education for our survival -- keeping those export-oriented sectors on the back burner for the time being.
The writer is a banker. He can be reached at
e-mail: maswood@hotmail.com