Bangladesh maintained a reasonably good growth performance during the last couple of years withstanding a number of domestic and international challenges. But the outlook does not look equally promising this year. Several economic observers and development partners have already expressed their pessimism. Their predicted rate of growth for the current fiscal year varies but all remain below 6.0 per cent.
One should not worry much about the projected decline in the growth of GDP (gross domestic product) in the current year. Our past experiences since the 1990s - the beginning of the democratic regime of the country - suggests that rate of growth of GDP declined in every election year and then picked up the normal trajectory in the following years. In FY1996, when two national elections took place - one in February and another in June - growth of GDP declined from the previous year by 0.3 percentage points but picked up again by 0.8 percentage points in FY1997.
Similarly, growth of GDP declined from 5.9 per cent in FY2000 to 5.2 per cent in FY2001. The 8th parliamentary election took place in FY2001. Eventually growth escalated to 6.3 per cent by FY2004. The growth of GDP in FY2008 was 6.2 per cent, which declined to 5.7 per cent in FY2009. The 9th parliamentary election of the country took place in December 2008 which belongs to FY 2009.
The above numbers suggest that growth of GDP in an election year on average declines by about 0.5 percentage points. According to the latest estimation of the Ministry of Finance, the growth of GDP in the last fiscal year was about 6.0 per cent (Bangladesh Economic Review 2013, Ministry of Finance, p-303). If our economic environment remains more or less unchanged, and there are no newly-emerged domestic and international challenges, simply for being an election year, the growth of GDP in the current fiscal year is likely to decline to about 5.5 per cent. And given our past experiences, as long as growth remains within the vicinity of 5.5 per cent, it should be accepted as normal for an election year.
The economic observers have identified the political unrest and looming threat of up-scaled violence as the main reasons for their pessimism. Their prediction for growth of GDP in the current year varies between 5.7 to 5.9 per cent. Thus the overall impact of conflicting political situation in terms of lost growth of GDP is not extraordinarily high, only about 0.3 to 0.1 percentage points - smaller than the average loss during the previous election years.
However, lost growth of GDP due to political unrest represents only one dimension of the problem and misses the distributional dimension. The economic cost of political unrest is not equally borne by all citizens of the country. Let us take the example of hartal. It affects the low income groups like the transport and service workers, salespersons, and petty traders the most. In most cases, these people work and receive payment on daily basis. They are the people who also struggle hard to manage the bare minimum. They find it difficult to bear the economic hardship of one day's forgone income. That is why the actual economic cost of hartal cannot be fully grasped only from its growth effect.
Whether use of hartal as a political tool will be stopped or not depends on the political leadership. No matter how severe its economic impact is, the economic policymakers cannot stop hartal. Therefore, the policymakers should rather focus on how to minimise the economic damage of it accepting the reality that hartal is a constraint that cannot be avoided. Unfortunately, despite our long history of using this political tool, our policymakers are yet to adopt measures for economic management of hartal.
The informal sector is he most severe victim of hartal. Therefore, it is not easy to identify and locate the to provide any targeted and time-bound complementary assistance during the period of political turbulence. Unfortunately, this will remain to be the case in the foreseeable future. The government cannot do much to alter the distributional impact of hartal.
However, measures can be taken to minimise the loss of economic growth due to political unrest and violence. Discussion with several private entrepreneurs suggests that private sector tries best to compensate for the loss of production due to hartal by working extra hours in the post-hartal days. But the irretrievable loss is faced by the transportation and service sector. This is the area where the government and policymakers should be more proactive to compensate for the lost transportation services.
Bangladesh economy is now well-integrated with the rest of the world. Exports and imports are playing a very significant role in promoting our growth. More than three-fourths of our total exports are ready-made garments, which need to be transported to the destination market on time. More than 90 per cent of the cargo is shipped abroad through Chittagong port. Same is true for most of the other exports as well. Due to hartal, the exporters cannot transport a consignment to Chittagong port and deliver it to the destination on time. The cost of this failure is huge.
Faced with hartal, the exporters have to ship their products by air, which is costly and sometimes beyond the economic ability of the small and medium exporters. It emerged from the discussion with a number of exporters that they have to accept price lower than the agreed level for delayed shipment of the product. In addition to that, the receipt of their payment is also delayed as a result of delayed shipment. As a result of these, in many cases the exporters cannot pay their workers in time. This, in turn, results in labour unrest in the main export sector - the readymade garment - of the country.
The problem is intensified by the chaos created in our transportation sector immediately after the hartal. The Dhaka-Chittagong highway, the main trade corridor of the country, suffers from capacity to carry the normal traffic. Immediately after the hartal, everybody rushes to transport their consignment to the port. The inevitable results are chaos and miles-long bumper-to-bumper traffic jam in this trade corridor, especially in the vicinity of the Chittagong port.
The government should take special measures to deal with the post-hartal traffic so that the exporters can ship their consignment without further delay. It should introduce special train service from Dhaka to Chittagong during the post-hartal period so that the backlogs of export containers can be transported to Chittagong. For doing so, close coordination between government and exporters is crucially important.
Abul Basher, PhD is Researcher at Bangladesh Institute of Development Studies (BIDS), former economist, World Bank, and former faculty, Willamette University, USA. [email protected]
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