About 400 pages long report by a panel of eminent economists, led by Dr. Debapriya Bhattacharya, was submitted on November 30 after about four months of deliberations. It contains 23 chapters, placed under five (5) broad themes - macroeconomy, structural, social, institutional, and reforms & policies. The White Paper is supposed to unearth the extent of damage that the fallen regime of Sheikh Hasina has done to the economy, highlight the challenges that the Interim Government faces and outline strategies and policies for building an inclusive, vibrant and sustainable economy.
The eminent panel acknowledges at the outset its limitations "in terms of the scope and depth of analysis… largely due to paucity of time and resources available". Yet the authors of the White Paper hope that it "would serve as a good resource for the Commissions, committees and task forces set up by the government to look into specific economic reform related issues".
Undoubtedly, the draft White Paper deserves heightened attention and critical evaluation. This note focuses mainly on macroeconomic issues. It will be followed by critical examination of some key sectoral chapters, e.g., health and education.
THE GOOD: The draft White Paper "is the culmination of an intense and inclusive consultative process". The panel conducted 20 policy consultations, 14 technical consultations, and three public hearings in different regions of the country. The panel itself met 18 times to consider various issues raised at these consultations and to discuss initial drafts.
The draft White Paper has covered a wide range of issues. The authors of various chapters have made sincere attempts within a limited time period to dig into malpractices and corruption during the 15-year rule of the autocratic Hasina regime. They have largely succeeded in assessing the damages to the economy through the destruction of every institution of the country that enabled the cronies of the unaccountable regime to plunder and siphon off billions of dollars out of the country.
The draft White Paper has provided a long list of malpractices through which wide-spread corruption became deep-rooted. Cost inflated mega infrastructure projects funded by aid and borrowing - both domestic and external - and capture of banks have been the two main vehicles for plundering. The cronies of the regime have used various instruments, including trade mis-invoicing, for illicit transfers of plundered wealth out of the country.
Data manipulations largely succeeded in creating a smoke-screen of a 'high-performing' economy in order to present the kleptocratic regime's rule by loot as acceptable. Thus, the expert panel's probing reveals that the depth of wounds is "much deeper than is generally suspected". The expert panel gathered and examined a large number of documents and information from various sources to derive its conclusion.
THE BAD: The draft White Paper suffers from analytical weakness. This is partly due to conceptual confusions. For example, money laundering and illicit transfer of funds are used inter-changeably. Although there are some links between money laundering and illicit transfer of funds, they are not the same activity.
The United Nations Office on Drugs and Crime defines money laundering as "the conversion or transfer of property, knowing that such property is derived from any offense(s), for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in such offense(s) to evade the legal consequences of his actions".
In simple terms, money laundering means whitening the black money which could be ill-gotten; but not paying tax (tax evasion) also makes money black even though its earning may not be from any illegal activity. Laundered or whitened money comes back to the original owner and may not leave the country or may not remain out of the country, even if it is laundered through overseas vehicles. The fallen kleptocratic regimes often provided various incentives to its cronies to whiten (launder) black money.
On the other hand, illicit transfer of funds refers to illegal movements or transfers of money or capital from one country to another. However, sources of such funds may not be illegal (e.g., corruption, smuggling); but their transfer may be illegal, such as trade mis-invoicing or the use of 'hundi' system that lacks proper security measures and formal documentation..
Complications arise when illicit transfers of fund also involve ill-gotten money - the worst case scenario as has been demonstrated in Bangladesh. The billions of dollars that were taken out of the country were mostly obtained through corruption and theft of public funds. This stolen money remained out of the country - whitened or not.
THE MISSING: The missing is most glaring in Chapter V on debt. It avoided some hard questions, such as the behaviour of international financial institutions (IFIs) - the World Bank, Asian Development Bank (ADB) and the International Monetary Fund (IMF). Why did they continue to provide life-lines to a corrupt regime that clung to power by brutally suppressing people's democratic rights and unprecedented election manipulations? Why did they legitimise the regime's concocted growth and development narratives? Have they followed United Nations principles of responsible lending when they pushed loans?
Eager to push loans, the World Bank headlined, "Bangladesh has an inspiring story of growth and development, aspiring to be an upper middle-income country by 2031". Expressing the Bank's desire to be a partner in the country's development, its Country Director, Abdoulaye Seck lauded the Hasina regime and termed the country as a true global champion on various fronts like attaining GDP growth, reducing the poverty rate, women's empowerment and adapting to climate change.
The Awami League was quick in capitalising on such praises. For example, it posted on X, "Asian Development Bank praises #Bangladesh's economic growth". Sheikh Hasina's Finance Minister Mustafa Kamal claimed, "the IMF opened its heart and described Bangladesh's achievements as outstanding".
Bangladesh's external debt is largely (about 52 per cent) owed to the international financial institutions (IFIs)- the largest lender being the ADB, accounting for nearly 40 per cent of the total IFI financing. The expert panel has rightly noted the optimistic bias of the IMF-World Bank's debt sustainability and raised alarm about the debt outlook. However, the expert panel should have asked to what extent the loans pushed by the IFIs were used to benefit the people and estimated the extent of 'odious' debt.
The same questions should have been raised about bilateral lenders, accounting for about 34 per cent of Bangladesh's external debt. Of the total bilateral debt, Japan's share stands at about 42 per cent, Russia accounts for 25 per cent and China for 21 per cent. Many of the projects financed through Russian, Chinese and Indian finance are dubious - not only a source of mega corruption, but also lacking financial viability.
Dealing with odious loans is critical for debt sustainability. It is also a moral issue - should the people of the country be responsible for repaying the loans that did not benefit them? Unfortunately, the draft White Paper is silent about odious debt.
Anis Chowdhury, Emeritus Professor, Western Sydney University. He held senior positions in the United Nations at the Department of Economic and Social Affairs (UN-DESA, New York) and Economic and Social Commission for Asia and the Pacific (UN-ESCAP, Bangkok). anis.z.chowdhury@gmail.com