Reading books on economics is not always enjoyable as most of the topics, presented with numbers, tables and charts, make the text a dry one. Nevertheless, sometimes we need to read these books due to the importance of an author, like the one titled `Selected Macroeconomic Issues … Theory and Practices' written by Dr Mirza Azizul Islam. He is a former finance and planning adviser to the caretaker government in 2007-2008. The book contains 15 essays which are focused on globalisation, taxation, foreign investment, financial market, trade and inflation.
Dr Mirza Aziz is an eminent economist of Bangladesh and has long experience of working with both government and international organisations. He had the opportunity to implement the macroeconomic theory in the real-world context and also found out how theory functioned in the complex life of Bangladesh as well as at global level. His writings could, thus, be defined as a mixture of theory and the real-world scenario. Going through the book, one can find this blend of theory and practice.
GLOBALISATION AND GROWTH: The writer starts with globalisation and Bangladesh's gradual integration with the global economy. Upon giving a brief account of the benefits and risks of globalisation, he rightly concludes: "Risks of globalisation do not call for withdrawal from participation in the process but for alertness in monitoring global development and adoption of appropriate domestic policy measures to mitigate potential adverse impact." (Page-15)
As export is a major channel in expediting global integration, Dr Aziz favours a strong export-oriented growth strategy for Bangladesh in the second article of the book.
He takes an in-depth look at foreign direct investment (FDI). He discusses in detail the relevant determinants and institutions, and clearly points out that despite several positive and supportive measures the inflow of FDI in Bangladesh has not reached a desirable level. He also offers some suggestions for improving the situation like ensuring political stability and good governance.
Unlike many others, the author touches on the importance of labour in the country. He observes, "Labour indiscipline, partly engendered by poor working conditions, inadequate safety in work places and exploitive wages, discourage FDI in Bangladesh." (Page-40)
An important and quite relevant issue has been discussed by Mr Aziz in his book. It is the access of the country's private sector to international financial market. For the last couple of years, private firms have received some $5.5 billion in foreign loans for their operation and business expansion. These days it is becoming a matter of concern for the financial sector which was earlier predicted by Dr Aziz. He writes, "It is not clear why creditworthy companies cannot get credit from banks loaded with excess liquidity unless the banks suffer from irrational risk aversion, which is hard to accept. Moreover, driving local creditworthy companies into the arms of foreign financiers would hurt the local bank." (Page-45)
Dr Aziz recalls the Asian Financial Crisis, which took place in 1997-98. It forced the East Asian Tigers (Indonesia, Malaysia, Thailand, Hong Kong and South Korea) to pay a heavy price. Thus by depicting both risks and benefits of opening access to international private capital, the author sounds a note of caution. He suggests approval for such borrowing on 'highly selective basis.' However, this selection process may be vulnerable to discriminatory treatment and corruption. Apprehending this, the author recommends an explicit policy framework.
In another article, Dr Aziz sheds light on the debate regarding growth, inequality and poverty. In Bangladesh, economists are divided on this issue - one group stresses 'growth-first development strategy' while the other advocates 'addressing inequality on priority basis.' The writer goes with the first group as he says, "…increased inequality is an inescapable consequence of growth, if not a precondition.' (Page-49) He adds, "At the present stage of development, poverty alleviation should receive the highest priority, not inequality or income distribution.' (Page-51) But to substantiate this proposition, the author ought to have gone into details along with some empirical evidence. Probably through his inclination to growth over inequality, Dr Aziz opposes property or wealth tax in another article in the book. Â
SKIPPED EXPERIENCES: Dr Aziz's experience at the finance ministry in Bangladesh is indirectly reflected in his essay titled 'The Political Economy of Privatisation.' During his around two years' tenure (2007- 2008) as finance adviser to the army-backed caretaker government, he tried to push up the privatisation process of some loss-making state-owned enterprises (SOEs). Due to bureaucratic tangle and lack of political 'legitimacy', his efforts brought little success. The government closed four state-owned jute mills and 84 jute-procurement centres leaving some 14,000 workers jobless; and despite heavy criticism, Dr Aziz at that time made it clear that the state exchequer couldn't continue to look after such loss-making enterprises year after year. He, however, doesn't mention it and some other such things in the book, but hints at the opposition made by many intellectuals and civil society members.
Dr. Aziz argues, "Privatisation is not a panacea. While we must expedite the process of privatisation, we should pursue it on the basis of a well-conceived plan of action." (Page-83) He also counters some prevailing arguments against privatisation. Having strong faith in market, Dr Aziz concludes, "We must not harbour the notion that once an enterprise has been established, it has to live permanently. There is something called an exit and that exit must be planned.' (Page-84)
Dr Aziz amply deals with the financial sector reform but skips his experience as head of the Bangladesh Securities and Exchange Commission (BSEC). For example, it was during his tenure when the country's capital market entered the paperless trading system through the introduction of the Central Depositary System (CDS). Â
The most theoretical and detailed discussion Dr Aziz offers the readers is titled 'Inflation: Causes, Consequences and Cures', the book's last article. There is a wide scope for linking the theoretical aspects with the real scenario in Bangladesh. During his tenure, he faced both high and low inflations. In FY07, annual average inflation rate was 6.32 per cent and in FY08, it surged to 9.93 per cent. His battle with inflation could be a good story for the readers.
In fact, in the foreword of the book, Professor Rehman Sobhan, founding chairman of the Centre for Policy Dialogue (CPD), refers to Dr. Aziz's skipping of his experiences gained while in job. He says, "Aziz, in his operational engagements with the SEC, Sonali Bank and as finance advisor, was exposed not just to policymaking but acquired first-hand experience of the underlying political economy of policymaking and the state of governance in the financial sector. He could have, thereby, added to our understanding of the realities of implementing policies in the specific circumstances of a country such as Bangladesh. Unfortunately, little discussion of his experiences in the real world of policy implementation appears in this volume." Â
Mirza Aziz, however, in reply to a question told the Financial Express, "The articles are mostly analytical. I, therefore, felt day-to-day experience as policy maker would be somewhat out of context. However, a little bit is reflected in the paper on Anatomy of pre-budget discussion." He also said that he decided to write the book because he considered the issues being of great relevance to economic development of Bangladesh.
Overall, the book is a handy one, especially for students, journalists and development thinkers. It is also significant that an economist and policymaker shared his thoughts and views, although one may not agree with him on many issues. The book is an important contribution to informed debate on policy options.
Finally, there is a saying about economic theories. It says, "A theory is appropriate as long as it fits into the fact; when a theory doesn't fit in the fact, it's wise to walk with the fact." Mirza Aziz probably prefers to walk with theories most of the time.    Â
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Selected Macroeconomic Issues…Theory and Practices
by Mirza Azizul Islam
Pages: 168; Price: Tk 330
Published by Daily Star Books, Dhaka, in 2014