Women work at Goldtex Limited garment factory inside the Dhaka Export Processing Zone (DEPZ) in Savar on April 11, 2013 (Andrew Biraj/Courtesy: Reuters).
Bangladesh has been wracked by political protests over the past two years. Paradoxically, despite the country’s dysfunctional politics, its economy has done well. Last year, the all-important garment sector defied the odds and actually grew around 14 percent between July 2013 and May 2014. This insulation of the economy from the country’s toxic politics may be coming to an end, however. Since early January, the opposition Bangladesh Nationalist Party (BNP) has led street protests (hartals) along with transportation blockades. For the last two months, the daily strikes and protests have continued, keeping the country at a low boil, and resulting in the death of more than 120 people.
Yesterday, following the completion of an International Monetary Fund (IMF) mission to review the state of the Bangladeshi economy as part of an extended credit facility arrangement in place for the last three years, mission lead Rodrigo Cubero issued astatement. He noted prudent macroeconomic policies in place and highlighted positive economic developments: reserves restored, inflation down, public debt-to-GDP down, “robust and resilient” growth, and poverty on the decline. His comment on the economic outlook linked to politics, though, was pointed:
However, the resurgence of unrest in recent months is taking a toll on the economy. For FY15 (July 2014-June 2015) as a whole, we expect real GDP to grow by about 6 percent. Inflation has eased against lower food prices, but faces upside risks from unrest-related supply disruptions. The external current account is expected to shift to a deficit on the heels of strong import growth and a moderation in exports.
Although Bangladesh’s economic growth has been hovering around 6 percent for the last few years, the IMF had estimated earlier that FY15 would see a growth rate of about 6.4 percent. So yesterday’s IMF statement represents half a percentage point cut in the forecast, and it is well below the Bangladeshi government’s target of over 7 percent. Bangladeshis were probably not surprised. In February, Bangladesh Finance Minister AMA Muhith stated in a press conference that he doubted the country would be able to meet its 7.3 percent growth target due to political unrest. A World Bank official told the Los Angeles Times that the larger economic toll of political unrest could be as high as $2 billion.
What appears to be different from this year’s political violence compared to that of a year and a half ago is the negative effect on garment exports. Unlike the previous period, during which fears of a downturn turned out to be unfounded, the garment industry has begun to speak about a decline in orders. The head of the Bangladesh Garment Manufacturers Export Association (BGMEA) told the press that between foreign currency depreciation and political violence in Bangladesh, buyers are offering lower prices and “do not want to come to Bangladesh to place orders amid the violence.”
One anonymous industry source told the newspaper Prothom Alo that orders had dropped by 30 to 40 percent. To try to solve the problem, the Federation of Bangladesh Chambers of Commerce and Industry, along with export-focused industry bodies BGMEA, the knitwear association, and the textile mills association, recently joined together to file public interest litigation seeking for transport blockades and disruptive protests to be made illegal. The industry does not believe it can weather the storm this time around.
Why would the Bangladeshi opposition want to hurt their own country’s economy, especially its most important export sector? Every time I have ever asked members of the BNP why they employ the hartal form of protest, the answer has always been that they feel they have no other choice to make their voices heard. This feeling has only intensified after the party decided not to participate in the January 2014 national election since it would not be held under a caretaker government. The result was predictably a landslide for the Awami League, which swept seats that in about half the consitutencies went unopposed. But I simply cannot see why that should excuse the use of transportation blockades and violence. Parties and activists around the world mount protests and sit-ins peacefully and without disruption to national economies.
Of course, the Bangladeshi government is not helping defuse the situation. BNP Chairperson Begum Khaleda Zia has been held under de facto house arrest in her party office since early January, and she may be arrested shortly on corruption charges according to recent press. Every effort to mediate the impasse between Prime Minister Sheikh Hasina and Begum Zia has run aground. It is hard to see a way out of this situation, since neither side will back down. Political dysfunction is tarnishing the great optimism about Bangladesh’s future and its ability to maintain the growth, positive development progress, and important maintenance of democracy that has set this developing nation of 160 million apart.
The BNP has shown they can selectively call off the blockades, since they just did so fortwelve hours to celebrate Bangladesh’s win over England in the cricket World Cup. They ought to call off their strikes and blockades once again, unilaterally, and shift to a focus on peaceful expression of dissent. The Bangladeshi government should similarly take steps to lower the temperature, starting by ending the threat to arrest Begum Zia.
I do not have high hopes that the hot war between the two begums can be successfully mediated. A late 2013 effort to bring the two leaders together to talk directly foundered sadly on quibbles over who should call whom. But that shouldn’t mean giving up. The United Nations effort unfortunately has not succeeded, but perhaps a fresh attempt could be renewed. Or perhaps the Elders, voices of deep experience and reason representing countries around the world, might have better luck. Regardless of the mediator, Bangladeshi parties should focus on their country’s future, and learn to live with political difference. That’s the essence of democracy.