Friday, April 17, 2009
100 days of Mohajote Government
Economy off to a steady start
Shah Husain Imam
FROM day one of its assumption of office, the Mohajote Alliance, led by the Awami League, took a firm grip of the economy. At its very first cabinet meeting, fertiliser prices were halved and diesel price decreased by Tk 2 per litre. This reduced cost of cereal production by up to Tk 2.5 per kg. Boro cultivation, the mainstay for food security, received a boost with a message going out to the peasantry that it is in character with the new government to be friendly and caring to them.
The first moves along with the falling international oil and commodity prices triggered a fall in domestic prices, almost across the board. In the process, the syndicates were roundly left without any wind in the sail to be playing around with inflationary expectations in manipulating the market forces to serve their ends.
It so happens that warnings were issued by the finance and commerce ministers early in the day through all conceivable fora that illegal syndication, hoarding and speculative trading would be dealt with severely. With market intelligence available to a well-structured winning political party such as the Awami League, it has had the advantage of watching market behaviour on the radar.
Basically, the cautionary words carried weight because of the convincing electoral mandate the Awami League received and the relative ease with which the BNP reconciled to its defeat, accepting the popular verdict. Normalcy got quickly established from the hang-ups of uncertain and stormy two-year-long caretaker governance.
Altogether, the smooth transition of power from an un-elected to an elected government did generate a sense of confidence across various sectors of the economy.
Awami League was quick to turn its attention to the urban and rural poor with a pragmatic realisation that any failure to provide food to hungry mouths was a sure-fire way of courting social tension. So, we have seen the introduction of well-targeted safety net programs by way of test relief, food for work, rural rationing and OMS sale to urban poor. The initial sale price of rice had to be scaled down from Tk 18 per kg to Tk 16 per kg to give a slender attractive edge over the ruling market price.
This brings us to the justified fear that the declining price of cereals could force the farmers to shy away from food production due to lack of remunerative prices in the market-place. Responding to such a concern, Agriculture Minister Matia Chowdhury assured the farmers of price support in the government's procurement drives, much the same way, she added, that the 1996-2001 AL government had done.
With the existing subsidy package looking large and that in prospect being equally so, the need for belt-tightening is very compelling indeed. Nevertheless, to put it mildly, if people were to read some negative signals in the big, rather prodigal, purchase of luxury cars for newly elected MPs and upazila chairmen would they be wrong? The previous batch of cars was of 2004-vintage. And, even if it is assumed that all of them are too ramshackle for use, could they not be replaced with a less costly variety?
It simply does not sit in with the government's otherwise robustly populist and inclusive series of economic policies.
By external dependence we have traditionally meant reliance on foreign aids, loans and grants, but now as our economy has had to navigate the rough waters of the knock-on of global economic meltdown, the externality of our dependence seems widespread, encompassing as it does foreign trade and migrant remittances.
In both the areas, we are having to face twin problems; fall in garment export volumes topped of by decreased earning from under-pricing and the steady trail of returnee Bangladesh employees from abroad. A word for the plight of returnee migrant Bangladeshi workers, which seems poignantly depicted through reported arrival of some corpses lately.
The finance minister's plan to garner funds through private-public participation, including contribution from NRBs, aimed at rehabilitating the returnee Bangladesh wage earners is a good idea that will, however, entail considerable institutional preparations to materialise. The government's public spending needs to be geared to employment creation and the best channel for doing so would be provided by the ADP.
On the closing day of the first 100 days, the finance minister has announced broad outlines of a bailout package for recession-hit export industries worth Tk 2,500-3,000 crore. The cash subsidy comes on the back of introducing banking facilities in the shape of lower interest rate, and loan rescheduling in six sectors for as many months.
A new window of opportunity can fling open on our garment products if we can negotiate duty-and quota-free (DFQF) access in the US market, an agenda that should be taken up energetically with the Obama administration.
Finally, we ought to join with other LDCs in a bid to persuade the WTO in securing a better bargain in their trade with the developed economies. If this is not the time for the WTO to take a role, then what is?
Mr. Shah Husain Imam is Associate Editor, The Daily Star.
