Fragile economy, volatile politics welcomes a turbulent 2011 M. Shahidul Islam The stability of the nation is inextricably linked with geopolitics, political economy and domestic cohesiveness. The last sunset of 201o did not beacon the arrival of a better 2011 due to the geopolitical uncertainties caused by the impact of some unwarranted concessions offered to India, provocative repressions unleashed against the opposition within and most of the economic indicators showing further down turns. Yet, to keep the flame of aspiration burning, as we must, an insightful assessment of the bygone year is essential before resetting the focuses toward the New Year that seems to hold in store much more unpalatable turbulences. Volatile polity Politics of the previous year had left behind the scars of traumatic emotionalism; especially due to the pre-emptive and forceful eviction of the opposition leader from her house before the court could decide finally on the merit of a judicial review petition and, the 'untimely' and 'illegal' arrest of opposition lawmaker SQ Chowdhury without any warrant of arrest; his subsequent torture in custody notwithstanding. Amidst this bitter, antagonistic ambiance, opposition leader Khaleda Zia termed the government illegal on January 1 during a rally of her party's student wing, cautioning that, 'all the actions of the government will be declared illegal' once the government quits power. "This government is not legal; it's an illegal government. It is a government created by another illegal government of Moinuddin-Fakhruddin," Khaleda reiterated. The same day, JP Chairman HM Ershad said the 'country's politics is heading towards a disaster.' He added, "Not much time is left in hand. I appeal to the leadership of all parties to find out a way to overcome the disaster ahead." These are hardly indicative of the arrival of a better time. Human rights, law & order Tension also intensified when a diabolic farce of law and order was created in 2010 following the government's decision to sweepingly withdraw cases instituted on so-called 'politically motivated grounds.' Police statistics shows, till June 2010, government had recommended 3000 cases for withdrawal, involving nearly 10,000 accused. Despite the recommended cases having been lumped together as 'politically motivated,' many are in fact cases involving murder, theft, repression of women and women trafficking. Accused of these cases are ruling party loyalists, according to media reports. That aside, the year witnessed at least 133 persons having been killed in 'shootouts' with the law enforcers while another 128 died of mob beatings, according to human rights watchdog, Ain O Salish Kendra (ASK). ASK found that 74 persons died in custody, of which 18 were convicted detainees and the rest awaiting trial. The ASK report further claimed, law enforcers had clamped section 144 in seven divisions for 152 times, which alone speaks out how the opposition gatherings were repressively foiled by the government. The year also witnessed many unexpected onslaughts on freedom of the press. Mahmudur Rahman, editor of a vernacular daily, faced the worst wrath of the government by being subjected to arrest and torture in custody. He still remains in custody while about 19 other journalists were traumatized by life-threats from unidentified persons, activists of ruling AL, cadres of Jubo Dal, etc. The ASK report also claims that as many as 127 incidents of extra-judicial killings had occurred during 2010, and, at least 556 women and girls became victims of rape and 137 others suffered acid burns. Economic woes Add to this the menace of unemployment that had exacerbated further. According to the Board of Investment (BoI), 93 new projects, amounting Tk 23,911.922 m investment, were launched during the first 6 months of 2010, demonstrating a sharp decrease from the same period in 2009 when 129 projects, worth Tk 46,896.015 m investment, were launched and 33,000 new jobs created. Meanwhile, poor salesmanship and crippling power shortages and other negative factors had resulted in 52% drop in FDI during the first half of FY09-10, reducing the FDI amount to a paltry $297 million and much less than $603 million received during the same period of FY08-09. BoI's latest statistics, however, shows receipt of USD 697 million FDI during the first 10 months of 2010. These are commitments in the pipeline and must be steered towards fruition. The reality remains quite different, however. According to the World Bank, lack of investment continued to pose major constraints to faster growth in FY10. The WB observed that gross domestic investment remained stagnant at 24.4% of GDP, reflecting both stagnant private and public investment rates while lives of the poor were hammered by whopping inflation (year-to-year) which spiked every month (except March and April 2010) and reached 8.7% in June 2010. Most worrisome was the phenomenal increase in the price of coarse rice—which the government promised to make available at 10 taka per kg if voted to power—that had registered an increased of 50-60 % across the board, compared with 2009 prices. Jaundiced trends Although overall export grew in 2010 by almost 28.9 per cent, export of readymade garments grew only 1.2%, registering slowest growth since FY02. During May-July 2010, exports of readymade garments to the US and Germany – the two largest export markets – declined by 4.1% and 7.9% respectively. That scenario has changed lately. According to BB, export receipts during July-November 2010 showed an increase by US$2181.44 m, or 35.80 percent (totalling $8275.29 m), compared to $6093.85 m during July-November, 2009. This particular gain, however, seems to have been compromised by enhanced import payments during July-October 2010, which had increased by $2397.30 m, or 33.50 percent (totalling $9553.90 m), compared to $7156.60 m during the corresponding period of 2009. Consequently, trade balance recorded a higher deficit of US$1876 m during July-October 2010, compared to the deficit of US$1540 m during July-October, 2009. Another troubling trend was the flow of remittance where monthly pace slowed down and turned negative at the end of 2010. In FY10, remittances reached $11 billion, a 13.4% increase compared to 2009. However, between January-June 2010, the growth rate was only 5.2%, a drop from 22.8% during July-December 2009. Preliminary data for July-August 2010 shows a continuation of this jaundiced trend, with remittance inflows declining further by 0.8%. According to BB, remittance receipts during July-November 2010 decreased by $77.91 m, or 1.67 percent, and registered only $4581.43 m, against $4659.34 m during the corresponding period of 2009. Meanwhile, external current account surplus rose to US$3.7 b in FY10, over 50% higher than previous year. BB's latest data also showed gross foreign exchange reserves at $10700.17 m, as of end November 2010, against $11160.34 m by end October, 2010. The reserve can withstand import expenditures for 90 days at best. Aid, revenue & loans As the net receipts of foreign aid during July-October 2010 reduced further to a trickle of $183.11 million (against $230.37 mi during July-October 2009), the treasury felt a jolt due to the budgetary expectation of higher tax revenue earning not materializing (although tax revenue collection during July-November 2010 increased by Tk. 5,350.58 crore (24.81 percent) to Tk. 26,916.41, it showed clearly that the NBR's target of receiving Tk. 72,590.00 crore collection will fall far short) and the outstanding borrowing of the government, as of end October 2010, reaching Tk.63,304.89 crore, showing an increase of Tk.9,583.98 crore (or 17.84 percent) from October 2009. Analysts believe, public borrowing will rise further in coming months due to the new power plant construction costing between Tk.52.4b and Tk. 55.8b, which alone accounts for 0.67 - 0.72% of the GDP. Based on such trends, GDP growth in FY 2010-11 is unlikely to surpass 6.2% at the most. The reason that the Chinese GDP had outpaced the Indian one has much to do with Chinese pursuance of peace with all neighbours while India sought domination against its weaker neighbours. Capital market bubble However, even that modest level of GDP growth expectation could be dashed off if the capital market volatility leads to a sudden bursting of the bubble. In 2010, Dhaka Stock Exchange's benchmark index (DGEN) rose by over 95 per cent. This has demonstrated a price-to-earnings ratio of 30 times, which is the highest in the region and twice the level of Thailand and three times that of Pakistan. These unrealistic and hyper activities not being driven by capital flows from overseas investors, an implosion within the capital market remains a strong probability. In fact, foreign investors' ownership of the DSE is just 1-2 per cent as yet. To the contrary, rapid asset price inflation in the stock market has been driven by excess liquidity, with money supply growing in excess of 20 per cent and the financial institutions having increased their investment nearly 10 folds since 2006, to about TK 45 b ($630m) in 2009, and almost hitting the level of $1 billion by the end of 2010. Massive unemployment and under employment has also spurred dramatic increase in individual stock trading accounts, which had risen from less than 500,000 in 2006 to almost 3.5m by December 2010. If these unemployed bunch loose their investment, all hell will break loose. A dry run of how this bubble burst can destabilize the nation was seen on December 8 and 19 when protesting investors smashed windows and hurled bricks and bottles on the police as the market experienced record fall in a single hour and displayed highest single day fall in its history. Add to these the lingering of a grinding recession that had reduced many affluent nations into sheer paupers, further worsening the demand for our export. If all of the above fail to rein in our government's craze for retribution against the opposition, what will? |
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