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Partner Reflection: Farida Akhter

May 20, 2009

By pwrdf

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Bangladesh Roundtable Context

A general election was held in Bangladesh on December 29, 2008 after two years of military rule backed by an often called unconstitutional caretaker government. Voter turnout was very high and the Awami League led Alliance received a three-fourths majority in the Parliament. The opposition party, BNP, a four party coalition earned only 30 seats, not enough to be effective in opposing major decisions.
The new Prime Minister is Sheikh Hasina, daughter of the first Prime Minister of Bangladesh and Father of the Nation, Sheikh Mujibur Rahman. This is Hasina’s second time in office. The leader of the opposition is Begum Khaleda Zia. The minus-2 formula of the caretaker government did not work in unseating these women and they are back in positions of leadership.

The new government took office in January 2009 with the promise of ensuring good governance, improving the economy and reducing poverty. But several unexpected incidents have happened that are creating serious political instability. The first blow came when paramilitary troops, the country’s second line of defence, the Bangladesh Rifles (BDR), mutinied and killed at least 57 commanding army officers on February 25 and 26. The real reasons for this carnage are unknown and suspected to be more than mutiny.
The global financial meltdown posed another challenge for the present government. Bangladesh gets between $1.5 and $2 billion a year from the World Bank and other donors for development. The $14 billion earned from exports and $9 billion from remittance payments are other pillars of the economy. The Bangladesh central bank expects a gross domestic product growth of around 6 percent in the current fiscal year to June, last year it was 6.2 percent. However, a recent World Bank report forecasts growth of less as 4.5 percent, which would be the lowest in seven years.
The price of rice for the next harvest has dropped in retail markets to the level of what the government is offering. The price of imported food and fuel has also been reduced, easing the burden on the government. However, rice farmers are severely affected by the government policy of lowered prices and cannot even sell their produce at cost.

Remittances from migrant Bangladeshi workers have been helping the economy, even more than foreign donor agencies. Spiraling oil prices opened up a whole new market for Bangladeshi labourers who moved to the Middle East for jobs in the booming construction industry. Unofficially, according to recruitment agents, at least 9 million Bangladeshis, including those who leave through illegal channels, are thought to work overseas. Officially, the figure is 6.3 million. Last year alone, remittances pumped 9 billion dollars into the economy, more than 10 percent of the gross domestic product, helping Bangladesh pay its rising import bills. But the present global economic crisis and falling oil prices have ended the boom for the Gulf States and elsewhere, dashing the job prospects of many young Bangladeshis.

According to the Bangladesh government, overseas jobs fell by more than 40,000 in January compared to a year ago with the downward trend continuing into February. Recruitment agents forecast that the market will get much worse. In the last two years, a record 1.6 million workers were sent abroad, but this year they will be lucky to be able to send 400,000 workers.

The textile sector, which employs over 2.5 million workers, has asked the government for a bailout package including cash incentives, bank loans with lower interest rates and other incentives. While a government appointed task force is working to address this issue and other economic concerns, the authorities have started selling rice at fixed prices to low-paid garment workers and others who earn small wages on a very small scale.

The ready-made garment industry was not immediately affected by the global financial crisis that began in 2008 but by 2009 orders are being deferred by buyers from the countries where stores have reported declining sales. Exporters say that buyers are cutting down import costs to cope with the slump in consumer confidence. Bangladeshi exports, mostly to the US and Europe, are becoming vulnerable. The International Monetary Fund (IMF) has recently projected that income growth in Bangladesh’s export markets will decline to 0.5 percent in 2009 from 1.5 percent in 2008. Less than 30 percent goes to retail giants like Wal-Mart, JC Penny, Levi Strauss, Gap, Zara, Van-Heusen and H&M, while others are mostly small and mid-sized companies, more vulnerable to financial shock and surprise.
Farida Akhter, International Partner: Asia and the Pacific
PWRDF Board of Directors

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