Tuesday, July 16

Macro Mirror: Corruption Hurts

Dr Fahmida Khatun: After experiencing many ups and downs over the last four plus decades, the economy of Bangladesh has trans-formed into a promising one on many accounts.

This is evident not only through higher economic growth, but also through less volatile economic growth. Despite being a least developed country, the volatility of long-term economic growth in Bangladesh has been lower than many developing countries.

Also, notwithstanding various shocks such as the global financial crisis of 2007-08, domestic political uncertainty and frequent weather variability, the country has been able to hold on to its growth momentum during the last decade.

The impetus of higher economic growth in Bangladesh has come from various enablers, including domestic regulatory policies and global linkages. A favourable policy environment and continuity of policies have been the key factors behind the strong growth of Bangladesh.

Domestic regulatory measures have been coupled with global policies and institutions that contributed to economic transformation in the country. For example, market access by a number of developed countries has boosted readymade garments export from Bangladesh.

Access to the global labour market by Bangladeshi workers has been a source of increased national savings. Remittances have created a vibrant rural economy, as the families of remitters now have more disposable income.

Thus, increased amount of investible resources generated through the incomes of the export-oriented RMG sector and remittance of migrant workers have contributed to the sustainability of a higher growth in the country.

However, there are a number of binding constraints that hinder faster development, which range from infrastruc-tural deficiency to technological limitations to administrative complexities.

The Seventh Five Year Plan (2016- 2020) of the country emphasises on infrastructure as a critical development priority towards fulfilling the gov-ernment’s vision of becoming a middle income country.

In the past, a number of mega projects in the transport and communications sector have acted as a boost for development. For example, the Jamuna Multipurpose Bridge has connected the eastern and western parts of Bangladesh. As a result, inter-regional trade in the country has improved.

This infrastructure has contributed to stimulate economic growth by facilitating inter-regional, cross-river transport of passengers and freights, and transmission of natural gas, telecommunication and electricity.

Technology has contributed to improve efficiency and alleviate poverty in recent times. Automation in banks, ports and other offices has improved the quality of services and reduced the time lag in transactions.

This has also facilitated exports. Increased access to technology has created income opportunities for the young population. The use of mobile telecommunication in the development sector has brought spectacular results in remote villages of Bangladesh and helped promote inclusive growth.

Farmers are now able to receive market information through mobile services. A large number of women enjoy the services provided by mobile technology. The demand for technology is high in all spheres of administrative activities as well. It can be used as a tool for fighting corruption, a problem we are grappling with.

Recent figures of Transparency International show that the Corruption Perception Index remained unchanged in 2015. Bangladesh scored 25 out of 100, which is the same as that in 2014. In terms of ranking, Bangladesh’s position is 13th from the bottom among 168 countries that were listed in the ranking of corruption.

Though such index creates a lot of debate in our country, the prevalence of corruption and its negative role in the economy cannot be denied. The finance minister himself refers to corruption time and again. Sometime back, he also mentioned that 2 – 3 percent of our GDP is lost due to corruption.

Stamping out corruption needs improvement of governance across all sectors. Institutional reform is crucial to achieve this. The first generation economic reform measures in Bangladesh led to the opening up of its economy in the 1990s.

But they were not coupled with reforms and strengthening of institutions at that time. During the following decades, a few regulatory and institutional reforms were undertaken to accelerate economic growth, albeit on a limited scale.

The banking sector is one of those institutions which underwent reforms. But those re-form initiatives did not result in much improvement in economic governance.

Reforms of the public administration remain an unfinished agenda till date. Though the government has expressed its willingness to improve transparency and accountability in public administration, substantive initiatives have not been undertaken, except for a new pay scale for government officials. But the major task for cracking down on corruption is to establish accountability.

Another crucial area of reform is strengthening the Anti-Corruption Commission (ACC). The creation of ACC in 2004 was part of donor conditionality that a watchdog body be formed which would be independent of govern-ment influence.

Many donors tied their financial support with the effectiveness of anti-corruption measures of the government. However, the institution did not receive necessary legal, administrative and institutional support from subsequent governments.

As a result, it is unable to discharge its responsibility without political pressure. The autonomy of the organisation is also constrained by inadequate financial and human resources.

The Sixth Five Year Plan and the Perspective Plan of the country referred to the strengthening of ACC, so that it can func-tion independently. This is yet to be achieved. Economic development of Bangladesh has so far been autonomous of governance to a large extent.

However, to improve the efficiency of its development efforts, and to propel economic growth, corruption has to be rooted out. Corruption maintains the status quo and thus stops the wheel of development from moving forward.