‘Louha tribhuj’ and the political economy of development

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On many development metrics, Bangladesh’s performance and achievements have been rightly recognized and celebrated in the country and around the world. However, while the 50-year transformation scenario has indeed been robust, near-term trends have revealed systemic weaknesses, making the medium-term outlook decidedly fragile. While the immediate sense of macroeconomic collapse has been muted, the micro realities of poor and middle-class households battling an unrelenting cost-of-living crisis, and the meso realities of heightened business-level uncertainty about growth prospects in critical sub-sectors, signal the entrenched presence of “bad days” for a majority of the population.

In May 2022, the fifth round of the PPRC-BIGD panel survey estimated the proportion of new poor at 18.5%. Last week, the government’s statistics agency finally acknowledged that the poverty rate had indeed increased and now stands at 29.5%, up from 20% before Covid. But these rising poverty figures and the economic desperation of a growing number of middle classes are only the tip of the iceberg of the crisis. The real worry lies in the political economy of the political landscape, which impacts both short-term crisis management and medium-term growth management.

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Bangladesh has a vibrant public discourse on the state of the economy. However, what is often missing is a political economy lens and the necessary connecting dots.

Is corruption just a moral failure or does it thrive because of the way rule-making, incentives and sanctions are politically constructed? Is reluctance to reform simply a matter of inefficiency or is it dictated by the need to protect vested interests? Are the weaknesses in implementation a lack of capacity or are they due to the way merit is systematically set aside in favor of sycophancy? What is indeed the reality of economic governance?

We have always had deficits in our economic governance. But over the past decade, the political economy of the political landscape has shifted into something more structural. A louha tribhuj, or iron triangle, of three tendencies came to define and limit the political landscape.

The first part of luha tribhuj is a one-sided view of development. Infrastructure has become the ‘alpha and omega’ of development, with social development relegated to the background. This does not mean that the “social” is out of budgetary attention. But even in “social”, all the attention is on the hardware, with the software out of sight. The construction of schools has become more important than the quality of education. The construction of hospitals has become more important than the quality of health care. Stand-alone infrastructure without attention to integration with other parts of the infrastructure network leads to a drop in the livability and productivity of urban centers. The focus is on the concrete only, without commensurate attention to usage protocols, maintenance and governance of the infrastructure.

The consequences of this one-sided focus are all too familiar: shocking lack of road safety and unpredictability of travel; decline in the quality of the educational experience; health care becomes a reality of runaway costs without results.

The second part of the iron triangle is the rampant spread of conflict-of-interest policy-making. The boundaries of public and private interests are constantly being transgressed in the political landscape in favor of private interests closely aligned with ruling groups. Breaking the rules and, in some cases, rules specifically designed for narrow private interests have shockingly become the norm in critical and rewarding sectors such as finance, banking, energy, transport, ICT and infrastructure. These collusive “contacts and contracts” have become brazen and have become a structural property of current economic governance.

A few sectoral examples perfectly illustrate the above. Quick-lease power plants have been adopted as a short-term option to deal with load shedding. But why has it continued well beyond the original schedule, with relentless expansion of installed capacity without required investment in distribution infrastructure and primary energy supplies? Why has gas exploration been deliberately sidelined due to a disastrous over-reliance on expensive LNG imports? Why was the state agency Bapex systematically sidelined in favor of a foreign firm in the Bhola gas fields, a flagrant example? It is no wonder that capacity charges have emerged as the shameless face of planned inefficiency and corrupt collusion, dictated not by economics but by political economy.

A similar story prevails in the most catalytic economic sector, namely transportation. The primacy of private interests intertwined with politics has become a structural impediment not only to road governance, but also to transport economics which has an impact on travel time, onerous formal and informal travel costs and generalized shortcomings in road safety. The BRTC has become a perpetually ailing state-owned enterprise, route licensing is dominated by an oligopoly of transport owners that impedes both road safety and industry efficiency, and the BRTA is far to assume its role of stewardship. Private interests that flout the rules are effectively granted immunity to continue the impasse of bad governance.

Turning a blind eye to blatant conflicts of interest – even positively supporting corrupt and collusive rule-making – has also cast the darkest shadow over the banking and financial institutions sector. The stalwarts of financial sector governance are either too eager to pander to selected private interests or blatantly inactive in their regulatory and supervisory responsibilities, which has led to staggering levels of fraud and corruption. The case of PK Halder has perhaps become emblematic of such entrenched culpable institutional bad governance.

The consequence of such corrupt and collusive rule-making is neither vague nor inconsequential, with the most severe impact on the competitiveness of the economy. Our export-to-GDP ratio – a measure of competitiveness – has halved between 2012 and 2022, from 20% to 10.6%. The continued stagnation of the private investment-to-GDP ratio is another source of concern. More recently, collusive regulatory actions seem to have confused outside investors in the stock market. In such an amoral world, the “good entrepreneur” is effectively left adrift with an arduous and Herculean task.

The grip of the “iron triangle” works differently, but no less negatively in the case of development projects, especially infrastructure projects. Electronic tendering was supposed to have brought transparency and efficiency to the whole process of awarding contracts, but the reality speaks otherwise. Corrupt, inefficient, and collusive practices operate here through informal barriers to competitive bids, inflated costs, post-approval cost increases, and project delays.

The third part of louha tribehuj is the obicharer orthothoniti – the economics of injustice rooted in the political marginalization of all those without a political voice, including workers, farmers, small entrepreneurs and now even the middle classes. Not a single member of the popular masses remains idle, relentless in their efforts and labors for all the opportunities that come their way, but the benefits of political attention are diverted disproportionately to a small number of favored groups. Public transport, prices of basic necessities, costs of public services, affordable housing, access to quality health care and education, access to green spaces – each of these pillars of a quality life, essential to the good -being ordinary people, lacking the level of political attention that makes a difference. It is as if the popular masses have to shoulder the burden of resilience as the fruits of growth flow disproportionately to favored groups.

The second aspect of the economy of injustice is equally worrying. All of our discussions revolve around macroeconomic imbalances and the resulting crisis. Yet we must also stay focused on our medium-term goal of achieving the SDGs. In at least three areas, there is a real danger of reversal with Bangladesh drifting away from the Sustainable Development Goals: nutritional deficits (with the disappearance of nutrients from household diets due to a lack of financial accessibility), the increase in the secondary school drop-out rate and the increase in youth unemployment. (especially the unemployment of young graduates).

Bangladesh may be at an inflection point in its development journey. Many other initially prosperous countries fell into the “middle-income trap” because warning signals went unheeded and the need for reform went unheeded. Will Bangladesh be able to recognize the louha tribehuj for what it is – a vicious triangle of mutually reinforcing political tendencies that has turned into a structural barrier straddling Bangladesh’s inclusive and sustainable development aspirations? It cannot be overcome or dislodged simply by technical recommendations and feel-good conversations. The need of the hour is a dismantling of the louha tribehuj through a qualitative change in political realization, political approach and political will, and a great and urgent impetus on reforms.

Hossain Zillur Rahman, economist and political sociologist, is the executive chairman of the Power and Participation Research Center (PPRC).

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