Tue 28 Aug 2007
After years of their services what good organizations like IMF and World Bank have done for Bangladesh? Venezuella recently asked the same question and found out that the answer was “not much”. Hence they were asked to pack up and leave their country.
Farid Bakht makes a strong case to say goodbye to these organizations from Bangladesh.
The rich countries do not take their advice. They certainly do not follow their guidelines when it comes to managing their own economies. The US and UK can run up huge trade deficits but ignore the tenets of orthodox Fund thinking. Yet, when it comes to the Third World, they come down hard on any wavering government. The Aid Consortium works in unison with the Bank and the Fund. It does not help that most of the poor governments are weak, lacking in principle, and happy to play ball in return for Western support.
That is why, in most of these countries, there is hardly any political debate about disastrous Fund or Bank policies. Witness the political debate in the three largest South Asian countries, Pakistan, India and Bangladesh. In each, the two largest political parties accept the basic premise of these two institutions. That is why they resort to issues of identity, religion and nationalism to offer a “choice” to the electorate. When it comes to bread and butter issues about economic progress, farming, industry and development, they are not as far apart as they pretend to be. Beyond the rhetoric, they sing from the same hymn sheet.
No one needs to talk about getting rid of the Bank from Dhaka tomorrow. We want to start getting rid of their stranglehold over our political and economic process. This can only happen in the first instance via meaningful negotiation over economic programs.
This would require our leaders to have demonstrable popular support. We would also require leaders to know what they want, as in having a coherent alternative, which would demand a shift in the Bank’s position.
Let our weak-kneed leaders not forget that our expatriate Bangladeshis are sending as much as five times the amount of money that the entire Aid Consortium actually spends every year (forget about aid “pledges”). They could send even more.
Unfortunately, we are in the same position as the Philippines. High level of remittances: low level of political independence.
When we all get excited over Two Ladies and their sons, or new NGO messiahs, we should remind ourselves that none of them are keen to stand up and offer a challenge. They just want to be invited to the party.
Read the whole piece here.
August 28th, 2007 at 8:06 am
Couple of comments:
Re Venezuela, Chavez is lucky to be sitting on his massive oil reserves. The Venezuelan economy is still basically a one-trick pony, its fortunes closely tied to world oil prices. And given current demand for oil, prices will probably stay north of $50 a barrel for a long time to come. So Chavez can sit tight in the knowledge that his country will go on reaping the benefits. One should also remember the authoritarian streak in Chavez - ex-army, failed coup leader in the early 1990s. It’s a lot easier for him to dictate terms to the Bank and the Fund than it is for our corrupt, divided political elite.
On Thailand, an excerpt from a recent market report:
The interim Thai government has done a poor job managing the country since they seized power in a coup almost a year ago. As the army took control there was a feeling of cautious optimism among the population. The coup offered an enticing opportunity. All the army needed to do was to refrain from meddling too much in the running of the economy until a more robust democratic foundation could be constructed. Instead, the military tenure has been accompanied by a series of policy missteps. The economy has suffered long-lasting damage as a result.
…The domestic economy remains in the doldrums, and business and consumer confidence have taken a battering. Business investment all but dried up through the opening six months of 2007, with local firms keeping a close eye on expenditures, while the military government’s new rules and restrictions have deterred much-needed foreign investment… …The household sector has fared little better, with consumer spending in steady decline since September last year. This is not a coincidence. The sight of tanks rolling through the streets of Bangkok did nothing to instill confidence among consumers.
I had an eerie feeling of deja vu as I was reading this. Our own economy is probably going to go in the, erm, tank if current conditions persist for much longer.
August 30th, 2007 at 7:05 am
Will it be very difficult for our country to close the doors for WB, IMF, ADB or so called donours?
ALO
August 31st, 2007 at 7:18 am
Bangladesh doesn’t borrow much from the IMF these days. And yet the government is thinking about signing up a Policy Support Instrument with Fund. This Instrument will allow the Fund to ‘grade’ government’s economic policies.
But what does this ‘grade’ really mean? Suppose the government takes policy X, and IMF says ‘X is contrary to the best practice as understood by us’, what does it mean? If we owed the Fund a lot of money, they could charge us a higher interest rate. If we needed to borrow from them, they could say ‘get rid of X or we won’t lend’. But we don’t owe them much, and we haven’t borrowed from them for a while (though one never knows what the future holds).
Will a poor ‘grade’ by IMF means that we will lose foreign investment? I don’t think FDI depends on IMF grades, if it did then China wouldn’t get any. So why do we care if the Instrument is signed or not?
Here’s my guess.
The government is contemplating a series of policies that will be deeply unpopular. Because the government lacks any mandate to take such policy, it will use the IMF Instrument as an shield - we don’t want to do this, but look, the Fund is making us do it.