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Meeting the millennium development goals: uncertain external environment and domestic challenges
The shift from aid dependence to trade dependence
South Asian context with special reference to Bangladesh
Globalisation, domestic policies and Bangladesh
Gas: to export or not to export
Globalization and poverty reduction in Bangladesh: problems and promises
‘White man’s burden’ and the collapse of world trade negotiations
Paying the price of globalisation
Meeting the millennium development goals: uncertain external environment and domestic challenges
M. Syeduzzaman
The Annual Meetings of the IMF and World Bank in Dubai marked a significant point of departure. Critical changes and developments affecting global economic growth prospects across the board surfaced. Developing countries have now reasons to worry about meeting the Millennium Development Goals (MDGs).
The Meetings in Washington a year ago ended on a most optimistic note about the prospects of the developing countries. Leaders of multilateral and bilateral financing and development agencies were basking in the euphoria of Doha, Monterrey and Johannesburg.
The situation has changed unexpectedly in the past one year raising serious doubts about meeting the MDGs. The World Bank President James Wolfensohn disclosed that aid from the developed to the developing world has fallen to its “lowest level ever” relative to the size of the developed countries’ economies. ODA of major donors has fallen from 0.5% of GDP in the early 90’s to a tiny 0.22% in 2002! The Institute for International Finance based in Washington has indicated that net global flows of bilateral and multilateral aid are expected to be negative this year ! The share of low income countries continues to remain below that of the middle income countries. Wolfensohn invited world leaders to “take a cold hard look” at the future of what he called our “unbalanced planet.”
After the commitments by the major industrial countries under the Doha Round, trade was recognized as the most promising and powerful tool for global growth, but also for poverty alleviation as envisaged in the MDGs. The prospects of gain from trade for the developing countries are in serious jeopardy after the failure of ministerial talks at Cancun. Gaps have appeared in the provision of promised resources by the creditor countries for debt relief to the highly indebted poor countries (HIPC). Financing of the programmes for the MDGs for these countries are now in doubt.
In a report titled as that of this article, published last month, the World Bank has highlighted the need for “a concerted effort by the Bank and other development partners to give increased and explicit attention to the implementation of the CDF (Comprehensive Development Framework) principles in supporting the strengthening of national strategies through the PRS (poverty reduction strategy) process.” It concludes that “this support coupled with implementation of the eighth MDG – increased aid, debt relief and open trade is essential for reaching the MDGs.”
Of the eight Millennium Development Goals to be met by 2015 which have been pledged by all 189 United National members, the eighth goal is “Develop a global partnership for Development.”
The interesting thing to note is that in the eight point “Deal” at Cancun, the 7 (seven) goals to be achieved by the developing countries have specific dates. But for Goal-8, i.e. aid commitments, there is no such date. Whereas the consensus was for doubling of ODA from the level of about $ 50b, the $ 16b a year of additional aid that some leading donor countries pledged at Monterrey last year, will not take effect until 2006 ! Availability of aid will be under increased pressure because of the needs of Iraq, additional needs of the African countries after the failure of the trade talks, and inadequate progress on debt relief financing.
In the midst of all these discouraging developments, the President of the World Bank JD Wolfensohn said all the right things. He called upon the industrial countries to meet their commitments on aid, trade, debt-relief, and on improvement in the quality of aid. Gordon Brown, the UK Chancellor of the Exchequer also appeared as an important champion of the MDGs in Dubai. He called upon the international community “to confront the global war against poverty”, the richest countries to redeem their promise to the poorest countries, and to work together to “build a virtuous circle of debt-relief, poverty reduction, trade and economic development.” He proposed a mechanism for “providing an immediate critical mass of predictable untied and effective aid, predominantly in grant form.” His concrete proposal is for an International Finance Facility (IFF) which would “leverage additional money from the international capital markets to raise the amount of development aid for the years to 2015 from about $ 50b a year to $ 100b per year.” It is to be seen to what extent he will continue to push his idea. Not much enthusiasm was visible from other OECD countries or from the multilateral development institutions. The Managing Director of the IMF added full support to the World Bank President and appeared persuaded by Gordon Brown. To quote, “current aid flows are not only insufficient they are also unpredictable, and often insufficiently coordinated among the donors. Better aid-coordination and multiyear commitments are key steps in making development assistance more effective. In my view Gordon Brown’s proposal for an International Finance Facility deserves serious consideration.”
In the emerging situation Bangladesh faces fresh challenges. The impasse between the government and the donors led by the IDA (WB) and the IMF was resolved last June with approval of a Poverty Reduction Growth Facility (PRGF) from the Fund, and Development Support Credit (DSC) from the IDA. These augured well for resumption of support from other donors, and at higher levels, in support of the Poverty Reduction Strategy. The hard fact is that the international environment looks less promising now than what it was only a few months back. At a time when Bangladesh was expecting larger contributions of external assistance and trade opportunities, uncertainties have suddenly crept in.
The changed environment will call for a serious review of the policies, and harder look at the programmes envisaged for poverty reduction. Fulfilment of the commitments made by the Government to the donor community in the PRSP will assume greater importance for getting support for reduction of poverty. Support from the lead agencies i.e. the IMF and the World Bank will be contingent upon performance and stricter evaluation of performance. For most bilateral donors, support will be contingent upon good governance, economic policies that promote entrepreneurship, more open markets, sustainable macrobalances and higher levels of public resource support for health and education.
After more than a decade the World Bank has decided to resume financing of infrastructure realizing the “important contribution infrastructure makes to sustainable economic growth and in reaching the MDGs by improving the investment climate and supporting the development requirements of low and middle income countries.” The Bank thinks that better physical infrastructure will help investments from inside and outside. Developing countries will welcome this step reemphasizing public sector role in building infrastructure after apparent disenchantment with the extent and outcome of private sector involvement in this area for over a decade. (Only last week the Finance Minister Saifur Rahman called for abolition of the IDCOL and IIFC which have miserably failed in stepping up private investment/DFI for infrastructure though the IDCOL is sitting with large amount of resources.)
It is important for us to note and realize one important dimension of our development performance. Bangladesh economy has been growing at an average rate of nearly 5% over the past decade. Bangladesh’s human development stands out compared to developing countries with similar levels of income and also compared to its neighbours. These are achievements have been made in spite of adverse conditions, deteriorating and poor governance, declining law and order situation, and inadequate infrastructure facilities! If decline in the parameters of governance, law and order can be arrested and modest improvements are made in the coming years, with increased attention to infrastructure, the growth rate could reach 6% or more, with positive implications for poverty reduction and attainment of the MDGs. This is where the test will lie for this government and the next, and the next, until 2015.
Preparation of an Interim-PRSP or completion of the PRSP cannot be an end in itself. To achieve sustainable growth for reduction of poverty, we need sustainable systems and institutions in critical sectors like education, health, local government, and in public administration across the board.
The Government has to urgently address the gaps that remain to make the PRSP a meaningful guide and a medium term instrument for reaching the MDGs. The strategy for poverty reduction in the PRSP has five broad components – raise GDP growth rates to benefit the poor (“pro-poor” growth), continued priority on social sector expenditure, social protection of the vulnerable groups, participatory governance, and advancing the cause of women. We can derive satisfaction from the fact that Bangladesh has already achieved the MDG target of closing the gender gap in education. To make sustainable progress in the direction of the goals we need sustainable policies and sustainable systems in support of the goals. First, departing from the generalities of statements in the I-PRSP medium term priorities have to be established in every sector, with concrete poverty reduction programmes. Second, a realistic medium term budgetary framework has to be put in place for financing these programmes. Third, capacity has to be mobilized in the concerned agencies for effective implementation of these programmes. Fourth, a dependable mechanism has to be put in place to monitor progress on meeting the goals on an annual basis. Finally, a medium term programme has to be taken in hand for improving the investment climate for greater and fuller participation of the private sector in stepping up economic growth. While approving the Development Support Credit (of approximately $ 300 mln) which created the thaw in the relationship between the Government and IDA, weaknesses in these areas were specifically mentioned as ‘significant risks’ in achieving the targets of the PRSP. Two other risks which have been flagged are in the areas of sustaining ‘political support for the medium term reform programme’, and deteriorating external environment which could adversely affect economic growth and export.
Risk of deterioration in the external environment appears to have become a reality. While hoping for the best and expecting that the international community can be held broadly to its commitments, progress will be slow by current indications. But the Government cannot afford to give up the MDGs on this plea. In this situation, the domestic potential has to be maximized to finance the programmes in support of the MDGs. This will also call for sustainable decisions and their implementation in not only meeting but exceeding the targets of domestic resource mobilization indicated in the I-PRSP. Bangladesh’s Tax-GDP ratio is one of the lowest in the region (less than 8.5%), and the target of 9.7% in the I-PRSP is modest indeed. The revenue administration, particularly the customs administration needs basic reforms and modernization to reach the target with growing GDP projection. Hard decisions will be needed in terms of administrative and process reorganization if sustainable gains are to be achieved in tax revenue generation. The restructured revenue administration system in Pakistan should be an eye opener.
The most important area where a sustainable system needs to be put in place is private investment. The I-PRSP states: “The Government is aware of the constraints hindering the growth of the private sector and would implement effective measures to remove the hurdles through effective and coordinated policies and action. The key areas would be: infrastructure development (i.e. power, telecommunications, roads and ports), strengthened financial and capital markets, quality of the labour force, reduced costs of doing business by reforming institutional and regulatory frameworks, improved law and order condition and better environment for foreign investment. Specific measures would be worked out in consultation with the private sector. For proper functioning of the private sector, physical improvements and management reforms in the basic infrastructure including power, water supply, port and telecommunications will be given priority along with private sector participation.”
These are well meaning pronouncements. The test will lie in implementing the commitments with specific policies and time bound action plans. The unfortunate truth is that private investment is not picking up though there are large amounts of surplus liquid funds in the banking sector. Bangladesh’s national savings, currently over 20% of GDP, is higher than that of many low income countries. But savings have exceeded investments in a number of years in recent times. Obviously we are foregoing potential and much needed growth for reaching the MDGs. The crucial factor here is restoration of business confidence and improving the investment climate for stepping up of private investments. This is a complex issue, consisting of institutional weaknesses, governance problem, law and order situation and absence of adequate infrastructure which have been recognized by the Government. The issues need close and serious consideration in the emerging situation. Action with strong political commitment needs to be taken on an urgent basis if a change in the climate is to be expected.
Investment climate is influenced by three major things – macroeconomic conditions, governance and infrastructure. Governance and public administration are the most important areas where a sustainable systems have to be put in place. The public administration system has to be depoliticized, and made rule based and merit based. The issues of law and order and corruption, extortion, toll taking and “cost of doing business” in general are being flagged day in and day out by domestic as well as foreign quarters. Improvements in theses areas can come only through depoliticised public administration, and more importantly, through better political governance which shapes and influences public administration. It covers the entire range – civil service reforms, professionalization of bureaucracy to be able to interact with the private sector, judicial and police administration reforms, and sustainable administrative, service delivery, and monitoring systems in the education and health sectors.
Growth of private investment over the past two and a half decades has been overwhelmingly financed by the banking system. This has now turned out to be a serious weakness, and has weakened the foundations of the banking system. Major problems have arisen from this. First, from mismatch of maturities of borrowing (deposit raising) and lending by the commercial banks, which have to keep the cost of funds high to meet obligations. Second, absence of adequate capacity in most commercial banks for undertaking due diligence on projects for term lending. Term lending was led by the nationalized commercial banks and followed by some private banks. This is believed to have been a source of many malpractices – leading to unsustainable levels of non-performing assets with all government owned banks, and burden of non-performing assets for a number of privately owned banks. If private investment growth is to be stepped up sustained change is needed in the institutional arrangements for financing term loans. Recent exhortation of the policy makers asking the commercial banks to lower interest rates for financing private investment/term loans demonstrates the anxiety of the Government. Interest rates may gradually come down, but will not help growth of private investment unless the malaise in other sectors admitted by the Government itself, particularly governance and infrastructure are remedied. As a matter of caution it is necessary to mention that one of the most important factors behind the East and South East Asian financial collapse of 1997 was the predominance of bank financing of the private sector in the affected countries. Bank financing of total private investment reached unsustainable levels -– 60-70% in these countries, whereas in the mature economies the safe limit is considered to be 25-30%. This is because of the ‘callable’ nature of the resources on which commercial banks operate.
A number of measures deserve urgent consideration. First, new institutions have to be created for channeling term lending to the private sector. This can start with reform and restructuring of some of the existing institutions like the BSRS (Bangladesh Shilpa Rin Sangstha) without going for privatization. Proposals in this respect are waiting government decision for some time. An early decision on this is strongly recommended. Second, the prevailing situation has given rise to a number of private investment and leasing companies, some of which need to be supported on a selective basis through domestic and foreign credit lines. An appropriate and effective regulatory framework has to be designed for this variety of local financing institutions to give them a systematic role in term lending. Third, the domestic capital market has to be rejuvenated. Finance Minister’s promise of giving attention to the capital market is yet to be fulfilled. Action is needed to develop a domestic bond market. Sometimes back some policy makers had pronounced on creating a bond market, but no action has so far been taken. Finally, there is urgent need for reforming the pension fund rules and the insurance industry as has been only recently done in India for channeling savings to private investment. These will be hard decision, but have to be taken on an urgent basis if private investment is to be stimulated.
The achievements of Bangladesh in growth, human development and poverty reduction are the product of joint efforts of the government, donors, private sector and civil society organizations led by the non-governmental organizations (NGOs). The list will remain incomplete if mention is not made of the local government structure and its contribution to the growth process. In the 70’s and 80’s this made a major contribution in building up rural infrastructure and growth of non-formal activities, an important factor in reducing rural poverty. Unfortunately a sustainable local government system is yet to be put in place though over twelve years have elapsed since the upazilla system was dismantled. Deterioration in quality of delivery of primary education and health services in the rural areas have been attributed largely to the absence of an effective local government structure. The political leadership is engaged in a harmful debate, and wrong steps are being taken which will harm the cause of a sustainable local government system. The I-PRSP document clearly depicts concern of the society at all levels for “lack of an effective local government and decentralization.” Politicians perceive an independent local government system as a competitor if not a threat. This is totally misguided and damaging. There may be possibility, or history of corruption at local levels. But the same applies to the national government, and very few or no public agency can be spared of this allegation! If the targets of the MDGs in the social sectors are to be met a strong and independent local government system should be established without further delay. It will also help to enforce accountability of service delivery and in strengthening rural infrastructure. Needless to say that the system has to build safeguards against corruption. It will be equally important to differentiate the role of a law maker from that of a local “development administrator” which is more likely to breed corruption.
The most important contribution to Bangladesh’s growth in the 90’s came from agriculture and exports. The I-PRSP says: “A rapid agricultural growth will sustain high growth with better capacity to reduce poverty through enhancing rural wages, creating synergy for diversifying the rural economy, and enabling the supply of low-cost food to improve nutritional status and food security of the people.” The government needs to prepare and present immediately a medium term programme for realizing the stated objectives in this sector through a combination of policies, programmes and projects, and undoubtedly with clear financing arrangements.
The same applies for export of RMGs. Some measures have been taken to help this sector. But these remain piecemeal. There has to be a comprehensive programme for improving the RMG sector’s competitiveness. This has to incorporate investment needs, infrastructure support, reform of the customs administration, port facility, and simultaneously the financing arrangements. The emerging trade scenario after Cancun heightens its urgency.
The above discussion broadly indicates the hard options facing the Government which would be unavoidable if the MDGs are taken seriously. In a situation of hard budget constraint the temptation to opt for deficit financing may be high. Here a word of caution will be in order. Deficit financing is not bad per se. Deficit financing within limits may contribute to growth only if there is idle or surplus capacity in the economy, or if it helps to create capacity in the short term to contribute to growth as in agriculture. Implications for inflation have to be kept in view. The only idle capacity in the economy is ‘sick industry’ capacity in the public and private sectors which will not be helped by deficit financing. Here will be a test for the newly designed Coordination Committee for Fiscal and Monetary Affairs.
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Political economy of Bangladesh’s external relations
The shift from aid dependence to trade dependence
Rehman Sobhan
Bangladesh’s foreign policy options have become increasingly constrained in a unipolar world. This is not a new phenomenon since our options have been limited over many years by our dependence on aid. However, the nature of this dependence has in recent years changed from aid to trade. This may appear a positive development but it has imposed no less severe fetters on our external choices. We have always known that our aid relations were driven by political factors. I wrote a book titled Crisis of External Dependence: The Political Economy of Foreign Aid to Bangladesh as far back as 1982. However, in today’s world our trade relations are no less exposed to political influences, so we need to understand the underlying political economy driving our external relations.
Changing dynamics of aid dependence
In the 1980s Bangladesh’s aid dependence was over 10% of the GDP and financed nearly 100% of our Annual Development Plan (ADP). This meant that no finance minister could frame a budget without first being assured of aid pledged at the Paris Consortium meeting in April. This dependence on donors gave them a disproportionate leverage over our policies. The World Bank, in particular, used this leverage to impose an extensive programme of Structural Adjustment Reforms (SAR) on the Government of Bangladesh (GOB), based on the neo-liberal economic philosophy associated with the so-called Washington Consensus. Bangladesh, readily accepted this advice though many of these reforms were unsatisfactorily implemented. This raised tensions with the donors but did not lead to any discontinuity in aid. The donors and successive governments played a discreet game where Bangladesh accepted and promised to implement all reforms whilst the donors turned a blind eye on our failure to do so. The era of aid dependence built up its own class of beneficiaries who prospered from aid and acquired a vested interest in its continuity. Aid dependence, thus, generated its own dynamics that influenced the political behaviour of successive regimes and the workings of the administrative as well as the business community. The SAR process impacted on the political economy of Bangladesh where new social forces were financially and politically empowered whilst large numbers of people, from desubsidised poor farmers to unemployed factory workers, became its victims.
The unsatisfactory and often unjust outcome from the SAR did not persuade donors to rethink their reforms. Rather it pushed them to increase the burden of reforms. The poor results from the reforms were now ascribed to poor governance. Thus, issues of governance, covering corruption, the judiciary, even the state of democracy were added to the ongoing need for structural adjustment reforms. In this new phase poverty reduction was prioritised over growth by both The World Bank and the IMF. The GOB was invited to prepare a Poverty Reduction Strategy paper (PRSP) that was presented to the donors at the recent Aid Group meeting in Dhaka.
This rethinking of aid priorities by the donors did not extend to greater introspection over the impact that such aid dependence, which was dictating our policy choices, was having on the political economy of Bangladesh or other aid-dependent countries. I was, in the early 1990s, invited by SIDA, the Swedish aid agency, to visit Tanzania to examine the consequences of their growing aid dependence and compare this with Bangladesh’s experience. It was quite educational to see that many of the consequences of aid dependence that had affected Bangladesh were being replicated in Tanzania. I subsequently wrote a book on this subject. The pathology of aid dependence obviously transcends national boundaries and even cultures.
This policy influence of the donors over the GOB persists today, even though aid dependence has declined from over 10% of GDP when M. Saifur Rahman was first finance minister in 1981 to under 3% when he has become finance minister for the third time. However, we still seem to give the same regard to donors’ advice as we did when we were heavily aid-dependent. Today, aid finances less than 50% of the ADP so we are no longer totally dependent on aid to frame our budget. Nor are the donors regarded as the universal font of all wisdom. The Washington Consensus is heavily discredited whilst Structural Adjustment Reforms are seen to have brought neither sustained growth nor poverty reduction across much of the Third World. The increasing ferocity of the attacks on global institutions such as The World Bank, IMF and WTO, both on the streets and at a professional level, suggests that these organisations no longer command the credibility or authority they enjoyed in their golden age of the 1980s. In these changed circumstances there is scope for Bangladesh to forge an entirely new pattern of relations with its aid donors.
The GOB cannot begin to develop a more equal relation with its donors unless it is able to get its own house in order and design its own policy agenda. The donors themselves, in principle, encourage governments to make their own policy choices. However, the available experience suggests that the exercise of such policy independence by aid recipients is only welcome if countries such as Bangladesh choose policies that concur with donor policy advice. Thus even after 20 years of unfruitful Structural Adjustment Reforms few Third World governments have challenged the assumptions underlying the SAR. As a result even today the SAR remains at the core of The World Bank’s Country Assistance Strategy to Bangladesh as also for most LDCs and has been incorporated into the PRSPs of virtually all these aid-dependent countries.
Aid and foreign policy
Aid dependence under the tutelage of The World Bank should not have impacted on Bangladesh’s foreign policy in the same way as it did on our economic policies. After all The World Bank is a multilateral organisation, which is supposed to have neither an ideology nor a political position. It was therefore noteworthy that a changed stance in The World Bank’s lending philosophy in the early 1980s to push SAR coincided with an ideological change in the policy regimes of the US after President Reagan came into office in the US and Margaret Thatcher became Prime Minister in the UK. These two leaders may be deemed the political godparents of the neo-liberal revolution across the world. The messianic commitment to a neo-liberal philosophy within The World Bank and IMF originates from this period.
The embrace by The World Bank and IMF of the political philosophy of some of its principal financiers encouraged the belief that what Washington thinks today The World Bank thinks tomorrow. As a result, successive governments in Bangladesh have come to believe that The World Bank and IMF are extensions of the US State Department and Treasury. This view gained currency when the United State intervened time and again in the boards of The World Bank and IMF to pressure them to participate in the bail-out of strategically important countries such as Mexico, Russia and other victims of rapid globalisation deemed of strategic interest to the G-7 countries. Acceptance of Bank-IMF advice was thus believed by the policymakers of Bangladesh to have some approbation from the United States and even the European Union whose goodwill remained of importance to the GOB.
The US, which was once Bangladesh’s principal donor through the 1960s and 1970s, is not even our principal bilateral donor, which today happens to be Japan. The GOB is, however, persuaded to believe that Bank/IMF largesse is contingent on good relations with the US government. This assumption is not entirely a fantasy. The Pakistanis have already noted that their alignment with US strategic interests in Afghanistan and provision of logistical support to the US invasion of Afghanistan won them significant collateral benefits from the IMF. The IMF reaffirmed its credentials as a foreign policy instrument of the State Department by assuming a much more favourable perspective on Pakistan’s policy reforms compared to the hard line taken prior to the change in Pakistan’s external posture. The World Bank, too, has become much less jaundiced in its perception of Pakistan. The US has backed up IMF’s generous loans by enhancing its own bilateral aid commitments to Pakistan and rescheduling Pakistan’s debts. The lesson from the recent experience of Pakistan suggests that aid commitments as well as their terms, even from multilateral bodies such as The World Bank and IMF, remain linked to foreign policy alignments with a superpower even when countries such as Bangladesh and Pakistan have become far less dependent on aid.
Political economy of trade dependence
This paradox of genuflecting to aid donors, even as aid dependence declines, may be linked to the new trade dependence which is influencing the external relations of Bangladesh and many other Third World countries. In the case of Bangladesh the US remains our largest single market, absorbing around 40% of our exports, mostly in the form of Readymade Garments (RMG). The EU accounts for a further 40% of our exports. Since Bangladesh’s exports along with remittances currently finance over 80% of our foreign exchange expenditures, our trade relations have a much stronger impact on our economy than aid. Access to the US and EU market and the continuance of the absorption of our migrant labour in the Middle East, as also in East Asia and the United States, remains an important foreign policy objective for Bangladesh. As a result, RMG exports to the US and EU have acquired a special significance in our foreign policy choices.
At the same time we should also take note of the fact that India is the fastest growing and today the largest source of Bangladesh’s imports (official and unofficial), closely followed by China. Whilst this growing import dependence on our two large neighbours is less concentrated than our export dependence and there is greater scope for diversifying our import sources than there is for exports, our import trends also remain relevant to the political economy of our external relations. Bangladesh’s ongoing search for greater market access to the Indian market is therefore not just an issue of commercial relations. The political economy of Indo-Bangladesh relations has its own special features that merit separate discussion.
What we are learning to our cost is that, as with aid, trade is also politicised. Once upon a time we were led to believe that trade relations were forged in the market place. Our own experience, as indeed our experience at the WTO jamborees in Doha and Cancun, has exposed us to the importance of political variables in determining trade relations. The notion of the WTO taking us towards a rule-based, market-driven, global trading regime has proved a fantasy as the major powers and even regional powers are increasingly responding to political stimuli to both deny and provide access to their markets.
The US, in particular, has discovered the strategic significance of its market since it presides over the world’s largest market. The terms and conditions on which Bangladesh accesses this market can influence our economic fortunes as a country and can impact on the lives of millions of poor families. If the US were to reduce our RMG export quotas and continue to give trade preferences to our prospective rivals, as it has done to Sub-Saharan and the Caribbean countries, this could impose severe economic as well as social costs on Bangladesh which in turn could have a political fall-out at home. If the US were today to give us duty- and quota-free access to its market, as it has done for Sub-Saharan Africa, this could possibly double our exports of RMG and provide additional jobs to a million poor women. Given the far-reaching implications of its policy decisions, the US may expect to extract a significant political rent from Bangladesh for the privilege of providing enhanced market access. This rent may range from a demand that we let UNOCAL export the gas from its Bibiana fields to India, that we send peace-keeping troops to Iraq, that we recognise Israel or that we even abandon our commitment to the LDCs in regard to sensitive global issues such as agricultural subsidies and the so-called Singapore issues. All such decisions involve serious political consequences for Bangladesh at home and in our relations with neighbouring or partner countries. Fortunately for Bangladesh, the US is not yet ready to recognise Bangladesh as a strategic partner with whom such political horse trading can be negotiated. But this day may not be far off and Bangladesh may well have its notions of foreign policy independence severely tested in the days ahead.
Asserting autonomy over foreign policy
The scope for countries such as Bangladesh escaping from such strategic pressures exercised by its principal trading partners is limited. Such demonstrations of autonomy have not come easily even to big countries such as China and India. Even China has to calibrate its external relations with the US to take account of the fact that it provides the destination for over $100 billion of Chinese exports. It is not surprising that even where China has strong disagreements with the US in the Security Council, it has never exercised its veto to frustrate the strategic decisions of the US. China too has had to become aware of the political economy of its relations with the US.
In such an unequal world order, countries such as Bangladesh have to rethink their notions of sovereignty and reassess their domestic policy options to see how far they can assume greater autonomy in their external relations. To be able to enhance our freedom of choice, we need to commit ourselves to a process of structural change not just in our economy but in our politics. We would, thus, have to drastically diversify the composition and destination of our exports, enhance our domestic savings and significantly improve the quality of our policy making and governance. This will have significant social and political implications within Bangladesh.
To initiate all of the above changes and to then demonstrate policy independence vis-à-vis the US and other major trading partners would require the building of a strong political consensus within Bangladesh underwritten by massive support from the common people. To develop such support will require a major structural adjustment in our politics as well as in the direction of our economy. We will have to begin to correct the deep injustices of our social order so that ordinary people develop a stake in the growth of the economy. Only then will they provide the political support needed to assert autonomy in our external relations and to bear the short-term costs of our search for policy change. Bangladesh will have many rivers to cross before we move from our state of political atrophy and structural stagnation to assume the trappings of a sovereign nation state.
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Impact of war on terrorism on ‘small states’
South Asian context with special reference to Bangladesh
Imtiaz Ahmed
War on terrorism defies modernist structures. It is certainly a desperate attempt to resolve issues arising out of post-modern realities. While it is a war waged by the empowered state—the United States—against the relatively dis-empowered non-state—the terrorists, it is also a war at a precise moment of history when the relatively dis-empowered non-state has become as global as the empowered state and attained an empowering status.
The global nature of the thing has some other interesting consequences as well. Not only it shuns the linearity between the empowered state and the relatively disempowered non-state, but also carries with it the burden of encompassing or even devouring the other states of the world, including the relatively weak and disempowered small states, in the empowered state’s fight against the non-state terrorists.
In this sense, understanding or criticising the impact of the war on terrorism on Bangladesh is a justifiable case. But then the argument might as well be that Bangladesh’s case is justified for qualitatively different reasons. Let me explain.
That Bangladesh is a “small state” is contentious, and this is more so in the era of globalisation and post-geopolitical phase of international relations. The contention itself has far reaching implications insofar as the issue of war on terrorism is concerned. To wit for a moment, Bangladesh is territorially and no doubt economically “small,” but demographically as well as “civilisationally” and according to civilisation it is a “large” country.
And it is the latter than the former that has now put Bangladesh on a different plane and that again both regionally and globally in the business of combating terrorism. This could be further concretised. I will limit myself to two.
The first is the recent case of Bangladesh being categorised as “high-risk” by the United States in its war against terrorism. That religion or the notion of Bangladesh being a “Muslim state” played a part cannot of course be denied here. It may be pointed out that save North Korea, all the 24 states that have been labelled so far as “high-risk” by the United States in its war against terrorism are conspicuously “Muslim states!”
Armenia, though predominantly Christian, was also dubbed “high-risk,” but the United States later withdrew the labelling allegedly at the request of the Armenians. I guess the American fear is that “civilizationally” elements in Bangladesh would join hands with extreme Islamic groups operating at international level on issues ranging from the Palestinian cause to countering Muslim bashing in the west.
The American categorisation itself, however, is bound to alienate the Bangladeshis from many even becoming disinterested in the very campaign against international terrorism. But then there are other more practical reasons for the American fear of Bangladesh harbouring international terrorists, something to which we shall return later.
Secondly, the speed with which Bangladeshis are seeking job abroad and migrating there, and that again both legally and illegally, has created apprehension in the minds of many scholars, politicians and policymakers both within the region and beyond. Indeed, when Bangladesh is viewed in terms of demography and as the eighth largest country in the world, it does have the effect of creating tension in migrant-receiving societies, particularly those having lesser population and communal-cum-racial political structures.
Indeed, one aspect of the tension is that a newer and formidable Bangladeshi diaspora is in the making, and that it ought to be nipped in its infancy. What is worse with this scenario is that the more the war on terrorism seeks to invest on military means and starts diverting funds from economic or social development, the more the members of over-populated, less developed economies become restive and decide to migrate.
The current war on terrorism, given its military and violent content, has the potential of creating further economic and social ruptures, which indeed may go on to defeat the very objective of the war, that is, routing out terrorism. Such contentions, however, need further explorations if we are to take them as theoretically tenable and empirically valid. The article attempts to do precisely that.
The article is divided into five sections. The first section examines the “grounds” responsible for what has come to be labelled as US-led war on international terrorism. This sets the stage for the second section that makes an attempt to understand as to why South Asia or more precisely Bangladesh becomes a recognisable entity in the war on terrorism.
The third section deals with the real face of contemporary terrorism, with particular reference to South Asia and Bangladesh. Section four then highlights the “hyperpowered” status of the United States and the impact its war on terrorism is having on the lives and livings of the people of Bangladesh. The concluding section deals with the issue of what is to be done.
Why the war on terrorism?
9/11 has often been cited as the raison d’être for the current war on terrorism. There is an element of truth in this, but then it cannot be stretched very far. Indeed, it gets bit fuzzy when one starts criticising the more recent American-led invasion of Iraq. The state of “fuzziness,” however, has some solid circumstantial or more precisely conjunctural basis.
In the case of the United States, and this may sound puzzling to many, it is related to the arithmetic of reproducing democracy. Gandhi, if we remember, once noted that democracy is a “heartless doctrine” because what it means is that 51 per cent can impose its will on the 49 per cent of the population. But that was Gandhi’s way of criticising majoritarianism.
Things have now moved to a pathetic level, even in some developed countries, when it comes to reproducing democracy and state power. Indeed, electorally speaking, the United States is currently a “democracy deficit” society. This is because in the last presidential election in the United States, and this has been the pattern for some time, less than 50 per cent of the voters turned out to vote, out of which Bush Jr barely managed half. The current presidency otherwise is mandated by a quarter of the voters, the bulk of which came as “block votes” from the more organised, albeit conservative, section of the population.
Keeping aside the fact that the last presidential election was a controversial one, with messy counting and the intervention of the Supreme Court, some explanation is still required as to why a quarter of the votes were solidly conservative. Voters’ frustration with the mainstream political parties—Democratic and Republican—is often held responsible for the lower turnout on the election day. This may be true to some extent, but then as a point of contention, it remains too simplistic, with little or no parallel manifestation of such frustration elsewhere in the society.
My understanding is that there is actually a more complex process contributing to the lower voter turnout, and this has to do not so much with the frustration of the population as with the relative success of the United States in bridging democracy with opulence overtime. And it is the latter more than anything else that has nurtured societal values of a precise nature in the United States; one bordering on disinterestedness beyond the immediate. Not surprisingly we find that more and more Americans are increasingly disinterested with the rituals of democracy, however critical they may be.
Let me at this stage reflect on a survey comparing Asian values with that of the United States to further clarify my point. Noordin Sopiee undertook an interesting survey under the title “Asian Values and the United States: How Much Conflict” and found out that for the Americans the five most important societal values were free expression, personal freedom, individual rights, open debate and “thinking for oneself.”
On the other hand, the top five societal values for the East Asians were orderly society, social harmony, official accountability, new ideas and respect for authority. I have no intention of dwelling on the differences between the two sets of values, and that again at a continental level, but would like to reflect on the precise nature of the American societal values and how these impact upon electoral politics.
If we take cue from the top five societal values of the Americans it is easy to comprehend that for a common person in the United States the “right to vote” is as critical as the “right” not to vote. In this respect, one could very well say that the more society ends up with freedom lovers, individualists and liberals, the more it is exposed to the possibility of having fewer people attracted to the rituals of democracy, including getting up and voting on the election day.
The conservative equation is quite different from this. There is almost an ideological zeal of reproducing the conservative agenda on issues as diverse as “abortion,” “gun control,” “military expenditure,” and even “religious freedom,” and that again noisily and collectively. The net result is sticking together and when required even voting together locally as well as nationally. In any close call election with lower voter turnout, as it has been the case with the 2000 presidential election, the chances of having a conservative president becomes greater for the sheer reason of “block votes” by the conservative section of the population. The bulk of the liberals, while failing to get up, register and vote, soon find their liberalism at stake by actually being liberals! And this is the irony now facing liberalism and democracy in the United States.
The conservative agenda, including some aspects of the current war on terrorism, was well laid out long before Bush Jr became president of the United States. Indeed, as part of “Campaign 2000,” Condoleeza Rice, the foreign policy advisor to the Republican presidential candidate and now national security advisor, wrote a piece in Foreign Affairs where she made it clear that,
Foreign policy in a Republican administration will most certainly be internationalist… [It] will also proceed from the firm ground of the national interest, not from the interests of an illusory international community (emphasis mine).
In fact, Rice even went on to use the term “911,” saying that the United States cannot continue to be “world’s ‘911’” as it will degrade its capabilities, instead it ought to decide unilaterally where, when, how and what to attack. In this regard, and particularly with reference to Iraq, Rice bluntly said:
Nothing will change until Saddam is gone, so the United States must mobilise whatever resources it can, including support from his opposition, to remove him.
Indeed, the conservative agenda of unilateralism and militarism or what could be referred to as the current nature of the war on terrorism was well laid out long before 9/11 and the invasion of Iraq, although it must be quickly admitted that 9/11 did help accelerate the process.
There is otherwise a precise nature to the current internationalism of the United States. No doubt, it has to do with the conservative agenda but in the midst of a precise and qualitatively different international or global reality. The current internationalist thrust of the United States and that again at the hands of the conservatives came about when globalisation significantly displaced the post-Bretton Woods international relations. That is, the United States must now deal with the power of the non-state as much as it has to deal with the power of the state. And here lies the irony. When the United States following the demise of the Soviet Union and its own recourse to unilateralism and militarism attained the status of “hyperpower,” it found itself threatened by a bunch of relatively less powerful rogue states and non-state terrorists.
There are critics, both American and non-American, who would go even further in “grounding” the current internationalist thrust of the United States. The conservative stand on the peace dividends from the post-Cold War era has always been shrouded in a mystery if not laid down with suspicion that the idealists and liberals are trying to make the United States militarily and economically weak! To support their argument, the critics fall back on President Eisenhower’s warning, very forcefully outlined at his farewell speech, that the American nation must guard itself from the growing power of the “military-industrial complex.”
There is certainly an element of truth in this, particularly when it comes to operationalising the war on terrorism, indeed, with rising military expenditure and hefty profits to arms manufacturers and other concerned partners. One could certainly cite the close relationship between the Bechtel Group or Paladin Capital Group and the members manning the Committee for the Liberation of Iraq.
But lest we suffer from an essentialist argument it must be quickly noted that the military-industrial complex does not go on to create the global reality. Instead the global reality creates a space for the military-industrial complex to creatively reproduce and profit. And it is from this standpoint that we find some merit in critiquing South Asia or Bangladesh as a recognisable entity in the US-led war on terrorism. Let me reflect on this issue at some length.
Bangladesh: soft but certainly not small
I have already referred to the fact that it is contentious to call Bangladesh a “small state,” and this is more the case if we consider its demographic and civilisational aspects. This however is based on a precise theoretical understanding of both geography and culture, an understanding of which would provide weight to our contention and make clear as to why Bangladesh is so relevant to the US-led war on terrorism. But before delving in it further, let me take recourse to the technical meaning of “small state” and see whether Bangladesh is characterised as such. The Commonwealth Secretariat and the World Bank, while working on the issue of small states, used a threshold of 1.5 million people. But more importantly, these two well-respected international organisations prepared a joint report on small states in which they noted the following:
There is no single definition of a small country because size is a relative concept. For instance, Simon Kuznets in “Economic Growth of Small Nations” used an upper limit of 10 million—by this measure, 134 economies are “small” today. Other indicators such as territory size, or GDP are sometimes used. But population is highly correlated with territory size as well as with GDP; therefore, use of population as an indicator of size helps highlight small states’ limited resources.
That is, population is a critical factor in determining whether a state is “small” or not. If between 1.5 and 10 million is the range for defining a small state, I am afraid even the city of Dhaka (which incidentally has a population of over 10 million) would fail to get a membership if it ever decides to apply!
In fact, from South Asia, only Bhutan and the Maldives fulfil the Commonwealth-World Bank criteria of small state, and these two are included in the list of another 45 developing countries referred to as small state.
Population, however, brings other issues as well. After all, unlike territory, population is a mobile concept, which includes not only the movement of people from one place to another but also their allegiance to things and ideas beyond fixed geographical locations and boundaries. But then the question becomes, why is Bangladesh with a population of nearly 120 million referred to as “small state”? When did this all begun?
My contention here is that there is an element of Indo-centrism when we refer to Bangladesh as a “small state.” I am reminded of a BIISS (Bangladesh Institute of International and Strategic Studies) seminar in August 1979 on the theme, “Security of Small States in the Contemporary World,” in which the then president of Bangladesh, Ziaur Rahman, made a presentation. This is probably the first of a series of seminars on the theme in Bangladesh.
The theme, in fact, soon caught the attention of many. In 1982, Talukder Maniruzzaman published his monograph titled, The Security of Small States in the Third World, in which he argued that the small states, including Bangladesh, must develop a “complex diplomatic repertories to counteract the moves of much larger states,” presumably in Bangladesh’s case the author had India in mind. It may be mentioned that Maniruzzaman categorised “large” and “small” states in terms of quantitative and traditional war capabilities.
Two years later in 1984 came out an edited book, in which I also had a piece, with an interesting sub-title, “Foreign Policy of Bangladesh: A Small State’s Imperative.” I guess this was the first concrete attempt to depict and formalise Bangladesh as a small state, although the idea of the book, at least to the editor, Emajuddin Ahamed, was similar to that of Ziaur Rahman and Talukder Maniruzzaman and that was to get Bangladesh out of the Indian nexus.
It was otherwise a politically thought-out intellectual intervention in so far as defining Bangladesh was concerned, albeit devised at a critical moment of history when political pressures at home demanded so. That is, Bangladesh as a “small state” required external support, extending from the Muslim states to China and the United States, to contain “Big Brother” India!
Ironically, while India remained where it was, Bangladesh got stuck into the idea of being “small.” But insofar as it was an attempt to win over the minds, that is, Bangladeshis would be more resolute and externally focused even beyond South Asia to guard their independence; it did carry some sense beyond the notion of territoriality and “smallness.” But this has to do as much with the immediate sense of security as it has to do with the changes that have come about in organising security. Let me explain.
Security in the traditional sense of the term has always been understood in geo-political perspectives, that is, either in the sense of having domination over the oceans and the seas or the land. Although this has been the core thrust of European or western security doctrines as well as their practices to a considerable extent, it did have significant impact on the question of organising security in post-colonial or developing societies.
In the aftermath of World War II and more concretely towards the end of the Cold War the geo-political understanding of security gave way to what is best referred to as the multidimensional approach to security. That is, population, ecology, food production, finite natural resources, even the effects of El Niño and La Niña, came to be recognised as no less important in the consideration of national security. This is also referred to as the phase of geo-economics.
But then towards the end of the 1980s, the understanding of security took a major turn towards what may be called psycho-geography, the consideration of space (be it of land, water or habitation) from the standpoint of culture and psychology. In fact, as one critic pointed out, instead of considering a place in its absolute, old-fashioned latitude-longitude sense, the place (more as mental maps) is now being considered for its relative location. Howard Stein is more emphatic on this:
There is nothing mysterious or esoteric about psycho-geography: it is part of our everyday experience of ourselves and our world. The close fit, if not fusion, between one’s sense of self (“who-ness”) and one’s sense of place (“where-ness”) can be seen throughout the range of the imagery of large groups such as nations to smaller groups such as corporations and medical departments, and in the personal symbolism of individuals as well. The term “psycho-geography” refers to people’s shared psychological representation or “map” of the natural and social world, the developmental antecedents of that map, the group dynamics which forge and revise that common map, and the consequences in group and inter-group action of living according to that map.
This is particularly critical at a time when globalisation has redefined not only our understanding of the national and the nation state but also the international and the global. The concept of Bangladesh, to give an example, can no longer be contained or limited within the 55,126 square miles of its territorial boundary but must also include the Bangladeshis living in increasing number in different parts of the world.
Similar is its content of having being identified by both friends and critics as an Islamic state. The latter allows Bangladesh, whether willingly or unwillingly, to align itself with the Islamic population worldwide, which at times could create serious security concern, as was the case in the post-9/11 period. And here lies the relevance of Bangladesh in the current war on international terrorism. There is something else however is involved here.
The “softness” of Bangladesh comes not only from a psycho-geographical reading and the advent of globalisation, something to which we will return in some details in the next section, but also from the practice of polarised politics at home, including inter-party rivalry on the issue of terrorism. The following editorial of a national daily of Bangladesh captured this point well:
If UNB report last Thursday is correct then the former prime minister in a lecture on “Democracy, Human Rights and Security Threats” held last Tuesday in Brussels said that the last general “election results were manipulated through planned fraud, vote rigging and unfair practices.” “If the election process is betrayed, if a fundamentalist alliance assumes power through conspiracy the country might become a hotbed of terrorism, it can become a safe haven for terrorist network as the government of fundamentalist alliance will morally and physically help so-called fundamentalist terrorists through under cover,” she said….
What we find extremely regrettable is that [the former prime minister] seems to want to use the present global concern, western anxiety and US hysteria about terrorism, and especially its link with Muslim fanatics in some countries to discredit her political opponent in Bangladesh. What she is not realising is that in attempting to do that she is harming the country much more, of which she is a leader, than her political rivals.
But lest the party-in-power suffer from disrepute and be outmanoeuvred on the issue of terrorism, the incumbent prime minister called the main opposition party “al-Qaeda and Taliban of Bangladesh.” My issue here is certainly not with the ruling party or with the opposition but with polarised politics, which further exposes Bangladesh to dubious elements and shadowy activities, including the active and empowered terrorists. It is this to which we will now turn and discuss in some details.
Real face of contemporary terrorism in South Asia
We have already referred to psycho-geography and how the issue of national security gets redefined with globalisation. But then globalisation, mainly because of its birth from a complex combination of multiple interactions, has given rise to a multiversity or multiple universes of knowledge and practices. As a result we are faced with several versions of globalisation, but then one particular variant—subaltern globalisation—is critical in understanding the nature of contemporary terrorism. A closer exposition will make this clear.
Economic globalisation or globalisation from top is something we are all familiar with. What it means is that in addition to the internationalisation of trade, finance and investment we now have the internationalisation of production as well. That is, multi-national or rather trans-national companies now collect resources in several countries, process them in another several countries and finally, export the finished products to the rest of the world.
A fully finished product, therefore, no longer has one single birthmark; it has multiple birthmarks since several countries have gone to produce it. A Compaq computer, in that sense, is no longer entirely American, or a Toyota car fully Japanese. The final product of both these items will have components made in several countries of the world. Put differently, unlike the previous internationalisation of things, in the globalisation phase of capitalism the thing itself is the product of the international or global market.
In this newer configuration, the non-state enterprises are often more critical than the state-oriented or state enterprises in the reproduction of capitalism. The need for safeguarding the non-state enterprises, therefore, is as vital as protecting the state enterprises. The outcome has been greater policing and diffusion of licit weapons, which often for reasons of pilferage and structural leakage end up in the market as illicit commodities. I will return to this issue shortly.
There is yet another type of interaction informing and reproducing globalisation. In fact, critics have already referred to the mushrooming of global networks resisting economic globalisation as “globalisation from below.” The latter includes a diverse group of people—environmentalists, NGOs, religious groups, small farmers, labour unions (incidentally of both the developed and developing countries), women’s movement, consumerists, African debt relief campaigners, anti-sweatshop activists, and the like, all one way or another either critical of or directly suffering from and struggling against the impact of economic globalisation. The subaltern nature of the resistance movements, particularly the networking, can hardly be minimised.
But then, there is a further subaltern variant to the whole notion of globalisation from below. This refers to the deepening of relationship between and amongst the “dubious groups” and “shadowy activities” ranging from smuggling of goods and people, illicit production and trading of small arms, money laundering, narco-production and trading, terrorism, and the like, and that again, across and beyond national, ethnic, racial, and even religious affiliations.
The subalterns, particularly the poverty-ridden and marginalised population, become easy target of such groups and activities, but more importantly the state of being itself becomes a factor for certain groups of (relatively well off) people to rally support and even clandestinely work for their cause. A protracted nature of poverty and marginality and a lack of substantive global concern also push them to seek informal or even criminal means to reproduce their lives or redress the situation.
The complex networking at this level and in combination with the resistance movements against economic globalisation could be best referred to as subaltern globalisation. Here the subalterns, including their ardent supporters and sympathisers, are no less creative and empowered when it comes to organising and reproducing their activities at the global level, and that too often by challenging the overly empowered forces of economic globalisation.
The element of subalternity in the resistance movements against economic globalisation cannot be denied. The anti-globalisation protests in Seattle, Rome, Prague or Washington all tend to indicate that the subalterns or marginalised forces have been put into a dire situation because of economic globalisation. The protests are otherwise meant to highlight the grievances of the subalterns worldwide.
The resistance movements however in and by themselves do not reproduce the life and living of the subalterns. Mittelman has already indicated that “where poverty is severe, criminal gangs flourish.” The link between poverty and criminality is less linear than what is seemingly suggested here. A state of subalternity in fact creates conditions that make people disinterested in the business of reproducing the power of the state. Misgovernance otherwise becomes the (dis)order of the day.
People, particularly the subalterns, increasingly start depending on informal, often criminal, means for reproducing their livelihood. Even when requiring business or personal security they fall back on the power of the “godfathers,” hired goons, mastans, and the like, than on the otherwise inept, often corrupt, governmental machinery. A shadowy network of things and transactions get reproduced and in the process destabilises not only the power of the state but also the power of the subalterns, indeed, making them more vulnerable and disempowered. This further creates grounds for fresh recruits and creative but demonic ventures for organising and reproducing subaltern globalisation. The complex structure is somewhat demonically intriguing. I will limit myself to three areas, with particular reference to terrorism.
Narco-terrorism
Narco-production and trading is a lucrative business in this region. In 2001 Myanmar surpassed Afghanistan as the largest producer of illicit opium and heroin in the world. To provide some knowledge of the amount, 865 tonnes of opium were produced in Myanmar in 2001, almost all of which were processed into heroin and sold to the illicit market both within and outside the region. This is more than double the amount of illicit opium that is available in other heroin-producing countries, such as India, Columbia, Mexico, or Laos.
There exists a vibrant but complex relationship between opium growers and heroin producers, drug dealers and consumers, security and custom officials, high-risk investors and money launderers, and that again, not only nationally but also regionally and globally. As the following US Drug Enforcement Agency report suggests:
Opium poppy cultivation and heroin refining take place in remote, mountainous border regions. Armed ethnic groups such as, the United Wa State Army, the Kokang Chinese, and the Myanmar National Democratic Alliance Army control the cultivation areas, refine opium into heroin, and also produce methamphetamine.
Associates of these organisations from other Asian nations have shipped tonnes of heroin from Burma to the United States within the past decade. The largest single heroin seizure in the United States consisted of 486 kilograms of Burma-produced heroin that the US Customs Service discovered in a containerised shipment of plastic bags from Southeast Asia, via Taiwan, en route to a warehouse in Hayward, California, in May 1991.
But Myanmar, apart from being a member of the infamous “Golden Triangle,” is also close to yet another major narco-producing region, the “Golden Crescent.” In smuggling heroin from Myanmar beyond the region and the continent both India and Bangladesh are used as transit points. This further exacerbates problems related to narco-terrorism in the region.
In fact, one critical problem arising out of the confluence of two major narco-producing and trading regions is the cementing of a diabolic relationship between insurgent groups, arms dealers and narco-terrorism. Such a relationship is quite common in and around Thai-Myanmar, Indo-Myanmar and Bangladesh-Myanmar borders. Not that all the insurgent groups engage in narco-production or narco-trafficking but it has been found that almost all of them have regularly taxed and exhorted money from the traffickers while providing protection to the latter for conducting trafficking in drugs. There are several critical implications of this.
Firstly, the trans-national narco-networks, now backed by armed insurgents, make anti-narco-production or anti-narco-trafficking drive immensely difficult. And given the terrain (both physical and topographical) in which the insurgents and the traffickers operate there is now all the more reason to believe that the nationally-organised military or coercive solutions may not be the correct way of overcoming the menace of narco-terrorism.
Secondly, weapons, particularly small arms, in the hands of both the insurgents and traffickers become more rampant, indeed, to the point of threatening law and order in the vicinity. A large portion of the money received from taxing and extorting the narco-traffickers goes on to purchase small, at times sophisticated, arms for the insurgents. I will have more to say about this issue later.
Finally, subaltern aspirations get entwined between insurgency and narco-terrorism, almost to the point of blurring the distinction between the two. While this becomes handy for the state machinery in the strategy of depicting the insurgents as narco-traders and winning back the support of the members of the dissenting communities, it often leads them to quick-fix remedies with little or no results.
As the World Bank-sponsored study on Indo-Bangladesh border smuggling once pointed out that “ordinary men, women and even children participate in smuggling as couriers, porters and rickshaw pullers,” which only indicates that the subalternity of smuggling or even narco-terrorism is far more complex than what is readily understood. There is therefore no guarantee that the narco-menace would discourage the subalterns from joining the trade.
Money laundering
Narco-terrorism would not make much headway without the practice of money laundering. It is the latter that provides the required funds for the production and later on, shipments of the narcotics across regions and continents. The weakness and corruption prevalent in the banking system of the region remain easily susceptible to money laundering. Often drug traffickers invest their drug profits in the country’s infrastructure and legitimate businesses.
The drug trafficker-cum-money launderer otherwise with the connivance of the bank and the state end up running legal businesses! When such a structure comes into being, it becomes impossible to eradicate narco-trafficking and all the corroborating agencies, including money laundering and terrorism, unless and until the state itself goes through a sustained period of reforms and restructuring.
At times certain other structural factors are also responsible for reproducing money laundering, as is the case with the stateless but relatively well-off Rohingyas living abroad. As stateless and few licit areas to invest, these Rohingyas have no option but to launder money to various Rohingya nationalist or insurgent groups, mainly to fulfil their subaltern aspirations in the northern Arakan region of Myanmar. That a part of this money would be used in purchasing arms and later on in insurgent or terrorist activities can never be ruled out.
Let me at this stage clarify one point. Once a subaltern struggle takes a military or violent turn, it cannot escape from being linked to the various networks of subaltern globalization. This is because in order to sustain the subaltern movement through military means there is a dire need for both cash and arms, indeed, over and above the committed recruits of fighters. Often the funds as well as the arms come via the network of dubious groups and shadowy activities.
In recent times, more so in the post-cold war era, this has been the case practically with all the militant groups, including those directly involved in subaltern movements. Tamil Tigers is a good instance, which despite having being funded by the Tamil diaspora, did not hesitate to enter into the business of selling heroin and hashish for financing arms purchases.
Again, take the case of Kachin Independence Organisation, a militant group fighting for the interests of the Kachin people within Myanmar, which with 5,000 regular “armed” soldiers remains “heavily involved in the heroin trade.” This is not something unexpected in view of the protracted nature of these movements and the cost that is involved in sustaining them.
Even a modest costing will show that the need for cash is quite substantial. For instance, if we take that a militant group is made up of 3000 fighters or terrorists and that each is paid a monthly allowance of Rs 5000, the need for cash just for paying the terrorists every month comes to Rs 15,000,000 (or US $319,148 at the current exchange rate), which is quite substantial in local standards.
Often the militant groups, for the sake of maintaining their freedom and this is more so in the aftermath of the Cold War, shy away from a particular source of funding. Instead, they now prefer diversifying fund-raising, which at times includes money from taxing the narco-traders or even joining in the business of selling drugs and arms. The following report is a good indicator of the militant groups’ involvement in arms trafficking and making money from it:
Around 100 AK-47 rifles reached different gangs of criminals in the port city (of Chittagong) and its surrounding areas from the insurgents of Arakan state of Myanmar staying in deep forests across the Bangladesh border… Arakan insurgents sold the rifles and some other sophisticated weapons to these gangs through a clandestine channel of local kingpins of arms dealers and smugglers on various occasions in the past few years.
This brings us to the third and final area, the issue of illicit small arms.
Illicit small arms
If anything that has empowered the terrorists and mastans lately, it has been the proliferation and use of illegal small arms. In April 1996 the Bangladesh military seized the following weapons from the vessels off Cox’s Bazar, a place incidentally not very far from the Bangladesh-Myanmar border:
List of illegal small arms
AK-47 Rifles 5002
Machine guns 803
Rocket launchers 504
Grenades 2000
It is difficult to imagine that these weapons, including many in the pipeline, enter Bangladesh without some connivance of the state machinery, particularly the police and customs departments. But even the knowledge of possible “helpers” does not provide a clear picture as to who received the arms and more importantly who supplied them. The best we can do in this kind of circumstances is consult Jane’s Infantry Weapons, a book of notable distinction, and find out the names of the countries manufacturing these weapons. According to Jane’s 1996 edition, then following countries, both developed and developing, were listed as the main producers or suppliers of small arms: Argentina, Austria, Belgium, Brazil, Britain, Chile, China, France, Germany, India, Iran, Iraq, Israel, North Korea, Pakistan, Russia, Singapore, South Africa, South Korea, Spain, Switzerland, Turkey, USA, Venezuela and many more.
But this does not help much unless we identify the birthmark (i.e. the original manufacturer) of the small arms that are found and used in terrorist activities. But since the public had no access to the seized weapons mentioned above, there was no way to find out the birthmark of these weapons. But then a survey conducted at the University of Dhaka in 1995–1996, supplemented by various newspaper reports, helped to trace the type, birthmark and cost of small arms found in the hands of student political cadres and in-campus mastans. The following is the list:  |
The type and birthmark of the small arms indicate that the bulk of them were produced in developed countries but then it does not tell us how they made it to the university. It is unlikely that these weapons were directly shipped or airlifted from the manufacturing countries to their destination in Dhaka. What is more likely is that these weapons entered Bangladesh from various border points (Bangladesh–Myanmar as well as Indo–Bangladesh) via a vibrant subaltern network (both dubious and political) that possibly included at various stages of their shipments members of both developed and developing countries.
On this issue, a national daily of Bangladesh reported:
Sixteen northern districts of the country, especially the frontier ones, are flooded with illegal arms and ammunition, posing a threat to law and order situation. These arms are mostly possessed by political activists, outlawed extremists, terrorists, extortionists and miscreants. The illegal arms include both foreign and local sten gun, SMG, sawed-off rifle, SLR, revolver and pipe gun. Most of the firearms are in the hands of activists of “three political parties” who have separate hideouts in different places in this region including frontiers of Natore, Pabna, Sirajganj and Bogra districts.
The subaltern nature of the network cannot be denied, although the flow of small arms has gone beyond those adhering to some form of subaltern aspirations. In fact, the flow has become so acute and extensive that even the former Indian High Commissioner to Bangladesh, Deb Mukherjee, publicly noted, “It is possible that firearms are among the items smuggled from India into Bangladesh.” Put differently, without an extensive subaltern network, it is impossible to imagine the flow of small arms, whether to Cox’s Bazaar or Dhaka University. At times, however, not only the arms flow but also the network could prove deadly. Let me cite an example by quoting Jasgit Singh:
A large number of terrorist groups are believed to be in possession of man-portable SAMs now… The whereabouts of the unaccounted 560 Stinger missiles (out of the stock supplied to Afghan Mujahideen) are unknown, and all efforts to recover them have failed so far. A few had appeared in Iran, having been sold by the Mujahideen. Another 312 were reportedly sold in the open market at Landi Kotal (Pakistan) in January 1993. Earlier this year (1995) the LTTE shot down two Sri Lanka Air Force aircraft carrying passengers.
What we have here is a subaltern network consisting of Afghans, Iranians, Pakistanis, and in so for as the missiles making it to the hands of the Tamil Tigers, Indians and Sri Lankans. But then, an American-made weapon changing hands in Afghanistan, Iran, Pakistan, India and finally reaching Sri Lanka can only make everyone culpable when the said weapon is finally used against the Sri Lankans. Similar is the case with the weapons that are used in Bombay, Karachi, Dhaka, Delhi, Colombo or any other place in South Asia.
Indeed, if there is an element of subaltern bonding among the users of small arms, there is also a bonding, albeit more social, among those killed by these weapons. This is because most of the victims turn out to be disempowered, marginalised subalterns! In this context, can we bank on the state for ridding South Asia of illegal small arms, particularly when the network of small arms itself is subaltern, regional and global? Few, I believe, would have the nerve to answer this in the affirmative.
If we take a critical and holistic stock of narco-terrorism, money laundering and illegal small arms, it becomes easy to comprehend the art and skill of contemporary terrorism. When it comes to the issue of organising and reproducing the latter, it has certainly ceased to remain “national” or “statist.” Instead it has now become “transnational,” making the best, if not creative, use of globalisation, particularly of the subaltern variant.
Added to all these, however, has been the horrifying phenomenon of suicide bombing. The latter is now regarded as “the most feared weapons in the arsenal of political activists.” And as indicated earlier, once the subaltern aspirations get intertwined with the dubious elements of subaltern globalisation, the result could be deadly.
Suicide bombing, in this context, could create havoc on an unprecedented scale. This is mainly because suicide bombings far from being acts of loonies and the macabre “are initiated by tightly run organisations that recruit, indoctrinate, train, and reward the bombers.” And it is this aspect of terrorism that has come to haunt not only South Asia and Bangladesh but also the United States and the west, for the subaltern network, at times aided by suicide bombing, could play havoc not only nationally and regionally but also globally.
Hyperpower, hypertension
Hypertension is on the rise in the United States. I am of course referring to a medical study recently completed at the universities of South Carolina and Wisconsin that claimed that “almost one in three US adults had high blood pressure at the end of the last decade.” This had reversed a downward trend and raised another warning flag about Americans’ health. What is equally surprising is that at the same time the US Department of Health and Human Services warned the Americans about the dangers of obesity, which also showed a marked increase.
One can in this respect easily make a correlation between “gigantism” and hypertension, although the linearity may not always hold true for many of the individuals. The significance of this study can hardly be minimised; it has implications that are social, political, and even psychological.
The hyperpower status of the United States seems to have reproduced hypertension, not only for itself but also for others. As one critic pointed out:
America is not just the lone hyperpower—it has become the defining power of the world. America defines what is democracy, justice, freedom; what are human rights and what is multiculturalism; who is a “fundamentalist,” a “terrorist,’ or simply “evil” (emphasis in original).
Not surprisingly but somewhat ludicrously, in the wake of US invasion of Iraq and anti-war sentiments in France, the food courts in US Congressional buildings in Washington DC redefined “French fries” and “French toast” and started calling them “Freedom fries” and “Liberty toast” respectively. What happened to the “French wine,” however, remained a mystery! The hypertension soon became contagious even to those serving the government of the United States abroad.
A news reporter of a mainstream daily in Bangladesh told me that the US embassy had sent a note of concern to the editor for letting a “teenager” publish something humorously on how to make a (fictitious) bomb! But more importantly, in the wake of America’s hypertension, Bangladesh found itself redefined by the United States—from a moderate, Islamic, democratic polity to “high-risk” terrorist-prone society.
Far from helping Bangladesh overcome its polarised politics, the labelling further hardened the respective positions of the political groups, with each ceremonially blaming the other. War on terrorism otherwise contributes newer and refined fuels to “warring” factions at home.
But let me go back to the contention that I made earlier. The 9/11 may have accelerated the process, but in so far as terrorism is concerned Bangladesh came under the watchful eyes of the United States long before that event took place. One is reminded here of Clinton’s visit to Bangladesh and how his movements were restricted to the US Embassy at Dhaka, allegedly for reasons of security. The post-9/11 “high-risk” labelling of Bangladesh only confirmed what seemed an aberration at the time of Clinton’s visit.
Two immediate factors seem to have readily contributed to the United States almost overnight redefining of Bangladesh. The first is the recovery of the Rohingya files in Afghanistan by the Americans. The following report filed by Bertil Lintner is a telling one in this respect:
Among the more than 60 video-tapes that the American cable television network CNN obtained from the Al Qaeda’s archives in Afghanistan in August this year, one is marked “Burma” (Myanmar), and purports to show Muslim “allies” training in that country. While the group shown, the Rohingya Solidarity Organisation (RSO), was founded by Rohingya Muslims from Myanmar’s Rakhine State and claims to be fighting for autonomy or independence for its people, the tape was, in fact, shot in Bangladesh. The RSO, and other Rohingya factions, have never had any camps inside Myanmar, only across the border in Bangladesh. The camp in the video is located near the town of Ukhia, southeast of Cox’s Bazaar, and not all of the RSO’s ‘fighters’ are Rohingyas from Myanmar.
Although the report falls short in identifying the main reason for RSO’s militancy, that is, protracted statelessness of the Rohingyas within Myanmar, it raised one issue that merits some attention: locating the Rohingya militants and the RSO within Bangladesh. In so far as this report is concerned, the hypertension of the United States vis-à-vis Bangladesh is understandable. For the Americans there is now evidence (!) that the “dubious elements” and “shadowy activities” within Bangladesh have come to reproduce themselves beyond the national boundaries, and more frighteningly, linking themselves up with networks that stretches from Myanmar to Afghanistan, if not beyond.
Secondly, the Right and Left political distinctions within Bangladesh got blurred as a result of the war on terrorism, particularly following the US-led invasion of Iraq. This requires some explanation. In earlier times, particularly during the Vietnam War, the Left forces within Bangladesh (then part of Pakistan) opposed the US policy in the Southeast Asia region.
On the other hand, the Right, including the so-called “Islamic forces,” sided with the Americans. Even later, save on the issue of Palestine, the Left forces remained aloof when the United States got militarily involved in countries with Muslim majority population. In recent times, Bosnia and Afghanistan are good examples. Only with the invasion of Iraq do we see for the first time that the Left and Right forces within Bangladesh campaigning together against the United States.
There is also a global side to this, but that need not bother us here. What is, however, important in this radical realignment is that the position of the moderates also got blurred. And that is something very worrying, for it only confirms that more and more people have become disinterested, if not hostile, to the US-led campaign against international terrorism. For the hyperpower, this is bound to reproduce hypertension!
The prescription, and this could only happen when things are over-tensed, is to seek an easy way out. The “soft state” is being repeatedly told to gear up and become “hard!” But given the weak nature of Bangladesh’s economy and the psycho-geographical concern of the majority of the people, this amounts to a tall request. In fact, the only place where it had some effect is at the visa counters and international airports! But restrictions on the movement of people, as anyone familiar with its history knows, invite all kinds of desperation. Some even would not hesitate to join the dubious networks of subaltern globalisation to reach the desired destiny. At times, such restrictions tend to empower the very network against which the war on terrorism is launched.
Elsewhere in South Asia, the war on terrorism provides a “model” for some countries to at least take up the rhetoric of violence, if not to boost up their military strength. Advani’s language of coercive diplomacy and Musharraf’s equally forceful retort in post-9/11 period is one aspect of it. Needless to say, not only does this divert developmental funds towards the coercive sectors, including the military and police, but also creates a hyper-tense milieu within the region with frightening prospects.
Conclusion: what is to be done?
Getting a grip of the situation is first. It is in fact too early to provide some evidential impact of this war, for elements of it got fused with something that had a birth parallel, if not prior, to economic globalisation, namely, the subaltern variant of globalisation. Contemporary terrorism and the US-led war against it only tell that the “national” resolution of the problem is not possible. If that is the case, it is important that we take up research agendas, including policy initiatives, which are not only fresh and creative but also trans-national or multi-national in nature.
Two could easily be cited in this context. One is the reform of the police, without which the “dubious groups” can never be contained. But given the complex, if not creative, network of the latter in South Asia, it is worth pursuing police reform regionally and not just nationally. This would not only require cross-national confidence-building but also newer kinds of training, certainly beyond the conventional ones.
On this issue and this brings us to the second example, I would go a little further and propose the creation of a South Asian Civil-Police Force. This is because in this region, policing has been an absolute prerogative of the government and the coercive forces, namely the police and the military.
There has been virtually no role for the civic population or civil society on matters related to security. But there is more civil content than military when it comes to narco-terrorism, money laundering, and even illegal small arms. Indeed, these are critical sectors in the nexus that is responsible for reproducing contemporary terrorism. There are precise structural reasons for money laundering, particularly when it comes to illegal migrants/stateless persons who are otherwise barred from transferring money through official channels.
Beefing up the power of official scrutiny or that of the police or the military to contain and resolve these issues, including contemporary terrorism, would take us nowhere. A combined civil-police force and that again, South Asian in scale, would have the effect of not only degovernmentalising and subsequently denationalising but also depolicing security issues, indeed, to a point where the (post-national) civil authority would be engaged in the task of combating the dubious elements of subaltern globalisation, including terrorism, both within and beyond national borders.
Secondly, only massive reconstruction, indeed, of the Marshall Plan type, could make a difference to those “failed states” which are otherwise engaged, not necessarily knowingly but structurally, in the business of reproducing both “dubious elements” and terrorists. The bottom line, of course, ought to be that states, including the hyperpower, must resist the temptation of depicting or making “the other state” a failed state. A continuation of the latter, even without serious military excursions, makes reconstruction work, even of meagre nature, very difficult.
BRAC’s role in Afghanistan is a good case in this context. Not only its work remains limited to the periphery of the cities, mainly for reasons of security, but at home also there is little motivation to carry out the task. A greater participation of the United Nations could make a difference, and this includes sending peacekeeping forces as well.
In this connection, it may be pointed out that India has already formally notified the United States that without the participation of the United Nations no Indian peacekeeping troops would be sent to Iraq. Bangladesh, more because of domestic pressure, has already voiced the same. If anything, this further creates ruptures and delays the critical role of reconstruction in the war against terrorism.
Thirdly, there is a serious need for the hyperpower to overcome its hypertension and replace it with what could be referred to as “hyperesponsibility.” There is a Chinese proverb that says that the tallest tree attracts the most dangerous winds during a typhoon. Indeed, as the “tallest tree” it is quite natural that America would be the target of resentments and criticisms. But to contain them what the United States requires is not arrogance and a display of firepower but greater understanding backed by a greater sense of responsibility.
In fact, at this stage a hyperesponsibility towards the Palestinian people would overnight change the resentments and criticisms against the United States not only in Bangladesh but also globally. I can almost guarantee that if such a thing happens those who are now silent spectators of the US-led war on terrorism would voluntarily join the latter to rid the world of the spectre that has come to haunt the lives and livings of the people.
Finally, war on terrorism brings home the point that reproducing democracy, including its rituals, is as critical as having democratic institutions keep an eye on its practice. This factor is as important to the United States as it is to South Asia and Bangladesh. Indeed, in post-modern times, election results no longer remain contained within the national boundaries but inform and shape ideas and activities, often global in nature.
In this context, if “democracy deficit” is an unacceptable outcome, requiring urgent reforms and rectification, so is “democracy surplus” devoid of democratic institutions. Both could distort things and make war on terrorism a difficult vocation altogether.
The writer is professor and chair of the department of international relations, University of Dhaka.
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Globalisation, domestic policies and Bangladesh
M. Asaduzzaman
Globalisation has become a dirty word for quite some time. Witness the noisy demonstrations in Seattle in the past and in Cancun a few days earlier along with those interspersed in between Davos, Washington and Prague. Who were not involved in this melee? Disgruntled government representatives, NGOs (particularly those from the Western world), farmers and trade unions — all had something to say to, and demand from, the rich world. Much of this demand was genuine but apparently more often than not rhetoric got the upper hand rather than the substance of the matter. If nothing else, Cancun has proved that the issues are too complex. I wish to discuss a few of them below.
The first type of complexity arises because there is more than one kind of globalisation. Only one of these, trade relations and facilitation through liberalisation and market access, was under consideration in Cancun. The others were not. These latter ones probably have as much, if not greater, importance for the economic growth of countries. In fact, the outcome of economic globalisation may depend on these other processes both in the short and the long run. Before turning to the issue of the process of economic globalisation under which the Cancun meet and its consequences fall, I shall therefore say a few words about these other kinds of globalisation.
The second type of complexity arises because even when many of the actions have to be at the international level, these also necessitate domestic policy actions to make those international efforts beneficial to the country concerned. This is discussed both with respect to the other types of global issues as well as the issue of agriculture. Furthermore, the problem is put in its perspective to indicate the reasons behind the differences of opinion in the World Trade Organisation’s (WTO) deliberations on agriculture. Also in this case reference is made to studies, which show how active domestic policies may raise the level of benefits to Bangladesh compared to passive acceptance of policies in the developed countries. Furthermore, this indicates how Bangladesh’s economic interest may not be the same as those of other least developed countries (LDC) in this regard.
Thirdly, one other contentious problem, that of Mode 4 for trade in services, i.e. movement of labour for a limited period to other countries, is discussed along with the domestic actions that are needed if and when this is accepted as a vehicle for trade in services. Finally, I provide a brief run-down of the history of negotiations for trade liberalisation that indicates that while compromise is the art of negotiation, it is also true that much of the problem has often been created by the USA again and again. The USA is the largest economy in the world, and for better or worse she cannot be counted out in any negotiation if it is to be fruitful and meaningful. This does not mean that one has to just accept what the USA says. Rather, it is better to constructively engage the country with facts and concrete analysis than with rhetoric. Let me now begin with the brief discussion on the other kinds of globalisation.
Other kinds of globalisation
The first and probably the one with the most potential as a harbinger of economic and social change among the other kinds of globalisation is that of knowledge. The fast spread of the Internet all over the world has opened up new and exciting avenues for information and knowledge-sharing, faster and cheaper communication and transparency in business and governance. Of course, not all countries are equally capable of taking advantage of this opportunity, nor is it easy to see the changes happening autonomously. This disadvantage and the lack of change in Bangladesh, however, arises mainly due to ill-advised domestic policies regarding telecommunication and sharing of information, missed opportunities for connection with the trunk routes of physical channels of communication (the sea cables) and the general mind-set of the policy-makers. Furthermore, one senses as well the inadequate understanding among the high level policy-makers regarding the potentials of Information and Communication Technology in changing the society and the operational aspects of realising the potential. Indeed, the lack of such awareness translates into missed opportunities for faster growth of trade and commerce and dissemination of new and better technology, in other words that of a rise in the incomes of millions of people in the country.
The second kind of globalisation may be termed the globalisation of vulnerability. While most environmental issues of global importance may fall under this rubric, one of these, climate change, is a truly global phenomenon and needs global action for facing the challenge. The threat to global bio-diversity is another. In this case, the immediate causes may be local but the ramifications are global as the threat is ultimately to human existence. Both these phenomena have a direct bearing on the economic relations between nations.
Climate change may affect such relations because resource-based production systems, particularly agriculture, are expected to be affected in various ways. If output levels are affected, so will be the level and pattern of trade. This may or may not lead to new agriculturally surplus and deficit areas across the globe leading to new geographical patterns of trade. In fact, analyses indicate that the expected climate change may strengthen the present patterns as much of the present grain surplus areas will be climatically more favourable to agriculture. Thus, unless the present inequities in agricultural trade are not addressed properly, as has been the demand in Cancun, in the longer term the situation may worsen further for the developing countries. The consequent losses may be severe in some countries. Yet, we find that the concerted global efforts to manage the problem through ratification of the Kyoto Protocol have not taken place. And that because of the intransigence of some of those countries, including the USA whose stance became a major stumbling block in Cancun. On the other hand, the USA is the main culprit in the emission of greenhouse gases that are the major cause of global warming and climate change.
The issue of preservation of biological diversity still remains uncertain because again the USA is the only major country that is yet to ratify it, possibly because she is more interested in patenting some of the natural products of other countries. So far she has been unsuccessful in one or two such attempts, such as patenting the Neem tree and Basmatee rice. But if she continues the effort and becomes successful in some cases, it will reduce the capacity of many countries to produce and trade in many indigenous primary commodities.
In case of both the types of globalisation as described above, the main problem towards mitigation, adaptation and use of the new opportunities relates to the lack of understanding of their linkage with the economic life of the nation, whether now or in the future. While one cannot say that such understanding is completely lacking in this country, one discerns a lack of serious policy action and intervention. Unfortunately this lack of seriousness regarding economic globalisation also appears to permeate in various degrees, at least till very recently, various spheres of the government. In the rest of this article, I shall concentrate on this issue.
Birth of WTO and economic globalisation
Prior to the First World War, the world was substantially free of restrictions on movement of goods, capital and also labour to some extent. However, this was so primarily because only a few colonial powers mattered in making these decisions. The most restrictive trading practices occurred between the two World Wars when nations imposed high tariffs on one pretext or another against imports from other countries. But again most countries of the world had little to do with it as it was the colonial or Western countries that took many of these actions. When the Second World War was over, the victors came to the decision that a suitable economic world order was necessary to prevent the chaotic global economic situation of the period between the wars. The International Bank for Reconstruction and Development (IBRD), popularly known as the World Bank, and the International Monetary Fund (IMF) were born out of the decisions of a conference in 1944 at Bretton Woods, New Hampshire. The former had the mandate to finance longer-term reconstruction and development activities while the IMF’s job was to help countries manage their short-term balance of payments problems. A third institution, the International Trade Organisation (ITO) was proposed but failed to come into existence because its charter was never ratified by most countries, notably the USA, despite her being initially the prime mover behind its establishment. What came into existence in its place was the provisional set-up of the General Agreement on Tariffs and Trade (GATT).
The GATT had seven rounds of talks over its 40 years of existence till 1987. These talks were aimed at lowering of tariffs among nations against each other’s imports on non-discriminatory and reciprocal basis. But this process was limited mainly among the developed countries. Most developing countries including the then Soviet Union remained outside it as they followed basically an inward-looking, import-substitution strategy of growth. As they did not actively take part in the process, tariffs on exports from developing countries such as agricultural commodities remained high in the developed nations. Indeed, agriculture was kept outside the discipline of GATT till the eighth round of talks (the Uruguay Round or UR for short) that began at Punta del Este in 1986. On the other hand, since 1961 textiles remained outside the GATT disciplines and by 1974 the Multi-Fibre Agreement (MFA) actually allowed countries to impose bilateral quotas in case of textiles and apparels, thus compromising the ideals of non-discriminatory treatment in trade. This helped some of the developing countries. It certainly helped Bangladesh to gain a foothold in the readymade garments industry and exports, for example. But it also created distortion in trade by providing preferential treatment to some countries and also helped to keep the developing countries’ industries less efficient than those of the developed nations.
The launching of the UR was preceded by the successful conclusion of the ministerial level meeting to provide the general basis for talks. Yet, as records show, even by 6 p.m. the day before the meeting was to be concluded, little of substance was achieved. By midnight that same evening, however, the USA and India came to an agreement over services trade. The agreement on agriculture was reached by 2 a.m. in the morning while other changes to the draft declaration were finalised by 4:30 in the morning. By midday, the final text was ready and approved in the full plenary. The stage was thus set for detailed talks under the UR.
The conclusion of the UR resulted in the establishment of the World Trade Organisation (WTO) in 1994. Yet, despite the ministerial declaration in Punta del Este, the outcome was never certain because of the many almost irreconcilable differences in interest that the countries had, particularly in agriculture, textiles, Trade Related Intellectual Property Rights (TRIPS) and safeguard mechanisms. The talks were saved finally because of a compromise reached by the USA and the EU over agriculture and other matters. The WTO included among others two new aspects of trade, those on agricultural commodities and also on trade in services. Both of these have now become bones of contention. Also, for Bangladesh the issue of immediate concern was the phasing out of the MFA which means that she would have to compete with others for market shares in the importing countries after December 31, 2004.
The period since the setting up of the WTO was turbulent, to say the least. The developing countries complained that the developed countries have not kept their promises and the latter have not improved the situation by catering to special interest groups. The break-up of the Seattle meeting was due to such dissatisfaction regarding both the substance and the modalities in the WTO for reaching a decision, particularly the informal (and patently undemocratic) Green Room deliberations from which the developing countries have been generally excluded. The fears of the developing countries were further aggravated by the announcement of President Clinton during the Seattle meeting that the USA may impose trade sanctions to enforce core labour standards. This was justifiably seen by the developing countries as a non-tariff barrier to exports from developing countries.
The Doha round of talks to streamline and complete the unfinished agenda of agriculture and others was comparatively successful. The Cancun meeting was supposed to take stock of the progress since the Doha meeting of trade ministers. The talk failed. It had a parallel with the Punta del Este meeting which almost failed but was saved on the last day through compromises as described earlier. This time in Cancun, the EU backtracked somewhat at the last minute, but that was already too late. The causes of failure remain basically the same — deep divisions between the developed and the developing countries (including the LDCs). But while in Punta del Este a compromise was reached, no such thing happened in Cancun. While agriculture remained a major sticking point, the raising of the Singapore issues by the USA, EU and Korea, though ultimately mostly dropped, had already vitiated the atmosphere of compromise.
The agricultural trade issue
I shall now discuss the issue of agriculture. Take the example of cotton. It is the single most important export from Chad, Mali, Benin and Burkina Faso where its share in total non-fuel commodity exports varies from just about 80 to 95 per cent. Guinea Bissau similarly depends on cashew nut exports where its share in non-fuel commodity export is 98 per cent. Over 1990-2002, the exports from these LDCs have grown at less than 3 per cent per annum compared to the world average of above 5 per cent. Why? Because countries such as the USA discourage imports from them by imposing high tariff walls or giving subsidies to their own agriculture, keeping domestic prices low. But the number of people benefiting from such policies is sometimes very small. Many fail to understand as to why the USA, the self-proclaimed preacher of the gospel of free market and free trade, should block the demand of Burkina Faso, Malawi and other sub-Saharan countries for freer market access for cotton while perhaps no more than 20,000 US farmers may gain from such a policy. On the other hand, it is likely that those 20,000 farmers may be backed by a powerful Senator or Congressman who wields much clout in Washington DC. The protection of the interests of so few farmers naturally is at the expense of the consumers who even in the USA have a much weaker voice than the steel or tobacco or some other such lobbies.
The support to agriculture is provided in more than one way in the developed countries. There is the usual tariff against imports from the developing countries, thus discouraging competition within the domestic market. Export subsidy is provided for exporting certain farm goods. Output price support is a major element of the support while subsidy is provided also for lowering the price of inputs. All these are to be withdrawn according to certain formulae under the Uruguay Round Agreement in Agriculture (URAA). While similar rules apply for the developing countries, they are given a longer timeframe to adjust while LDCs are exempt from such reductions.
The total support provided to agriculture in the Organisation for Economic Cooperation and Development (OECD) countries in 2001 was a whooping $3111 billion. Support provided to producers was $231 billion. In 2000, it was somewhat higher at $241 billion. Of this, the Aggregate Measure of Support (AMS) was 63 per cent. EU tops the list in providing farm support. Of the total producers’ support, EU provided 40 per cent of the total. The respective shares of USA, Japan and South Korea were 21, 20 and 7 per cent.
The support to farmers in these countries is such that in Switzerland, Norway, South Korea and Japan, for every one hundred dollars of farm earning, 60-70 dollars is actually a hand-out from the government. In EU, it is 35 dollars for every one hundred dollars while in the USA and Canada it is around 20 dollars. In some countries such as Norway, Japan and South Korea, the level of support provided to agriculture more or less matched by its (agriculture’s) contribution to the GDP in those countries.
The WTO negotiations notwithstanding, the fact remains that despite some noises by some countries and groupings such as the EU, the level of support is likely to remain the same in some disguise or other. For that matter, there are EU proposals to decouple some of the support from production decisions. However, some people contend that if farmers are given money not to produce, they will remain in farming and over-produce. In USA, the signs are similarly ominous. With the passage of the Farm Security & Rural Investment Act 2002, farmers in USA have been assured guaranteed prices for rice, wheat, corn, soya bean and cotton for a period of six years. This is highly trade-distorting, to say the least.
Political economy of farm subsidy
An interesting issue is the distribution of the benefits of farm subsidy in the developed countries. While subsidies are justified on the plea of protection of the livelihood of small farmers, in reality much of the money goes to the large farmers in these countries. On the whole, farmers get 31% more than the world prices of farm products. But 25% of the largest farms get 70% of the total benefit in the EU. The corresponding shares in USA, Canada and Japan are 89%, 75% and 68%. While producers benefit, consumers in these countries lose as they have to pay on an average 37% higher than the world average price of the farm goods. However, as the farmers’ lobbies are politically powerful, it is not easy to withdraw or lower the support from agriculture in the developed countries.
Bangladesh situation
Bangladesh took little interest in the UR negotiations either before or after the establishment of the WTO. The earlier policy-makers were so unconcerned that when this writer pointed out to the then finance minister in the late 1990s the gravity of the problem due to the phasing out of the MFA by 31 December, 2004, he thought the issue to be of little consequence for the country.
In agriculture, Bangladesh has already cut down her subsidies since the mid- 1980s at the insistence of the World Bank, although later WTO rules permit her to provide such subsidies to a considerable extent (10% of the value of output). Tariffs have been cut down substantially over the nineties although later the introduction of supplementary duties has raised them again. Bangladesh at present provides very little support to agriculture, particularly by way of input subsidy, due to the earlier reform programmes. Recently, the government has announced support for fertiliser and irrigation use by farmers. However, this is very small, about Taka 7 billion at most, which represents no more than 0.65-0.67 per cent of the value of agricultural production.
On the other hand, the level of Bangladesh’s agricultural exports is miniscule, no more than 2-3 per cent of the total export trade. Imports of agricultural goods, however, are somewhat more substantial, around 20 per cent. Furthermore, a major import item is food grain, often purchased from the countries in EU, USA and others. Thus, Bangladesh’s situation regarding her agricultural trade is fundamentally different from that of many other LDCs, which are dependent on exports of primary goods, which also means that her economic interests may not be similar to some of them.
Analyses have been made to model the impact of withdrawal of the subsidies in the four Quad countries (USA, EU, Canada and Japan). Because Bangladesh is a net food-importing country, the reduction of subsidies in these countries leads to a lowering of her economic welfare. However, if Bangladesh provides instead a subsidy of just up to 1% of the value of agricultural output (nearly $188 million), she gains moderately. Employment of unskilled labour rises by 0.8 per cent while GDP rises by nearly one third of one per cent in such a case.
As the Bangladesh-India talks for bilateral free trade are going to start soon, analyses have been made of their consequences for the country. If the bilateral free trade deal is signed between the two countries, this alone will have lower benefit for the country compared to the Bangladesh subsidy to agriculture case. However, if the latter is provided at the same time when free trade with India takes place, the gains are likely to be much higher than either of the stand alone cases. More particularly, subsidy along with free trade will double the benefits of free trade alone, be it overall economic welfare or employment or GDP growth. If the subsidies in the Quad countries are also cut by 50% at the same time, estimated changes will remain positive and high, but will fall slightly from the free trade plus Bangladesh subsidy case. It remains a matter of conjecture if providing subsidy to agriculture is the best way to increase welfare. Yet, this shows the importance of the creation of a level playing field through domestic policy interventions as India is known to support her agriculture in various ways.
Service trade
During the LDC trade ministers’ meeting in Dhaka this year, there was a lot of discussion related to trade in services, particularly Mode 4. I will end this article by making some comments on this issue.
The General Agreement on Trade in Services (GATS) is a part of the agreed UR text. Twelve types of services with 155 sub-sectors have been identified under GATS. There are 4 ways called Modes in which the services may be traded. Mode 1 refers to cross-border trade, which is akin to trade in goods in which the result of service is sent to the importing country. But the service provider does not have to go to the importing country. One example is the software export or data processing service. An airline in country X may want its data to be input and processed in certain forms. A Bangladesh firm may provide the particular service by processing the data and sending the results in compact discs to the importing firm and get paid.
Mode 2 is what may be called consumption abroad. For example, Nepalese students who come to Bangladesh for study consume the educational services here. Similarly, those from Bangladesh going to Thailand for heart surgery consume health services there. Tourism also falls under this mode.
Mode 3 is what is known as commercial presence. Foreign firms doing business in this country through their subsidiary companies, or directly by establishing an office here, are actually exporting their services to Bangladesh.
Mode 4 is the migration of natural persons (i.e. citizens and permanent residents) from a country, going abroad to provide specific services in the importing country. There appears to be a huge unmet demand, for example, for nursing services in the USA and Western Europe. If Bangladeshi nurses can go to some of these countries for a limited period under contract, get employed by hospitals, clinics, medical service provider organisations or the Social Welfare Departments and come back after the period of contract is over, this will constitute trade in service under Mode 4.
Modes 2 and 3 depend on the quality of service that Bangladesh establishments can provide and may have to be generally supplied by private firms and organisations in education, health, tourism and business. Mode 1 similarly should be the preserve of the private sector. The question is why this has not happened so far. While India has, for example, established a firm foothold in IT services, why has Bangladesh failed? The reasons are not far to seek as has been described earlier in the beginning of this article.
The Ministry of Commerce commissioned a study in 1997 on the prospects of IT service exports. It is not clear what has happened to the recommendations. And this, most sadly, when the resolution of the problem is theoretically within our means. But it is still better late than never. Only we have to change our mind-set and free ourselves from the tyranny of the monopoly of telecommunication services. Unless this is done, we will not be able to do much in this area. Also, we need to streamline and modernise our customs system, which is a major block against external trading in this country.
A similar case may be made for the printing and publishing services. Who can provide such services cheaper than us in the region? Yet we buy American and British books printed in Delhi, Singapore and Bangkok. But to compete with those cities, we may have to import fine printing paper as the apparels industry does with fabric. That means again a simplification of customs and related procedures. Furthermore, in all such cases of service, payments systems must be quick and hassle-free. The financial services of banks have to be modernised if fuller benefits are expected.
It comes as a surprise that Mode 4 is being touted by some people as the major advance in negotiations in the WTO. True, the developed countries have unmet demand for certain services such as nursing, cleaning, etc. It is also true that estimates indicate that such trade in services could raise world income much more than all the free trade in goods. Yet, this is likely to be a difficult proposition for countries like ours.
There are two aspects to it. First, it is very likely that given the option, many of the developed countries probably would import such labours from say, Kazakhstan or Macedonia, rather than Bangladesh. This may be for the simple reason that the Kazakhis or the Macedonians may seem less alien culturally and by colour and thus less likely to draw attention and become sources of political tension in the importing countries. Hate campaigns against non-white migrants is common in many developed countries.
Secondly, even if Bangladesh is able to clinch such deals, how prepared is she to supply, say, 5000 nurses next year if there is any such demand, or for example, 2000 brick-layers. And also there is no dearth of detractors who would argue that we are supplying neo-slaves. If we must supply them, it is time now that we think about it in a coordinated manner. We need to have special training schools for such skills based on the exact kind and quality of service demanded. They need to be trained in language, hygiene and etiquette as well as in the specific skills. There possibly have to be changes in immigration procedures for such temporary migration. The specific rules and regulations of various countries may need to be known and policies framed accordingly. Also, one needs to think about what to do with these people once they come back.
Concluding remarks
Many things are happening in the world in the name of globalisation and economic liberalisation. Practically none of these are of our choosing, nor have we ever thought to influence the course of events in the past, except probably this time in Cancun. Yet, countries, groupings of countries and forces are at work that are beyond our capacity to influence except through collective action. Here, too, we may not be right in being always in a group, particularly if the group interest goes against the country interest in certain situations. We will have to make a choice, which of course is easier said than done. Already there are allegations that Bangladesh has looked after more of LDC interest than her own. On the other hand there are counter-allegations of sell-out by Bangladesh of the LDC interest. These indicate the difficult nature of the choices to be made, sometimes almost instantaneously. But, as stated in the beginning, the art of negotiation lies in compromise. Yet, ultimately it is the preparedness of the country to reap the benefits of the opportunity that will matter more than the creation of opportunity itself. Economic policies at home must be consistent with economic diplomacy abroad.
The writer is Research Director, Bangladesh Institute of Development Studies, Dhaka.
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