But Hasina’s sudden exit from power this week has exposed the limits of that strategy, as Bangladesh struggles to combat steep inflation and unemployment that economists say are the result of poor policy decisions. His increasingly authoritarian rule and rampant corruption in Bangladesh only added to the growing frustration and forced his ouster.
Now, Bangladesh has to decide its future.
Student protesters demanding Hasina’s resignation have brought in Muhammad Yunus, a Nobel laureate and microfinance pioneer, to oversee the interim government. Jonah faced a difficult task.
As soon as possible, the country must restore order and stabilize the economy. In the long run, Bangladesh will have to face more economic pressures that sent the protesters to the streets in the first place. All of this must come on top of the pressing demands to address the widespread disparity under Hasina’s repressive tenure.
It is unclear how long the interim government will remain in place and how broad its mandate will be. But and Yunus have “many aspirations entrusted to them to deliver justice, create a functional economy and democracy, and establish a transparent and accountable rule of law and government,” said Saad Hammadi, a fellow at the Balsillie School of International Affairs. in Canada. The challenge may be too much for an interim government whose main goal is to ensure that a new leader is chosen in a free and fair process, Hammadi said in an email. “Institutional reforms will be needed in the administration,” he said. Bangladesh has undergone economic reforms since the 1970s, and the garment industry has been the center of the country’s economy for decades. But Hasina, who came to power in 2009, narrowed the country’s focus to that single sector and expanded into a new global market, driving much of Bangladesh’s growth.
Cheaply made clothes are attracting global fashion retailers, especially fast fashion brands like Zara and H&M. At the same time, these demands create livelihoods for millions of people, especially women, and transform living standards.
Hasina is spending heavily on infrastructure, assuring international companies that they can count on the country to meet their demands.
“What it brings is a level of stability, which is attractive to foreign investors,” said Thomas Kean, a Bangladesh consultant at the International Crisis Group. Garment buyers can’t send their business to Bangladesh if there are labor strikes, power outages or other unreliable factors, Kean said.
Hasina also instilled domestic confidence. Although he controlled the armed forces and judiciary, suppressed dissent and became authoritarian, there was almost a “compact” between Bangladesh and his government, Kean added. “There is a belief that she and the Awami League are the parties that will bring economic growth and development,” he said, referring to the political party Hasina has led since 1981.
During Hasina’s more than ten years, the economy grew rapidly, in some years crossing 7%. Garment exports drive more than 80% of the country’s income.
But this dependence also cannot be done by Hasina.
The pandemic has reduced global demand for textiles and clothing. At the same time, supply chain disruptions and Russia’s war in Ukraine have sharply increased prices for imported food and fuel. With little economic diversification, Bangladesh cannot draw income from other industries to help pay the bills.
As inflation rises, the Hasina government’s efforts to control it backfire. As it tries to shore up the value of its weakened currency, Bangladesh is draining its foreign exchange reserves, which have dwindled so much that it will be forced to seek a loan from the International Monetary Fund in 2022.
While garment exports are rebounding after the pandemic, Bangladesh is facing short-term problems – a situation that also highlights fundamental problems. Bangladesh collects very little tax, partly because of a lax bureaucracy and many citizens who refuse to pay taxes. The tax-to-gross domestic product ratio, a measure of the government’s ability to finance priorities, is one of the lowest in the world. This means that they cannot count on their taxable income to pay their steep bills.
Bangladesh still has a high growth rate, but economists and others say growth is uneven, and income inequality is high. The perception that the growth story on paper doesn’t match the reality people see on the ground stems from distrust in the government, said Iftekhar Zaman, executive director of Transparency International Bangladesh.
Brazen corruption, including loan fraud and money laundering reports by many in the business community who appear to be close to the prime minister, sowed further disaffection, Zaman said. “Everyone knows that this is being done by people who are supposed to control corruption,” he said.
Perhaps the biggest long-term problem for Hasina is the government’s inability to create new jobs because of its narrow focus on the garment business. There aren’t enough new or better-paying jobs for the country’s growing working-age population.
Last month, that cumulative frustration found an outlet when students began demanding a preferential quota system for government jobs, which provides stability that Bangladesh’s private sector often lacks. After Hasina sent the armed forces to crush the protests, the bubbling frustration with the system that has failed to send boiled into anger against her.
On Thursday, Bangladesh swore in a new interim government, with 84-year-old Yunus as its leader. He called for calm and urged the nation to restore order and avoid violence. Although it is unclear how long he will remain in office, Yunus – a social entrepreneur who has profited from development through micro-credit operations pioneered through Grameen Bank – is expected to implement market-friendly reforms.
This article first appeared in The New York Times.
