World Bank sponsored ‘revival of reforms’ in BD

THE World Bank’s Country Director in Bangladesh, Frederick T. Temple, finished his five-year term in Dhaka last week, and before his departure, praised the government of Khaleda Zia in general, and Finance and Planning Minister M. Saifur Rahman in particular, for bringing back the ‘revival of reforms’.

“Bangladesh has experienced a revival of reforms in the last 20 months,” Temple observed in an interview with a Dhaka-based daily, New Age. In the picture the daily has printed with the interview, Temple looks very happy. Naturally. He has, perhaps, had the most successful years of his career in Bangladesh — thanks to the ruling elite’s unquestioning acceptance of the conditionalities of the international lending agencies, especially the World Bank.

However, what the ‘revival of reforms’ actually means to many in Bangladesh is that the World Bank, along with the International Monetary Fund and its Asian partner, the Asian Development Bank, has succeeded in forcing indiscriminate privatization of public sector industrial units, both loss- and profit-making ones, without taking into consideration the fate of the thousands of retrenched workers and their families and the industrial future of Bangladesh.

The Khaleda Zia government has so far decided, primarily under World Bank pressure, to divest over 100 state-owned enterprises, clearly to the benefit of potential foreign investors and a small group of rich local individuals close to the power centre. A large number of such enterprises, especially the Adamjee Jute Mills, was closed down in June last year without giving the ‘promised’ compensation to the workers. The process is to be completed by June 2006, which a section of the local economists believe, poses a threat of retrenchment of around 75,500 workers without proper rehabilitation measures.

Along with other things, a huge amount of recurring ‘losses’ was cited as reason for the closing down Adamjee Mills while the losses were attributed to, among other things, the perpetual corrupt practices of a section of the mills administration and labour leaders. But the WB, always ready to impose conditions, did not recommend any legal action against the corrupt bureaucrats and labour leaders concerned.

The WB’s Dhaka office under Temple in March this year suspended disbursement of a $65-million ‘grants’ package because of the health ministry’s initial reluctance to accept the bank’s condition of contracting NGOs to deliver essential health services at the union and community clinic level.

The bank’s condition, which includes setting up of a working group comprising representatives from the government, non-government and development partners to prepare the framework for contracting NGOs, would definitely have created job opportunities, as highly paid consultants, for some unemployed people and further strengthened the country’s hardly accountable NGO. But it would not benefit the poor patients living in the rural areas. At least this is what the Bangladesh Medical Association (BMA) believes.

“(Such plans) will not help the poor patients of the country,” the BMA’s secretary-general told New Age. “The BMA will protest any move to hand over health service to the NGOs.”

But the bank recently ‘approved’ two credits worth $536 million as it was ‘satisfied’ that Bangladesh, by a number of actions, was carrying out the ‘necessary’ reforms.

In a statement on June 20, the WB said that it had approved one credit facility amounting to $300 million, which will support the initial stages of reforms as outlined by the government’s strategy. “Our assistance to Bangladesh is gradually moving away from project-based operations to those which support broader programmes under the government’s poverty-reduction strategy.”

It is, however, public knowledge that the ‘poverty-reduction strategy’ is not a ‘home-grown’ strategy. Rather, it has been prepared by a group of ‘economists for hire’ on the basis of guidelines provided by the WB. Many people call it ‘poverty reproduction strategy’.

The government steps that ‘satisfied’ the bank include, among others, ‘approval of a new privatization policy’. And the approval followed a series of action, genuinely enabling Temple to declare that there had been a revival of reforms in Bangladesh.

The government reportedly decided on June 9 that four units of the Bangladesh Petroleum Corporation would be divested from state ownership. On the same day, the Bangladesh Telegraph and Telephone Board discussed the issue of disinvesting the establishment, which is, incidentally, one of the biggest contributors to the government coffers.

On June 15 top officials of the Bangladesh Power Development Board (PDB) and other government organizations of the power sector stressed that distribution of electricity should be ‘commercialized’. The commercial activities (maintenance, meter reading, billing, etc) of the Dhaka Electricity Supply Authority (DESA) are to be leased out to private firms soon. Besides, the government is learnt to have been planning, under WB recommendations, ‘restructuring’ of the power tariff, which clearly implies an increase in utility charges.

The International Monetary Fund (IMF) approved a $490 million credit for Bangladesh on June 22, a day after the WB had approved a loan of $536 million. The IMF approved the loan “to support Bangladesh’s economic reform programme for 2003-06 under the Interim I-PRSP”, an IMF statement said. “Over the past year, Bangladesh’s economic performance has (been) strengthened as a result of the renewal of structural reform (‘revival of reforms’, in the words of Temple),” the IMF noted in endorsing the loan.

The conditions imposed by the IMF, as expected, are similar to those of the WB. They include fiscal reforms (read ‘reduction of import duties and imposition of fresh taxes’), reforms of SoEs selling of public sector industrial units at throwaway prices), phasing out export subsidies, etc.

The Asian Development Bank (ADB), the Asian partner of the WB and IMF, is not lagging behind. It has reportedly made a fresh offer in June of a gas infrastructure credit of $200 million for linking northern Bangladesh with the gas grid through pipeline. The condition is an old one: Bangladesh has to export gas, primarily to the benefit of international oil companies. The government, as it appears from the recent media reports, is getting ready to swallow the pill. The State Minister for Energy and Mineral Resources told the press, after the meeting with the ADB men, that ‘the export through pipeline of three trillion cubic feet of gas would not hurt the reserve in the country, if explorations continue and the finds are put on stream’. “Export is necessary for the sake of infrastructure development in the country.” Before the general elections, the ruling BNP found export of gas an unpatriotic idea.

In the circumstances, little wonder the WB has reasons to be happy with a government, reviving so-called reforms.

Hong Kong, Singapore, US top ‘economic freedom’ index

WASHINGTON: Hong Kong, Singapore, and the United States rank first, second and third, respectively, in the latest edition of the ‘Economic Freedom of the World’ annual report released here on Tuesday by the Cato Institute and more than 50 other libertarian think tanks around the world.

The 160-page report, which ranks a total of 123 nations, concludes that citizens and businesses in Africa, Latin America and the former Soviet bloc states comprise among the least economically free countries in the world, with Burma, also known as Myanmar, claiming the cellar position.

The report, which was released on the same day as the United Nations’ celebrated Human Development Index (HDI), is based on 38 variables in five major categories designed to measure economic freedom.

The five categories include the size of government, as determined in part by spending, taxes and state enterprises; the legal structure and security of property rights; access to sound money that is not weakened by high inflation rates; the freedom to exchange goods and services with foreigners unencumbered, for example, by tariffs or quotas or currency controls; and the degree to which business and credit and labour markets are regulated by the government.

The basic philosophy guiding the ratings is that of classical economic liberalism or, as the third US President, Thomas Jefferson, famously put it: “That government is best which governs least”, except, perhaps insofar as it actively protects private property rights.

“Freeing people economically unleashes individual drive and initiative and puts a nation on the road to economic growth,” said Nobel Economics laureate Milton Friedman, whose basic economic ideas have acted as guideposts for the report and Cato and the other think tanks, including the Fraser Institute of Canada, the F. A. Hayek Foundation in the Slovak Republic, the Foundation Liberated in Argentina, the Centre for Civil Society in India, and the Institute for Advanced Strategic and Political Studies in Israel. “In turn, economic prosperity and independence from government promote civil and political liberty.”

At the same time, the study asserted that economic freedom is highly correlated with per-capita income, economic growth, and life expectancy and does not necessarily lead to greater income inequality.

Of course, not everyone agrees with this rosy assessment. For years, civil society organisations around the world have complained that unchecked globalization and the “free trade” model being pushed by multinational corporations is driving a race to the bottom in environmental and labour standards. This conflict will doubtless come to the fore in September when the World Trade Organization meets in Canczn, Mexico, where WTO officials hope to advance a new round of “reforms” that will help corporations invest wherever they like while avoiding government regulations.

The just-released Cato report, the seventh in an annual series, should not be confused with the ‘Index of Economic Freedom’ published by the ‘Wall Street Journal’ and the right- wing Heritage Foundation here, although the results are fairly similar. Like the Cato report, the Index, the most recent version of which appeared last fall, rated Hong Kong and Singapore as the two countries — out of a total of 156 — with the greatest economic freedom.

According to the Cato report, which covers 2001, the year for which the most comprehensive data is available, economic freedom has gained ground around the world over the eight-year period since the first ratings were published for 1995. The average rating for 2001 stood at 6.35, only slightly higher than the previous year, but substantially more than the 5.96 eight years ago.

The report’s authors, economists James Gwartney and Robert Lawson, said that the turning point over the past 30 years took place in 1980 — coincidentally, perhaps the same year that the World Bank introduced structural adjustment programmes (SAPs), which were designed to reduce the impact of government on the economy — when ratings averaged 5.36, according to their calculations. “It has been on the rise since then,” the reporters said.

Out of a 10-point scale, Hong Kong gained the highest rating for economic freedom at 8.6, closely followed by Singapore at 8.5, the United States at 8.3, and New Zealand and Britain, both at 8.2. The five other nations in the top 10 were also heavily tilted toward Anglo influence. They included Canada, Switzerland, Ireland, Australia, and the Netherlands.

Although the rankings did not precisely follow those used in the Wall Street Journal’s Index, seven out of the 10 top nations overlapped the two surveys. In the Journal’s survey, Luxembourg, Denmark, and Estonia, also made into the top 10 at the expense of the Netherlands, Switzerland, and Canada.

The rankings of other large economies in the Cato survey included Germany, 20; Japan, 26; Italy, 35; France, 44; Mexico, 69, India, 73; Brazil, 82; China, 100; and Russia, 112. In the Journal poll, Germany ranked 19; Japan, 35; Italy, 29; France, 40; Mexico, 56; India, 119; Brazil, 72; China, 127; and Russia, 135.

The Journal poll’s major categories included trade policies; the government’s fiscal burden; its intervention in the economy; monetary policy; foreign investment policies; banking and finance policies; wage-to-price ratios; property rights; regulations; and the black market.

Among developing countries rated in the Cato poll, the United Arab Emirates and Oman rated the highest at 16 and 18, respectively, followed closely by Chile, the Latin American leader, at 20 where it was tied with Mauritius.

El Salvador and Panama tied for 23, while Bahrain and Botswana, the African leader, tied with Costa Rica, and six other countries, including South Korea and Trinidad and Tobago at 26.

Other major African countries included South Africa which tied with Zambia at 42; Uganda and Namibia at 44; Kenya at 51; and Nigeria, which tied with Benin, Cameroon, Chad, Madagascar, and Niger, at 91. Zimbabwe and the Democratic Republic of Congo (DRC) placed last among the Africans at 121 and 122, respectively.

Aside from Chile, El Salvador, and Panama, the highest-ranking Latin American countries included Costa Rica (26); Peru and Uruguay (44); the Dominican Republic (51); Argentina and Bolivia (56); and Nicaragua (60). Lowest ranking were Colombia (101), Venezuela (103), and Ecuador (112).

Aside from the emirates in the Gulf, highest-ranking Middle Eastern states included Jordan and Kuwait (39); Egypt and Israel (56); Tunisia (60); Morocco (82); and Iran (89). Lowest ranking included Syria (106) and Algeria (120).

Besides the overall two winners, Asian countries with high marks included Japan and South Korea, at 26; Thailand (44); the Philippines (51); Malaysia (60); and Sri Lanka (64). Aside from Burma, the lowest-ranking Asian countries included Indonesia (91), China (100), and Pakistan (101).

The results in the UN’s HDI, which measures social welfare, educational enrolment, maternal and infant health, and political freedoms, as well as per capita income, among many other criteria contrast fairly dramatically with the libertarian findings.

Northern European and other developed countries monopolize the top 25 rankings, while Hong Kong, Barbados, and Singapore rank 26, 27, and 28. The top Latin American countries include Argentina (34); Uruguay (40); Costa Rica (42); Chile (43); Cuba (50); and Mexico (55).

Aside from Cape Verde (103), South Africa tops the African list at 111; followed by oil-producing states Equatorial Guinea (116), Gabon (118), followed by Namibia (124) and Botswana (125).—Dawn/The InterPress News Service.