by Nozrul Islam

Crashing share values, unrest in the Arab world, the Japanese tsunami and nuclear crisis have shaken an economy with great potential but fragile bases. Despite a 6 per cent growth rate, poverty remains high, more than 40 per cent of a population of 150 million people.

Dhaka (AsiaNews) – Bangladesh is a country of contrasts. Despite the recent economic crisis, it has maintained a growth rate of about 6 per cent. With a population of almost 150 million, 57 per cent under the age of 25, the country has a well-educated and trained workforce. Yet, small investors have been hard hit by crashing share prices. At 40 per cent of the population, poverty has not declined. In fact, the turmoil in the Arab world and the loss of Japanese financial aid in the wake of the tsunami have further burdened the country.

External factors have had a negative impact. Political instability in Libya and other Mideast countries have forced more than 30,000 Bangladeshis home. Japan’s tsunami and Fukushima nuclear crisis have forced the Japanese government to defer a US$ 600 million line of credit to Bangladesh.

The credit proposals included US$ 400 million for the construction of Padma Bridge, a 6 km structure to connect Bangladesh’s capital Dhaka to the country’s south-west region, cutting travel time and increasing business opportunities. The other US$ 200 million would have gone to a water treatment plant in Khulna.

These are major losses because Japan is the South Asian nation’s largest foreign donor with US$ 300-500 million on average per year.

On the plus side, despite these problems, Bangladesh remains attractive. The World Bank for example has just agreed to a US$ 2.9 million loan for new infrastructures.

Foreign investments are also flocking. The country’s favourable tax legislation, the most liberal in South Asia, has encouraged Foreign Direct Investment (FDI).

On the negative side, tax evasion remains high with ordinary Bangladeshis and small business paying the highest price.

After reaching an extraordinary high, the local stock exchange crashed, hitting many small investors. For months, shares went up, thanks in part to some analysts who urged people to buy. Some people sold land and shops to join the gravy train. However, often they bought shares issued by less than perfect companies. When the inevitable came, many lost heavily. Even though many felt cheated, protests and demonstrations fizzled out because market corrections are part of the game.

Finally, the central bank’s call for the resignation of Yunus, Nobel Prize laureate for peace and founder of the pioneering microcredit Grameen Bank, has cast clouds over the government and Prime Minister Hasina, and might undermine relations with important western countries (see Nozrul Islam, “Political games behind the request for resignation of Yunus, inventor of microcredit,” in AsiaNews, 4 March 2011).

• bangladesh
• economy
• crisis
• growth
• poverty
• stock
• exchange