Dr Debapriya Bhattachariya, Executive Director of the Centre for Policy Dialogue (CPD), has reportedly insisted in a recent press briefing that "who is a good economist and who is a good accountant should not be judged by people of other professions". Press reports quoted him saying so while making a swipe at Finance Minister Saifur Rahman for his reported criticism of economists in the board meeting of the Bangladesh Institute of Development Studies (BIDS) the other day. From his observation, it appears that Debapriya does not recognise that intelligent people may have the faculty of judgement to correctly assess the competence of people of any profession.
As I read the news conveying the message that non-professionals should not judge the competence of professionals, my mind raced backward to recollect what the architect of modern Malaysia, Mahathir Mohammad, said in a gathering of academics, industrialists, businessman, senior bureaucrats and journalists in an auditorium of Sonargaon Hotel in Dhaka during his visit to our country in 2004. On being asked, perhaps by Professor Shamser Ali, Vice-Chancellor of the South East University, how could Mahathir, as Prime Minister, manage to ward off the East Asian economic crisis, triggered by dwindling value of local currencies, the elder statesman, with his characteristic smile, said, "thank God, I was not a trade economist. Otherwise, I would have looked for a solution in the textbooks". He then said (may not be the exact quote but content is the same), "We have a group for economic issues. We discussed the problem. We drew the conclusion that currency racketeers of foreign origin are involved. They are buying local currency in huge quantities, depositing them in local banks and then selling them in terms of dollar in huge amounts to fellow racketeers of foreign origin at depreciated value with an arrangement to compensate the loss thus sustained through bank transactions in their own country or countries. We than ordered that Malaysian banks should not permit transfer of ringgit (Malaysian currency) in large amounts from the account of any foreigner to that of any other foreigner".
Finance Minister Saifur Rahman was then on the dias alongside Mahathir presiding over the function. Was Saifur Rahman infected by the remark of Mahathir in that meeting? Dr Debapriya might have been present in that gathering. But he was not conspicuous by any angry reaction to Mahathir's remark. If he was not there, he could have subsequently reacted angrily to Mahathir's remark, which verged on joking about the professional competence of trade economists on issues not yet covered by textbooks.
In fact, in social sciences, like economics, they theorise from lessons gained from experience. Adam Smith wrote the mother-book of economics, The Wealth of Nations, without studying economics at any academic institution but on studying the society around. Saifur Rahman is the longest serving Finance Minister not only in our country but also in Asia, if not the whole world. His acumen in economics must have been greatly enriched by his vast experience. As a doer, rather than bare talker, handling the nation's economy for years, he should be able to correctly presuppose things on economic matters which professionals may take time to grasp. Saifur's recent remarks that the gross domestic product (GDP) in the current fiscal year may exceed 7.0 per cent has drawn harsh criticism from Debapriya, who says that such remark may influence official statistics, which is yet to be compiled. The Indian Prime Minister, Dr. Manmohan Singh, was also recently reported to have said that the Indian GDP in the current year could cross 8.0 per cent. What is the fault of Saifur Rahman if he has made an observation based on his assessment?
Besides, responsible politicians are also salesmen of optimism. They are in the business to enthuse the people and inspire nation-building activities to guide the nation forward and bolster the national image for a variety of good reasons including attracting foreign investment. The CPD Executive Director says, it is not right to estimate the GDP looking through the windows of a car. Perhaps, that refers to the Finance Minister occasionally saying that he witnesses a lot of private construction works going on while travelling to his constituency by road. Seemingly, Saifur was indicating that a lot of economic activities do not get entry into the official statistics. Similar observations are also made periodically by donors in the form of allegations questioning the reliability of our official statistics. It will not be far from the truth to say that many of the micro-level economic activities often do not attract official attention. A lot of small fish and poultry farms have come up in the villages across the country. Small shops have sprung up inside the villages away from the traditional bazaars as if to evade attention. These are contributing to the GDP although their contributions may remain unrecorded.
Mahathir Mohammad, the physician, is credited for having successfully engineered the spectacular economic rise of Malaysia. So is Margaret Thatcher, the chemist-turned barrister, in the United Kingdom. The Iron Lady had chosen one A-level passed former banker, John Major, as the Chancellor of Exchequer to salvage the declining British economy from drifting towards bankruptcy, a job which they jointly did remarkably successfully restoring the forward drive of the UK.
One may remember that Britain, during the time of Prime Ministers Harold Wilson and James Callaghan, used to take a huge amount of loan monthly from the then European Economic Community (EEC) to pay the salary bill of its public servants. That was the time when they imposed the counter-inflationary wage increase freeze to keep the government expenditure and inflation as low as possible.
Evidently, these are examples of non-economists having proved themselves as splendid economic planners. Indeed, the industrial revolution took place without there being economists to play a role in it. Economics as a subject is relatively new. But economic activities have been going on since men started walking on the earth, a fact that tends to establish that a good hunch is often good enough for guiding economic activities. If Saifur has criticised economists without making any exception, he might have done so in a rage. It may be so that he may not be happy at the performance of the BIDS. One has reasons to believe so as he has not put a non-economist at the top of the Bangladesh Bank.
The CPD has taken stock of the economic situation, which is indeed not good enough because of the high oil prices and other factors that are not within our control. The balance of payments' deficit resulting from higher import has been identified as a major problem although it is often argued that higher import on account of capital goods and industrial raw materials is a progressive development. The CPD has prescribed a six-track approach to tackle the situation. These are faster disbursement of project aid, collecting $350-$500 million from the international financial institutions for budgetary support, putting together energy-special foreign aid for targeted use, improving the foreign exchange reserve by inducing the friendly Middle-Eastern countries to keep a couple of billion dollars with the Bangladesh Bank at a reasonable interest rate, borrowing of foreign currency by government from foreign banks on the condition that the currency will be used for higher value productive investment or support imports and liberalising the foreign exchange regulations compatible with the anti-money laundering Act to attract foreign exchange remittances. Few of the proposed measures are realistic. But most of them may not be workable and they do not recognise that it takes two to make a clap. Loan from the international financial institutions may not be available unless the government agrees to lender's terms. The Middle-Eastern countries may not agree to keep a couple of billion dollars in the Bangladesh Bank at any rate of interest. Even if they agree, can we spend the money at our will or during the times of need unless we have sure ways to replenish them for repayment on time?
On the contrary, another economist has suggested in a write-up, published recently in this very paper, that "the less the dependence on foreign aid the better is the outcome for the country". He argued that foreign aid is utilised in projects chosen by donors and that their choices may not be the optimal choice for the country. "There is less accountability and transparency in aid-financed projects leading to large leakages and that foreign aid allegedly supports a great deal of corruption."
Those having good common sense and carefully watched our national efforts for economic transformation may tend to agree with this observation. But the said economist further writes, the Finance Minister seems to have taken to heart the IMF advice that the reserves should be kept at above $3.0 billion or about four months' import payments. In order to build up the reserves he seems to have consciously adopted a policy of pushing the current account to a surplus.
However, the current policy is not the best available option for a poor country like Bangladesh. While building up certain minimal amount of reserves is certainly desirable, a current account surplus is neither necessary nor sufficient for increasing the international reserves. A large number of countries such as India, Malaysia, Indonesia, the Philippines and Thailand have run fairly large deficits during the period from 1975 to 2000 and yet built up very considerable reserves. This apparently contradictory result was achieved by encouraging inflows of foreign investment that more than compensated for the current account deficits".
The above view seems to have ignored the effects of events, like the Cold War, the rise of communist China, the Korean War, the Vietnam War and the US policy of containment, on the economic development of many nations including those in the South East Asia and the Far East. Richard J. Walton mentions in his book 'America and the Cold War' that to stop any trend towards socialism and nationalisation of industries the US provided economic aid on a scale never before known to men. "It would be impossible" he writes, "for anyone who had not lived through it to comprehend the hysteria, the hate, and the fear which in those years convulsed America". He observes that, during the Cold War, the US hastened the industrial development of what was previously known as the Federal Republic of Germany to make it attractive to the American investors. The Korean War and the Vietnam War made Americans and the West worried about the vulnerability of nations in the area to communism. They saw economic development as a tool to contain the spread of communism. However, the location of Singapore and Malaysia on the sea-lane to the Far East was their additional advantage. The Philippines, being close to the area of confrontation in the North Korea, became the focus of close western attention.
When Vietnam was fighting Vietnam i.e. pro-western South Vietnam -- bolstered by the West with men and materials -- was fighting communist North Vietnam, the Philippines allowed Americans to have military bases on its soil. Thailand, a traditional western ally, also provided bases to the American military. On the other hand, we took out processions in our cities to protest the US attacks on North Vietnam and earlier against the anti-communist alliance, the South-East Asia Treaty Organisation (SEATO). How can we now have economic policies similar to those pursued by these nations during the times when international politics influenced local economics far more than now? Previously, India, which is a big country and big market, used to be courted by the West with more aid, trade and investment in order to alter its pro-Moscow tilt.
Now it is being courted in the same manner with greater attention as it is being considered as a counter-weight against China now that its pro-Moscow tilt has almost vanished. Direct investment is being injected profusely in China by the West as it is a big market with potential to grow much bigger and as such investment is being seen as a tool to dilute communism. Where do we stand in terms of such parametres?
The end of the Cold War has also ended the undeclared guarantee of the West to provide economic aid or to bail out poor nations in face of economic difficulties. Is the world climate now very favourable for Saifur as the Finance Minister? How many options has he to become choosy? As a doer, rather than bare talker, with the responsibility to manage the national economy, Saifur Rahman has no scope for experimentation of diverse policies. Which of the two opposing sets of proposals that the two economists have advanced should he follow? Perhaps, he realises that it is time for home-keeping with prudence and not tunnel vision. He should strive to maintain a balance of payments' surplus by discouraging unnecessary import by adopting either fiscal measures or using the banking system. He should not permit a spending spree as it would provide stimulus to inflation and drive prices further up to adversely affect the quality of life of the vast majority of people having limited income. He should try to stabilise the value of Taka so that imports do not become costlier to cause contagious inflation to tax the people who grease the economy. The Annual Development Programme (ADP) may be trimmed to defer implementation of projects having no bearing on productivity to the next fiscal year. Voters do not understand much the implications of ADP. But none has to tell them about the adverse effects of price escalations.