For years, Bangladesh was spoken about as a new, emerging ‘Asian Tiger’ ready to pounce towards stratospheric economic growth. The combination of women’s empowerment in joining the workforce, greater financial inclusion through widespread access to the banking system, and a ready-made garment sector accounting for over 11% of the country’s GDP, had many compare the country’s position to that of India or China.
That growth however, has been stymied by recent political upheaval. The ousting of prime minister Sheikh Hasina ushered in a wave of unelected, reform-minded officials – led by Muhammad Yunus – who actively meddled with core economic pillars and industrial management. For reasons both political and personal, they targeted a host of industrial pioneers, taking control of assets and businesses under the guise of equitable growth.
Without concrete evidence or anything resembling a fair trial, the Interim Government led a widespread effort to take control of key businesses and corporate assets. In all, they targeted 11 business groups – including Aramit Group, Beximco, Nasa Group, Sikder Group, Orion Group, and S Alam Group – going so far as to institute control of bank boards and force the merger of five banks into a super bank. While the Interim Government seized control of these groups and their assets, it permitted other industrial leaders the leeway to go about their business, unaffected.
This meant that in Muhammad Yunus’s first year in control of the country’s Interim Government, foreign direct investment shrank by almost 9%. While outlets supportive of Yunus’s economic policy lauded investment rebounding to 19% the following year, on closer examination, the rebound wasn’t a direct injection of investment. Rather it was driven by reinvested earnings and intra-company loans while, crucially, equity capital fell by 17%, down from nearly half the previous year.
Now, with a new government looking to make its mark on the country, the most impactful thing the BNP can do to foster an era of growth is to improve investor confidence and put the meddling of the Interim Government resolutely behind it.
The approach for just how to achieve this is playing out as the BNP debates whether to allow former owners of five banks to regain control. Under Muhammad Yunus and the direction of his central bank governor, Ahsan Mansur, the Interim Government took control of these banks and merged them into one, government-run entity. Despite many commentators raising concerns over the cost and necessity of the merger, the Interim Government plowed ahead. Billed at almost $2 billion dollars in taxpayer funds, depositor withdrawals ended up being severely limited and shareholders received nothing for their holdings.
When the BNP came into power, it looked at this highly contentious move and began taking steps to compensate shareholders. The effort clearly signaled its awareness of the importance investor sentiment has in driving economic growth and provided hope to many of the other business owners whose assets and interests had been summarily seized by the Interim Government.
However, despite writing a provision to the country’s banking laws that would allow former owners to take back control provided they follow strict guidelines, the BNP has waffled about permitting owners to do so. Pressure from political groups and media outlets who either worked within or were broadly aligned with the Interim Government’s policies has created a persistent drumbeat of opposition. A recent report used the unique and slightly suspicious descriptor of “responsible sources” from within the Ministry of Finance and Bangladesh Bank to share that the decision to repeal the provision had been made but was “still at the policy level”, whatever that means. The BNP should tune this noise out.
Allowing former bank owners to regain control would be a clear signal to local and international investors that the rule of law has returned to Bangladesh. For the country’s future and its long-term growth, assurances must be clearly and resolutely provided to local and international businesses that, whatever the political climate, economic development is possible and that returns on investment won’t be devoured by the government.
