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Loan defaults now part of business model: Rehman Sobhan

Express Report
  25 Feb 2024, 12:25
Professor Rehman Sobhan

Loan defaults have now become a part of the business model and many businessmen prefer to use this strategy to stay competitive, said eminent economist Professor Rehman Sobhan, chairman of the Centre for Policy Dialogue (CPD).

"Some people borrow money without paying interest, while others borrow money and pay interest, creating an uneven playing field that reduces competition," he said while speaking at a panel discussion on the second day of the 7th Sanem Annual Economists' Conference 2024 in Dhaka.

Prof Sobhan said the deinstitutionalisation of the country has emerged in recent years, leading to a substantial reduction in the rule of law. The fortunes of businesspeople now depend entirely on their political identity.

"The essence of deinstitutionalisation lies in the absence of a unified law applied to all, whether in the Election Commission, the Anti-Corruption Commission, the NBR, or any other functional institution," he said.

"Whether you receive tax or loan rebates depends on your identity and political connections," he added.

He explained that the ongoing default crisis, which has persisted for the last 40 years, was initiated by Ziaur Rahman's policy of channeling state financial institutions to build the capitalist class.

While this process continues, the emergence of the Ready-Made Garments (RMG) sector has enabled the capitalist class to develop its own autonomous capacity for regeneration and growth without state patronage, he said.

"We have a class of people who now heavily depend on access to state power and patronage to further their business fortunes. This process diminishes the effectiveness of competitive markets. It is a crucial aspect of consolidating capitalism within the system," he said.

Rehman Sobhan said it is not the case that every businessman wants to be a defaulter now. Instead, a class of politically privileged individuals has multiplied their fortunes through the accumulation of rescheduled loans and defaults.

He said significant capital accumulations are not solely based on defaults but also on the process of loan rescheduling itself.

The economist also highlighted that politics has become a crucial instrument for participating in business, extending even to the Union Parishad level, rather than solely at the highest levels of office.

"If you are not dependent on competitive tendering processes for projects at all levels, then political access becomes necessary, and the ruling party becomes the primary means of capital accumulation at that level," he said.

He also noted that the rapid rise in fortunes from the grassroots level to the top, including individuals owning numerous banks, stems from political proximity and access.

He identified the lack of functional institutions as a major obstacle to the country's progress towards development.

"If everything becomes discretionary and politically patronised, we are progressively moving towards a Hobbesian state. This deinstitutionalises political parties, turning them into mere conglomerations of people," he said.

Individual freedom essential for democracy: Rounaq Jahan

Professor Rounaq Jahan, distinguished fellow at the Centre for Policy Dialogue (CPD), chaired the event and raised questions regarding the role of the party and the role of the state in her speech.

She said individual freedom is essential for democracy, but collective action is also necessary, especially for the poor. Many advanced countries have both, with organisations such as trade unions existing for the collective good. However, in Bangladesh, they have become avenues for individual gain.

Amid the shifting political landscape in Bangladesh, there looms the potential for a power vacuum, which could significantly alter the country's trajectory. In such a scenario, the ground reality suggests the emergence of Islamist influences as potential drivers of the economic future. This phenomenon needs to be understood further.

Dr Mahbubul Mokaddem Akash, professor at the Department of Economics, University of Dhaka, said at the event that within the ruling party, power dynamics revolve around control over the coercive and non-coercive apparatus of the state, raising questions about the longevity of dynastic influence.

Dr Ashikur Rahman, senior economist at the Policy Research Institute (PRI), posed questions to the academics regarding the reasons behind the country's inability to consolidate democracy despite having a democratic system and years of fair election regimes. He further emphasised that understanding the root cause is imperative.

'The emergence of dominant party state in Bangladesh'

Dr Mirza M Hassan, senior research fellow at the BRAC Institute of Governance and Development (BIGD), presented the keynote paper at the event titled "The Emergence and Rise of Dominant Party State in Bangladesh: What Consequences for Democracy and Development?"

In his paper, he argued that there is no basis to term Bangladesh as a one-party state, given the existence of more than fifty political parties. He noted a significant political competition between the Awami League and the BNP, with efforts made to keep the Jatiyo Party in opposition. He commented that such dynamics would not occur in a true one-party state.

He said over the past 50 years, the political order in Bangladesh has been characterised by a Dominant Party State (DPS) for 26 years, a competitive party system for 17 years, and martial law for 9 years.

He claimed that despite some free and fair elections under caretaker governments, which created an illusion of a competitive party system, the reality is that the country has faced a Dominant Party State for a total of 43 years. He emphasised that regimes of monopolistic power arise following all elections, and such tenures should be counted as part of the DPS.

In his presentation, Dr Mirza M Hassan explained that Bangladesh is transitioning towards the classical dominant party-state model, a trajectory it has followed since its inception. Despite occasional illusions of competitive party politics, Bangladesh has effectively been a dominant party state since 1972, with tendencies toward monopolistic party rule. The ruling party often sidelines constitutional bodies, exerting control as it sees fit.

He said state-society relations are primarily structured by the political order, with less influence from economic or social factors. Regarding capitalism, Bangladesh experiences a blend of political and economic logic, with political elites often aligning with capitalist interests. 

However, capitalist elites may not necessarily outstrip political elites due to advantages gained from being part of political dynasties, he said.

The relationship between most common people and the state in Bangladesh primarily revolves around positive rights, where their main concern is whether commodity prices are low or not. There is generally little interest in matters such as the rule of law, free elections, or freedom of expression, especially within the dominant party state system, where the ruling party holds significant advantage, he added.

He further said that in Bangladesh, the poor people have an implicit agreement with the political elite, wherein they refrain from demanding rights like democracy in exchange for basic necessities like food.

He noted that the poor lack organisation, with leftist parties not actively addressing this issue, and even civil society being largely absent. The primary concerns of civil society, such as the rule of law and freedom of expression, are of less interest to the poor, Dr Ashikur Rahman said.

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Loan defaults now part of business model: Rehman Sobhan

Express Report
  25 Feb 2024, 12:25
Professor Rehman Sobhan

Loan defaults have now become a part of the business model and many businessmen prefer to use this strategy to stay competitive, said eminent economist Professor Rehman Sobhan, chairman of the Centre for Policy Dialogue (CPD).

"Some people borrow money without paying interest, while others borrow money and pay interest, creating an uneven playing field that reduces competition," he said while speaking at a panel discussion on the second day of the 7th Sanem Annual Economists' Conference 2024 in Dhaka.

Prof Sobhan said the deinstitutionalisation of the country has emerged in recent years, leading to a substantial reduction in the rule of law. The fortunes of businesspeople now depend entirely on their political identity.

"The essence of deinstitutionalisation lies in the absence of a unified law applied to all, whether in the Election Commission, the Anti-Corruption Commission, the NBR, or any other functional institution," he said.

"Whether you receive tax or loan rebates depends on your identity and political connections," he added.

He explained that the ongoing default crisis, which has persisted for the last 40 years, was initiated by Ziaur Rahman's policy of channeling state financial institutions to build the capitalist class.

While this process continues, the emergence of the Ready-Made Garments (RMG) sector has enabled the capitalist class to develop its own autonomous capacity for regeneration and growth without state patronage, he said.

"We have a class of people who now heavily depend on access to state power and patronage to further their business fortunes. This process diminishes the effectiveness of competitive markets. It is a crucial aspect of consolidating capitalism within the system," he said.

Rehman Sobhan said it is not the case that every businessman wants to be a defaulter now. Instead, a class of politically privileged individuals has multiplied their fortunes through the accumulation of rescheduled loans and defaults.

He said significant capital accumulations are not solely based on defaults but also on the process of loan rescheduling itself.

The economist also highlighted that politics has become a crucial instrument for participating in business, extending even to the Union Parishad level, rather than solely at the highest levels of office.

"If you are not dependent on competitive tendering processes for projects at all levels, then political access becomes necessary, and the ruling party becomes the primary means of capital accumulation at that level," he said.

He also noted that the rapid rise in fortunes from the grassroots level to the top, including individuals owning numerous banks, stems from political proximity and access.

He identified the lack of functional institutions as a major obstacle to the country's progress towards development.

"If everything becomes discretionary and politically patronised, we are progressively moving towards a Hobbesian state. This deinstitutionalises political parties, turning them into mere conglomerations of people," he said.

Individual freedom essential for democracy: Rounaq Jahan

Professor Rounaq Jahan, distinguished fellow at the Centre for Policy Dialogue (CPD), chaired the event and raised questions regarding the role of the party and the role of the state in her speech.

She said individual freedom is essential for democracy, but collective action is also necessary, especially for the poor. Many advanced countries have both, with organisations such as trade unions existing for the collective good. However, in Bangladesh, they have become avenues for individual gain.

Amid the shifting political landscape in Bangladesh, there looms the potential for a power vacuum, which could significantly alter the country's trajectory. In such a scenario, the ground reality suggests the emergence of Islamist influences as potential drivers of the economic future. This phenomenon needs to be understood further.

Dr Mahbubul Mokaddem Akash, professor at the Department of Economics, University of Dhaka, said at the event that within the ruling party, power dynamics revolve around control over the coercive and non-coercive apparatus of the state, raising questions about the longevity of dynastic influence.

Dr Ashikur Rahman, senior economist at the Policy Research Institute (PRI), posed questions to the academics regarding the reasons behind the country's inability to consolidate democracy despite having a democratic system and years of fair election regimes. He further emphasised that understanding the root cause is imperative.

'The emergence of dominant party state in Bangladesh'

Dr Mirza M Hassan, senior research fellow at the BRAC Institute of Governance and Development (BIGD), presented the keynote paper at the event titled "The Emergence and Rise of Dominant Party State in Bangladesh: What Consequences for Democracy and Development?"

In his paper, he argued that there is no basis to term Bangladesh as a one-party state, given the existence of more than fifty political parties. He noted a significant political competition between the Awami League and the BNP, with efforts made to keep the Jatiyo Party in opposition. He commented that such dynamics would not occur in a true one-party state.

He said over the past 50 years, the political order in Bangladesh has been characterised by a Dominant Party State (DPS) for 26 years, a competitive party system for 17 years, and martial law for 9 years.

He claimed that despite some free and fair elections under caretaker governments, which created an illusion of a competitive party system, the reality is that the country has faced a Dominant Party State for a total of 43 years. He emphasised that regimes of monopolistic power arise following all elections, and such tenures should be counted as part of the DPS.

In his presentation, Dr Mirza M Hassan explained that Bangladesh is transitioning towards the classical dominant party-state model, a trajectory it has followed since its inception. Despite occasional illusions of competitive party politics, Bangladesh has effectively been a dominant party state since 1972, with tendencies toward monopolistic party rule. The ruling party often sidelines constitutional bodies, exerting control as it sees fit.

He said state-society relations are primarily structured by the political order, with less influence from economic or social factors. Regarding capitalism, Bangladesh experiences a blend of political and economic logic, with political elites often aligning with capitalist interests. 

However, capitalist elites may not necessarily outstrip political elites due to advantages gained from being part of political dynasties, he said.

The relationship between most common people and the state in Bangladesh primarily revolves around positive rights, where their main concern is whether commodity prices are low or not. There is generally little interest in matters such as the rule of law, free elections, or freedom of expression, especially within the dominant party state system, where the ruling party holds significant advantage, he added.

He further said that in Bangladesh, the poor people have an implicit agreement with the political elite, wherein they refrain from demanding rights like democracy in exchange for basic necessities like food.

He noted that the poor lack organisation, with leftist parties not actively addressing this issue, and even civil society being largely absent. The primary concerns of civil society, such as the rule of law and freedom of expression, are of less interest to the poor, Dr Ashikur Rahman said.

Comments

Bangladesh built a tech park for 100,000 workers. Now it’s a ghost town
Iran’s Su-35 Fighters, S-400 SAM’s Acquisition Would Make ‘Mission Impossible’ For Israel – US Media
Record breaker! Milky Way's most monstrous stellar-mass black hole is sleeping giant lurking close to Earth (Video)
How will Israel respond to Iran’s attack and could it cope with a war?
India's Lok Sabha election 2024: What are the key issues?