War-induced price shocks push 3m people into poverty: BIDS

The spike in global commodity prices caused by the Russia-Ukraine war pushed around three million people into poverty in Bangladesh, reveals a study by the Bangladesh Institute of Development Studies (BIDS).

The study titled "Impact of the Russia-Ukraine War Price Shocks on Bangladesh Economy" further states that rural households, especially the vulnerable groups who earn the most from agriculture, are worst affected by the war.

Thareen Tahrima Chowdhury of the BIDS and Angga Pradesha from the International Food Policy Research Institute presented the highlight of the paper on the first day of the BIDS Research Almanac on Wednesday.

Planning Minister MA Mannan inaugurated the two-day event arranged by the BIDS at a hotel in the capital. State Minister of Planning Dr Shamsul Alam, Planning Secretary Satyajit Karmaker, and BIDS Director General Dr Binayak Sen spoke at the inauguration session.

Dr Binyak sen said that about 50% of the total number of poor people in 2022 were new as the coronavirus pandemic left a major impact on the country.

The percentage of poor increased for only three months during the Covid-19 pandemic, but it declined shortly after.

Poverty decreased by 4.3% points in the post-Covid period compared to the pre-Covid period.

At the time, private research firm SANEM conducted a survey titled 'Covid-19 Pandemic Impact on Poverty and Livelihoods in Bangladesh' and the findings said that the poor have almost doubled due to the impact of the pandemic.

"Poverty declined in Dhaka. The overall poverty headcount has decreased between 2019 and 2022 by 4.3%. This is a considerable progress in poverty reduction under the duress of Covid-19," said Dr Binayak Sen, director general at the BIDS, while presenting the keynote paper at the opening session of BIDS Research ALMANAC.

The key drivers are shifts towards self-employment income, transfer receipts, access to mobile financial services and financial dissaving. Casualization of urban labour did not play a major role here. Urban remittance also did not directly work as a poverty reducing tool for the poor during this period, he added.

He said the number of poor people increased during April-June 2020. From June onwards, problems surrounding coronavirus started to dial down. The main reason for declining poverty back then was self employment.

During the pandemic, self-employment increased from 41.54% to 45.65%. Overall poverty increased from 33.60% to 38.56% for the poor, and from 15.47% to 33.21% for the extremely poor.

Planning Minister MA Mannan said, "If we can understand our mothers' and sisters' contribution at home, we can find out the picture of another parallel economy. There should be research for this because their work needs recognition. They need to know what they are contributing to the economy."

He said, "We may not be able to include it in GDP now, but we will get the real picture of the economy then. This is something that America does every year."

The minister also emphasised the need for research on enhancing agricultural resources.

Impact of price shocks

The price shock caused by the war pushed some 3 million into poverty, revealed another paper.

IFPRI researcher Angga Pradesha said that as many as 24.40 lakh people in rural areas are estimated to have fallen into poverty due to war-related price shocks of petroleum, fertilisers and food. The total number of new poor reached 29.93 lakh including 5.53 lakh people in the city.

The paper also highlighted that the skyrocketing commodity prices in the global market caused by the war negatively affected Bangladesh's economy. The war reduced national welfare by 2% caused by a negative impact on consumption and investment.

The agriculture sector is the most affected sector given the strong interlinkages with the affected sectors. The increase in subsidy on fuel products helps spur consumption but with the cost of a reduction in investment demand.

Angga Pradesha said that fertiliser subsidies helped spur agriculture production the most, while cash transfer is most effective in reducing poverty.

The paper highlighted that cash transfers could protect around 2.45 million vulnerable people to remain out of poverty from the combined shock of petroleum, fertiliser and food price in the global market.

Safety compliance helped to increase productivity not profit

Safety compliance prescribed by Accord and Alliance for readymade garment factories increased labour productivity while workers' efficiency is higher in big compliant units, according to another study. But impacts of compliance on profit and market access are not 'significant'.

Presenting the study Tahreen Tahrima Chowhury said, a positive effect of compliance on real variables and market access was expected results suggest a significant impact only on labour productivity.

The paper highlighted that, firms which addressed a higher number of remediation measures performed better in terms of increased labour productivity, she said explaining that workers of the compliant firms feel more safe at their factories to the workers of the non-compliant firms.

The compliant RMG firms might enjoy benefits of productivity enhancement in the future if they maintain the standard level of compliance, she suggested.

Since the study was done soon after implementation of compliance standards, it is unlikely to gauge the impact of safety compliance on firm performances, she said, suggesting a several rounds of survey over time might help understand definitive impact of compliance standards on firm performances and profitability.

The study was conducted in 2019 to explore whether Accord-Alliance compliant RMG firms perform better compared to non-compliant ones, compliant ones with higher number of remediation gain more and workers perception about safety compliance during the period of 2014 to 2018.

A total of 322 firms located in Dhaka, Gazipur, Narayanganj and Chattogram were surveyed while some 179 firms participated in the compliance initiatives of any of the three initiatives namely Accord, Alliance and National Initiative.