The Covid-19 pandemic has yet again proved that the market is subject to distortions and asymmetries which erode its capacity to be either an efficient or a fair mechanism for allocation of resources. Thus, there is hardly any alternative to strong state intervention in that regard. The rationale of this idea also calls for transparency, accountability and greater participation of stakeholders in policy design and implementation.
Needless to say, state intervention may stand to gain nothing significant in terms of social welfare if, on the part of the establishment, there is no strong commitment to the stakeholders. The institutional fault-lines derailing such commitment in the Bangladeshi landscape need to be analysed from a historical perspective and addressed accordingly.
Multiple studies have shown that the pandemic has exacerbated the income and wealth inequality, i.e. the rich have gotten richer and the poor have gotten poorer. It would be unreasonable to assume that Bangladesh is an exception. South Asian Network on Economic Modeling (SANEM) has found that the upper poverty rate has increased from 21.6% in 2018 to 42.0% in 2020 while the lower poverty rate has risen from 9.4% in 2018 to 28.5% in 2020. Multiple studies have shown that there has been decrease in income in both formal and informal occupations. On the other hand, according to Bangladesh Bank, around 13,881 people have become millionaires over the last one year—a finding also shared by international observers such as Wealth X. The union of these opposite realities is corroborated by SANEM's estimation of the consumption Gini co-efficient which rose from 0.31 in 2018 to 0.33 in 2020.
The inequality situation calls into question the overall management of the stimulus package and other cash transfer programs. Whether the recovery process is robust and inclusive enough to address the poverty and inequality situation is a matter that requires further investigation. Short to mid-term approaches focusing on income and wealth distribution are required for overall improvement of the situation. However, without wider engagement of stakeholders representing industrial and agricultural sector employees from the grassroots level, those approaches may prove to be counterproductive.
In the present context of the pandemic, the role of the private sector in economic development in terms of equity in distribution of income and wealth, access to health and habitation and building of capacity, has to be re-evaluated.
The private sector in Bangladesh has been emanating more confidence than ever. According to SANEM's Business Confidence Index (BCI) survey, in 2021 the ratio of confident businesses jumped to 60.67per cent in the final quarter (October-December) from 52.31 per cent in the previous quarter (July-September). The rise in confidence of businesses indicates the revitalization of conditions favourable for the private sector and relative increase in returns.
Recent upsurge in COVID cases in the U.S. and Europe, primarily driven by the Omicron variant, may evoke some amount of tension among the business community. Streak in business confidence in the coming days is largely dependent on the nature and extent of the health policies adopted by the countries of North America and Europe in response to this "new wave". Success in the implementation of massive vaccination programmes is perhaps also a determining factor in this regard.
A deceleration in global growth in 2022 and 2023 has been projected by most forecasts. However, according to IMF forecasts, Bangladesh's economy is expected to grow at 6.6% in 2022. ADB has also raised the 2022 forecast for Bangladesh with cautious optimism—in relation to the advent of Omicron. So, hopes for a rather robust economic recovery for Bangladesh is high.
Given the implications of rising inequality and poverty, and the gradual recovery of businesses, it is imperative that the private sector shares some burden of the recovery process as well and provides impetus to the development of condition of lives and livelihoods of workers employed in industry and agriculture. Improvements in workplace safety and security, comprehensive health insurance coverage for workers, upgradation of wage structure with a view to increasing real wage of workers, etc. need to be prioritized by the private sector.
The government can accelerate this process by designing regulations and incentives to reorient a portion of private sector investment in human capital development and other areas of necessity—although in this scenario the private sector must focus more on long-term national gains and sustainability.
Omar Raad Chowdhury is a Research Assistant at South Asian Network on Economic Modeling (SANEM).