There is no denying the fact that Bangladesh has to its credit some impressive accomplishments on the social and economic fronts in the last 50 years. Seeing the odds stacked up against it in the beginning, allowing oneself the indulgence of such self-admiration may seem well-earned. But Bangladesh's achievements as claimed may pale in comparison to some Southeast Asian neighbours', such as Vietnam's. Notably, like Bangladesh, Vietnam, too, emerged from a devastating war against occupying forces in the mid-1970s. But the difficulties it faced could not be an excuse for it not to press ahead with all its vigour for achieving many economic feats. So, why has Bangladesh not been able to do better? What did come in its way to hold it back from excelling over a few others?
Economists at a recently held virtual international conference in the city organised by a local think tank tried to find answers to these questions. Of the many issues of concern they touched upon, inadequate institutional capacity figured prominently in their discussions. Obviously, it would call for effecting necessary reforms, and deep ones at that, to strengthen the capacities of the social, political, and economic institutions that support growth. Also, strengthening of institutions means unfettering the productive forces of society bound by policies that are a throwback to colonial times and the mindset that goes with them. The financial institutions like banks, for example, are suffering from chronic institutional weakness giving way to rampant corruption. And if it is not due to weakness in the system, how could fake companies like Hallmark steal hundreds of billions of taka from the country's largest state-owned commercial bank, Sonali Bank, between 2011 and 2012? The scam, moreover, took place with the connivance of bank officials! Or consider the instance of defrauding huge amount of fund collected from private depositors by a so-called Multi-level Marketing (MLM) company, the Destiny Group, found out in 2012. In either case, the embezzlement of the public's money is attributable to the questionable integrity of some bank officials and weakness of the regulatory regime in the financial sector.
The incidents of fraudulence aside, the runaway loan-default culture is also sapping the strength of this important financial service institution. But despite repeated occurrence of such corrupt practices, precious little could be done thus far to stop it. Evidently, a drastic reform in the banking sector is now imperative to stop the rot. As indicated by some financial experts at the international conference in question, an entrenched nexus of vested interests is to blame for the failure of the efforts made to reform the financial sector.
However, it is not the financial sector alone that needs to be brought under the reform agenda. For the economy to move further ahead, the institutional bottlenecks in every sector of the economy need addressing through reforms. This is more so at a time when the nation is going to upgrade itself to a higher economic plane as a middle-income economy (MIE). But how can an economy with such poor institutions expect to sustainably become a higher-income one? Moreover, there is also the risk of falling into the so-called 'middle-income trap (MIT), a condition under which an economy quickly attains the MIE status. But then it fails to overcome that income range to catch up with the developed economies. Given the economy is left with only four years to reach that level, the urgency of the institutional reform measures cannot be overemphasised.