Getting It Together in Bangladesh

Bangladesh has been in the news lately, mainly because of the Rohingya refugees that have been pouring into it from Myanmar – close to a million of them. We can be pretty sure that the treatment of the Rohingya in Myanmar has been very, very bad– if for no other reason than the fact of where they’ve been going — Bangladesh has nothing even close to sumptuous accommodations for them.

I had been wondering about conditions in Bangladesh, because of its geographic status as a place certain to get hit very hard indeed by the many forces of climate change. It is low-lying, full of rivers and deltas which are being massively swelled by accelerating glacier melt from the Himalayas. Additionally, India diverts large amounts of water to irrigation during growing seasons — and then releases it Bangladesh’s way during rainy ones, exacerbating flooding. If you can think of any one nation that would be getting slammed by climate change, Bangladesh would be the one.

And yet, a bit of cursory Googling reveals heartening surprises about how things are going these days in Bangladesh. Despite the many geographic, demographic and geopolitical challenges this nation faces, in a number of key measures, it is doing much better than nations that seem to face far fewer challenges. Bangladesh’s economy grew by 7.1% in 2016, and it grew by at least 6% for each of the previous six years. It’s middle class is expanding much more quickly than comparable developing nations – it is said to be closing in on the “middle range” societies, those that are developing an appreciably influential middle class. Life expectancies and infant-mortality numbers have improved significantly. It cannot be doubted that there’s some good stuff going on in Bangladesh.

A Scientific American article about the horrific effects of climate change in Bangladesh nevertheless offered these facts:

Fazle Karim Chowdhury, a Member of Parliament, who explained, with a measure of pride, “once there was a shortage of food, now we export food.” Bangladesh once led the world in child mortality. No longer. Due to better health care, life expectancy rose by 10 years, from 59 to 69 between 1990 and 2010. Providing free birth control empowered women and reduced the fertility rate from seven children per woman to three, which is substantially lowering population growth rates. Universal primary education is helping to create a more skilled workforce. Perhaps most impressive, the poverty rate declined from 57 percent to 25 percent between 1990 and 2014.

A widely-publicized terror attack 2016 hit the popular Holey Artisan Bakery in the capital city of Dhaka – and some suicide bombings followed. However, these had been the first Islamist terror attacks in Bangladesh since before 2005. On balance, Bangladesh has seen very little terrorist activity. ISIS has declared a desire to open up some form of Islamic state front in Bangladesh, due to its strategic location – but, there seems to be little indication that such efforts are gaining traction.

The big news: the Rohingya

As has been widely reported, the Rohingya Muslims of Myanmar have been fleeing unspeakably horrible conditions of ethnic cleansing, and the vast majority of them have gone to the closest place they could reach, across the border from Myanmar’s Rakhine State, to the Cox’s Bazaar region in Bangladesh. Nearly 1,000,000 of them have settled in makeshift refugee camps in Cox’s Bazaar. Seven other Muslim countries have absorbed about 750,000 Rohingya refugees. Ill-equipped Bangladesh has borne the greatest burden, by far. A group of NGOs and foundations have announced a goal to raise $434 million to aid the Rohingya; it’s not yet clear how much of that will be delivered.

There are some indications that this massive influx of suffering and needy refugees has engendered some political controversy in Bangladesh. There are some reports of “increased authoritarian tendencies,” but in general, the political upshot of this seems to be rather slight. Indications are that Bangladesh is simply doing its best to make do in a difficult situation, providing what meager sanitation, water and food supplies they can in the gigantic Cox’s Bazaar refugee camps. Though it may seem callous to say so, one gets the impression that Bangladesh’s Rohingya situation is just one more thing on the list of difficult challenges that the country is dealing with. Last fall, a proposal was floated in the parliament to relocate a couple of hundred thousand of the Rohingya to a small, entirely inadequate and indeed sinking island in the Bay of Bengal – but fortunately the proposal seems to have been shelved.

Dhaka: the megacity’s megacity

Bangladesh’s capital city, Dhaka, is by all accounts an astoundingly busy place. Its current population is estimated at 18 million, and it is growing by some 400,000 people every year. It is the world’s fastest-growing city. The incentives for such explosive growth aren’t hard to identify: things like the stresses to the countryside caused by sea-level rise, severe cyclones and those melting Himalayan glaciers. And, as chaotic as the capital city might seem, it promises attractive economic opportunities, compared to the profound stresses faced by subsistence farmers (despite the fact that Bangladesh’s delta-enriched soils have traditionally been some of the most fertile in the entire world). There are old sections of Dhaka that boast architectural treasures, but, of course, huge tracts of the city now amount to little more than shantytowns, informal settlements such as are seen in any number of developing-country megacities. Yet one gets the distinct impression that in Dhaka, all of these processes are intensified – not just those that lead to chaos, but also those that lead to prosperity. Of course, like most of Bangladesh, Dhaka is quite close to sea level. Surrounded by great rivers whose flows have become increasingly unpredictable in recent years, Dhaka is estimated to be the worst-situated urban area in the world. Flooding is endemic. Local transportation is often provided by rickshaw drivers, who can frequently be seen pedaling through streets with two feet of water in them. These guys have to have the strongest quadriceps in all of Asia!

And yet, somehow, most of those hordes of people pouring into Dhaka are managing to make a living. Dhaka is by no means a wealthy city; average family income there is currently about $170 per month – but that is up. A recent World Bank report showed that income for the poorest 40% of Bangladeshis grew by half a percentage point during that period during the last six years of strong growth; in India, that trend was precisely the reverse. Yale economist Ahmed Mushfiq, quoted in Quartz Media, said, “Bangladesh’s recent success can be attributed to two major factors: the flourishing garment manufacturing industry and the country’s robust NGO sector.”

What we mostly recall in the West about the Bangladeshi garment industry is the horrible 2013 collapse of the eight-story Rana Plaza building outside Dhaka, in which 1,100 workers were killed. It would be an exaggeration to say that working conditions in Bangladesh’s garment industry have been transformed; the labor market is still very competitive – but the profits to be gained in the industry have created incentives for far more hospitable working conditions. Today’s factories tend to be clean and efficiently run. In 2015 Bangladesh exported over $26 billion worth of clothing, second only to China.

Demographics have played a fortuitous role as well. Eighty percent of workers in the garment industry are women, and it is clear that economic empowerment of women tends to have an outsized influence over economic development generally. Among Muslim countries, Bangladesh has long enjoyed a reputation for religious tolerance. There has been some unrest and inter-religious violence in recent years — but far less than has been seen in, say, Pakistan. Most encouragingly, economic and health indicators for women in Bangladesh have improved across the board since the early 2000s. The broader demographic picture is favorable as well: unlike many developing countries, some 40% of Bangladesh’s population is now in its most-productive age range: 25-54 years.

In a country starting from as low an economic level as Bangladesh has, what these trends lead to is the rise of a middle class. “Middle-class” can be defined in various ways. Business interests looking for marketing opportunities in Bangladesh seem to be defining it as a household income of $5,000 a year or more, a level of income that tends to allow Bangladeshis to buy “luxury items” such as air-conditioners, refrigerators, or automobiles – all of which are beginning to sell well in Bangladesh.

Meanwhile, in Dhaka

It certainly stands to reason that the lion’s share of economic growth and activity in Bangladesh would be taking place in the capital city. That’s where everyone is going; that’s where things are happening. Yet that is where the chaos is greatest! Many commentators have reported that Dhaka’s most defining characteristic is its horrendously snarled, essentially immobile transportation situation. It takes literally hours to get anywhere in this city. A relatively small number of automobiles have recently appeared in the city; they confer prestige and status, but the streets are by no means designed for them, and they take up a lot of room. In fact, people try to get around Dhaka in every imaginable kind of conveyance, from rickshaws and donkey carts, to the small three-wheeled motorized taxicabs that are quite common, to bicycles and feet – all trying to make their way through the same narrow and frequently-flooded streets. Indeed, the rivers of Dhaka are nearly as crowded as the streets; watercraft of all sizes (and degrees of repair) careen dangerously around the city on the rivers. The entire transport picture in Dhaka is one of nearly-incomprehensible randomness and chaos. It’s very hard to imagine how goods get to market, how business people get to appointments or how children get to school.

A great deal could be done to improve the flow of traffic in Dhaka. It would take careful study, of course – and any solution would have to account for all of the local, organic factors of Dhaka’s unique traffic situation. Simply dedicating certain pathways to each of the many different kinds of conveyances that are now poured onto Dhaka’s chaotic streets would be a tremendous improvement. If the tricycle taxis, for example, didn’t have to dodge the rickshaws and the donkey carts, they could vastly decrease their travel times. If I could suggest a policy, I would ask a consortium of well-placed foundations, such as the Gates, the Clinton, the MacArthur, etc., to pull together a fund of $300 million to design and implement a comprehensive traffic flow plan for the city of Dhaka. This plan could not simply come from outside experts. It would have to be designed, from the ground up, with input from the people who actually live in and try to travel in Dhaka. Such a well-funded plan would probably even have some money left over to start creating some of the necessary infrastructure. But the initial plan’s goal would not be to build a lot of superhighways, but rather to come up with a comprehensive plan that would help Dhaka make the most efficient use of its existing roads, streets and waterways. Of course, new transportation infrastructure – including public transportation systems – would be forthcoming. But that calls for more funding. Let’s talk about that in a moment.

It might be reasonable to expect the United States government to contribute some of this exploratory funding. One might think the US would benefit in terms of goodwill as well as business – but that’s not going to happen. Our current administration simply thinks that “those Muslims” want “our jobs.” Our current administration is in fact quite stupid about this. You can get a perfectly-good pair of Bangladesh-made jeans at Walmart for twenty bucks. But have you priced a pair of 100% American-made Levi’s jeans lately? Their most popular pair, model 501, original fit, will run you $168. Other US-made Levi’s jeans can be had for as little as $88. Sometimes shipping is free.

We have a few modest proposals

Here at Earthsharing we pay a lot of attention to the issue of public revenue; we don’t seem to be able to avoid it. But, it’s not merely an obsession; we believe that society’s choices about public revenue reveal the most important aspects of the essential relationship between individuals and the community. The leading source of tax revenue in Bangladesh is the value-added tax, or VAT, at just under 30% of overall revenue. The next-largest sources are import duties and personal and corporate income taxes — which take relatively smaller bites. From a business-competitiveness point of view, the news is somewhat good; Bangladesh’s ratio of tax rate to GDP is considerably lower than India’s. Nevertheless, the VAT is by no means an efficient or advantageous source of public revenue. It is sometimes defended on the grounds of encouraging exports — particularly, if the country exports a lot to the United States, which, luckily, has no VAT. But that is hardly a good reason to have a VAT at home – not if there is a better alternative.

Well, there is. A landmark 2010 study, done by Ahsan H. Mansur and Mohammad Yunus for the Policy Research Institute of Bangladesh, detailed the many inefficiencies of the VAT in Bangladesh, and recommended replacing it with the system of broad-based capital gains and land value taxes.

The Khan Mohammad Mridha Mosque in Old Dhaka

As you might expect, Earthsharing recommends land value taxation – most particularly in crowded, growing cities. It’s certainly likely that a place like Dhaka has many lingering land-tenure and cadastral issues. Yet these problems are unlikely to be intractable. The city certainly has a functioning and indeed lively real estate market. Given the extreme density of population – and therefore the intense level of involvement of Dhaka’s people with literally every square inch of the ground they occupy, it stands to reason that the people have a very clear seat-of-the-pants understanding of what Dhaka real estate is worth. Under such conditions, a highly-accurate land cadastre would require just two things: a sincere desire among its organizers to find and publish accurate data, and real input from normal people. These aren’t sure things politically, of course, but they are at least conceivable.

Various accounts track real estate values in Dhaka as having risen by about 90% over the past ten years. It seems that some cautious optimism would be justified about the positive effects of $300 million being effectively spent on designing and implementing improved traffic-patterns in Dhaka. How could that not bump up land values?

So: here are my modest proposals. I don’t claim to have any particular political sway over the situation, obviously – I’ll just submit that they make enough sense to merit real consideration. First, Bangladesh should scrap the VAT. Just do away with it; it never was any good. The roughly 29% of national revenue it now provides could be made up with land value taxes over a three-or-four-year phase-in period. In fairly short order, buildings, commerce and even personal income could be made exempt from taxation. Would that not accelerate all of the positive economic trends in Bangladesh, and even, possibly provide funding to help abate some of the most dangerous threats posed by climate change?

It does not do to try to minimize or gloss over the exceedingly daunting problems faced by developing megacities such as Dhaka. Yet at the same time, it has been well established that the overall ecological footprint, the economic efficiency and the per-capita sustainability of production improves when poor people move from stressed, impoverished rural areas into cities. With all of Dhaka’s urban stresses, those processes are manifestly going on there, right now. With some sensible city-planning and public revenue policies, this “world’s most chaotic city” could become a great 21st-century success story.

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1 thought on “Getting It Together in Bangladesh”

  1. Would it be possible give more details of how LVT would operate in Dhaka? It appears you may have some ideas on property valuations there, so you ought to be able to extrapolate that to give a balance sheet, if you like, with no VAT and no personal or business taxes.

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