Economic growth: Shabash Bangladesh

Having a GDP growth rate of 6.51% is quite an achievement and the state should feel proud of its achievements. Given the political unrest and the havoc that regular people had to suffer in the past year, one needs to take a step back to appreciate the enormity of the achievement.

This is an achievement of which every citizen of Bangladesh can be proud. It demonstrates their resilience and their indomitable will to survive and succeed despite the odds being stacked against them. The common people of Bangladesh are generally powerless to do anything. They are harassed by the police or persons affiliated with political parties whenever they try to work hard and make a difference in their lives.

Given the way other nations treat us, being a citizen of Bangladesh is quite demoralising. But the people should not give up hope. Many nations which have been in a similar situation as Bangladesh – ravaged by war and internal strife for decades – have been able to break free from the yolk of poverty. The trick is to learn from their stories and then implement them in Bangladesh.

One thing that is quite clear is that the GDP growth rate of Bangladesh has to reach 10% or higher if we need to fulfil the goal of becoming a middle income country anytime soon. For that to happen, many things need to change. One of the most important things that need to happen is update the anachronistic land laws that still operate in Bangladesh.

Land is a very valuable asset in Bangladesh, and the laws managing these assets are mind-boggling. Anyone who has ever tried to register land that they own will have many horror stories to share. There have been instances where people have purchased land quite legally, but then they have had to go jump thorough enormous hoops just to get it registered. The sad part is that even though one has the right to get their lands registered, one is treated like the scum of the earth if they do not take part in the contemptible practice of paying bribes.

Paying bribes – either directly or by giving the people some explicit benefit in another transaction – is self-destructive. It erodes trust in the system and encourages people to undermine it. When a large portion of the population undermines the system, the system becomes unsustainable and it leads to chaos.

Consider the roads of Bangladesh. There are traffic lights and there are police officers at many of the intersections of Dhaka. Yet, people have to suffer every day for hours in excruciating heat to go to their work and carry out their day to day affairs. Many a people will say that this is the way Bangladesh has always been so nothing needs to be done.

But have these people considered that if things had not changed then most of the population of Bangladesh would have died of starvation and poverty because the traditional agricultural practices and the export of jute would never have been able to sustain Bangladesh?

So, things need to change and the sooner they change the better it will be for everyone. The most important thing that needs to happen is the establishment of order and stability. Order is essential because it will help people to plan their lives and then try to make changes that will help them improve their state of affairs.

Order is the unsung hero for economic prosperity because it will provide business people to make plans for their future investment and encourage them to contribute to the economy.

One of the most effective ways to promote order is to ensure that the property rights of people are respected. This is because property rights are essential for development. If property rights are not respected then the people who use force to acquire property have no incentive to manage it and increase its rate of return. Furthermore, this discourages people to invest their money because lack of property rights increases their risk of return.

One of the most effective ways to reduce the mayhem in relation to property rights is to develop a robust system of inheritance law. The inheritance law of Bangladesh it a nightmare. There are multiple streams of laws that increase the risk of ownership which in turn increases the cost of doing business. If property laws are streamlined such that there is one law that operates in relation to the distribution of property, then it will facilitate the identification of owners and thus help them engage in economic transactions.

Changing the inheritance law may provide a huge challenge because the people of Bangladesh are still very much driven by religious fervour and emotions. They need to realise that the laws of inheritance under Islamic Law and Hindu Law were designed centuries ago and they have outlived their purpose. In the modern world, time is money. Any law or rule that increases uncertainty imposes a cost.

Religious factions of Bangladesh could be appeased by proclaiming that the traditional rules of inheritance will be applicable if the person who owns the property explicitly states the laws along which his assets will be distributed. The key issue is that the people who own the property should have the authority to dictate who will stand to benefit from their assets after their death.

There may be some protection built in for spouses, especially in Bangladesh because women have been treated less preferentially under the traditional inheritance laws. The law may state that the wife or the husband of the deceased will be entitled to 25% of the asset irrespective of the will of the deceased. In cases where there is no will, the state can develop a rule of intestacy that can be developed after careful discussion with some leading inheritance lawyers.

Such an approach will do a great deal for the economic development of Bangladesh because it will ensure that assets are not unnecessarily mired in legal uncertainty and encourage orderly economic transactions. This will in turn take away a lot of the inefficiencies of the economy and help the economy reach double digit growth rate in no time.