A lack of ethics coupled with political patronage has led to a default loan culture in Bangladesh, said yesterday Rehman Sobhan, a renowned economist.
Sobhan and some young researchers identified the ethical crisis in the banking system in the 1980s.
"This problem has been perpetuated over successive regimes – and up to the present day – in fact, you are in a situation where the perpetuation of non-payment is rooted in commercial practices."
Sobhan's comments were made at the opening of the 20th Biennial Conference of the Bangladesh Economic Association held at the Bangladesh Institution of Diploma Engineers in Dhaka.
At the opening ceremony of the three-day event, the BEA honored the economist Mahabub Hossain (posthumously), Sobhan and Ashraf Uddin Chowdhury with the medal of the day. or BEA 2017.
In his speech, Sobhan, who was a member of the Interim Government Advisory Council in 1991, also spoke about the use of money in politics, the perpetuation of corruption, and corruption. unequal access to justice for the people. ]
Political patronage and relations have now become an integral part of entry into the banking profession; this favor is then used to accumulate personal wealth.
"This, of course, has led to other major ethical crises: the default culture."
It reflects the regulatory failure of a colossal scale and the politicization of the operation of the regulatory system.
Now, the country has settled in a situation where most borrowers know that they do not need to repay their loans on time since they will be bailed out by way of rescheduling, according to Sobhan.
"So, now you have an integrated process of default and reprogramming."
And the worst thing is that it destroyed the competitive nature of the financial sector, said Sobhan, who is the chair of the Center for Policy Dialogue.
"And I'm not quite sure how we're going to cope."
There is also a wide disparity in access to credit.
Low-income groups, who tend to genuinely assume their debt service obligations, have to fight for credit, while the wealthy, who tend to be defaulty, get new loans. easily.
"We are suffering from a totally perverse and unethical situation in which the biggest offenders tend to be elite and the most credible agents tend to be households in low income, "said Sobhan.
Subsequently, he called for greater access to credit for small borrowers and small and medium-sized businesses.
The capital market becomes a casino
The octogenarian compared the capital market in general to casinos – not just in Bangladesh but also in other parts of the world.
"In Bangladesh, there is no capital market that connects savers to borrowers.The capital market has become a casino – largely concerned with speculative things."
"Operation contrary to the market ethic"
The unethical functioning of the markets also bother him, he said, adding that this does not simply mean the manipulation of markets as is often the case in Bangladesh.
"If you have an outstanding potato crop, it is sold for a pittance to the farmers' markets, and the product is then sold for 20k per kilo in the Dhaka markets. imperfection of the market but the rupture of an ethical basis for the functioning of the market. "
All valuable additions take place as the product moves up the value chain. As a result, the main market benefits accrue to those engaged in the transformation of the primary or final market.
"Here, economic theory has no solution for you beyond saying we want competitive markets because markets are never competitive by nature.What you see is an unfair participation on the market. market. "Disparity in Education and Health
There is also a disparity in the country's education system, Sobhan said.
Those who have the opportunity to buy an expensive private education become self-perpetuating elites, while the poor, who attend schools of poor quality, see their chances of upward mobility seriously compromised .
Similarly, inequality exists in access to health care. "You get the health services you are willing to pay for."
Workers get a living wage
The former general manager of the Bangladesh Development Studies Institute took the opportunity to complement entrepreneurs in the garment industry, citing their success in the marketplace. of export.
"But success has a deeply unjust and unethical basis."
The competitive advantage of entrepreneurs comes from the living wages that they pay to workers because of the surplus of labor in Bangladesh.
"The notion that you will have a handful of homeowners who will enjoy a first-class global lifestyle and you will have four million workers who will earn a living wage is a situation profoundly contrary to the rule of law. This must be recognized. "
He said that women contribute at least 50% of the country's GDP, but that they actually have a very small share of that GDP and face a variety of other injustices in the process of road.
"Justice tends to be one-eyed"
"We operate in an unequal justice system," said Sobhan.
Those with resources can buy the best legal services while ordinary people have to operate in a very unequal market for access to justice.
"You operate in a world where justice, instead of being blind, tends to be one-eyed.In fact, you operate in a situation where some people are protected by law, while many of them are in the dark. between them must either buy all possible services or become victims of the whole process. "
The political process is captured by people with money Sobhan also mentioned the unequal participation of people in politics.
"The political process was captured by people with money."
This created a serious problem because they can then use the process to improve their wealth and continue to perpetuate themselves.
"I often think that given the dominance of money on the political market, people like Bangabandhu and Tajuddin, from very modest families, would have had great difficulty getting nominations when They entered politics. "
Subsequently, he urged policymakers to democratize politics so that people from all walks of life can participate.
Corruption: No one receives a serious risk signal, said Sobhan, claiming that corruption has been perpetuated through condescension over the years.
"In reality, it is very rare that measures are taken and that many of them tend to be politicized."
This creates a moral hazard problem: no one believes that a serious price will be paid if he gets caught.
"But what people recognize is that we should be on the right side of the political line."
He suggested revisions in the calculation of GDP. He recommended the addition of domestic labor by women and the removal of the cost of environmental damage.
He also called for the inclusion of illegal capital flight in balance of payments accounting.
"Once recalculated, you will get an accurate measure of what happens to the economy, which contributes to the economy. And then you will get an ethical appreciation of the real state of the economy. "