Bangladesh’s ongoing political crisis is ‘high risk’ for fragile economy

Experts attribute the current economic downfall to an oligarchy of political elites entrenched in the Sheikh Hasina regime.

Police cordons of the office of the main opposition BNP in Dhaka, Bangladesh

Vegetable trader Afsar Uddin was distraught. He needed to pay nearly 50 percent more to bring a truck of vegetables to his shop in Karwan Bazar, the largest wholesale market for fresh produce in Bangladesh’s capital Dhaka.

The ongoing countrywide road-rail-waterway blockade imposed by the main opposition Bangladesh Nationalist Party (BNP) and its allies has disrupted the supply chains and significantly pushed up the cost of transport because only a fraction of the trucks and buses have been on the road during the shutdown.

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“Just days ago, I needed to pay 15,000 Bangladeshi takas ($136) for a truck to bring vegetables from the countryside to my shop in Dhaka. Now it has become 22,000 takas ($200) as very few truck owners are allowing their vehicles to ferry goods,” said Uddin. This is on the heels of already high inflation in the country, he pointed out.

“If we don’t increase the prices again, we will bear losses. But if we do, then we will end up with unsold, rotten vegetables,” Uddin lamented.

Tailor Samrat Mia, who lives on a daily paycheque by sewing and altering ready-made garments at Dhaka’s New Market, is also frustrated with the lack of business. “We are sitting here for the whole day but no customers. Who would come out to buy and alter pants amidst this political crisis?” he asked. “But we have a family to [take care of] and mouths to feed. Will [politicians] bother?”

Political unrest in Bangladesh is crippling the country’s already shaky economy and hurting small traders like Uddin and Mia, as the opposition parties attempt to push Prime Minister Sheikh Hasina to quit ahead of a general election scheduled for January.

BNP and its allies have been demanding the restoration of a caretaker government system to oversee national elections as they believe no free and fair election can take place under Hasina’s regime.

Hasina’s party — the Awami League — has been in power since 2009, and the last two general elections of 2014 and 2018, respectively, were marred with opposition boycotts and allegations of massive vote rigging.

Hasina, the world’s longest-serving female head of a government, is also accused of brutally suppressing the opposition and dissenting voices during this nearly 15-year period.

In 2011, the country’s parliament dissolved the caretaker government, a neutral election-time administration that had successfully conducted at least four elections since the South Asian nation’s democratic transition from military dictatorship in the early 90s. Both the Awami League and BNP came to power twice, alternatively, in those elections.

The BNP’s efforts in the last few years to restore the caretaker government have invited police brutality and thousands of court cases. Now the party and its allies have vowed to step up disruptive events ahead of the national elections and declared a series of nationwide blockades since early November.

But the brunt of this political impasse is ultimately being borne by ordinary Bangladeshis.

Rahul Amin, a travel agency executive, is paying at least 10 times his normal fare to work as there are very few buses, autorickshaws and taxis plying, pushing up prices.

“We have already been struggling hard with rising food prices and inflations for the last year or so. Now this political turmoil is wreaking havoc in the market,” Amin told Al Jazeera. “I understand the opposition’s demand for a free and fair election, but the whole economy will tank if these [blockades] continue.”

Tailor Samrat Mia and others were passing days without customers in Dhaka, Bangladesh

Economy in tatters

The escalating political standoff is causing serious concerns for the South Asian economy, which has already been squeezed by the global effects of the COVID-19 pandemic and the war in Ukraine. Shrinking foreign currency reserves and strong inflationary pressures pushed Hasina’s administration to seek a $4.7bn loan from the International Monetary Fund (IMF) earlier this year.

At a recent public forum, Abdur Rouf Talukder, the governor of Bangladesh’s central bank, admitted that the country’s economy has hit “rock bottom” and they are navigating “a very strenuous period”.

During the July-September quarter, Bangladesh’s balance-of-payments deficit – its import of commodities, capital and services higher than its exports – increased to $2.8bn. At the same time, its current-account deficit – which occurs when a nation sends more money abroad than it receives – increased to $3.93bn. According to central bank data, foreign currency reserves have fallen to a new low of $20.66bn.

Last month, earnings through exports, the lion’s share of which comes from the ready-made garments (RMG) industry, fell by 13.64 percent to $3.76bn, the lowest in the last 26 months, according to the Export Promotion Bureau.

Inflow of remittances, another important economic lifeline after exports, also fell by 4.4 percent during the last quarter.

Now, the blockades are causing Bangladesh’s economy to lose 65 billion takas ($588m) a day, as per the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the country’s apex trade body.

“All businesses, small and large, are affected by these blockades,” Mahbubul Alam, president of FBCCI, told Al Jazeera. “We have seen how political violences disrupted the economy for a long period back in 2014 before elections [then]…. The crisis this time will be even bigger.”

Zahid Hussain, former chief economist of the World Bank’s Dhaka office, warned of the same. “The current political impasse is looking similar to 2014 in which the economy suffered damages worth several billion dollars. This time it may hurt more not just because the economy is bigger, but also because the buffers are thin to begin with,” he said.

Hussain, however, said the current economic crisis cannot be attributed to the political impasse only. “[It] has been there for more than 15 months and counting,” he said. While the global shocks have played a role in creating some of these pressures, the country’s monetary, exchange rate, financial and fiscal policy response did not help either, he added.

Since the start of the pandemic, Bangladesh had capped the lending rate at 9 percent for more than three years until this past July. This gave businesses the scope of grabbing funds at real interest rates of nearly zero (borrowing rate minus inflation, which was hovering at around 10 percent).

The central bank’s policy to keep the value of the country’s currency – the taka – artificially inflated also exacerbated inflation.

“Now, a deeper political impasse and violence will add loads of salt to pre-existing injuries,” Hussain said.

Financial analyst Zia Hassan told Al Jazeera that while the political impasse obviously exacerbated economic instability, the roots of the struggle around the balance of payments and dollar reserves can be traced back to deeper structural weaknesses in Bangladesh’s import-dependent, and undiversified economy.

In the fiscal year ending June 2023, Bangladesh imported goods worth $90bn against its export of $55bn – over 80 percent of which came from RMG products.

Bangladesh’s narrow export base, which is solely reliant on RMG products, and over-reliance on remittance inflows, have left it vulnerable to external shocks for many years now, Hassan says.

Counters in Mohakhali inter-district bus terminal in Bangladesh wears a deserted look

Need for ‘restoring democracy’

Hassan also attributes the current economic downfall to an oligarchy of political elites entrenched in the Sheikh Hasina regime who have control over banking, bureaucracy and business.

Corruption in the country’s banking sector caused a loss of 100 billion takas ($900m) in the 2016-17 fiscal year, found a study by the South Asian Network on Economic Modelling (SANEM), a Bangladeshi think-tank.

Global Financial Integrity (GFI) data indicates that between 2008 and 2017, Bangladesh lost a staggering $7.53bn – or 17.95 percent of its international trade – per year on average to trade misinvoicing where companies declared a lower value for their imports and exports to pay lower taxes.

This oligarchy, which has been accused of corruption and money laundering, has stymied reforms that threaten their economic interests, Hassan said. “Without a political settlement that restores genuine democracy by dislodging entrenched oligarchic networks, meaningful economic reforms are unlikely to be undertaken or implemented effectively,” he added.

Opposition leaders and activists meanwhile say their ongoing blockades are a part of their quest to break up this oligarchy and “restore democracy” in Bangladesh. “In the last 15 years, the Hasina governments and their beneficiaries have conducted unprecedented corruption. The whole economy is in shambles because of that,” said Ruhul Kabir Rizvi, joint secretary general of BNP.

“Blockades are obviously detrimental to the economy, but if we don’t fight to restore democracy now and allow another sham election, the economy as well as the whole country will be in bigger trouble,” he told Al Jazeera.

Ali Riaz, distinguished professor of politics and government at Illinois State University in the United States, told Al Jazeera that the absence of an inclusive democratic system and pursuing cronyism have led to the economic crisis of Bangladesh.

“The ruling party needs to understand that stubbornness, use of brute force, silencing opposition and machination may provide an aura of invincibility, but they do not deliver a solution to the economic crisis,” he said. Blaming the opposition or the global economy will not put an end to it, he added.

Riaz said the Awami League needs to address the sources of problems – break the hold of a small group of beneficiaries in various sectors. “It is not an easy task,” he said, “and only a new political settlement with popular mandate can deliver this.”

Bangladesh Economy Shows Resilience Amid Global Uncertainty

WASHINGTON, April 13, 2022— Bangladesh has made a strong economic recovery from the COVID-19 pandemic, but growth faces new headwinds as global commodity prices increase amid the uncertainty created by the war in Ukraine, says a new World Bank report,  Bangladesh Development Update – Recovery and Resilience Amid Global Uncertainty,   launched today.

In Bangladesh, a rebound of manufacturing and service sector activities led strong growth in FY21 and in the first half of FY22. In the medium term, GDP growth is expected to remain strong. Headline inflation rose to 6.2 percent in February 2022, driven by a rise in both food and non-food prices. The war in Ukraine and associated sanctions may lead to a higher current account deficit and rising inflation as global commodity prices surge. Public debt remains sustainable, and the March 2022 joint World Bank-IMF Debt Sustainability Analysis assessed that Bangladesh remained at low risk of external and public debt distress.

“Following a strong economic recovery from the pandemic, estimated poverty declined to 11.9 percent in FY21 from 12.5 percent in FY20, as per the international poverty rate,”  said  Mercy Tembon, Country Director for Bangladesh and Bhutan.   “Going forward, close monitoring of inflation and the potential impacts of the war in Ukraine will be important for the country's sustainable and inclusive growth.   The World Bank stands ready to help Bangladesh address structural reforms to support recovery and strengthen resilience to future shocks.”

The Update is a companion piece to the latest South Asia Economic Focus - Reshaping Norms: A New Way Forward   which notes g rowth in South Asia, already uneven and fragile, will be slower than previously projected, mostly due to the impacts of the war in Ukraine.

The report projects the region to grow by 6.6 percent in 2022 and by 6.3 percent in 2023. The 2022 forecast has been revised downward by 1.0 percentage point compared to the January projection. Countries in South Asia are already grappling with rising commodity prices, supply bottlenecks, and vulnerabilities in financial sectors. The war in Ukraine will amplify these challenges, further contributing to inflation, and deteriorating current account balances.

“South Asia has faced multiple shocks in the past two years, including the scarring effects of the COVID-19 pandemic. High oil and food prices caused by the war in Ukraine will have a strong negative impact on peoples’ real incomes,” said Hartwig Schafer, World Bank Vice President for South Asia. “Given these challenges, governments need to carefully plan monetary and fiscal policies to counter external shocks and protect the vulnerable, while laying the foundation for green, resilient and inclusive growth.”

The war and its impact on fuel prices can provide the region with much-needed impetus to reduce reliance on fuel imports and transition to a green, resilient and inclusive growth trajectory. The report recommends that countries steer away from inefficient fuel subsidies that tend to benefit wealthier households and deplete public resources. South Asian countries should also move towards a greener economy by gradually introducing taxation that puts tariffs on products which cause environmental damage.

“The introduction of green taxation can have multiple quantifiable benefits for South Asia, including improved energy security, environmental gains and increased fiscal revenues,” said Hans Timmer, World Bank Chief Economist for the South Asia Region. “These revenues could be utilized for adaptation against climate-related disasters and to strengthen social safety net systems.”

Another challenge the region faces is the disproportionate economic impact the pandemic has had on women. The report includes in-depth analysis of gender disparities in the region and their link with deeply rooted social norms, and recommends policies that will support women’s access to economic opportunities, tackle discriminatory norms, and improve gender outcomes for inclusive growth.

Sources:  World Bank Macro Poverty Outlook and staff calculations.  

Note:  (e)=estimate, (f)=forecast, * = excludes Sri Lanka. To estimate regional aggregates in the calendar year, fiscal year data is converted to calendar year data by taking the average of two consecutive fiscal years for Bangladesh, Bhutan, Nepal, and Pakistan at 2015 constant US$, for which quarterly GDP data are not available. GDP measured in 2015 prices and market exchange rates. Pakistan is reported at factor cost. Afghanistan is not included in the regional aggregates as Afghanistan is not producing statistics so there are no estimates or forecasts beyond 2020.

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The Financial Express

Major challenges for Bangladesh economy in 2023

Shah Kamal Sohail

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global economic crisis and bangladesh essay

Bangladesh's economy has faced a number of challenges in recent years, and as we enter 2023, these challenges continue to persist. Despite some progress, the country still has a significant portion of the population living in poverty and suffering from inadequate access to basic services such as healthcare and education. Additionally, the country is highly vulnerable to natural disasters such as floods and cyclones, which can disrupt economic activity and cause significant damage to infrastructure and crops.

Bangladesh has made significant progress in recent years in terms of economic growth, poverty reduction, and human development, driven by a combination of factors such as a growing MAC, low labour cost and an expanding manufacturing sector. According to data from the World Bank, the GDP of Bangladesh has been growing at an average rate of 6.5 per cent per year over the past decade.

Let's examine the economic challenges that Bangladesh is likely to face in 2023, especially in the context of a global economic crisis, Russia-Ukraine war, the national election-2023, Forex reserve, internal capacity of the banking systems to facilitate import and export through opening LCs, timely payment and collection of foreign currencies, Remittance etc.

EXPORT, IMPORT AND BALANCE OF PAYMENT (BOP) GAP: The country is dependent on both imports and exports, on export side - particularly on the readymade garments (RMG) sector, which accounts for around 80 per cent of total exports, and on import side - commodity, raw materials and capital machineries etc. The RMG sector has been hit hard by the ongoing trade tensions and economic slowdown in major markets such as the United States and Europe. This has already led to a decline in export revenues and a slowdown in economic growth.

The currency flow of export and import during the years 2013 to 2022 shows that the amount of money Bangladesh spent each year on import is higher than that earned through export. However, it is worth noting that though the country was able to reduce the import-export gap to US$ 2 billion in 2021, it rose to $4 billion in 2022.

REMITTANCE: Additionally, the country is also facing a slowdown in remittances, which is a major source of foreign exchange and a key driver of the country's economic growth.

The decline in remittances is mainly due to the economic crisis in the Middle East and Gulf countries, which are major destinations for Bangladeshi migrant workers. These workers are facing job losses and reduced wages due to the economic crisis, which has led to a decline in remittances to Bangladesh.

BANKING & FINANCIAL SYSTEM: Poor Capital market, lack of governance, corruption and mismanagement in the financial sector, especially in the banking sector, have been persisting for many years. The sector, which is dominated by state-owned banks, has been plagued by a lack of transparency and accountability, leading to widespread corruption and mismanagement. One of the main issues in the banking sector is the lack of proper regulations and oversight. The government has been accused of turning a blind eye to the corruption and mismanagement, and of not taking action to prevent it. This has led to a culture of impunity. Another major issue is the lack of proper risk management systems.

Many banks in Bangladesh have poor lending practices, which have led to a high level of Non-Performing Loans (NPL). This has put the banks at the risk of insolvency and has had a negative impact on the overall economy. The banking sector in Bangladesh has also been affected by political interference. Many politicians have been accused of using their influence to secure loans for themselves or their allies. All these factors are limiting the country's ability to mobilise savings and provide credit to the private sector which in turn is constraining the growth of the economy. The lack of access to credit is also affecting the country's small and medium-sized enterprises, which are the backbone of the economy.

DOLLAR CRISIS: Commercial banks in Bangladesh are facing difficulties in fulfilling their import payment obligations due to a rapid depletion of their foreign currency holdings due to the ongoing dollar crisis. The foreign currency held by these banks decreased by 13.5 per cent to 20 per cent in the last quarter of 2022, making it difficult for them to open Letters of Credit for importing essential products. This situation has become increasingly challenging, as commodity traders in major markets are unable to open LCs for essential products, particularly for the upcoming  Ramadan. The inter-bank foreign exchange market has nearly collapsed, and banks have been unable to meet their own demand in recent months. The Bangladesh central bank's decision not to sell dollar from its reserves to private commercial banks has exacerbated the crisis. Despite the increasing of Repo and Reverse Repo rate from the beginning of 2023, it is yet to be seen what actually emerges.

 Over 40 per cent of commercial banks with negative balance in foreign currency holdings are currently struggling to pay their import payments against their issued LCs. These banks have fallen into a dollar deficit after paying large amounts against LCs. Many banks have delayed paying their import payment obligations, and the crisis has prompted other banks to refuse to open LCs, as they do not have enough dollars to meet the high demand in the market, which has resulted in a bad reputation in the international financial system.

NATIONAL ELECTION-2023: Another major challenge Bangladesh will face in 2023 is the upcoming national election. This is a tricky issue. It has both internal political weight and also the chain reaction of the geo-political events going on around the world. In the past, the country's political environment, especially in the year of national elections, has often been characterised by uncertainty and instability which can have a negative impact on business and investment in 2023.

INFLATION: The rate of inflation in Bangladesh increased to 6.2 per cent during the last fiscal year, up from 5.6 per cent the previous year. This uptick in inflation is primarily due to strong domestic demand and rising global prices of oil, gas, and other commodities as a result of supply disruptions caused by the Russia-Ukraine war. Additionally, the depreciation of the Bangladeshi Taka against the US dollar also contributed to trigger inflation. In the coming months, inflation in Bangladesh is expected to continue to rise due to factors such as increasing global commodity prices, increases in prices of all types of fuel, and an anticipated upward adjustment in domestic power tariffs.

RUSSIA-UKRAINE WAR: The ongoing conflict between Russia and Ukraine has had a significant impact on currencies, with the euro falling below the dollar for the second time in 20 years. Other currencies, such as the Bangladeshi Taka and the Indian Rupee, have also lost value against the dollar, while the Russian Rouble has gained 34.14 per cent by July last  year. The decline in the value of these currencies is largely attributed to the Federal Reserve of the USA raising interest rates, which has led to foreign investors moving their money to the USA. Additionally, Russia's invasion of Ukraine has driven up commodity prices globally, particularly crude oil, which has led to a higher trade deficit. In Bangladesh, the situation has been further exacerbated by the Bangladesh Bank's policy of fixing the exchange rate without adjusting for inflation differences, and by maintaining a fixed interest rate. This has made it harder for the country to cope with the gradually increasing interest rates in developed economies to curb inflation. The economic fallout and uncertainty over the war in Ukraine will slow the growth in key export destinations and substantially reduce export momentum and growth in the coming months.

The recent discussions with the International Monetary Fund (IMF) are a positive development in the current economic situation. Securing funds from the IMF can play a crucial role in stabilising the economy in the medium-term and controlling inflation. IMF has already approved US$4.7 billion loans for the country. The first tranche of $476 million is likely to disburse by the second week of this month. It can help the country to address its short-term economic challenges and promote sustainable growth in the medium-term.

Shah Kamal Sohail is an entrepreneur and economic analyst.

[email protected]

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Assessing the Impact of the Global Economic and Financial Crisis on Bangladesh: An Intervention Analysis

CPD Working Paper 97

The global financial and economic crisis had a lagged impact on the economy of Bangladesh, resulting in declines in export, import, FDI and foreign aid inflows. All these had concomitant negative effects on the country’s various socio-economic indicators including the GDP growth rate and per capita income. While a number of papers have used descriptive analysis to investigate the sectoral impacts of the crisis in Bangladesh, this paper incorporates an Intervention Analysis approach with Vector Autoregression to extend a Solow growth model to explore the impact of the global crisis on the key economic indicators of Bangladesh. The study finds that due to the crisis, Bangladesh lost approximately 0.60 per cent of real GDP per capita growth in 2009; equivalent to a loss of USD 2 billion in real GDP.

Contributors: Debapriya Bhattacharya, Shouro Dasgupta and Dwitiya Jawher Neethi

Publication Period: March 2012

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YaleGlobal Online

Global crisis: bangladesh bucks the trend.

global economic crisis and bangladesh essay

NEW HAVEN: A year ago as the world financial system teetered on the edge of collapse after many Wall Street giants failed, there was widespread concern about the impact of its tsunami effect on the world's developing countries so dependent on the US market.

But not only have China, India and other major developing countries survived and prospered, even poorer countries like Bangladesh have come out virtually unscathed. How did this happen? A combination of prudent economic management and resilience of the low-end export sector in hard times seems to have helped the country to survive the global challenge.

Speaking on the anniversary of the fall of Lehman Brothers on September 15, US Federal Reserve Chairman Ben Bernanke said the US might finally be coming out of the recession, but cautioned that the worst is not over: further job losses are still to come and families could expect to continue to see hardship well into the new year.

Contrast this with Bangladesh, immortalized in the 1970s description of it as a "basket case" – the differences could not be sharper.

global economic crisis and bangladesh essay

It has, against all the odds, confounded skeptics, demonstrating how some developing economies can remain sure-footed as more developed economies fall victim to their fancy financial instruments and derivatives.

The conventional wisdom has long been that in times of global financial turmoil, it is the countries at the bottom of the food-chain – those that have the least flexible economies, the least responsive governments, and the least financial reserves – that are the first ones hit; that it is the developing economies, such as Bangladesh, that would be expected to be the earliest and most serious casualties of the crisis.

However, Bangladesh, while no means immune to the effects of the global down-turn, has weathered the worst of it, and, at what appears to be an impressively low economic cost. GDP growth in 2009 is estimated to be roughly 5 percent for the second year in a row, down only modestly from the 6 percent plus growth rate that the country had been enjoying since the mid-nineties.

One reason Bangladesh has fared so well lies in the minimal exposure of Bangladeshi financial institutions to the toxic assets originating in the US mortgage market due to government restrictions on investing in foreign financial assets. Meanwhile, the central bank's dollar exposure was concentrated in conservative US treasury bonds, which enjoyed a significant rally during the market turmoil. 

global economic crisis and bangladesh essay

But if Bangladeshi financial institutions were insulated from the financial crisis, the economy remains closely integrated with the contracting global economy, with exports standing at 17 per cent of GDP. In an $82 billion economy, with $14 billion in exports and $20 billion in imports, the trade-GDP ratio was 42% in 2008.

Surprisingly, Bangladesh officials say that export growth is on target for 12 percent growth despite the 9 percent drop in world trade estimated this year. Last year, exports grew 10 percent with 16 percent growth in its knitwear exports and 14.5 percent growth in exports of woven garments. The composition of such exports is one of the likely clues to Bangladesh’s resilience.

Companies such as Wal-Mart and McDonald's serving the low-end of the market have done notably well despite the economic down-turn, outperforming their more up-market competitors as consumers abandon brand names for a bargain and value for money.

Bangladesh's $12 billion garment export trade embodies the same ethos and reaps the same benefit. The Bangladeshi garment industry, catering largely to the low-end market but with a reputation for value for money, has seen its market share in the US grow by 10 per cent this year, even as overall US garment imports declined by 3 percent.

global economic crisis and bangladesh essay

Bangladesh's share in the US apparel market has risen as a result of rising sales of cheaper clothing in the US due to the recession. In fact, the 7 percent growth in retail sales recorded by Wal-Mart in fiscal 2009 (and estimated 5 per cent growth in fiscal 2010) has directly benefited the Bangladeshi garment industry, as Wal-Mart alone imports $500 million worth of apparel from Bangladesh, accounting for 30 percent of Bangladeshi garment production for the US market. Indeed, Wal-Mart's 2008 supplier of the year was a Bangladeshi company.

Like Wal-Mart and McDonald’s, a prudent and clear-sighted management together with an eye to providing good value at low cost, have allowed countries such as Bangladesh with a similar and indeed complementary focus to weather the global recession. In other words, what has worked for individual companies works for entire economies as a whole.

The second mainstay of the economy has been the life-raft provided by the estimated ten million plus Bangladeshis working outside the country, from whom remittance earnings are on course to reach $10 billion this year, recording growth of almost 20 percent over last year.

Here, too, the fact that Bangladeshi migrant workers are typically at the bottom of the food chain has, paradoxically, helped them, as employers looking to cut costs increasingly turn to the cheapest source of labor on the market.

As a result, even though the economies from which the bulk of remittances originate have been hurt by the recession to a greater (US and UK) or lesser (Saudi Arabia and UAE) extent, Bangladeshi migrant workers continue to remit funds in record amounts.

Finally, Bangladesh's resilience was aided by the prudent economic stewardship of the outgoing caretaker government of two years and continued through the tenure of the current government that came to power nine months ago.

global economic crisis and bangladesh essay

From the start, the finance ministry and central bank have done the right thing. When global commodity prices were spiking in mid-2008, the government responded by tightening its belt and also slashing fuel subsidies, an unpopular but necessary step.

Throughout the downturn, the government has continued to subsidize the agricultural sector, thus ensuring both food security and a living wage for 60 percent of the population still involved in agriculture, as well as other targeted subsidies aimed at minimizing the worst of the fallout.

The resultant budget deficit of 5 percent of GDP over the past two years is higher than the government's target of 4 percent, but still well within the bounds of prudence given the economic climate and compared to the global situation.

The central bank, meanwhile, has resisted strong pressure to devalue the currency (the taka) to help out the export sector. A strong taka has ensured that commodity prices remained within reach while on the upswing worldwide, and now, with prices far below the peaks of 2008, Bangladesh is reaping the benefit of the terms of trade gains.

Perhaps the ultimate lesson to be learned is that in the rough and tumble of the new global economic order we shouldn't be too quick to jump to conclusions as to who will weather a global downturn better. Globally, as employers and consumers look for a bargain, it is countries that service the bargain basement such as Bangladesh that can benefit if they offer value for money and play their cards right.

Zafar Sobhan is Editor, Editorial & Op-Ed, The Daily Star, Bangladesh, and a 2009 Yale World Fellow.

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Impact of the Global Economic Crisis on the Employment and Labour Market of Bangladesh: A Preliminary Assessment

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2009, Dhaka: CPD and ILO

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The Global Economic Crisis Essay

I could never have thought that the world’s economy could be brought down on its knees in such a short while if you would have asked me before the economic crisis hit. Yet again, it’s not like there was a war looming in the air to contribute to this or anything. My view is that the great depression of the 1930s could be excused because the globe was just coming to form the repercussions of the First World War, and again the Second World War was just lingering in the air.

Many parties are to blame for the global economic crisis. These range from the economists with their low forecasts to central banks with poor policies through regulatory institutions that could not develop proper frameworks to govern the innovations in the financial markets. Financial institutions are also to blame for entering into hapless deals that almost brought the global economy tumbling in doom.

Blame time is over, and the blame game is not equally going to take the global economy to higher heights. Lessons and a myriad of them, for that matter, have been drawn to our attention as individuals, governments, institutions, and businesses. However, these lessons can only be beneficial when a proper review of the leading causes, effects, and effectiveness of the remedies is evaluated. My honest opinion would then be that teams of professionals be set up to look at all these items and then come up with policies that will be able to maneuver around such challenges in the future.

I have personally been able to make several inferences from the causes of the effects and the strategies that governments tried to apply to alleviate the situation. My approach to personal finances, business approach, and home establishments has been renewed. For example, at my privately owned equity firm where I work, I realized that the types of assets held by an organization are fundamental. I would not have made this statement this authoritatively had the financial crisis not occurred. Financial institutions lost a great deal as relates to toxic assets and bad loans. In as much as a business and as an individual, I do have assets; I believe the levels of asset volatility need to be weighed first. In as much as toxic assets need to form the asset structure, they should be held in moderation.

Being in a buy out firm in France, I noted with keen interest that speculators were venturing into buyouts at this particular time. This was the case because some investors could not foresee that this crunch was going to last long. This speculation made persons buy firms at an overvalued price only to realize that the crisis was ongoing and were making losses. From this, I believed that during such swings in the economic cycle, getting into buy out was tantamount to gambling. Further, organizations venturing into the buyout would end up in worse situations since they would have to offset the debt they had incurred before launching the buyout. Secondly, they would have to bear the losses that the firms that they were acquiring were making.

This also applies to real-life scenarios in my life. As a person, I have come to realize that I should not make snap decisions, especially when conditions are so volatile. There are moments when I am faced with challenges, and I have to come up with solutions. Say when I have argued with a close friend and I need to decide on the direction of our friendship, I have learned that emotions or short term excitements are not meant to inform the kind of decisions that I am to take in life. Integrity, to me, is core. I hold on to it so dearly. However, the global economic crisis occurrences just worked to open my eyes to how much our society currently lacks integrity. Talk of the banks that would offer loans at adjustable interest rates, which is not brought to the full attention of the customers who ended up suffering in the long run. This has worked to change my perception of banks and other financial institutions. My dealings with them are now with much more caution.

Another aspect of my perception that has been influenced is that investments that people make in the company stocks are beneficial but face much more vulnerabilities than when persons invest in government bonds and bills. This thought has been influenced because the wealth levels of individuals met a nose dive as the S&P 500 was down by 45% in early November of 2008 from the high experienced in 2007. I there tend to be more risk-averse in my dealings and trades more than a risk-taker. In a nutshell, my risk attitudes have since changed. As I trade currencies, for example, I would love to use small margins and small lot sizes so that if I was to incur a loss, then it is totally minimized. This means that the profits that I take in these trades are also little. However, this does not mean that as a person, I am not rational so as to prefer small to more. On the contrary, I am very reasonable, but I would love to consider caution in my rationality.

Basing on the movement of savings and investments droning the onset of the economic crisis, I have determined that persons need to indulge in proper budgetary allocations. This will involve persons setting aside funds for investments, savings, and consumption. This setting aside of funds, as I later came to realize, should be well determined by taking into account the inflationary tendencies and price level changes. This is because savings and investments were also falling drastically at the onset of the credit crunch. The fed reserve has experienced a shift in role from the lender of last resort to be the lender of only resort. The downfall of the S&P 500 influenced my perception of equity sources of finance. To some point, I have come to believe that debt capital should be considered just as equally as equity is.

The way warning signs should be treated in organizations, for me, was much influenced by the happenings of the global economic crisis. I have come to form the opinion that however baseless allegations in an institution seem to be, consideration for them should be given. This is because effects at first were sidelined with governments and ministers of finance while political leaders were working to alleviate fears of the magnitude of the ramifications to be expected. In as much as some sideshows in an organization may serve to waste organization time, I am now of the opinion that firms need to set up ad hoc committees that will spare some time to handle any issues coming up in the organization; however small they may appear. With the effects of this economic crisis, other countries could not get an opportunity to sell their consumer products. The previous perception I had was that the trickle-down result of a financial mishap could not affect other countries as gravely as it did affect countries like Cambodia. This has made me view partners and other stakeholders carefully in terms of what happens in their realm and the possible ramifications in the whole industry that as a business I operate in.

The unemployment that followed the global economic crisis kept me thinking of ways that firms may engage in so as to limit the cases of unemployment. I was an ardent supporter of job specialization and the benefits thereof. I have to mention now that I consider that to be a cause of unemployment at times. My view is that once one joins a firm, there needs to be continuous training and job rotation so that in cases when some units or departments have to be closed, still the employees will have something to do other than remaining redundant. Further, I have come to realize that sustainable employment is essential in an organization. My thinking has been changed from job specialization to job diversification. As an organization, we should be in a position to employ multi-skilled workers and reduce job losses that are created by economic downturns.

The world was caught off guard by the global economic crisis. Leaders and policymakers had to keep shoving in the dark, trying to find solutions; some of them ended up deepening the already gross state of the economies. This got me thinking; what if, as a business, we did simulate possible grave positions and the solutions that would relate to them? Won’t that make it much more straightforward when faced with such challenges? For me, the answers to the two questions were yes and yes. The government of the US came in to bail out the central banks. As a business, my thought was if there was going to be another institution that would bail us out if we went crumbling. This placed an idea of having to diversify investments in various places and industries so that one sector would help should the other in times of financial crises.

My perception of government participation in business operations has changed at the onset of the bailout and the support that the firms got from the Obama administration. Previously my thoughts were that businesses should be allowed the autonomy to operate with minimum interference from the government. Considering what the US government did to salvage the awkward position that the central banks on Wall Street were in, the justification for government involvement in private business tends to make more sense for me as an individual. Another corrective strategy involved the use of regulatory responses for the financial institutions. I am now of the opinion that a business needs to come up with a dynamic yet consistently updated code of ethics to improve its performance.

I have come to the realization that as an organization, challenges are bound to face us, but the approach that we need to give it should be procedural. The global economic crisis was a challenge that posed great a question as to how issues need to be solved. As persons and as organizations, we do not try to give haphazard solutions or tries that are not well thought of. My perception now is that quick fixes are not the best solution to problems. Instead, the root cause of the problem needs to first be identified and then a procedural methodology given to the challenges that we are exposed to. The approach that the global economic crisis was given was, to some extent, a trial and error approach. Governments and institutions would come up with suggestions and possibilities without a clear understanding of what magnitude those solutions would work to solve the problems that had cropped up.

One of the possible solutions to the global economic crisis that has long affected my view of issues is that of the stimulus package that the governments, and especially the US government, did give. In a way, the stimulus package was being contributed towards by the taxpayers’ money.

In as much as the ramifications were not to be felt in the short run, the long-run effects were going to be gross on the citizens. I now look at business solutions differently. As an organization, I would like to determine how much we are going to suffer in the long run as a business. On the other optimistic side, I would first love to pick how much I am to gain by choosing a specific remedial action.

The last lesson that is worth mentioning is that: trouble does not last forever. With the current improvements that are noticeable and the optimism in the air, it only serves to teach me that I should never give up in life. However, challenging circumstances may appear; there always lays a solution for them. Now than ever before, hope is my friend but hope with effort, resilience, and perseverance. I recognize that nothing comes easy and that I need to be diligent and focused on my action. Along the way, sometimes I may face distracters, but while holding on steadfastly to my dreams, I am bound to soar high with wings like eagles.

The global economic crisis has informed my opinion in several ways about how to source funds, where to invest, and government participation in businesses. Stakeholder effects have since gained much more importance from my perspective. It is unfortunate that such world-shaking occurrences are the ones to inform our thinking but still, the lessons learned are to be appreciated. As an individual, I now know that investment should not be haplessly made based on the profitability of the firm but that there are other canons to be considered. As a government, I realize we need teams in place to not only set up policies but also carry out continuous monitoring of the same. I pray that every other stakeholder has learned something from the effects of the global economic crisis.

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IvyPanda. (2021, February 27). The Global Economic Crisis. https://ivypanda.com/essays/the-global-economic-crisis-essay/

"The Global Economic Crisis." IvyPanda , 27 Feb. 2021, ivypanda.com/essays/the-global-economic-crisis-essay/.

IvyPanda . (2021) 'The Global Economic Crisis'. 27 February.

IvyPanda . 2021. "The Global Economic Crisis." February 27, 2021. https://ivypanda.com/essays/the-global-economic-crisis-essay/.

1. IvyPanda . "The Global Economic Crisis." February 27, 2021. https://ivypanda.com/essays/the-global-economic-crisis-essay/.

Bibliography

IvyPanda . "The Global Economic Crisis." February 27, 2021. https://ivypanda.com/essays/the-global-economic-crisis-essay/.

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Stay up to date:, artificial intelligence.

This article was originally published in January 2024 and updated in February 2024.

  • The use of artificial intelligence (AI) can contribute to the fight against climate change.
  • Existing AI systems include tools that predict weather, track icebergs and identify pollution.
  • AI can also be used to improve agriculture and reduce its environmental impact, the World Economic Forum says.

The power of artificial intelligence (AI) to process huge amounts of data and help humans make decisions is transforming industries.

As one of the world’s toughest challenges, combating climate change is another area where AI has transformational potential.

Almost 4 billion people already live in areas highly vulnerable to climate change , according to the World Health Organization.

And this is expected to lead to around 250,000 extra deaths a year between 2030 and 2050, from undernutrition, malaria, diarrhoea and heat stress alone.

Here are nine ways AI is already helping to tackle climate change.

1. Icebergs are melting – AI knows where and how fast

AI has been trained to measure changes in icebergs 10,000 times faster than a human could do it.

This will help scientists understand how much meltwater icebergs release into the ocean – a process accelerating as climate change warms the atmosphere .

Scientists at the University of Leeds in the United Kingdom say their AI can map large Antarctic icebergs in satellite images in just one-hundredth of a second, reports the European Space Agency.

For humans, this task is lengthy and time-consuming, and it’s hard to identify icebergs amid the white of clouds and sea ice.

2. Mapping deforestation with AI

AI, satellite images and ecology expertise are also being used to map the impact of deforestation on the climate crisis.

Space Intelligence , a company based in Edinburgh, Scotland, says it is working in more than 30 countries and has mapped more than 1 million hectares of land from space using satellite data.

The company’s technology remotely measures metrics, such as deforestation rates and how much carbon is stored in a forest.

3. AI is helping communities facing climate risks in Africa

In Africa, AI is being used in a United Nations project to help communities vulnerable to climate change in Burundi, Chad and Sudan.

The IKI Project uses AI technology to help predict weather patterns, so communities and authorities can better plan how to adapt to climate change and mitigate its impact.

This includes improving access to clean energy, implementing proper waste management systems and encouraging reforestation.

4. Using AI to recycle more waste

Another AI system is helping to tackle climate change by making waste management more efficient.

Waste is a big producer of methane and is responsible for 16% of global greenhouse gas (GHG) emissions, according to the United States Environmental Protection Agency.

Greyparrot , a software startup based in London, United Kingdom, has developed an AI system that analyzes waste processing and recycling facilities to help them recover and recycle more waste material.

The company tracked 32 billion waste items across 67 waste categories in 2022, and says it identifies 86 tonnes of material on average that could be recovered but is being sent to landfill.

AI is helping to fight climate change in systems, including those that identify plastic pollution in the ocean.

5. AI is cleaning up the ocean

In the Netherlands, an environmental organization called The Ocean Cleanup is using AI and other technologies to help clear plastic pollution from the ocean.

AI that detects objects is helping the organization create detailed maps of ocean litter in remote locations. The ocean waste can then be gathered and removed , which is more efficient than previous cleanup methods using trawlers and aeroplanes.

Plastic pollution contributes to climate change by emitting GHGs and harming nature.

6. AI helps predict climate disasters

In São Paulo, Brazil, a company called Sipremo is using AI to predict where and when climate disasters will occur, and what type of climate disasters they will be.

The aim is to help businesses and governments better prepare for climate change and the growing challenges for communities that come with it.

The company works in industries including insurance, energy, logistics and sport, where its analysis of disaster conditions and factors such as air quality can inform decisions on whether to delay or suspend events.

7. A wish list of AI climate tools

Google DeepMind, Google’s AI research laboratory, says it is applying AI to help fight climate change in a number of areas.

This includes building a complete wish list of datasets that would advance global AI solutions for climate change. Google DeepMind is working on this with Climate Change AI , a non-profit organization set up by volunteers from academia and industry who see a key role for machine learning in combating climate change.

Other Google AI tools are focused on improving weather forecasting and increasing the value of wind energy by better predicting the output from a wind farm.

8. How AI can help industry decarbonize

AI is being used to help companies in the metal and mining, oil, and gas industries to decarbonize their operations.

Eugenie.ai , based in California, United States, has developed an emissions-tracking platform that combines satellite imagery with data from machines and processes.

AI then analyzes this data to help companies track, trace and reduce their emissions by 20-30%.

Industrial sectors generate around 30% of greenhouse gas emissions globally.

In response to the uncertainties surrounding generative AI and the need for robust AI governance frameworks to ensure responsible and beneficial outcomes for all, the Forum’s Centre for the Fourth Industrial Revolution (C4IR) has launched the AI Governance Alliance .

The Alliance will unite industry leaders, governments, academic institutions, and civil society organizations to champion responsible global design and release of transparent and inclusive AI systems.

9. Reforesting hills in Brazil using drones

AI-powered computers are pairing up with drones in Brazil to reforest the hills around the coastal city of Rio de Janeiro, Reuters reports. The computers define the targets and number of seeds to be dropped.

The initiative, which launched in January 2024, is a partnership between Rio's city hall and start-up Morfo, and aims to grow seeds in hard-to-reach areas.

A single drone can disperse 180 seed capsules per minute, which is 100 times faster than using human hands for traditional reforestation, according to the local government.

The potential of AI in the future

AI is one of the key emerging technologies explored in the World Economic Forum’s Top 10 Emerging Technologies of 2023 report.

The report specifically looks at generative AI – a type of AI that creates content including text, images and computer programming.

In the future, generative AI could be used in contexts such as drug design, architecture and engineering, the Forum says.

AI can also be used to improve agriculture and reduce its environmental impact by processing data from sensors placed on crops.

The technologies listed in the report, including sustainable aviation fuel, can be used to help tackle global challenges like the climate crisis – but more innovation is needed, the authors point out.

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License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

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