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Impact of Nationwide Strikes on Economic Development: a Case Study of Bangladesh

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INTRODUCTION

Bangladesh is a country in South Asia, located on the fertile Bengal delta. It is bordered by the Republic of India to its north, west and east, by the Union of Myanmar (Burma) to its south-east and by the Bay of Bengal to its south. It is separated from the Democratic Republic of Nepal and the Kingdom of Bhutan by the narrow Indian Siliguri Corridor. Together with the neighbouring Indian state of West Bengal, it makes up the ethno-linguistic region of Bengal. The name Bangladesh means "Country of Bengal" in the official Bengali language.

The borders of modern Bangladesh took shape during the Partition of Bengal and British India in 1947, when the region became the eastern wing of the newly formed state of Pakistan. Following years of political exclusion, ethnic and linguistic discrimination, and economic neglect by the politically dominant western wing, a surge of popular agitation, nationalism and civil disobedience led in 1971 to the Bangladesh Liberation War, resulting in the separation of the region from Pakistan and the formation of an independent Bangladesh. After independence, the new state proclaimed a secular multiparty democracy. The country then endured decades of poverty, famine, political turmoil and numerous military coups. Since the restoration of democracy in 1991, the country has experienced relative calm and economic progress, though its main political parties remain polarized.

Post Independence Bangladesh had to face the devastation wrought by earlier economic exploitation during the Pakistan era as well as destruction of critical infrastructure during the war. After many years of economic problems, Bangladesh has started to rebound with steady growth in recent years.

The economy of Bangladesh is a rapidly developing market-based economy. Its per capita income in 2012 was estimated to be US$2,100 (adjusted by purchasing power parity). According to the International Monetary Fund, Bangladesh ranked as the 44th largest economy in the world in 2012 in PPP terms and 57th largest in nominal terms, among the Next Eleven (N-11) of Goldman Sachs and D-8 economies, with a gross domestic product of US$306 billion in PPP terms and US$153.6 billion in nominal terms. The economy has grown at the rate of 6-7% per annum over the past few years. More than half of the GDP is generated by the service sector; while nearly half of Bangladeshis are employed in the agriculture sector. Other goods produced are textiles, jute, fish, vegetables, fruit, leather and leather goods, ceramics, ready-made goods.

Exports of textiles and garments are the largest source of foreign exchange earnings. Shipbuilding, pharmaceuticals and consumer goods manufacturing are important emerging industries, while the jute sector is re-emerging with increasing global demand for green fibres. Remittances from Bangladeshis working overseas, mainly in the Middle East, are another major source of foreign exchange earnings. Other important export sectors include fish and seafood, ceramics, cement, fertilizer, leather and leather goods, food products, software and IT services. Bangladesh has also made major strides in its human development index.

|Year | GDP | US Dollar Exchange | Inflation Index | Per Capita Income |
| | | |(2000=100) |(as % of USA) |
|1980 | 250,300 | 16.10 Taka | 20 | 1.79 |
|1985 | 597,318 | 31.00 Taka | 36 | 1.19 |
|1990 | 1,054,234 | 35.79 Taka | 58 | 1.16 |
|1995 | 1,594,210 | 40.27 Taka | 78 | 1.12 |
|2000 | 2,453,160 | 52.14 Taka | 100 | 0.97 |
|2005 | 3,913,334 | 63.92 Taka | 126 | 0.95 |
|2008 | 5,003,438 | 68.65 Taka | 147 | |

Table-1: Variables of Macroeconomics in Bangladesh from 1980-2008, Source: ADO, 2010

[pic]
Figure-1: GDP Growth in Bangladesh from 2004-2013, Source: World Bank, 2013

|Selected Economic |2013 |2014 |
|Indicators (%) – Bangladesh| | |
| | | |
| |ADO 2013 |Update |ADO 2013 |Update |
|GDP Growth |5.7 |6.0 |6.0 |5.8 |
|Inflation |7.8 |7.7 |7.0 |7.5 |
|Current Account Balance |2.0 |1.9 |1.0 |-0.5 |
|(share of GDP) | | | | |

Table-2: Selected Indicators of Bangladesh in recent years, Source: Asian Development Outlook (ADO) 2013 Update; ADB estimates.

Year-on-year inflation edged up from 7.2% in October 2012 to 8.0% in June 2013, as national strikes (Hartal) disrupted food supply and drove up prices, and as administered power and fuel prices were increased. Inflation slowed to 7.7% in FY2013 from 10.6% a year earlier. Imports rose by only 0.8% in FY2013. Exports grew by 10.7%, accelerating from 6.2% growth in FY2012, on higher garment exports. The balance of payments showed a large surplus of $5.1 billion in FY2013, boosting gross international reserves to $15.1 billion. Following the tragic garment factory collapse in April 2013, comprehensive protocols were signed to foster worker safety and welfare.

Money supply growth was below the central bank’s program target, even as banks’ net foreign assets rose sharply. The reason was growth in credit to the private sector languishing far below target as political uncertainty deterred investment. The Bangladesh taka has strengthened against the US dollar since early 2013, reflecting the large balance of payments surplus.

GDP growth in FY2014 is projected at 5.8%, lower than the ADO 2013 forecast, as exports and consumer and investment demand fall short of expectations. The current account will show a small deficit. The central bank is expected to adopt measures to contain inflation but also ensure adequate credit flows to maintain steady economic growth. The key challenges are to boost private investment and maintain macroeconomic stability in the run-up to elections.

|GDP total: |$112.00 bn (at current prices 2011-12) |
|GDP per capita: |$848 (at current prices 2011-12) |
|GDP growth rate (%): |6.32 (at constant prices 2011-12) |
|Total exports: |$24.287 bn (2011-12) |
|Total imports: |$35.44 bn (2011-12) |
|Total FDI: |$1.136 bn (2011), $462.77 m (Jan-June,2012) |
|Forex reserves: |$12.35 bn (Nov, 2012) |
|Currency: |BDT (1 BDT=$0.0121) (avg 2011-12) |

Table-3: GDP Values in 2012 (Bangladesh), Source: Bangladesh Economic Review-2012 (Bangla version), Ministry of Finance, Export Promotion Bureau

RATIONALITY:

Hartal means closing, obstacles or enclosures. Closing of offices courts and shops in order to agitate common people is Hartal. In the lexicographical sense it is the closing of shops. Mills and factories, stopping any kind of public work in offices and institutions. Stopping of transports for a definite period is to express protest or discontent against the govt. It is observed by a body of people under political parties. Political parties go on a hartal with people when they have any grievance against the govt. When other means of settling disputes fail, they generally resort to hartal to realize their rights. Causes of hartal: People are getting conscious nowadays. They read newspapers; listen to speeches delivered by political leaders and others and in this way they can realize that they are being oppressed by the existing govt., job authorities and other institutions. The authority does not easily meet the rights of general people. Even to their legitimate demands, the authority often turns a deaf ear. The political leaders with people are then compelled to go on strike. Kinds of hartal generally are of two types short-term and long-term. Short term hartal lasts for some hours of a day or one day. On the other hand long-term hartal lasts for two, three, or even some more days. Again when a group of workers strike in sympathy with other sufferers, it is called sympathetic strike or hartal. Lock-out strikes take .place when the employers refuse work to the workers. They keep the doors of their industrial establishments closed, and try to coerce the workmen to come to terms with them.

Hartal is a recognized device of politics. In the democratic politics it is a legal means and a basic right of men. When a government becomes despotic and the common people are fed up, the political parties in opposition may call hartal. But this hartal should have co-operation from all classes of people. Again in a truly democratic and welfare state the aim of the supporting and opposing parties of hartal is Identical, I.e., preservation of national interest and public well-being. But the political condition of the country is not stable. People are not respectful to democratic values. In such circumstances no good result can be expected from hartal. Hartal and our political parties: In our country both the party in power and party in opposition are led by narrowness. The party in powers objective is to remain in power In any way and to monopolies that power as much as possible. The opposition parties want to seize power as quickly as possible and for that they try to dislodge the elected govt. before the end of their term through hartal.

According to the information of Bangladesh is Human Development Report. 1991 the economic loss of one days hartal is approximately taka 386 crores. Again the impact of hartal on public utility services like railways. Buses, municipal service and postal service cause serious consequences. In the World Bank Report hartal has been marked as the crisis of Bangladesh for which all her development work is being impeded. Indeed, it is needless to mention that hartal culture has been a serious problem In the economic development of Bangladesh. Its root lies in the so-called democracy and political groups of the country. It is a matter of great regret that Bangladesh has not found the face of development till now. The inconsiderate activities of political leaders and irrational hartal have demolished the economic backbone of our country. So it should be stopped. We should make an auspicious political scene to keep abreast of the world politics. Conclusion: Hartal has become a national trouble for our country. Considering the interest of the nation and the country hartal cannot be supported. No peace loving people of the country expect the destructive activities of hartal. All the enlightened people of the country must find out the measures to prevent this most destructive cause of our economic backwardness. Otherwise our future generation will not forgive us for our dreadful indifference.

HISTORICAL BACKGROUND OF STRIKES

Strike/Hartal is not a new subject to Bangladesh. What has changed is their frequency and destructiveness. More than 100 years have past the world‘s first hartal was staged. It took place in South Africa and was lead by the person who conceived the idea, Mohandas K. Gandhi, to protest the Black Act in 1906. The history of Bangladesh as a nation state began in 1971. In the past time politics was used for the welfare of country. In those day‘s there was no quarrel among the politicians for money and power but as today most of the politicians are interest is grown for money and power not for welfare of country. The phenomenon of hartal is continuous with persistent regularity in present day at Bangladesh. On the other hand a stable political situation is strong prerequisite for achieving the targeted economic growth and creating employment opportunity. Hartal is used for political approach. Hartal was not everyday matter in those days but at present time Bangladesh‘s political system is feeble. For this purpose opposite party called hartal frequently.

Heightened confrontational politics, marked by frequent hartal, particularly during the run up to the national parliamentary elections, is not uncommon in Bangladesh. It may be recalled that prior to all the three national elections that took place since the 1990s, the country experienced spells of general strikes. On previous three occasions since the 1990s, imposition of hartal became more frequent in the fifth year of successive democratic regimes (FY1996, FY2002 and FY2007). No doubt, disruptions caused by hartal had adverse consequences for the economy. It appears that FY2013 will not be an exception in this regard. In connection to this, one may recall that, CPD in January 2013 observed that “the government has settled … with moderated economic growth, investment and employment prospects. Regrettably, even this modest ambition could come under serious challenge in view of the looming uncertainties in the political front.”Of course freedom of expression is a fundamental right in a democratic society. However, when shutdowns are imposed and enforced frequently and violently, they involve significant economic costs for producers, consumers, investors and the economy as a whole. Assessing the economic implications of hartal is thus important from three perspectives: (a) capturing the transmission channels of impact; (b) getting a sense about the costs and (c) influencing the discourse towards a search for alternatives. Although other categories of political shocks also persist in Bangladesh given the current circumstances, there is value in doing a meticulous analysis of shutdown as a standalone phenomenon.
As evidence bears out, hartal in Bangladesh is becoming more frequent in recent decades. Average hartal per year was significantly higher (46 per year) under the democratic governments (1991-2013) compared to the earlier regimes. It may be observed from the same figure that the occurrence of
Historical evidence of Hartal:

Historical evidence shows that during the present democratic system initiated in 1991, the average number of Hartals per year has been more than three times higher (46 per year) compared to earlier regime.
|Date |Time |Called by |
|Day-Month-Year | | |
|Between 1962-1971 |Total 15 days (Then East Pakistan) |- |
|Between 1972-1975 |Total 5 days |- |
|Between 1981-1987 |Total 59 days |- |
|Between 1991-1996 |Total 266 days |Unknown days hartal called by Awami League |
|Between 1996-2001 |Total 215 days |59 days hartal called by BNP |
|Between 2001-2006 |Total days unknown |173 days hartal called by Bangladesh Awami League |
|Between 2007-2008 |Total days unknown |Unknown |
|Between 2010- April 2013 |Total days unknown |17 days hartal called by Awami League |
|30/11/2010 |All day (1193rd hartal in the history of |BNP |
| |Bangladesh) | |
|02/04/2013 |All day |Shibir |
|09/04/2013 |All day |BNP |
|10/04/2013 |All day |BNP |
|11/04/2013 |All day |Shibir |
|23/04/2013 |All day |BNP |
|24/04/2013 |All day |BNP |
|26/11/2013-28/11/2013 |Four days |BNP |

Tabl-4: List of Hartals in Bangladesh, Source: Wikipedia
[pic]
Figure-2: Violence calculation due to Hartal in Bangladesh from 2010-2013 (March), Source: BTT Desk

ECONOMIC ANALYSIS OF STRIKES

IMPACT ON GDP:
The economy counts Tk 1,600 crore in losses for each daylong countrywide hartal while the country faces 40 hartals a year on average raising the figure of the losses to Tk 64,000 crore, reports UNB. This was found in a survey conducted by the Dhaka Chamber of Commerce and Industry (DCCI). The survey showed that the GDP is affected by 6.5 percent due to countrywide shutdowns and the GDP growth could be doubled if there is no hartal. The readymade garment (RMG) sector counts Tk 360 crore losses each day for hartal while the wholesale market, shopping malls, showrooms, small shops together count a loss of Tk 600 due to each hartal, it said. The DCCI chief alleged that political demonstrations are taking place even in commercial hubs like Motijheel, halting the business activities and hurting the economy. The country‘s GDP in 2011-12 fiscal was Tk 914,780 crore and the estimated GDP for 2012-13 fiscal is Tk 978,814 crore.[12] There are a number of other estimates which has also tried to calculate the economic loss from Hartals – however methodologies used were not available.

IMPACT ON REVENUE COLLECTION:
Revenue collection by the National Board of Revenue fell short of the target for the first eight months of July, 2012-June, 2013 by 4.5% due to failure in achieving target by VAT and custom wing of the NBR. Current Political unrest, frequent hartals, sluggish trends in export and negative growth in import in July-February have taken toll on revenue collection in the period. The NBR official said repeated hartals and political unrest were causing trouble for the business activities including export, import and trade in the country which were the main reasons for such a huge shortage.

IMPACT ON PRICE LEVEL:

The rate of inflation under 2005-2006 base year ,surged to 7.4% in December on point to point basis and the non food inflation stood at 10.03%in the same month. While commenting on the latest figure of the macro economic indicator analyst said inflation surged in December last mainly because of supply disruption of essential good due to dense fog and general hartal in the last month of the calendared year (The Financial Express.09 January 2013 By Jasim Uddin Haroon)[31]. Price of vegetable, egg, and meat soared recently due to political strike. Frequent shutdown has snapped the supply chain. All items are becoming costlier. Precedent of karwan bazaar cooperative agency Omar Faruk said transport owners refused to carry goods aimed the country wide panic triggered by political violence, causing a huge supply shortage of essentials in the market.

a) Wholesale market:
Traders convey that the supply of vegetable is decrease a bit but that of onion and garlic suffered a drastic fall, pushing their price up by 5 to 10 taka per kg over 24 hours between 2/4/2013 to 3/4/2013. He said onion and garlic‘s price had increased the most, with local onion being wholesaled at tk 32 a kg and imported onion at Tk 35 on the day while the wholesale proce of local garlic had risen to Tk 60 per kg and that of imported garlic to Tk 90. (New Age,March 4,2013 By Staff Correspondent)[32].
b) Retail market:
It is estimated that sales of consumer products have declined by 20% (The financial Express, December 19, 2012 By Syed Jamaluddin)[33]. There is a reciprocal relationship between price and purchasing power. When price are going from low price to high price that is when there is inflation in economy ,the value of taka is shrinking , that is our purchasing power is going from being able to buy a lot to being able to buy a little (Steven Tomlinson)[34]. So, we can say that inflation causing by hartal has a negative effect on purchasing power of the people.

IMPACT OF HARTAL ON LOW INCOME PEOPLE:

The low income people of Bangladesh are severely affected by hartal. Because most Auto rickshaws and Tempos do not operate on hartal days, almost all earnings for drivers and helpers are forgone. Some vehicles do operate at same personal risk to drivers and helpers but earnings are considerably lower then normal. Hartal is particularly damaging for cycle van drivers, because the vans are primarily used to transport cargo. With shops and market closed the demand for transporting cargo is also low. During prolonged or continuous Hartal the garments factories were more likely to close down in which case workers were retrenched and not paid. Small entrepreneurs like hawkers and Vendors are badly affected by hartal. The demand for product and services sold by hawkers and vendors – clothing, food, betel leaf, cigarettes, shoe repair and polishing, watch sales and repair relies on customer passing through the area on the way to some where else. Demand is there for linked to other activities that are themselves disrupted by hartal. Borrowing is common to tide over hartal for these low income people. During continuous hartal loans are taken from the association and interest is paid on these loans. During consecutive or prolonged Hartal these types of low income people work as day labor. Following Data are showing the abated trend of the income of low earning people.

IMPACT ON TRANSPORT SECTOR:

There is a great loss in transport sector due to recent hartal and political instability since November. Hartal activist burnt down about 400 vehicles from November, 2012 to 19th March, 2013.They also set aflame railway 92 times. They burned down the vehicle of Fire Brigade also.According to According to fire service and civil defense, 356 bus-truck have been set alight from November to 18th March and the loss in money amount is about Tk 14,33,00000. According to another reliable source of bus-truck owner‘s association and BRTA, from 28th February to 5th March, a loss money amount is about 18 crore in transport sector. From December to 3rd March, the loss amount of BRTC is about Tk 3,39,00000. And the loss of Bangladesh Railway is about Tk 9,39,00000. According to BRTA and bus-truck owner‘s association, 955 vehicles have been set ablaze from 28th February to 5th March. As per as calculation of police force, 129 of their vans have been broken and 37 of their vans have been set on fire.

RECOMMENDATION

Parliament is dominated by government where oppositions are so marginalized. As a result they prefer streets rather than parliament to press their demand. Constitution could be amended to enlarge the scope of speaking of opposition party. Policy makers think that in Bangladesh disguised democracy is continuing. Here monarchy is running under the cover of democracy. To abate this tendency scope for young generation must be created based on their efficiency. Social interaction between leaders of different political parties should be augmented. In Bangladesh student politics often works as a reason behind political violence. Students are used by corrupted political leaders here. These young people always take part in aggressive activity in haral. It should be ensured that student organization can play active role in case of claiming about student‘s welfare. Business community is a power pressure group and a major stakeholder in political stability of the country. In several times they donate big amount of money to the political parties. They can render a major service to the economy if they stick to the motto ‗business first, politics later‘. Strong lawful action against any political leaders and government high officials if found guilty through the amendment of the constitution shall raise fear in the minds of dispute planner and executor.

CONCLUSION

As was observed, frequent shutdowns have significant negative consequences for the Bangladesh economy. This is true for past years and, regrettably, FY2013 is also not an exception. In case of all three occasions in the past, GDP growth rate had declined as incumbent governments moved towards the finishing line of their regimes. It is apprehended that FY2013 will undergo a similar experience. Manufacturing sector’s growth rates during the aforesaid three spells were also affected, while investment (as a share of GDP) stagnated. A number of attempts were made in the past to estimate the loss arising from frequent shutdowns. An assessment of the methodologies used in these studies would show that these estimates (as per the methodology) were on the high sides. It is also noted that, affected stakeholders are trying to pursue more innovative approaches to reduce losses arising from hartal.
Shutdowns have significant adverse impact on such sectors as transportation and the retail sector. In contrast, there are certain sectors in the economy (e.g. mining, agriculture and the energy sector) which are perhaps less affected by hartal. Extent of losses arising from hartal varies in accordance with level of enforcement and nature and gravity of the incidences which occur. There are various transmission channels through which hartal impacts on the economy. The tracking process is based on micro-evidence of impact of shutdowns on economic growth observed over the early months of 2013. Three primary channels were identified: transport disruption, property damage and uncertainty.

The opposition doesn‘t have any other platforms to voice their demands and hence use hartals; politicians only care about personal gains and do not heed the impact on the economy because they are immune to the consequences; the government is hostile, leaving few alternatives; options such as rallies, protests, hunger-strikes are useless. All of these arguments make opposition leaders appear selfish, irrational, and ignorant. Hartal is a strategic tool for opposition parties utilized in the years prior to elections. Hartals legitimize the use of violence, which in turn can undermine the government, thereby raising the chances of electoral success for opposition parties. Hartals put salt in a wounded economy.

References
A 'hartal' not a revolution !. (2013, April 19). The Sunday Observer, p. 04.
A country of hartals. (n.d.). The Daily Star. Retrieved January 13, 2014, from http://www.thedailystar.net/beta2/news/a-country-of-hartals/ (2005). BEYOND HARTALS: TOWARDS DEMOCRATIC DIALOGUE IN BANGLADESH. UNDP Research, 023, 33.
Desk. (2013, April). Hartal a curse for the economy. Bangladesh Textile Today, 08, 03.
Bangaldesh Hartal. (n.d.). Pakistan Defence. Retrieved January 13, 2014, from http://www.defence.pk/forums/bangladesh-defence/112456-bangaldesh-hartal-4.html#ixzz2R0OiqO00
Bangladesh. (n.d.). - Saferworld. Retrieved January 13, 2014, from http://www.saferworld.org.uk/where/bangladesh
DCCI suggests alternative to hartal. (n.d.). Priyo News. Retrieved January 13, 2014, from http://news.priyo.com/business/2012/04/29/dcci-suggests-alternative-hart-50507.html
DSEX reaches all-time high. (n.d.). Financial Express. Retrieved January 13, 2014, from http://www.thefinancialexpress-bd.com/index.php?ref=MjBfMDNfMDZfMTNfMV8xXzE2MjIwNA==
Economy of Bangladesh. (2014, January 1). Wikipedia. Retrieved January 13, 2014, from http://en.wikipedia.org/wiki/Economy_of_Bangladesh
Financial Part. (n.d.). e-Prothom Alo. Retrieved January 13, 2014, from http://eprothomalo.com/displaypage.php?id=2013_03_22_10_0_b#
January 2014. (n.d.). New Age. Retrieved January 13, 2014, from http://www.newagebd.com/detail.php?date=2013-03-28&nid=44240#.UZu1XGXyFXh
List of hartal in Bangladesh. (2014, July 1). Wikipedia. Retrieved January 13, 2014, from http://en.wikipedia.org/wiki/List_of_hartal_in_Bangladesh
Political violence. (2014, January 13). Wikipedia. Retrieved January 13, 2014, from http://en.wikipedia.org/wiki/Political_violence
Revenue collection pace still slow in July-Feb. (n.d.). The Bangladesh News Network, Best news site in Bangladesh, Latest Daily News website. Retrieved January 13, 2014, from http://news.org.bd/news/business/revenue-collection-pace-still-slow-in-july-feb/
Stockmarket: a big casualty of hartal. (n.d.). The Daily Star. Retrieved January 13, 2014, from http://www.thedailystar.net/beta2/news/stockmarket-a-big-casualty-of-hartal/
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