Analysis of a ˝Hartal Economy - ULAB Center for ... · (DC CI), assuming a mean number for hartal days in a year, estimates that the GDP loses 6.5 percent due to countrywide hartals

Center for Enterprise and Society,University of Liberal Arts BangladeshHouse 56, Road 4/A, Dhanmondi, Dhaka – 1209Telephone: 9661301, 9661255, Fax: 9670931,

Email:[email protected]

Website: http://www.ulab.edu.bd/CES/home/

Blog: http://ces-ulab.blogspot.com/

Page | 1TABLE OF CONTENTS

2 QUANTIFYING GDP FOREGONE

2 HARTAL &THE MACRO ECONOMY

3 A CLOSER LOOK AT FDI

5 HARTAL & TRANSPORT SECTOR

6 HARTAL & THE RMG SECTOR

6 IMPACT ON SMALL BUSINESS

7 IMPACT ON RURAL ECONOMY

8 PERCEPTIONS OF RATINGAGENCIES

9 PERCEPTION OF THE PUBLIC

10 LOOKING AHEAD

Analysis of a “Hartal Economy”

FOREWORDWhile there is no dispute that political instability isa deterrent to economic performance, it isperhaps an even more moot point in the contextof frontier economies such as Bangladesh. As ofMarch 2015, hartals have sustained for twomonths since January 6, and the damage to livesof citizens, property, productivity, businessrevenue, trade-competitiveness, has beenstaggering and unprecedented. The Bangladesheconomy has grown at over 6% for ten straightyears until this year, and this the year whenmany analysts and economists expectedBangladesh to near the 7% annual GDP growthrate. Such economic targets have taken abackseat however, in the context of the malaisethat has gripped the country. Policy-makers,trade bodies, industry associations, regulators,conglomerates and average citizens are nowforced to realign their respective priorities in thecontext of a “Hartal Economy.” This report aimsto dissect the vagaries of a hartal economy byanalyzing the impact of hartals through varioussectoral and thematic prisms of Bangladeshieconomic life.

SAJID AMITAdvisorCenter for Enterprise and Society

THOUGHT LEADERSHIP ARTICLEMARCH 2015















10 LOOKING AHEAD



















10 LOOKING AHEAD





mailto:Email:[email protected]

http://www.ulab.edu.bd/CES/home/

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QUANTIFYING GDP FOREGONE

Different multilateral donors, think tanks,business lobby groups, have tried to estimatethe impact of hartals on the Bangladesheconomy over the years. These attemptsinclude the holistic approach used by theWorld Bank in 2001 (which converts theGDP to total working days annually andmultiply this number with total hartal daysto understand GDP foregone) and theComputable General Equilibrium model(CGE) used by the CPD since 2013. Withregard to the total estimated impact, thenumbers vary. The Center for PolicyDialogue, a leading national think-tank, inits 2013 report estimated annual GDPforegone at USD 1.0 billion due to hartals.Close to CPD’s estimate was that of theFederation of Bangladesh Chambers ofCommerce and Industries (FBCII) - thepremier umbrella organization forbusinesses in Bangladesh - which assessedannual GDP foregone to be USD 1.3 billionin 2013. Meanwhile, more recently, theDhaka Chamber of Commerce and Industry(DCCI), assuming a mean number for hartaldays in a year, estimates that the GDP loses6.5 percent due to countrywide hartals.According to a survey conducted by DCCI,each hartal costs USD 205 million per dayor 0.2 percent of the GDP. Turning toestimates by international organizations, theWorld Bank estimated that in the 1990s,approximately 5% of Gross DomesticProduct (GDP) has been lost annually due tohartals. A UNDP survey report showed thatfrom 90/91 to 99/00, the average GDP losswas 4.5% annually.1 While it is possible thatestimates ranging from 4.5-5% of GDP from

the 90’s is not applicable to the economiclosses of more recent years wherein copingstrategies have also evolved, it is also truethat successive day-long hartals that havegripped the country since January 6, 2014,have also been unprecedented with regard totheir severity and unbroken continuity.2

Table 1: GDP ForegoneSource Percentage of GDP ForegoneWorld Bank 5% annually

UNDP 4.5% annually

DCCI 6.5% annually

HARTAL & THE MACRO ECONOMY

In February of this year, the GeneralEconomics Division (GED) lowered thecountry's economic growth forecast underthe Perspective Plan 2010-2020. For thenext financial year (FY) 2015-16, thegovernment’s forecast was cut from 8.3percent to 6.6 percent. Meanwhile for thesubsequent fiscal years: FY2017, FY2018,FY2019 and FY2020, the growth forecastshave been lowered from 8.7 percent, 9.1percent, 9.4 percent and 9.7 percent to 6.8percent, 7.2 percent, 7.6 percent and 8.0percent, respectively. The revision wasattributed to the slower growth in the lastcouple of years (2013 and again in 2015), asa result of the ensuing political instability.3

Table 2: GDP Growth Rate Forecasts

Year Growth RateForecast

RevisedForecast

FY2016 8.3% 6.6%FY2017 8.7% 6.8%FY2018 9.1% 7.2%FY2019 9.4% 7.6%FY2020 9.7% 8.0%





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UNDP 4.5% annually

DCCI 6.5% annually





RevisedForecast

FY2016 8.3% 6.6%FY2017 8.7% 6.8%FY2018 9.1% 7.2%FY2019 9.4% 7.6%FY2020 9.7% 8.0%





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UNDP 4.5% annually

DCCI 6.5% annually





RevisedForecast

FY2016 8.3% 6.6%FY2017 8.7% 6.8%FY2018 9.1% 7.2%FY2019 9.4% 7.6%FY2020 9.7% 8.0%














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Meanwhile with regard to broadermacroeconomic impact, the effect on creditgrowth has been noticeable. Private sectorcredit growth has been on the decline sincethe political impasse of 2013 which loweredthe call money rate, created excess liquidityin the bank sector, and brought privatesector investment to a grinding halt. Thesetrends have worsened in FY2015. BetweenAugust 2014 and January 2015, excessliquidity has increased by 13 percent andcall money rates pushed further downwards.The general principle with regard toconsumption during days, weeks and monthsof hartal is that since people become morerisk-averse,theyinvest in risk-free ventures,spend less and save more. However, supplyalso becomes more restricted because ofdisruptions in the supply chain and attackson the transportation sector. Moreover, inthe context of Bangladesh, lower global oilprices have borne in on the prevailing stateof price distortion of commodities, creatingan unstable price environment. While therehave been price hikes for certain essentialssuch as onions and other vegetables, therehave been unexpected declines for certainothers, and cumulatively these have resultedin price instability.4

With regard to revenue collection, hartalshave had a considerable impact as well.Given that in a country of 160 millionpeople, only 1.8 million pay taxes, to suffera revenue shortfall of BDT 80 billion (USD1.02 billion) as of mid-February is inimicalto growth. The government is alsoconsidering various tax incentives andprograms to encourage tax payment. The

National Board of Revenue (NBR) andDCCI are in talks to organize an Income TaxFair at the local government level toencourage citizens to pay taxes. Businessesmeanwhile have requested the NBR to offertax rebates to help relieve the cost pressuresimposed by the ongoing blockades. To bespecific, DCCI has already requested theNBR Chairman to consider a 50 percentrebate on all charges related to use of ports.5

And with regard to inward remittance fromoverseas destinations, which constitute asignificant growth driver for the country, theflow declined by 5.0 per cent in Februaryover the previous month. For February 2015,remittance fell by USD 1.18 billion, whichwas lower by USD 64.62 million comparedto the January estimate. Hard-workingBangladeshi migrants overseas becomereluctant to remit money home in the eventof a prolonged crisis. A senior official at aleading private commercial bank (PCB), wasquoted, “Political stability usually plays animportant role in increasing the inwardremittance flow, as a portion of theremittance is used in investment.” Althoughremittance inflow increased in the first sixmonths of FY 15, “the trend was affected inJanuary that continued until February.”6

A CLOSER LOOK AT FDI

Foreign direct investment (FDI) is akin to amagic wand for development, especially fora capital-impoverishedcountry likeBangladesh. In addition to contributing tothe building up of physical capital, FDIleads to employment generation,enhancement of productive capacities, and





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skill development of local populationsthrough technology transfer and integrationwith the regional and global economy.Studies indicate that FDI inflows also have astrong positive correlation with higherexports, in the case of Bangladesh. FDI-financed organizations tend to export agreater proportion of their output than theirlocal counterparts as such organizationsusually have a higher degree of familiaritywith international markets, globaldistribution channels, and organizationalmalleability to adapt to changing dynamicsof global markets. Bangladesh has a varietyof policies in place to attract FDI inflows, acase in point being Export Processing Zones(EPZ’s). However, despite existingmeasures to attract higher FDI inflows,foreign companies consider several otherfactors before deciding to invest: quality ofessential infrastructure, perception ofinvestment friendliness, low-cost humancapital, nearness to ports, etc. Anotherimportant factor that contributes to the rapidof growth of FDI in a frontier-emergingcountry is political stability.

Absence of political stability severelyundermines foreign investors’ confidence.Existing and potential investors revise theirinvestment strategies and allocations inhigh-risk countries. As it is, underdevelopedinfrastructure, inadequate power and energy,procedural and bureaucratic bottlenecks,scarcity of industrial land constitute bindingconstraints to the growth of FDI. To thismix, when one considers political instabilityas a prevailing factor, investor flight ensues.According to the Board of Investment (BoI),as of mid-February 2015, only one new

foreign direct investor registered forinvestment in January 2015. The totalamount registered for is BDT 50 crore (USD6.4 million) compared to last year’s averagemonthly registration of BDT 2,500 crore(USD 320.5 million). In 2014, the totalregistered amount of foreign investment wasUSD 3,000 million, with real FDI beingUSD 1,640 million and re-investment beingUSD 700 million.

Table 3: FDI Registration Comparison

Monthly Average for2014

(US$ million)

FDI registered inJanuary 2015(US$ million)

320.5 6.4

Bangladesh, which has historically receivedlower relative FDI compared to other SouthAsian countries (as a percentage of GDP forexample), began to attract foreign interestaround 2013 because of a lack of politicalturbulence up until that year. In fact,sustaining the growth impetus from previousyears, Bangladesh received a total FDIinflow of USD 1.78 billion in 2013. Thiswas equivalent to a 37.5% rise from theprevious year. At that time, it appearedevident that FDI inflow would surpass theUSD 2.0 billion hurdle in 2014 and 2015. Inthe words of Dr. Syed Abdus Samad,Executive Chairman of BoI, “We could haveeasily achieved this target for last year hadthere been no political unrest.” 7 However,even the targeted FDI figures are well-shortof levels achieved by comparable frontiereconomies such as Vietnam. According tothe Metropolitan Chamber of Commerceand Industry (MCCI), the country requires atleast USD 7.4 billion annually to spend on





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(US$ million)


320.5 6.4






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(US$ million)


320.5 6.4















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infrastructural requirements to achievemiddle-income country status by 2021,which is only six years away.8

HARTAL & TRANSPORT SECTOR

The transport sector is usually one of themost directly impacted sectors as a result ofhartal. Hartals constitute a tremendous tollon this sector with miscreants resorting totorching, vandalizing and entirely stoppingthe flow of transportation networks, be ittrucks carrying goods between the capitalcity and the port, or both intra- and inter-citybus services as well as direct damageinflicted to railway services. This isnotwithstanding the damage done to privatecars and other vehicles through use of crudeexplosives, fire bombs or acts of arson, ashave been rampant in the country sinceJanuary.

Hartals also have a seriously disruptiveimpact on marine transportation and inparticular ports. The Chittagong Port, whichis the larger of the two primary ports inBangladesh, stands flooded with containersof import cargo as inadequate freighttransport has halted the delivery ofcontainerized goods. It is estimated thatabout 28,000 TEUs of containers wereawaiting delivery in the port sheds, as ofmid-February. As of February 2015, thevolume of export cargos being shippeddeclined from 2200 TEUs to 1600 TEUS,while the shipment of import cargosdeclined from 2200 TEUs to 1450 TEUs.According to the Vice President of theBangladesh Garment Manufacturers andExporters Association (BGMEA), Mr.

Shahidullah Azim, as of February, 300 to350 trucks of readymade garments plyChittagong port, against a total demand for550 trucks. The remaining quantity ofexports, around 30-40 percent, are beingshipped through air transport, which costsaround 12 times higher than sea freight. It isreported that exporters of RMG haveincurred expenses of BDT 40-50 billion(USD 500-600 million) in January as aresult of air shipment costs.

Meanwhile, sources at the Inland ContainerDepots Association (BICDA) attested to a20% decline of shipment of export goods inonly the first 10 days of February from lastJanuary. RMG exporters have also reportedthat certain European buyers have divertedtheir manufacturing work-orders fromBangladesh to other RMG-manufacturingcountries. BGMEA Director, M. A. Wahabconfirmed such worries for the sector. It isreported that Turkish buyers have beenvocal in their concerns and are cutting downon their orders from Bangladesh.9

Other than exporters, importers have alsobeen severely impacted by the hartals. Forinstance, as of February, over 6,000 carshave been stranded at ports as a result ofimporters being reluctant to take delivery ofvehicles (for fear of vandalism en route totheir final destinations). Mr. Habib UllahDawn, President of BangladeshReconditioned Vehicles Importers andDealers Association (BARVIDA),confirmed as much, “Most of us are afraidof attacks on the highway for the politicalunrest. That's why, taking delivery of carsfrom ports have become slow.” Of the total,





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4,400 imported cars are stranded at Monglaport which handles reconditioned carimports from Japan mostly, whilethe rest areat the Chittagong port. Mr. Habib furtheropined, “We would much rather pay thefines than see our cars getting torched. Weare suffering for no fault of ours.” He alsoestimated that sellers of reconditioned carsincur losses of BDT 30 crore(USD 3.8million) a day as a result of the hartals.10

HARTAL & THE RMG SECTOR

In addition to interrupted delivery of portcargo, the industrial sector in Bangladeshalso suffers from suspension of productionat factories. It is worthwhile to compare thedays of shipment for goods from Bangladeshwith those of competitor export-orientedcountries. Generally, shipment fromBangladesh takes around 45 days, while forCambodia, Vietnam and China, it is around15-25 days. Shipment from Bangladeshtakes longer during hartal days. Moreover,hartals also affect the cost of production dueto restricted raw material sourcing andsupply chain blockages, which when addedto the increased costs of air freight,translates to significant rise in costs forbusinessmen.

As for the hartals of 2015, it is estimatedthat the RMG sector, the largest industrialsector in the country, has incurred losses ofBDT 22,000 crore (USD 2.8 billion) as ofFebruary. The RMG sector in Bangladesh isworth USD 25 billion. According to theBGMEA, this sector has, as of February,faced order cancelations worth BDT 10,000crore (USD 1.28 billion) and incurred

additional air freight expenses of BDT 918crore (USD 118 million). Furthermore, thesector had to pay BDT 5,000 crore (USD641 million) in fines for failing to ship theirconsignments on time. The BGMEA hasalso reported that the sector has foregone on25% to 30% on new orders due to the hartalswhile cautious existing buyers haveconfirmed only 30-50% of their regularorders. In several cases, it is reported thatRMG buyers are factoring in a risk premiumat the time of order-negotiation and reducingcutting and making prices. 11 Calculatingrevenue foregone per day, the RMG sectorhas experienced BDT 360 Crore (USD 46.2million) in losses for each day of hartal.

IMPACT ON SMALL BUSINESS

The retail sector in Bangladesh comprises ofinformal outlets such as vendors, cornergrocery stores, hawkers, small shops as wellas larger, formal establishments and brandeddepartment stores. According to newspaperreports, the hartals have eroded 70 percentof retail sales across the country in January2015, forcing many small and mediumretailers to close their business. Due to fearof arson and bomb attacks, close to 2.4million hawkers and street vendors haveexperienced a drastic fall in sales. Aarong, aleading fashion store, has experienced a50% decline in sales in January compared toDecember. According to the BangladeshShop Owners’ Association that represents2.5 million retailers, average sales per dayhave fallen from BDT 3,000 Crore(USD 385million) to BDT 900 Crore (USD 115). Asenior sales executive of Panna Electronicsthat sells products of Panasonic, reported a





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precipitous drop in daily sales, from BDT500,000 to BDT 40,000. In the lower-middleto middle-class neighborhoods of the citysuch as Farmgate, daily sales at a leadingGeneral Store have declined 65% .12

The result of the survey conducted 9 yearsago are also illuminating with regard to therealities of small retailers during hartalperiods in different parts of the city. InMohammadpur, a low-to-income area, smallretail stores have reported varying degreesof decline in sales: small grocery and varietystores 25%, drug stores 15%, tailor shops30%, hardware stores 50% and bookstores60%. Coping strategies also vary acrossthese retail outfits. They usually attempt tomake up for losses by extending theiroperating hours and on holidays. Tailors,furniture shops and other smallmanufacturing establishments use the timeavailable to work on older orders.Machinists use the down time tomanufacture machines for their own use,thus increasing their stock of capital goods.In Banani – a more upscale neighborhood –government markets faced a 60 to 70percent drop in sales, since the governmentmarkets are required to be officially closedduring hartals. In the more upscaleneighborhoods, since most dwellers travelby car, they are also less likely to shopduring hartal hours and risk vandalism orarson to their vehicles. Women in upscaleneighborhoods are also less likely to shopduring hartals, leading to a further drop insales in such neighborhoods. Copingstrategies in such areas were no differentthan those in lower-income areas.

However, across the board, these strategieswere more applicable for hartals in previousyears. Owing to the fact that the hartals of2015 have been continuous since January 6,these coping strategies have been far fromsufficient. Transportation costs have beenhigher in hartal-affected 2015 than inprevious hartal years and price of stock hasalso risen, notwithstandingdeclines inavailable working capital and defaults onpayments to creditors and suppliers, thusaffecting profitability severely.13

IMPACT ON THE RURAL ECONOMY

The rural economy is not particularlyisolated from the impact of hartals either.Poorer sections of the rural community whooften borrow to sustain livelihoods sufferduring hartals by way of falling deeper intoindebtedness. They also encounter health-related grievances as seriously ill patientscan often face trouble in commuting longdistances during hartals when they needmedical attention not available in theirvicinity. Moreover, because rural areas havebecome increasingly commercialized andintegrated with urban centers, dwellers alsoencounter severe disruption in supply ofinputs and other commodities from theirsuppliers. Among the farmer communities,wealthy farmers tend to be slightly lessaffected by hartals than poorer farmers sincethe former can afford to postpone harvestingcrops or catching fish for one or two days.They are less dependent on daily sales for alivelihood.

It ought to be noted however that continuoushartals are equally disruptive to rich and





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farmers. In general, the impact of hartals issimilar across urban and rural areas. Therole of information constitutes an importantdifference, however, as people inBangladesh usually obtain information onhartals from radio, TV or word-of-mouth,which tends happen more slowly in ruralparts of the country. Therefore, their copiesstrategies are compromised sinceinformation arrives to them later.

PERCEPTIONS OF RATINGAGENCIESA significant achievement for Bangladeshwas being rated by two of “Big Three”credit rating agencies, Fitch and Moody’s.These credit rating agencies rank thecreditworthiness of borrowers, be itcorporations or governments, using astandardized rating scale that measuresexpected investor loss in the event ofdefault. In the case of a frontier-emergingcountry like Bangladesh, achieving a decentrating from any one of the Big Three creditrating agencies and being able to sustain it,is tantamount to growth in FDI as well asforeign portfolio investment (FPI).

Fitch was the most recent among the tworating agencies that assigned Bangladesh acredit rating. However, in August 2014,when it assigned a “BB” rating toBangladesh, it had also prescientlyhighlighted significant political risk as a keysource of uncertainty for Bangladesh’seconomic forecast. The international ratingagency underscored that RMG is afoundational sector in Bangladesh’s growthstrategy and constitutes 81 percent ofexports and is equivalent to 15 percent of the

country’s GDP. The disproportionate impactof this sector on the country’s growthimplies thata migration of export orders tocompetitor RMG-manufacturing countriesas a result of Bangladesh’s currentblockades could severely undermineBangladesh’s long-term growth (whiledepleting the country’s current account andexternal balance in the short-run). TheRating agency had further posited that ifpolitical violence persisted and undermineddaily economic activity, the Rating agencywould consider that to be a credit negative.14

Meanwhile, Moody’s, which has maintaineda respectable “Ba3” rating to Bangladesh forfive years in a row, has recently hinted itmay downgrade the said credit rating.Arating of “Ba3” implies a stable economicsituation which was the case when Moody’shad assigned this rating five years earlier.The Rating agency in its most recentanalysis titled “Credit Implications ofCurrent Events,” said that the worseningpolitical turmoil was negative forBangladesh, as “it is weighing on thesovereign's export performance, investmentactivity and headline growth.” As perMoody’s rating benchmark, “obligationsrated Ba are judged to be speculative and aresubject to substantial credit risk.”Moody’sadds numerical modifiers, e.g., 1, 2 and 3 toeach generic rating classification and themodifier 3 assigned to Bangladesh indicatesa ranking at the lower end of the genericrating category. If Bangladesh were to slipone rung below “Ba3”, it would be classifiedin the “B1” category, implying thatBangladesh’s international obligations





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would be perceived as being subject to highcredit risk.

The rating agency has further found thatexport growth which has historically beenimpervious to political trouble, has begun todeteriorate, growing by only 2.1 percent inthe first seven months of FY 2015 (July-January). In the words of the rating agency,“Prolonged political unrest will likely weighon export growth and hinder the country'sinvestment environment…The transportblockade has hindered factories’ ability todeliver goods to major ports.”Moody’sanalysis also highlighted the ExtendedCredit Facility (ECF) support Bangladeshhad acquired from the InternationalMonetary Fund (IMF), worth about USD900 million which also set in motion asignificant economic reform program.Moody’s acknowledged that the country hadalready implemented “several importantreforms” and in the process secured USD644 million of the ECF funds but that“protracted political tensions also riskdistracting the government from itseconomic reform program” and “thesuccessful completion of the programinvolves the passage of further structuralmeasures, including introduction of a newvalue-added tax and steps to improve thestate-owned banking system.” 15

PERCEPTION OF THE PUBLIC

As far back as 2005, a report entitled“Beyond Hartals: Towards DemocraticDialogue in Bangladesh” published by theUnited Nations Development Programme(UNDP) carried an interesting opinion poll

that summarized that most citizens ofBangladesh do not believe that hartals are aneffective medium of protest and they preferother channels for expressing a party’sposition. Although the report was publishednearly 10 years earlier, it can be safelysurmised that given Bangladesh’s continuedgrowth during that time, and relativeadvances in literacy, education, mediaopenness, and civil rights, the findingswould largely apply in today’s setting. In thesaid poll -a survey of 3000 respondents insix urban divisions of Bangladesh - althoughrespondents thought hartals constituted alegitimate democratic tool, 70 percentweremore likely to opt for political alternatives tocalling hartals.

Alternatives preferred to hartals among therespondents, included public rallies,discussion in the parliament, road marches,and sit-in demonstrations, thus underscoringa public demand for a peaceful channelthrough which to express one’s position.Moreover, most respondents of the surveyconsidered hartal to be ineffective forenacting policy changes and anoverwhelming majority (95%) regardedhartals as very negative or somewhatnegative for the economy. Furthermore,50% of the respondents believed thatpoliticians acquired financial gain fromcalling hartals. 16 Although a survey of thismagnitude and rigor has not been conductedfor 2015, gleaning from newspaper reports,the commonly-held view appears to be thatalthough political parties call hartals in thename of democracy, in reality, the effect ofhartal, directly and indirectly, impinges oncitizens in general and those belonging to





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the lower-middle and lower-income bracketsin particular.

LOOKING AHEAD

After nearly 58 days of ongoing politicalunrest that has gripped the economy,questions on how to end the ongoing crisisareforemost in the minds of authorities andcitizenry alike. In addition to the heavyeconomic toll it has taken on the country,lives and safety of citizens are at stake. Thehartals of 2015 have already claimed around90 lives of citizens through acts of arson,fire-bombing, vandalism and other forms ofviolence. Since hartals have been in the pastused as a democratic tool to disruptdictatorships and authoritarianism in thesubcontinent, the debate on the legality ofallowing hartals has long gestated amonglaw-makers. The debate appears to begaining momentum at present, given theunprecedented toll the recent spate of hartalshave had on lives, the economy and propertyof Bangladeshis.

On March 2, the High Court of Bangladeshissued a rule upon the Government and all41 registered political parties to explain infour weeks why calling a blockade shouldnot be declared illegal and unconstitutional.The country’s leading industry and tradeassociations – FBCCI, BGMEA, BangladeshTextiles Manufacturers and ExportersAssociation (BTMEA) and BangladeshKnitwear Manufacturers and Exporters

Association (BKMEA) filed a writ petitionseeking necessary orders from the HighCourt to impose reasonable restrictions tohartals. Following this petition, the HighCourt ordered all political parties to explainwhy calling a hartal without any prior noticeshould not be deemed unconstitutional andillegal. According to a recent estimateannounced by the Prime Minister’s Office,the country had incurred a cumulative lossof BDT 1,20,000 Crore or USD 15 billiondollars, which according to our estimates,appear to be a reasonable estimate, going bythe WB methodology for computingeconomic loss (discussed earlier).

As such, given the sprawling andunregulated nature in which hartal violencehas been conducted, it will pose a significantchallenge for law-makers, law-enforcement,business organizations and governmentauthorities to find a quick resolution to thisimpasse. Realistically, imposing restrictionson hartal such that elements of violence,prolonged disruption to economic activity,disruption to education, are rendered illegalmay be a pragmatic short-term solution. Inthe long-run, the discussion on hartals andtheir place in political life require a morethorough scrutiny and debate involving allsections of citizenry, especially the poor andmarginalized who tend to be the hardest-hit,as any long-term change in the prevailinghartal culture requires a realignment ofcitizen perception towards them.





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LOOKING AHEAD









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LOOKING AHEAD


















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Graph 1: Sectors Hit Hard By Political Turmoil,in % total losses Graph 2: GED Cuts Growth Projections

Source: The Daily Star Source: The Financial ExpressGraph 3: Incidence of ‘Hartals’ per year Graph 4: Number of People Killed in PoliticalViolence

Source: Sangbadpatre Hartalchitra by Ajoy Dasgupta; Ahmed,Imtiaz (2011); Odhikar; ASK and CPD Source: ASK and CPD

8%

9%

12%

12%

18%5%

36%

Tourism Real estate

Transport Agriculture & poultry

Wholesale & retail Other manufacturing

Garments

2.797.08

37.13

49.26

87

0

10

20

30

40

50

60

70

80

90

100

1947-1970

1971-1982

1983-1990

1991-2013

2013-2014





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12%

12%

Agriculture & poultry

Other manufacturing8.

30%

8.70

%

9.10

%

9.40

%

6.60

%

6.80

%

7.20

%

7.60

%

0%

2%

4%

6%

8%

10%

12%

FY16 FY17 FY18 FY19

Original Revised

56

2013-2014

2015(upto

March 4)

7658

84

507

147

0

100

200

300

400

500

600

2010 2011 2012 2013 2014





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9.70

%8%

FY20

147

100

2014 2015(upto

February)














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REFERENCES

Abdin, Md. Joynal. 2014. FDI: PoliticalStability Key to Improving InvestmentClimate in Bangladesh. Planning,Monitoring & Evaluation Wing, TheSME Foundation.

Ahmed, Moin Uddin and Pulok,Mohammad Habibullah. 2013. The Roleof Political Stability on EconomicPerformance: The Case of Bangladesh.Journal of Economic Cooperation andDevelopment. 34, 3, pp. 61-100.

Aisen, Ari and Veiga, Francisco Jose.2010. How Does Political InstabilityAffect Economic Growth? IMF WorkingPaper. Middle East and Central AsiaDepartment.

Alberto, Alesina, Ozler, Sule, Roubini,Nouriel and Swagel, Phillip. 2015.Political Instability and EconomicGrowth. Journal of Economic Growth1(2). pp. 189-211.

Bhattacharya, Debapriya. 2013.Assessing Economic Implications of thePresent Political Shocks. Centre forPolicy Dialogue.

Helal, Mohammed and Hossain, Md.Amzad. 2013. Four Decades ofEconomic Development of Bangladesh:An Assessment. Journal of the AsiaticSociety of Bangladesh(Hum.), Vol.58(2). pp. 335-362.

Prodip, Md. MahbubAlam, Hasan,A.H.M Kamrul and Hossen, Md. Liton.January 2015. Road March: Searching aBetter Alternative Way of Hartal Culturein Bangladesh. International Journal ofScientific & Technology Research.Volume 4, Issue 01.

Roe, Mark J. and Siegel, Jordan I. 2011.Political instability: Effects on FinancialDevelopment, Roots in the Severity ofEconomic Inequality. Journal ofComparative Economics.

Roy, Mallika and Borsha, Faria Hossain.August 2013. Hartal: A ViolentChallenge to the Socio-EconomicDevelopment of Bangladesh.International Journal of Scientific &Technology Research. Volume 2, Issue8.

Shonchoy, Abu S.May 2014. EconomicImpact of Political Protests (Strikes) onFirms: Evidence from Bangladesh.Institute of Developing Economies-JETRO and University of Tokyo &Kenmei Tsubota,

Uddin, M. A., Dey, R., Rahaman, M. M.and Roy, L. N.June 2013. Exploring thecausal-effect relationship of hartal: abinary logistic regression modelapproach. Journal of Science andTechnology 11.pp100-105.





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1 Discussion on estimates was partially gleanedfrom a popular publication for the RMG sector“Textile Today”. Available athttp://www.textiletoday.com.bd/magazine/6192Results of DCCI survey available at:http://www.bangladeshchronicle.net/index.php/2013/04/economy-counts-tk-1600cr-in-losses-for-each-hartal-dcci/3 Discussion on MTMF available here:http://www.thefinancialexpress-bd.com/2015/02/13/809844 News report on price distortions for selectcommodities available here:http://www.thefinancialexpress-bd.com/2015/02/14/810855 Information on dialog between the NBR andDCCI available here:http://www.thefinancialexpress-bd.com/2015/02/12/808506 For details on recent remittance estimates andopinions regarding the decline:http://www.thefinancialexpress-bd.com/2015/03/03/834377 Opinion of BOI gleaned from:http://www.dhakatribune.com/bangladesh/2015/feb/09/fdi-tumbles-turmoil-weighs-investor-sentiment8 Discussion on FDI targets by the MCCIavailable here:http://www.thedailystar.net/business/restoring-business-confidence-biggest-challenge-mcci-648119 For details on impact on Chittagong port,please see: http://www.thefinancialexpress-bd.com/2015/02/12/8080310 See for details on impact on car sellers:http://www.thedailystar.net/turmoil-batters-car-importers-6552511For details on how hartals have impacted theRMG sector:http://www.dhakatribune.com/business/2015/feb/12/rmg-losses-stand-tk22000cr-blockade#sthash.Zmx5xrV5.dpuf12 News on retail sector slowdown:http://www.thedailystar.net/70pc-sales-gone-with-blockade-6385613 The UNDP Report “Beyond Hartals: TowardsDemocratic Dialog in Bangladesh” is availablehere: http://www.un-bd.org/pub/unpubs/Beyond%20Hartals.pdf

14 For more on Fitch’s forecast for Bangladesh,see: http://www.thefinancialexpress-bd.com/2015/01/19/7655315 For response to Moody’s announcement fromGovernment authorities:http://www.thefinancialexpress-bd.com/2015/02/15/8129716UNDP Report: http://www.un-bd.org/pub/unpubs/Beyond%20Hartals.pdf





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http://www.textiletoday.com.bd/magazine/619

http://www.bangladeshchronicle.net/index.php/

http://www.thefinancialexpress-




http://www.dhakatribune.com/bangladesh/2015/

http://www.thedailystar.net/business/restoring-


http://www.thedailystar.net/turmoil-batters-car-

http://www.dhakatribune.com/business/2015/feb

http://www.thedailystar.net/70pc-sales-gone-

http://www.un-



http://www.un-
















http://www.un-



http://www.un-
















http://www.un-



http://www.un-

Documents

Analysis of a ˝Hartal Economy - ULAB Center for ... · (DC CI), assuming a mean number for hartal days in a year, estimates that the GDP loses 6.5 percent due to countrywide hartals