Mindset that generates intolerance

http://opinion.bdnews24.com/2012/12/29/binary-mindset-and-intolerance/

Mo Chaudhury

Binary mindset and intolerance

December 29, 2012

Photo: Reuters

What is the common defining element of extremism, polarization, either or, anything but, and my way or high way? The answer is that they are all binary or digital (zero/one) in nature since they define things in terms of two disjoint and inherently adversarial alternatives. This is what I refer to as the binary mindset. My thesis is that the binary mindset is the boson (God Particle) of intolerance.

Intolerance is much like the corner solution of economic theory where, for example, a consumer chooses either to buy as much food as she can afford or rent the biggest possible residence, meaning that either she does not have a place to live or she goes hungry. Intriguingly, such extreme consumption choices are optimal when the consumer is obsessed with a commodity and never gets tired of consuming more and more of it. In real life, rarely we observe such extreme consumption preference and behavior. Instead we find interior solutions to be prevalent meaning that most consumers spend their income on food as well as housing. The powerful message is that amalgams, mixtures, combinations, unions, and diversity represent moderate and balanced outcomes, and very importantly they result from mindsets that are not binary, and are tolerant or inclusive of alternatives.

Let us consider the thorniest and most divisive matter in the known history of mankind, namely religion. By definition, each religion/faith starts with the blind belief that only their version of the Creator and Creation is the "truth". By implication or divine instruction then, the followers of a given religion are to view all other religions as wrong and their followers as being misguided. This binary mindset of a believer irreconcilably bifurcates the humanity into fellow believers of the same "true" faith and the astray or the believers of other faiths and the people of no faith. This is precisely where religious intolerance is rooted and the process of blinding vision starts. This is because it is nearly impossible to accept or even see any merit in the view of another person believing that person to be absolutely wrong at the core. Importantly, it is not belief in the Creator, it is rather the imputed claim of exclusivity of a specific faith being the truth that procreates blinding vision and breeds intolerance.

Everyday thousands of children are born worldwide into families practicing numerous religions. And this has been going on for millions of years now. Clearly, to a believer, it is solely the Creator's decision as to what parental religion, if there is any, a child is born into. Then, it does not seem reasonable for the compassionate Creator to make truth seeking more burdensome for the newborns born into supposedly misguided parents. Stepping out of the binary mindset, however, leads to a more tenable and clearly harmonious premise that the divine messages to all religions at all times are, have always been and will always remain the same. The self-inculcated binary mindset of those believers who are "religious" about their religion prevents them from seeing this necessary logical commonality in all divine messages. What else could explain as to why the more "religious" people become about their faith, the more they litigate the untruth about others?

Arguably, the binary mindset with respect to religion has proven to be one of the most controversial influences in the governance of modern nation states. While a blanketing influence of religion is observed in some states, e.g., Saudi Arabia, Iran and Israel (de facto), the role of religion in state governance is primarily reflected in the ideological lenience of the political parties in most democracies. While occasionally parties with strong religious ideology do come to power (e.g., most recently in Egypt), the governance ideologies of mainstream parties in most democracies effectively differ in terms of the extent of secularism.

In practical terms, secularism as a state principle (enshrined in constitution or not) avoids legislating, implementing or adjudicating state policies that seek rationalization from or promote a specific religion or belief system including atheism. It is interesting to note that the ultra-secular people and parties (that subscribe to the highest degree of secularism) share an important characteristic with the religious right at the opposite end of the spectrum, namely a binary mindset. The binary mindset of the ultra-seculars views any accommodation of religion in public domain as an undesirable infiltration, meaning that religious guidance for governance can only be bad for the society. While the intolerant views of the religious right are overt, it is seldom recognized that often the ultra-seculars are quite intolerant of expression of religion in public sphere. For example, in USA and Canada, the ultra-seculars vigorously protest and sometimes litigate even the exhibition of religious replicas (like a Cross) or greetings (like Merry Christmas) in government buildings and venues. The intolerance of the ultra-seculars can and did (historically) reach extremes. Turkey once banned the wearing of hijab, and Egypt's religious right party, the Muslim Brotherhood, was banned as a political party for many years. In Bangladesh, even very recently, the ultra-seculars demanded banning of the parties with religious ideologies. In other words, while the religious right is "religious" about religion, the ultra-seculars are "religious" about non-religion, both being intolerant of each other.

The truth of the matter is that religion is an integral part of the life and values of many citizens, practicing or not. Hence a democratic society cannot afford to totally de-legitimize religion (of the majority) as a source of guidance for laws and public policies for too long without creating alienation, a sense of reverse discrimination and ultimately a backlash that might set back the secular progress over many decades. Similarly, it cannot also afford to govern its citizens into believing and practicing the divine codes of the majority without weakening the belief itself. This is because belief is a very personal voyage of our mind to explore divinity, ungoverned by human codes and unencumbered even by our own physique. Further, since belief is not observable and verifiable, enforcing the observable practices by way of governance risks increasing the incidence of fake observance that can degenerate into loss of belief altogether. Therefore, the key to simultaneously preserving the apparently competing but inherently congruous religious belief systems and the secular democratic societies that permit maximum attainable and most tolerant freedom of choice is to motivate the religious right and the ultra-seculars to break out of their binary mindsets. It is hoped that the above discussion is a small step toward convincing them that their respective corner solutions are too intolerant to be long term tenable and would ultimately sentence them to politically desolate corners.

While the impact of binary mindset is illustrated here using religion and secularism, the intolerance effect of a binary mindset arises in numerous other circumstances and dimensions of our lives. The more "religious" we are about anything, the more blinded and intolerant we become of competing views. Gradually but surely we, as individuals or as a collection, enter a phase of endless conflict with the "not-me" and "not-us" compartments of our fellow human beings. Life being a collection of countably finite moments, isn't it worthwhile to use those precious ticks to seek union instead?

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Mo Chaudhury is a Professor of Practice in Finance at McGill University, Montreal, Canada.

http://opinion.bdnews24.com/2012/12/17/dynamics-of-violent-activism/

Mo Chaudhury

Dynamics of violent activism

December 17, 2012

Photo: bdnews24.com

Media reports have identified a number of individuals involved in the murder of Biswajit on December 09, 2012. The incident is inescapably egregious, but what is outright detestable is that the alleged murderers are supposedly activists of a fabled student organization, and their violent act was motivated by the presumption that Biswajit belonged to the opposition camp. This commentary critically explores the making of such nefarious political activism in today's Bangladesh.

Let us start with the demography of the alleged activists, the suppliers of murderous activism that claimed the life of Biswajit. All of these activists are likely in their early 20's, and hail from low to middle income families living in small localities far away from the capital. The non-descript parents of these non-metropolitan boys are shell-shocked by the incident as there was nothing in their upbringing that would prognosticate anything even close to their December 09, 2012 barbarism. Their inauspicious transformation likely started with their entry into the glitzy world of campus politics in the central theatre of the country, Dhaka. And their regimentation into campus turf wars perhaps commenced during the last few years of escalating antagonism between the major political alliances.

It is not yet exactly known why the Biswajit killers chose the career path of violent activism that culminated in the murder of Biswajit. Admittedly speculative, a likely scenario may nonetheless facilitate understanding of the dynamics of violent activism. It stands to reason that the lucrative and fast pace career in the business of politics lured the Biswajit killers into violent activism. The alternative world of normal studentship appeared to these young fellows as one of life long economic despair and stagnation in the social gutter of nobodies since they were at best mediocre students and could only enter public university programs with weak employment prospect (private university option beyond their means). Discarding this unpalatable choice, the Biswajit killers may have considered the non-violent career track of student politics, only to find that lacking charisma, with no established political connections and pedigree, and with no financial resources to sustain them for long in studentship, the odds of making it big are rather slim.

The Biswajit killers having now made the career choice of a violent activist, the choice of the party was rather rational. They quickly and correctly recognized that it is a matter of survival of the fittest in the political arena of today's Bangladesh as it is in a jungle. Given that the ruling party's influence peddling controls the entrance to and exits from all doors in Bangladesh, including the doors of justice and law enforcement, the fittest are those who pledge loyalty to the ruling party of the time and/or have ample resources (financial means, business and family connections) to purchase their favours. The young perpetrators had none of it, and the mere pledge of political loyalty would surely go unnoticed by the party hierarchy. Hence, the path of violent activism for the current or imminently prospective ruling party might have made most sense to these small-locale boys given their fervent desire to break through the glass ceiling with the fastest possible ascend.

The above explanation of the supply of violent activism is, however, incomplete and inadequate in explaining why the frequency and severity of violent activism was rather low compared to now during prior periods of political turbulence dating back to the mid 1970s. The answer lies in the evolution of demand for violent activism and the rapid rise in the financial dividends from influence peddling. Without a doubt, the clients of violent activism are the very political parties that are entrusted with the security of ordinary citizens through the democratic process. Quite ironically, it is largely the periods of more competitive democracy that have seen the frequency and severity of violent activism shooting up. In periods of no democracy, dictatorial democracy, or democracy dominated by a single party, the all powerful single camp controls the entire turf of winning elections if there is any, remaining in power, gaining and distributing financial and political resources, and sentencing any opposition at will. On the other hand, as democratic competition heats up, the margin of electoral (popular vote) victory becomes thinner, and any marginal edge in the control of the turfs becomes ever so consequential. With a long term upward trend in democratic processes and institutions, albeit with troughs and valleys, the intensifying political competition has increasingly drawn the political parties toward developing, nurturing and growing their own shadow armies of violent activists, popularly known as the cadres. When in power, cadres are used to thwart competition by terror and when in opposition they are used to instigate and enact violent protests. It is also worth noting that the emergence of two dominant political alliances in the new millennium has polarized and intensified the political competition even further and in the process has also elevated the demand for the services of violent activists.

The process of paying for the services of violent activists is well illustrated by the recent satirical commentary of Shahdin Malik in a local Bangla daily. Essentially the violent activists are rewarded by status upgrade within the party in an accelerated manner and by permission and protection to seek rents from ordinary citizens and businesses while in power. In time, violent activists often graduate from the street alleys to the hallways of the parliament, manage and lead the new crop of young cadres, and of course peddle influence, while in power, to reap handsome financial rewards. Further, the political parties provide a vigorous defence and/or cover-up of their misdeeds, most recently illustrated by the denial of the ruling party affiliation of the Biswajit killers (bdnews24.com, December 10, 2012).

While supply and demand are necessary to explain violent activism, ultimately it is the financial dividend from governance power that makes the end to end business of politics a viable phenomenon in Bangladesh. This unholy business has taken a toll on the composition of the Parliament as well, tending to degenerate it into a "rich man's club" (p. 60, Rounaq Jahan and Inge Amendsen, 2012, The Parliament of Bangladesh: Representation and Accountability, CPD-CMI Working Paper 2). As incredible as it may sound, it is the miraculous pace of economic growth in Bangladesh that continues to boost the financial gains from governance power, the increasing gains also becoming necessary to sustain in opposition if and when needed. Alas, the ordinary citizens of Bangladesh, the Biswajits, have become unsuspecting victims of their collective economic success. Sadly, Biswajit's own hard work ended up powering the dynamics of violent activism that obliterated him.

To be sure, the people of Bangladesh are duly proud of a democratic and prosperous Bangladesh. But the fundamental building block of a civil and humane society is not its riches, it is not democracy either. Instead it is the rule of law that translates a hell of the survival of the fittest into a heaven of security for the weakest. The major political alliances, on their own, are not expected to become the protectors of law anytime soon. But if the history of Bangladesh repeats itself, both alliances have much to worry about in travelling along their law-as-we-like trajectories.

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Mo Chaudhury is a Professor of Practice in Finance at McGill University, Montreal, Canada.

 

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http://opinion.bdnews24.com/2012/12/11/law-enforcement-in-bangladesh/

 

Mo Chaudhury

Law enforcement in Bangladesh

December 11, 2012

Photo: bdnews24.com

The citizens of Bangladesh have much to celebrate in terms of cultural and linguistic freedom and miraculous achievements in terms of economic growth, literacy, health, education and diffusion of technology. But if ordinary Bangladeshis have been waiting for the cherished emancipation of mind (a la Robi Thakur) or sanctity of life and humanity (a la Nazrul Islam), unfortunately they just have to keep waiting. Meantime, their country is getting increasingly mired in the abyss of lawlessness in all forms, political and non-political crimes and violence, seething corruption, plunging morality, broken governance and self-serving politicking.

Is it possible to clean up such a gigantic mess? Yes, if only the Bangladeshis have the will to do so.

The four essential ingredients of law enforcement are: independence, resources, motivation, and (efficient) administration or management.

Independence: Absent the independence of the law enforcement agencies and the judiciary in all senses of the term, the ruling regime of any given time will legislate conveniently and enforce laws selectively to weed out opposition forces and to promote the interests of allies, and this will be done without judicial and law enforcement protection for the vast majority of citizens affected adversely and unjustly. Instead of bringing about this independence, ruling regimes in Bangladesh continue to exploit and abuse the lack of it.

Resources: Sufficient resources are necessary first for prevention and then for adjudication of unlawful acts. The size and strength of the law enforcement forces as well as strict and prompt adjudication of the unlawful acts are significant deterrents while offering worthy justice for the victims. Four types of resources are needed for this purpose: well-trained and sizable force of foot soldiers, capable managers/leaders, supporting physical infrastructure (arms, technology, facilities, vehicles, etc), and sufficient financial resources to fund the previous three.

What is sizable varies depending on the size of the population to be served, the geography of the land and the spatial distribution of the population mass, the current frequency, nature and severity of unlawful acts, and the targeted speed of improvement in the law and order situation. For Bangladesh, although a large and low income young population is its key resource base, this very critical and vast resource is widely exploited by political machineries and criminal gang leaders to outmuscle and/or sterilize law enforcement in committing a wide array of unlawful acts at the ground level. To deactivate and deter such practices, an unusually large, well-trained and well-equipped  law enforcement force is called for, given the gravity (kidnaps, murders, hijacking, torturing, controlling of strategic areas, institutions and processes, etc), the extent and the pervasiveness of unlawful acts. Dire circumstances call for drastic actions.

It is recommended that Bangladesh starts building a vast force of foot soldiers to reach a target of perhaps 100 law enforcement agents for every 1,000 residents. Very importantly, this force should be built wherever possible by attracting/drafting young members around the age of 18 to 30 years. Such a mega force will expedite the process of improvement (the speed of success will act as a significant deterrent as well) and turn the pool of recruits, the political apparatus and gangsters prey upon, against these very exploitative and infected organizations. Of course, this strategy will also generate much needed employment for millions of low income families.

The mega law enforcement force needs to be trained, equipped, inspired, directed, engaged and managed properly. Thus the complements of adequate physical infrastructure and managerial and leadership know-how will be vital. Further, the entire process of building and operating this force has to be as free as possible from political interference and influence. For these purposes, the building and operational leadership of the proposed mega force should perhaps be contracted out to an international consortium of countries with no participation from the immediate neighbourhood of Bangladesh. This will help procurement of donor financial resources needed to finance the venture as well as worldwide state of the art technology and know-how in law enforcement.

Motivation: Bangladeshis can ill afford to keep waiting for a motivational leader to lead the nation out of its severe moral decadence and beaten down governance. That leaves Bangladesh with non-inspirational motivation to work on. By and large this means the promise and delivery of a decent life for the foot soldiers and managers and their family members. Accordingly, the law enforcement forces need to be offered better than average economic benefits, educational and health benefits for the family members, social status via better job grades comparable to armed forces, employment security, career progress, and full force of protection of law and finance against powerful political and criminally engaged forces.

Administration: As the well-financed and well-equipped mega force start cranking the wheels of law and justice across the land, and as the transfer of foreign technology and operational management continues to flow in, it is only a matter of time that efficient indigenous administration will follow. While the public administration of Bangladesh has it share of governance problems, it is however an unproductive pastime at best to bash them for the widespread failures in law enforcement. They remain the solitary force of continuity in a nation marred by political upheavals and ceaseless turbulence, and they remain the apparatus of delivering services with so little resources and so little appreciation, financial or otherwise. For a better administration of law enforcement, transparency and accountability of public administration need to be enhanced, but the malignant practice of influence peddling by political regimes needs to be eradicated as well (M Chaudhury, How to establish clean governance, Financial Express, September 8, 2012).

To conclude, rule of law is of paramount importance to deliver the cherished land to the people of Bangladesh. This requires freeing the judiciary and law enforcement from the executive organs, and building a mega force of law enforcement that is well trained, resourced and motivated, and led by an efficient administration.

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Mo Chaudhury is a professor of Practice in Finance at McGill University, Montreal, Canada.

Thoughts on RMG Factory Fires

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Tuesday, December 11, 2012

OP-ED

Thoughts on factory fires

Mo Chaudhury

The recent tragic incident of factory fire in Ashulia has elevated long and widely held concerns about workplace safety in the RMG sector of Bangladesh. The purpose of this commentary is to explore the risks of such fatal events and how best to manage those risks.

Ashulia-like factory fires belong to the class of low frequency and high severity (LF-HS) operational risk events like earthquakes, hurricanes and terrorist attacks that can cause severe loss of life and damage to physical assets. They do not occur that commonly, but the consequences are fatal if and when they occur. In contrast, events such as mechanical failures, power outages, and work related injuries for individual workers are more commonplace but the consequences are not as severe.

Businesses typically manage operational risk in two principal manners. First, an operational risk control system is established to lower the chances of these events occurring in the first place and to reduce their potential severity. An operational risk committee oversees this process of measuring the risk on an ongoing basis, instituting physical measures and managerial action plans and controls, and monitoring the readiness and effectiveness of the overall risk control system. Second, since LF-HS events may still take place, businesses also purchase operational risk insurance to withstand such losses. Additionally, they often allocate and maintain operational risk capital as a buffer. The operational risk insurance and capital are funded solely by the business, and are different from work related compensation plans that cover contingencies (like accidental death or dismemberment) that are more commonplace, limited to one or at most a few employees in any one such event, and the employees typically contribute to such a plan.

Let us now review the Ashulia factory fire (AFF) from the above operational risk management perspective.

With more than 110 lives lost, the AFF is clearly one of the highest severity events in the worldwide RMG industry. According to Nilratan Halder (Financial Express, December 1, 2012), more than 200 people died over the last six years in Bangladesh and there were about 1,300 incidents in RMG factory fires. J. Ahmed and T. Hossain (Sri Lankan Journal of Management 14(1)) say that 263 people died in 9 RMG factory fires during 2001-2006. In contrast, factory fires are virtually non-existent in the RMG factories elsewhere including Vietnam and Nepal. Thus, the Bangladesh experience presents a lethal and uncommon combination of high frequency and high severity RMG factory fires. There is little doubt that this is primarily due to the lack of proper safety measures at the factories and the lax nature of enforcement of the mandatory safety standards by the government. In other words, prudent risk control, physical as well as managerial (RMG owners and related government agencies), is grossly inadequate.

While the nation and the families of the perished AFF workers grapple with the tragedy, the need for a national policy on operational risk control at RMG factories can hardly be overemphasised. A national policy should start with creating a National Operational Risk Board (NORB) with representation from the Parliament, related government ministries/agencies, RMG owners, foreign RMG clients, the RMG workforce, and home and foreign experts on operational risk management.

In addition to revisiting and resetting the proper safety standards, the NORB should set up the requirements of a mandatory operational risk control system at each RMG firm as well as at each factory that should be externally audited semi-annually if not quarterly by domestic and/or foreign firms qualified to do so. Much like the auditing of financial statements, no RMG firm or factory should be allowed to operate without due clearance from the external auditors as well as the NORB. NORB should also have a sub-committee responsible for developing and overseeing a plan of coordination and integration of the role and responsibilities of the pertinent government agencies including the areas of power, fire, water, labour, civil construction, roads and highways, health and medical services, and law enforcement.

While comprehensive and effective operational risk control is imperative in reducing the frequency and potential severity of factory fires, a fatal event like the AFF may still occur despite the best efforts. A principal concern in the aftermath of events like the AFF is adequate and immediate compensation for the families of the workers lost or injured. This purpose can be served well by the mandatory purchase of operational risk insurance and maintenance of a minimum amount of operational risk capital at the owner firms, both funded by the owner firm. To address moral hazard on the part of the owners, such operational risk insurance should have claim payout only to the families of workers (and not to the firm or its shareholders, creditors or clients) and the speedy disbursements of such funds should be overseen by the NORB.

To ensure compliance in this regard, forced reserving may be useful, whereby the Bangladesh Bank will withhold a sufficient amount of export revenue of an owner firm to pay for its operational risk insurance and to maintain the minimum operational risk capital. Since export revenues may be realised in creative ways, Bangladesh Bank should readily communicate to the NORB about any shortfall of required funds, and the NORB should then suspend the operations of a factory if the owner remains delinquent.

To conclude, as the nation grapples with the tragedy in the garment factory, it is important that a comprehensive national operational risk control policy and an operational risk insurance/capital programme are put in place as promptly as possible. This should lessen the exposure of the all important RMG sector to the high frequency high severity factory fires that continue to claim the lives of many workers, and could also materially hurt the vital export revenue due to client concerns about working conditions at the factories.

The writer is a Professor of Practice in Finance at McGill University, Montreal, Canada.

Email: mo.chaudhury@mcgill.ca,

E-mail: mochaudhury@gmail.com.

Election Alliances in Bangladesh: A Critical Review

 

http://www.thedailystar.net/newDesign/news-details.php?nid=257746

 

Saturday, November 17, 2012

OP-ED

Election alliances in Bangladesh

Mo Chaudhury

While there are many political parties in Bangladesh, two dominant election alliances (EA) have emerged since the 1991 election, led by the Awami League (AL) and its arch rival the Bangladesh Nationalist Party (BNP). The goal of this commentary is to explore if the EAs are a net plus for Bangladesh.

An EA should be differentiated from the formation of a coalition government when no single political party wins absolute majority in the general election. A coalition government is a governance coalition after the election and not an ex ante EA to compete in the election.

EAs can have major implications for election outcomes. Under an EA, effectively only one candidate is supported in a constituency by all the allied political parties. To the extent voter preference for a political party translates to votes in favor of its EA, an EA minimizes splitting of the votes for the allied parties. This enhances the chances of winning a given constituency by an EA candidate against the candidate of an opposing dominant political party or a competing EA. Thus, an EA system can make the electoral contests more competitive, make the parliament more robust, keep the governing party or EA relatively more accountable, and allow smaller parties to be represented in the parliament and in governance.

Importantly, however, the above EA benefits are expected in the presence of a single dominant political party or an EA already in place. In Canada, for example, during the 1990s, the Progressive Conservative Party literally collapsed and by default the left of centre Liberal Party became excessively dominant in national politics. The competitive fix came from the formal merger of the Progressive Conservative Party and the ultra-right Reform Party. Capitalizing on voter disappointments with the Liberals, the newly formed Conservative Party came to power, and using their latest absolute majority, is pushing through policies that could reverse many progressive achievements of Canada. As such, talks are now back in political circles to unify the left leaning parties. To summarize, the Canadian experience shows the downsides of a single dominant party and the benefits of an EA (merging of parties in Canada) in such contexts.

In contrast, in countries like Italy, Israel and Greece, there are numerous political parties that routinely win some seats in the parliament, no single dominant party repeatedly wins an overwhelming number of seats, and as such post-election coalition governments are a norm rather than an exception. Coalition governments in Italy and Israel are often unstable though and results in premature elections. While these democracies are fiercely competitive, the lack of assured continuity of a government and political gridlocks can be debilitating as has recently been observed in Greece.

Let us now evaluate the EA system in the specific context of Bangladesh.

First, there is no single dominant party in Bangladesh and no lack of competing political ideologies. Further, in the pre-EA elections in 1991 and 1996, there was no lack of competition, and a single party (BNP, then AL) won governing majority in each case resulting in stable parliamentary governments. Thus, there is no inherent need for EAs to make the elections competitive or to ensure stability in governance.

Second, the smaller parties have benefited the most from the EAs. Their representation in the parliament and their say either in governance or in EA positions on various issues have increased substantially. The disproportionate influence of the leftist parties on the AL-led EA and that of the religious right on the BNP-led EA can hardly be disputed.

Third, voters cannot choose any more between the stand alone views of AL or BNP, without yielding unintended support to either the extreme left or the extreme right. This resembles the US situation where a vote against the Democrats is a vote for the Republicans thus lending unintended support for the agenda of the extreme right groups that the Republicans need to court. Importantly, however, the US system of two equally powerful chambers of the legislature and the Presidency, builds in the much needed check and balance that is missing in Bangladesh since the winner EA in the parliament is in sole control of all organs of the government.

Fourth, the AL-led or BNP-led EA can form an overwhelming absolute majority government without the support of the majority of the voters. Thus, with no broad based electoral mandate, the winning EA can still bring about major and sweeping changes including constitutional amendments, and importantly it can do so without such changes being part of its election manifesto. The most recent example is the abolition of the interim Care Taker Government system by the ruling AL-led EA. Regardless of whether such changes are beneficial, the important point is that the EAs in Bangladesh expose the country to the risk of dramatic change in course with little support assured from the population.

Fifth, the parties not included in a coalition government do not typically have a unified opposition, but with EAs, the parties in the losing EA are by construction unified in opposition to the ruling EA. In the presence of two dominant political parties in Bangladesh, the marginal benefit of a unified opposition in the parliament is rather negligible. However, the unified opposition from the losing EA has traditionally led to much stronger anti-regime movements/agitations resulting in more frequent and widespread hartals, clashes, political violence, and disruptions in economic activities.

To conclude, with AL and BNP as the two dominant political parties, each allied with extreme partners in their respective EAs, the EAs appear to be a net negative for Bangladesh. With EAs, the extremist agenda, left and right, gains unwarranted leverage and can lead to polarization of the political landscape, moderate electoral choices are eliminated, the nation becomes exposed to dramatic changes in direction without a popular mandate, and the likelihood of the nation becoming hostage to disruptive political battles rises. It is thus recommended that the EAs are disbanded and banned in Bangladesh.

The writer is Professor, Practice in Finance, McGill University, Montreal, Canada.

Email: mo.chaudhury@mcgill.ca, mochaudhury@gmail.com.

http://www.thedailystar.net/newDesign/news-details.php?nid=256202

The Daily Star
Monday, November 5, 2012

OP-ED

Rohingyas and Bangladesh

Mo Chaudhury

The bouts of ethnic violence in the Rakhine region of Miyanmar since mid-2012 have once again triggered the attempted exodus of Rohingyas into Bangladesh. The purpose of this commentary is to explore key dimensions of the Rohingya tragedy and potential courses of action from the Bangladesh perspective.

First, the conflicting and growing strategic interests of the global power players in the land and sea area surrounding Myanmar (and Bangladesh) continue to prevent any strong independent action on the part of these players to bring about and enforce a mutually fair redress for the Rohingya trgedy. Such a redress would perhaps involve creating an autonomous Rohingya-majority territory in Myanmar carved out of north-western Rakhine with its political and governance structure similar to the territories of Canada and USA, for instance.

Second, the Government of Miyanmar (GoM) continues to deny citizenship to the Rohingyas claiming that the Rohingya ancestors, originating from areas now part of Bangladesh, unlawfully trespassed into and settled in the Rakhine region. The Government of Bangladesh (GoB), on its part, argues that it is an internal problem of Myanmar, and a more accommodative GoB policy regarding the Rohingyas would simply encourage continued governance failure in Myanmar.

Meantime, the tragedy continues to deepen with all of its manifold implications for Bangladesh, such as economic rehabilitation, cultural assimilation, risk of strengthening of anti-secular extremism, risk of counter violence against the Buddhists in Bangladesh, risk of infiltration of illegal arms and weapons, risk of border tension in case of Rakhine insurgency (of ethnic alliances of separatists) operating from within Bangladesh, risk of strengthening of separatist forces in the southeastern areas of Bangladesh, etcetera. The blame game (as much as the blames may be true) and the associated lack of commitment to the humanity of the Rohingyas do not seem like productive courses of action for Bangladesh.

Third, there is no legislation in Bangladesh specifically targeted at handling refugees or asylum seekers. Instead, the GoB relies on the 1946 Foreigners Act that grants it sweeping power. Further, Bangladesh is not a party to the 1951 Convention relating to the Status of Refugees and the 1967 Protocol. This legal void has provided utmost discretion to the GoB in dealing with the Rohingya refugees. For example, Bangladesh is yet to document/register the vast majority (221,000 out of the reported 250,000) of the Rohingyas already in Bangladesh, most of them since 1991-92.

Without any legal status, these Rohingyas do not qualify for any official humanitarian assistance and have been living in sub-human conditions. While respecting the international law of non-refoulement, Bangladesh did not expel the undocumented Rohingyas, but the 2012 actions of repelling the asylum seekers indicate a reluctance to respect this law going forward. Further, in November 2010, the GoB suspended the UNHCR programme for resettlement of Rohingyas abroad and has since rebuffed strong appeals from the UNHCR to revoke the suspension.

Granted that the internal security concerns of Bangladesh may be well-taken, the question is why twenty years (since 1992) is not a long enough period of sub-human living for the undocumented Rohingyas without access to lawful employment, education, health, freedom of movement, justice system and international assistance.

Fourth, the 250,000 Rohingyas in Bangladesh represent a tiny 0.17% of the country's population of 150 million, and only one-eighth of the annual growth (1.37%) of population. Further, if the documented Rohingyas are rehabilitated in low density areas, additional amenities and infrastructure needs will be minimal. With legal status, it is also expected that the economic productivity and consumption of the Rohingyas and the inflow of international assistance for them will rise. Thus, their registration is not likely to result in either a population burden or an economic baggage. Without documentation, however, not only the are economic benefits foregone, the Rohingyas may in fact become increasingly desperate and vulnerable to recruitment by criminals, extremists and political opportunists.

Fifth, there is a risk of ethnic clash and separatist turmoil if the Rohingyas are all rehabilitated in the south-eastern region of Bangladesh. For example, if all 250,000 Rohingyas are relocated to the Bandarban district, they will become a dominant ethnic majority there. Therefore security concerns warrant a spatially diversified rehabilitation, possibly dispersing a significant number of Rohingyas to the northern and western districts and perhaps the off-shore islands of Bangladesh.

Lastly, it is in the long-term interests of Bangladesh to be seen as a nation that genuinely cares about the sufferings of fellow human beings. Unbalanced concerns about internal security and geopolitics should not cloud the recollection of traumatic ethnic and political persecution of the Bangladeshis themselves in the not so distant past, nor should it be lost that a sufficiently large segment of the world was always there for Bangladesh whenever it needed economic and humanitarian assistance, especially at times of severe natural calamities. The care and assistance needed by the Rohingyas surely pales in contrast.

While mindless compassion can be reckless, so can be heartless pragmatism. Hence, it is a reasonable balance between the two that Bangladesh needs regarding the Rohingyas. Clearly the transition from defending minorities within own borders to accommodating minorities across the borders is fraught with unpleasant challenges, but continued deferral of taking up the challenges is not a sustainable choice either.

Such a recognition could perhaps start with: (a) unequivocal condemnation of the acts of violence in Rakhine as unacceptable by the GoB, civil society and other collective forums, (b) registration of the undocumented Rohingyas in Bangladesh, (c) cooperation with relief organisations to channel humanitarian aid to the Rohingyas in Bangladesh, (d) articulation and enactment of a comprehensive refugee policy, and (e) leadership by the GoB in orchestrating a multilateral alliance to address the Rohingya tragedy. In other words, a combination of unequivocal moral support, refuge and relief efforts within an internationally accepted legal framework, and mobilisation of interested powerful partners are called for.

The writer is Professor, Practice in Finance, McGill University, Montreal, Canada.

Email: mo.chaudhury@mcgill.ca

Any end to political blame game?

http://www.thedailystar.net/newDesign/news-details.php?nid=253659

Sunday, October 14, 2012

OP-ED

Any end to political blame game?

Mo Chaudhury

Political blame game is the practice of scapegoating the competing political parties for any failure or untoward event and unpopular outcomes in general. The purpose of this commentary is to explore why blame game continues to be a popular political trick and if there is a way to end its hold on politics in Bangladesh.

According to the Harvard Business Review Blog Network, researchers find that, in the end, blame game is not beneficial at the personal, group or organisation level. One explanation of this counterproductive behaviour is the virus of goal contagion, namely, one is driven to protect ego or self-image because others are doing the same. The prescribed remedial steps include constructive criticism, ownership of failure and learning from mistakes.

Given that the war rooms of political parties are quite astute, we would have observed more prevalence of such practices in politics if blame game were counterproductive in this arena. Instead, blame game has become the most anticipated strategy in politics perhaps because the electorate is not astute enough to see through the blame game maneuvers and/or not informed enough to determine true culpability, may view the blame game as a socially acceptable practice, and may not have a meaningful alternative choice (when all viable parties practice the blame game). The greater these electorate deficits are, the more aggressive the political parties may be in using blame game as a politicking tool, ultimately leading to a poor state of democracy and governance.

That blame game has taken a crushing hold on politics in Bangladesh with all of its ill consequences for the country is amply demonstrated by rampant blame and counter-blame by the ruling regime and the opposition alliance in the context of a series of recent controversies (Grameen Bank and Dr. M. Yunus, Padma Bridge financing), alleged scandals (railgate, Destiny, Hall-Mark and share markets scams), and crimes (Sagar-Runi murder, abduction of BNP MP Mr. Ilyas). However, the most blatant episode of blame game broke out following the September 29 Ramu-Ukhia incidents of violence against the Buddhist minority.

Let us explore the political landscape of Bangladesh that continues to permit and incentivise blame game even when it is utterly irresponsible, insensitive and disgraceful, like the latest one. First, despite steady strides in literacy and political awareness of the population, the vast majority of the electorate and even the grassroot party activists are still not savvy enough to decipher top level political maneuvers and theatrics. That a possibly fabricated blasphemous photo on Facebook succeeded in unleashing violence against the Buddhist community indicates that the electorate will remain quite vulnerable to manipulations like blame game for the foreseeable future.

Second, due to technological advancement and affordable access to communication networks (TV, mobile phones and internet), information now travels across the land at an unprecedented clip. Unfortunately, so does misinformation, making malicious campaigns (as witnessed in Ramu-Ukhia) and political spinning (like the ensuing blame game) more cost effective and time efficient than ever before. What is possible, however, is to leverage the same technologies to improve the transparency of governance of the state and that within the political parties and the judicial process.

The Padma Bridge financing crisis is a glaring example where inadequate and sporadic release of pertinent and often conflicting information has spawned a multilateral and global blame game that has been detrimental to the country's vital interest. Learning from that experience, a multi-party and multi-ethnic taskforce to oversee the investigation of the Ramu-Ukhia incidents can significantly improve the transparency, speed and credibility of the process, and thus save the victims and the population at large from the agony of a protracted blame game.

Third, blame game does appear to be a socially acceptable practice in Bangladesh. The political leaders and holders of high offices over many regimes have consistently declined to take ownership of their failures. Hitherto, no leader of a major political party has voluntarily taken the responsibility of a colossal electoral defeat and resigned, and no minister has yet voluntarily resigned either for massive governance failures or to make room for unhindered investigation of such failures.

Other efforts to cure the virus of goal contagion, such as constructive criticism, are also rather foreign to the political landscape of Bangladesh. Despite seemingly endless cycles of blame game and practically non-existent diligence to mitigate this infection, there is no electoral evidence that the population is sufficiently disturbed regarding this matter. Based on widely reported public sentiment, the Ramu-Ukhia centered blame game, however, appears to have shattered that complacency. If public outrage about this proceeds unabated, there is hope that blame games will finally start to recede.

Lastly, the trend of electoral alliances has practically confined the electoral choice to two grand alliances that are equally happy and mighty combatants of blame game. Since each knows that the other won't relent and there is no other viable alternative than these two grand alliances, neither has any incentive to stop blame game. In principle, an election act that prohibits electoral alliances (while permitting post-election coalition government in the absence of absolute majority) has the potential to dislodge the current grand alliances, and thereby to make room for political parties that can commit to healthier democratic practices and no blame game. But in reality, the prospect for such an act is quite slim since neither of the two grand alliances has any incentive to initiate such an act.

To conclude, the most promising path of making blame games unpalatable and politically unworthy to the political parties is for the people to remain united and unrelenting in expressing their disdain for the Ramu-Ukhia political blame game. If this blame game is not immoral, what is? If now is not the time to eradicate the virus of blame game in Bangladesh, then when is?

The writer is a Professor of Practice in Finance at McGill University, Montreal, Canada.

Email: mo.chaudhury@mcgill.ca.

Bangladesh Flag: Reviving History to Modernity

 

 

 

 

 

Reducing violence against minority

http://www.thedailystar.net/newDesign/news-details.php?nid=252710

Sunday, October 7, 2012

OP-ED

Reducing violence against minority

Mo Chaudhury

The September 29 incidents of Ramu and Ukhia are a clear reminder that the minority citizens of Bangladesh remain quite vulnerable to deplorable acts of violence even under a ruling party strongly committed to fighting religious or ethnic extremism. This commentary explores how best to reduce the future incidence of such heinous acts.

Violence in general is preponderant against citizen groups (for example, women) that are vulnerable to such crimes. The minority status of the religious and ethnic minorities makes them especially vulnerable, meaning that they are relatively more vulnerable than their majority counterparts. To illustrate this minority bias in violence let us use some hypothetical numerical figures, but the analysis and the conclusions below do not depend on the exact figures chosen. Suppose that the population of Bangladesh is normalised to 100, and say 80 are Bangali Muslims (B) and 20 are minorities (D). And say, in a year, a total of 40 citizens are victimised by violence. If there is no minority bias in violence, then we would expect 32 B victims and 8 D victims, in proportion to the population mix of 80% B and 20% D. Given the ugly reality of minority bias in violence, we would, however, expect more of the 40 victims to be D victims. A mild minority bias may lead to 12 D victims, indicating that 30% of the victims are minority citizens although they are only 20% of the population. With a severe minority bias, D victims may rise to 16 or 40% of all victims, twice their proportion in the population.

Now consider the situation where violence in general has risen so that a total of 60 citizens are now victims of violence in a year. If there is no change in minority bias due to a higher level of violence in general, we would now expect 18 (30%) D victims under mild minority bias and 24 (40%) D victims under severe minority bias. In either case, regrettably, there are more minority victims than before. But this increase in violence against minority is completely driven by the rise in violence in general and not because the minority citizens are relatively targeted more.

Aided by the above, some important observations can be made. First, with no change in attitude toward the minority (minority bias), violence against minority can be reduced significantly by vigorously arresting violence in general in the country, that is, by greatly improving the countrywide law and order situation and day to day security for ordinary citizens. In the above illustration, even with severe minority bias, reducing the incidence of violence in general from 60% to 40% cuts the number of D victims from 24 to 16. Here it is worth noting that the rise in violence against minority in Bangladesh since liberation may in part be due to an increase in the incidence of violence in general.

Second, significant improvements in security for minority citizens can be obtained by combining steps to reduce violence in general and special measures offering relatively greater protection for the minority. Thus, for example, with the lower incidence (40%) of violence in general, if the minority bias is reduced from severe to a mild level, the number of D victims will drop by 50% from 24 to 12.

Third, special motivational measures can reduce minority bias. These measures should include ceaseless public education and campaign to promote greater tolerance of competing views of religion and culture. However, a pre- or co-requisite for such measures is the assurance of freedom of expression, political or otherwise, and a culture of peaceful and legal, instead of violent and extra-judicial, resolution of conflicts of interests and opinions. Unfortunately, hopes are far fetched in these regards. Having said that, there is greater hope in an alternative motivational campaign, namely, to proclaim and promote a strong and pervasive sense of nationalistic feeling. In any political state, the greatest common denominator of citizens is their shared citizenship, and religious, ethnic and other identifications lead to increasing compartmentalisation and potential frictions. Thus, the best motivational healer of minority bias in violence seems to be an overwhelming sense of pride in and love for the land that both the majority and the minority share.

Fourth, motivational measures should preferably be supplemented by suitable legal deterrents to reduce minority bias in violence. One such legal measure could involve making the discriminatory (religious/ethnic) intent a count of criminal charge additional to the violence charge and having equal punishments for both charges. This way, a violent act with discriminatory bias would carry twice the punishment of one without such bias. Note carefully that the discriminatory intent/bias should be punishable both ways, majority crime against minority or minority crime against majority. As such, it should also help contain the risks of counter- violence and escalation in inter-group violence.

Fifth, special or targeted legal protection measures could include declaring the places of minority worship or cultural activities as national heritage sites and making the trespassing/vandalising of national heritage sites an additional (to general trespassing/vandalising) and equally punishable count of crime. It will of course be quite challenging politically for a democratically elected government to institute/legislate special protection for the minority citizens in this manner as the majority Bangali Muslims may feel reversely discriminated against. This is especially so if the special protection for minority is not accompanied or preceded by a significant improvement in security for ordinary citizens.

To conclude, it seems the best way to reduce violence against minority citizens is to improve security for ordinary citizens, promote freedom of expression and tolerance of competing views in all spheres, pass laws that make discriminatory intent behind a crime heavily punishable, and above all cultivate strong nationalistic pride and love for the country that once was earned by the promise of sanctity of life and liberty for all.

The writer is Professor of Practice in Finance, McGill University, Montreal, Canada.

Email: mo.chaudhury@mcgill.ca, mochaudhury@gmail.com.,/h5>

 

http://www.thedailystar.net/newDesign/news-details.php?nid=252022

 

Tuesday, October 2, 2012

OP-ED

How unholy is foreign aid?

Mo Chaudhury

Critics of foreign aid (FA) often argue that it is primarily used by the rich nations as an influence peddling mechanism to augment the interests of the citizens and organisations of the donor countries at the expense of the recipient countries. The popularly alleged partners of this unholy FA alliance are the donor governments, institutions like the World Bank, IMF and the UN, international NGOs and large multinationals. Political parties in the recipient countries are often labeled as agents of the FA alliance by many of their citizens, intellectuals and media.

This commentary attempts to evaluate the merits of this perception of FA being unholy or immoral. The focus here is on whether FA is contrived as an unholy endeavour, not the extent to which FA has historically helped or harmed the recipient countries. There are several angles to look at this issue.

First, except in unusual circumstances such as Iraq and Afghanistan, FA is not forcibly parachuted into the recipient countries; by and large it is the recipient countries that seek out FA.

Second, critics may argue that the alliance manufactures a crisis environment or a pretext in general, that forces a recipient country to request and accept FA. This could indeed be the case for achieving geo-political objectives of mighty or aspiring donor countries. In such instances, FA can be termed unholy if the geo-political outcomes are detrimental for the recipient country. There is nothing unholy about the manufactured pretext if both the donor and the recipient ultimately benefit from the geo-political outcomes.

Third, it is important to keep in mind a framework of mutual benefits for the parties to an endeavour. One-directional flow of benefits is inherently unsustainable in the long term, especially when resources are scarce. As such, that the FA alliance may seek to harness benefit from FA for their stakeholders is rational, and should be expected instead of suspected or despised. After all, FA transfers to the recipient country imply foregone opportunities (such as curtailing budget deficit) in the donor country. What could be truly at stake is the sharing of the long-term benefits of FA between the recipient and the donor countries. As a matter of practice, the long-term benefits for the donor countries are rarely stated or even discussed in FA arrangements. This lack of full disclosure permits the critics and political opportunists to paint FA as unholy endeavours with hidden agenda. Importantly, however, that the agenda of long-term benefits for the donor country is not being delineated does not make the offering of FA unholy in any way.

Fourth, it is true that there can be collusion between the international agencies and the rich donor countries funding these agencies. But this is known, rational and expected. Doesn't it make sense that the donor countries have a major say about the FA operations of the agencies they fund? Thus, for example, suppose the major donors ask the WB to cancel a previously approved loan to Bangladesh because of corruption allegations. Is this immoral? Not really. Governance is a major concern everywhere and it can only be beneficial for the people of Bangladesh if the WB uses the FA window judiciously to help improve governance atmosphere in Bangladesh.

Fifth, multinationals do profit from FA through consulting, banking, construction, et cetera, in the process of implementing FA funded projects. In most cases, the multinationals obtain these businesses through competitive bidding process and quite often they seek the services of local lobbyists and partnership of local firms. As long as the multinationals carryout these activities in a legal manner and within the stipulated conditions of specific FA ventures, there is nothing unholy about it. In fact, there is a transfer of technology and know-how from the multinationals to the recipient country. It is true that in some cases, the donor countries may insist on the employment of specific firms for FA projects. But in those instances, it is generally because the technological information is very sensitive and/or its transfer or leakage may pose a security risk, as in the case of nuclear power plants.

Sixth, unlike the multinationals, the NGOs are non-profit organisations. As they carry on their development work in the recipient countries, their mandate may require them to promote specific types of economic or social practices and institutions. Critics argue that the preferences of the NGOs lead to transformation away from the traditions of the recipient country. Yes, they can and yes, they do. The important thing, however, is that none of this is done by compulsion, all NGO activities take place upon the approval of the government of the recipient country and within the laws of the land, NGOs are not making any money from such activities and there is no owner of NGOs. They raise a significant part of their FA funds from the well-meaning citizens across the world including those from their home base or donor country, and the operations of NGOs create local employment and transfer of technology and know how. So, what is unholy about the operations of the NGOs?

To conclude, there is not much that is unholy or immoral about FA. So long as the FA activities are mutually consented to, respect the laws of the land and the terms of the contracts, and are not designed to benefit the donor countries and institutions at the expense of the recipient country counterparts, the perceived unholy alliance is just that, imagined, not factual, and the allegations are likely spawned by political opportunism or an inherent philosophical intolerance for foreign practices and institutions.

The writer is a Professor of Practice in Finance at McGill University, Montreal, Canada. Email: mo.chaudhury@mcgill.ca

Padma Bridge Financing Stalemate in Retrospect

http://www.thedailystar.net/newDesign/news-details.php?nid=251360

 

Thursday, September 27, 2012

OP-ED

Bridge financing stalemate in retrospect

Mo Chaudhury

In its September 20, 2012 statement, the World Bank (WB) expressed its intention to reinstate the previously cancelled Padma Bridge (PB) loan subject to a series of measures agreed to by the government of Bangladesh (GOB). At this critical juncture, it is worthwhile to reflect back on the preceding stalemate between the WB and the GOB so that similar pitfalls can be avoided in future.

The PB has the potential to significantly expand and accelerate the pace of productive activities in the country, especially in the south central region. Politically, construction of the PB would fulfill a key election promise of the current governing party. For the WB, the PB would be its largest ever infrastructure project and could expand its future development activities in Bangladesh. It is thus puzzling that the differences between the two quarters were not ironed out for so long. So let us try to understand the critical elements in the making of this stalemate.

First, once the alleged corruption schemes were brought to the attention of the WB and the RCMP of Canada concluded that the allegations were credible enough to merit a trial, the WB had to cancel the PB loan and could not afford to reinstate it as the GOB did not quite fulfill the stipulated remedial actions. Otherwise, the WB would be violating its own governance policy, creating a bad precedence of lax implementation of its governance standards, and also facing severe backlash from its governance-weary major donor countries.

Second, a scheme to engage in corruption is not an act of legally punishable corruption according to the operational definition of the GOB. As such, the prime minister and some GOB officials believe that no corruption was perpetrated since no bribe actually changed hands. However, any corruption scheme by itself is considered a legally punishable crime by the WB and its major donor countries.

Third, the WB publicly encouraged the GOB to release all of their shared information and communications, but the GOB released only some of its communications to the WB and none from the WB to the GOB. The often changing and conflicting statements of the GOB ministers and officials only deepened this dire information crisis. Consequently, instead of standing firm and united behind a consensus, the nation seemed more polarised and fractured than ever before. From a negotiation point of view, the credibility deficit of the GOB's position and actions loomed large in favourably reversing the hardened negative opinion of the major donor governments and hence the loan cancellation decision of the WB.

Fourth, the GOB followed an incremental and minimalist approach to address the concerns of the WB, perhaps believing that the WB stipulated a set of conditions that was broader than it was ultimately going to settle for. Also even a partial enactment of WB's recommended set of actions was likely seen by the GOB as over-accommodating given its operational definition of corruption. Further, perhaps the GOB felt that implementing the entire set of actions prescribed by the WB and doing so at once in a prompt manner might unduly extend the reach of external interference in the internal affairs of Bangladesh. As the events unfolded, it was apparent that the GOB grossly miscalculated the resolve of the WB in pursuing the entire set of remedial conditions.

Fifth, the GOB followed incoherent and sometimes quite contradictory paths of managing the PB financing crisis, for example, seeking other development assistance, self-financing, partnership with China and/or Malaysia, and on-again and off-again pursuit of reinstatement of the WB loan. Perhaps the GOB wanted to keep open alternatives routes to ultimately financing a PB, if not the PB. The inevitable consequence, however, was an overall sense of confusion, a lack of credibility for the restarted negotiations with the WB, and a widely shared perception that the government was in disarray.

Sixth, many in Bangladesh believe that the WB had an ulterior motive behind its PB loan cancellation. Among the competing theories, the one that became most popular and enjoys the support of the PM is that the foreign friends of Dr. Muhammad Yunus were exacting revenge for what they perceived to be a grossly unfair treatment of the Nobel laureate by the PM and her government.

Even if the revenge theory were true, it is unfathomable how such accusations by the GOB leaders could help the reinstatement of the PB loan and future economic interest of Bangladesh. Further, with no remedy for the perceived unfair treatment of Dr. Yunus, the GOB's recent Grameen Bank Ordinance could have only hardened the stand of his foreign friends on the PB loan.

Now, for the revenge theory to be valid, Dr. Yunus would have to promote the political and/or business interests of his foreign friends controlling the WB affairs. This sounds rather absurd. No political regime has ever complained about him acting to enhance the interests of any political party or ideology. Financially, microcredit institutions like the GB are arch competitors of the large multinationals and financial institutions based in the major donor countries funding the WB. Further, the social business model of Dr. Yunus could only mean stiffer competition and lower profits for the multinationals and big businesses in those countries. Thus, the Dr. Yunus revenge theory lacks a defensible foundation and of course tangible evidence.

To conclude, it is hoped very much that the above pitfalls in managing the PB loan crisis that led to the nearly fatal stalemate will be avoided in the days to come now that the WB has revived the PB financing deal.

The writer is a Professor of Practice in Finance at McGill University, Montreal, Canada. Email: mo.chaudhury@mcgill.ca

Solution for Governance Problem in Bangladesh

http://www.thefinancialexpress-bd.com/more.php?news_id=142652&date=2012-09-08
How to establish clean governance
Mo Chaudhury

Since Bangladesh emerged as a new nation in 1971, it has made enormous strides in terms of economic advancement during the last four decades. This feat is rather impressive given that political violence and instability gripped the country for most of this period and show no sign of abatement anytime soon. Unfortunately, a very poor record of corruption, violence and human rights abuses continues to tarnish the image of Bangladesh and poses a significant risk to harnessing the country's explosive development potentials. While a multitude of toxic factors, including some external ones, might be interacting to result in such degradation, by far the most recognised and detrimental one is the widespread and chronic failure in state governance perpetuated by severe moral decadence across the entire spectrum of citizenship, but more fatally across the hierarchy of political parties.

Undeniably moral decadence and the resultant governance failures also permeate the critical machineries of public administration, law enforcement and judicial system. But in the end, the buck stops at the top in a democracy, it is the senior leadership of the political parties that set the de facto moral standards for the country as a whole. The probing question is what is it they can do to turn around the situation.

Bangladesh is not suffering from a dearth of civil and criminal laws; it is the rampant violation and politically motivated abuse of those laws without sufficiently adverse legal consequence that is handicapping the country. It stands to reason that the foremost thing that any ruling party can do is to eradicate the culture of influencing the actions of the law enforcement forces and the courts. The problem, however, is that the competing parties may not follow the same clean route if and when they come to power. This is because there is little legal downside, if at all, to unduly influencing the law enforcement forces and the courts. Based on historical experience, there does not seem to be any longer term electoral punishment either, as the resources garnered and the influences bought during the ruling time appear to be mighty enough to outweigh the negativity of the transgressions. In fact, arguably, in the absence of credible commitment from the competing parties, transgression could be even optimal to compete effectively in the future electoral cycles and to withstand politically motivated prosecution, legal or otherwise, in case of electoral loss. To make things worse, Bangladesh regimes, democratically instituted or not, are prone to making constitutional amendments for the sake of political expediency, in some cases only to be reversed or declared illegitimate by another regime. The prospect of such constitutional piracy greatly adds to uncertainty about the constitutional environment within which a party, if dethroned, would have to reposition itself in future.

To summarise, the crux of the clean governance problem is that currently there is no credible mechanism for the political parties, ruling and opposition, to commit to clean governance. Any such mechanism should be such that both the ruling and the opposition parties find it credible in the sense that future transgression by the competitor, when ruling, appears impracticable or at least very unlikely.

One such mechanism to consider is for the ruling party (alliance) to legislate an act akin to the following.

Clean Governance Bangladesh (CGB) Act

A. Make a constitutional provision that the Home and Justice Ministries will be led by elected members of the main opposition party in the legislature.

B. Make a constitutional provision that the constitution can be amended only through 60 per cent+ support in a referendum that must have participation rate of 60 per cent+.

C. Make a constitutional provision that only democratically elected parliamentary governments can call for referendums on constitutional amendments.

Once the ruling party enacts CGB, by virtue of Part A, both ruling and opposition parties know that the next electoral defeat would place them in control of the key ministries of home and justice that the winner cannot rely upon any more to get away with influence peddling and corrupt practices in general. The defeated party, that is, the post-election opposition party would now enjoy better protection against political prosecution by the ruling party, and may even try to engage in influence peddling while in opposition. This latter prospect, however, does not seem promising for the opposition since all other (than home and justice) ministries and the legislature will be controlled by the ruling party, and these ministries offer the vast majority of financially and politically rewarding opportunities for influence peddling. On the downside, administrative stalemates may ensue if the ruling party passes laws that the opposition refuses to enforce and the courts are reluctant to uphold. But if the passed laws are favoured by the electorate at large, this downside should be limited since the opposition would clearly be held accountable for not respecting the wishes of the electorate.

An unpleasant and challenging problem may arise if the opposition decides to use the home and justice ministries to initiate new and/or to restart previously stalled investigation and prosecution of alleged malpractices undertaken by the ruling party prior to the CGB Act. To address this problem, the CGB Act may be extended to include a temporary clause that would constitute a special investigation committee of non-active law enforcement officials and a bench of retired judges, agreed upon by both the ruling and the opposition parties, to handle the alleged infractions committed by either party prior to the CGB Act. Along this line, some may argue for replacing Part A of the proposed CGB Act with a Caretaker Government (CTG)-style alternative, albeit with a very limited scope, whereby the home and justice ministries are headed by non-elected and non-partisan ministers that are acceptable to both parties. But such a CTG-style alternative to Part A seems problematic in several ways. It is not in the tradition of parliamentary democracies where the ministers are members of the parliament, the chosen non-elected ministers will not be politically accountable to the electorate, and it is extremely difficult to find ex-ante non-partisan (and competent) persons, acceptable to fiercely contestant parties, for the said ministerial positions, and then to assure non-partisan performance on a continued basis.

Part B of the CGB Act is intended to ensure that, once CGB is enacted, ruling parties cannot grab back the critical home and justice ministries and make other constitutional amendments that easily in future. In addition, Part C will not permit non-elected regimes to change the form of government away from parliamentary democracy and thereby assume sweeping powers. The two 60 per cent+ thresholds would make sure that any constitutional amendment is based on a referendum where significantly more than half of the electorate voice their view and a significant majority of the participating electorate is in favor of the proposed amendment. There is nothing magical about the number 60 except that it seems reasonable to use thresholds that are greater than 50 but are not too high such as to make constitutional changes practically impossible or irreversible.

Together Parts A, B and C of the proposed CGB Act provide a very clear and concise framework whereby the contesting political parties (or alliances) can credibly commit to stopping the cycle of governance malpractices that is destroying the moral fabric of the nation and holding back the attainment of its fullest advancement potential. This framework is not perfect - no framework is - but at the very least it could be the basis of a permanent or long-term solution to the fatal governance illness Bangladesh is suffocating from.

One last impediment to this solution is the lack of incentive for a ruling party to enact the CGB if it foresees winning the next electoral contest since in that case it can continue to use governance malpractices to its advantage at least until toward the end of the projected mandate.

This suggests that, failing a yet-to-be-seen overarching conviction to fix the governance problem, realistically the best prospect for enactment of a CGB-like act is a situation where the ruling party is not quite confident about winning the next contest and/or foresees turmoil that could once again derail Bangladesh from the trajectory of parliamentary democracy. Only time will tell how long the people of Bangladesh will have to suffer before that moment arrives.

The writer is a Professor of Practice in Finance at McGill University, Montreal, Canada. mo.chaudhury@mcgill.ca 

The Grameen Bank's Unique Organizational Form

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Errata: "GB could sell part or most of the 60 per cent remaining (after the GoB's 40 per cent) ownership stake .."

It should be: "GB could sell part or most of the 40 per cent remaining (after the GoB's 60 per cent) ownership stake .."

http://www.thefinancialexpress-bd.com/more.php?news_id=141943&date=2012-09-02

The Grameen Bank's unique organisational form

Mo Chaudhury

A recent ordinance of the Government of Bangladesh (GoB) to gain more control over the appointment of the Managing Director of the Grameen Bank (GB) has set off a furious worldwide debate about the legitimacy and the implications of the move for the future of the Nobel winning institution. The control move has assumed much importance since it is preceded by the removal of GB's Nobel-winning founder and long time Managing Director Dr Muhammad Yunus using a retirement rule that existed for long but was not applied until now. At the heart of the debate is the unique organisational form of GB and the role this uniqueness played in its widely admired achievements. A short digression in this regard is therefore very useful.

Is GB a government institution (not seeking profit) like the Bangladesh Bank (BB)? Is it a government-owned corporation (not seeking profit) like the Investment Corporation of Bangladesh (ICB)? Is it a public enterprise (government owned but profit seeking) like the nationalised banks? Is it a shareholder-owned (seeking profit, shares may or may not be listed for trading) corporation like the private sector banks? Is it a non-profit private sector organisation like the non-governmental organisation (NGO)-type microfinance institutions? Is it a cooperative bank? Is it a mutual bank?

The answer is none of the above. GB has a unique hybrid form that has elements of different types of organisations. GB is profit seeking and shareholder owned organisation like a public enterprise and the private sector banks, but the GoB has only 3.0 per cent ownership (unlike a public enterprise) and GB is not an incorporated business with limited liability for the shareholders (unlike the private sector banks). Like the cooperative and mutual banks, GB's member/borrowers are its main clients and depositors. But GB's profits are not normally passed on to the member/borrowers in the form of reduced borrowing rate or increased deposit rate or cash dividends (unlike a cooperative bank) and GB has non-member depositors and the GoB as part owner (unlike a mutual bank). In sharp contrast to the above profit-seeking corporate and membership-oriented cooperative/mutual character, GB shares a very important feature with government institutions like the BB and the ICB, namely, GB was created in 1983 by a special act (not under a general act) that conferred important governance and operational control rights to the GoB, much in excess of and unrelated to its ownership proportion.

It is worthwhile to explore at this point the implications of the unique hybrid form of GB as an organisation. The cooperative/mutual/NGO like features of GB kept the central focus of GB activities on the interests of the member/borrowers rather than profit maximising non-client shareholders. However, to do this with no initial deposit and capital contribution by the member/borrowers, to expand the membership significantly, and to offer more and better services, GB needed to raise a large amount of funds at a low cost of funding during the early years. This is where the special nature of the GoB sponsorship and GB's corporation like ownership structure played a vital role. In 1983, when GB was formed, the GoB injected equity capital in exchange for about 60 per cent ownership with the remaining 40 per cent allocated to the member/borrowers. The nationalised banks were instructed to provide loans to GB, and GB raised additional funds from international sources primarily in the form of loans, all at low interest rates as the 1983 GB Act essentially offered guarantee for GB liabilities by the GoB. It is to be noted that as of 1983 it was not yet proven that the microfinance model of Dr Yunus would be viable with a large number of member/borrowers with no collateral and equity of their own. The principal asset in the balance sheet of GB was the loans to its member/borrowers that are of poor quality by normal credit standards and as such the credit worthiness of GB to raise funds was of poor quality as well.

In other words, absent the GOB's partial ownership and its guarantee to backup GB loans, it is quite doubtful that GB could raise at the time the necessary funds at a low cost, the low cost being necessary to cover the high administrative costs of the microfinance model while keeping the interest rate at reasonable level for loans to the member/borrowers. While GB could sell part or most of the 60 per cent remaining (after the GoB's 40 per cent) ownership stake to local and foreign institutional investors, such an action would have taken away the majority representation of the member/borrowers in the Board of Directors and hence overall management of GB, very importantly including the selection of the Managing Director of GB. Without the majority representation by the member/borrowers and the selection of the Managing Director by the Board of Directors and not the Chairman, as is typical in a private corporation, one has to wonder whether GB's visionary founder-leader Dr Yunus could have continued as the Managing Director for as long as he did and as such whether GB would have turned into one of the most successful financial institution in the history of banking as it admirably did.

In this context, it is very important to recognise the very positive role the various regimes of the GoB have played, until now of course, in the governance of GB. Interestingly, the positivity comes from a historically passive, but facilitating, role of the GoB. By and large, successive regimes of the GoB have accommodated the various statutory changes requested by GB, including the crucial one that allowed GB to become a depository institution that can accept deposits from non-members as well. On the operations side, the GoB regimes permitted GB to expand its portfolio of services and investments without much of a hitch. In a nut shell, the GoB regimes awarded Dr Yunus utmost flexibility in building the world acclaimed institution that GB is today. Importantly, this flexibility included the continuation of Dr Yunus as the Managing Director beyond the stipulated retirement age for public employees although it remains controversial whether Dr Yunus was legally a public employee. In fact, the historical role of the GoB in the development of GB constitutes an exemplary case of optimal level and manner of government intervention in an otherwise free enterprise system. It has indeed been a virtuous trinity for socio-economic development, a path breaking concept of enterprise, a visionary leader and successive government regimes that passively facilitated the development of the enterprise, as and when needed, instead of actively governing or managing it.

In the backdrop of this history-making virtuous trinity and with the enforced departure of GB's visionary leader, the latest ordinance of the GoB to empower the government appointed Chairman of GB (instead of the Board of Directors) to select its Managing Director can only loom monstrous. Not only the move disenfranchises the 8.3 million poor and mostly female members of GB who now owns 97 per cent of GB, it represents a radical departure from the historical passive and facilitating role of the GoB in the management and governance of GB. Inevitably someday someone had to step into the shoes of Dr Yunus, and it is also entirely possible that the next GoB (via the Chairman) selected Managing Director will be the best qualified leader available, and both the GoB and the new Managing Director would have the wisdom of not toying with the proven and time tested business model of GB. But that possibility is just that, not a guarantee, nor even a reasonable expectation.

This is because the unique form of GB has been changed drastically by the latest ordinance since the GoB has effectively assumed operational control of GB as in the case of the public enterprises. As worldwide history would have it, enterprises operated by governments are rarely the most successful ones. Considering the dismal record of the GoB operated enterprises in particular, all well-wishers of GB, especially the vast army of member/borrowers, have good reasons to be terrified about the future of GB. Even greater than the risk of poor management by the GoB is the risk of instability in the GoB management goals, principles and priorities as the GoB regimes change or the preferences of the same regime shift. As a matter of fact, the latest ordinance itself demonstrates how the preferences of the same GoB regime can change abruptly and dramatically.

In this context, one argument to justify the assumption of operational control by the GoB is that, in the absence of Dr Yunus, the nine representatives of the member/borrowers (in the thirteen-member Board of Directors including the GoB appointed Chairman) do not have the necessary qualification and wisdom of making important decisions such as the selection of the Managing Director. And this could indeed be the case with a specific set of the nine representatives. However, such possibilities always exist in any shareholder owned corporation anywhere in the world where the Directors are elected by the shareholders. If at all, the representatives of the GB member/borrowers perhaps command more direct experience and knowledge of the micro level challenges and prospects of the microfinance bank than the elected directors in a typical corporation. Further, in countries with poor literacy rate like that of Bangladesh, democratic governments are elected by the popular support of voters who do not have any more qualification and wisdom than the member/borrowers of GB.

Shouldn't this be taken to mean that the collective wisdom of a large body of electorate, albeit of questionable wisdom at the individual level, is a better choice than the greater individual wisdom of a select few?

To conclude, the unique institution of GB is no more. The member/borrowers and the people of Bangladesh are left helplessly pondering if their prized institution could remain the pride of the nation and for how long.

Mo Chaudhury is Professor of Practice in Finance at McGill University, Montreal, Canada. His 27-year experience includes teaching and research in finance at reputable universities in Canada and USA and financial risk management of two large financial institutions based in USA.

mo.chaudhury@mcgill.ca

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