Bangladesh needs root and branch reform of local and central government structures

Bangladesh’s parliamentary democracy, in addition to being continually wracked by upheaval, is seemingly unable to deliver social welfare, environmental protection, and economic opportunity to its citizens. Some might call it a failing state.

In fact, when US secretary of state Hillary Clinton visited Bangladesh in May 2012, she was not shy (and received local media criticism) in her strong condemnation of the Bangladeshi prime minister Sheikh Hasina’s attempts to investigate – some have said persecute – Grameen Bank and the Grameen network of social business.

At the same time, Clinton noted the country’s need in general for greater “rule of law”.

“We are betting on Bangladesh,” Clinton said. “That’s why it’s very important to us to continue to urge the hard decisions that are necessary for rule of law, for transparency.”

But Bangladesh seems unable to make those hard decisions, seeing the issues from a different perspective.

It wasn’t until 1994 that the Bangladesh Companies Act (BCA) set a general framework for corporate financial reporting (with no provisions for social or environmental performance included). A code of corporate governance drafted a decade later in 2004 is voluntary. Except for a BCA requirement for companies to report expenditures on energy, any social and environmental reporting companies might decide to do is entirely up to them.

Bangladesh has experienced continual political unrest during its 40 years of independence. During a military-backed “caretaker” regime of 2007-8, some promising legal reforms and attempts to tackle corruption were introduced: the judiciary and executive branches of government were separated, and a round-up of officials and business leaders led to many convictions for shady dealings.

By 2009 the Right to Information Act was heralded as the road to a free press and the Consumer Protection Act as key to basic consumer rights. A 2010 Whistleblower Protection Act was also lauded as important to curb corruption.

Good first steps, but a lack of legal enforcement (the police force is considered the most corrupt of Bangladesh’s government entities) makes the non-profit CSR Bangladesh ruefully note the country has a very “poor climate” for corporate responsibility.

Top-down corruption?

In practice, say observers, Hasina’s government functions more as a top-down autocracy (with one strong opposition party) than a democracy. A majority of the population sees the government as corrupt, and fears the police as the most corrupt organisation of all.

Local jurisdictions (called Union Parishads) are less local governments and more service delivery agencies, exerting scant control over social programmes, and without resources to evolve new, better services.

Instead, Bangladesh’s elite and its government exert considerable control over programmes, as well as over the country’s natural resources, and currently do not seem interested in shedding light on their own affairs or those of a tight ring of family-owned businesses. It is only external pressures of a globalised economy that have brought corporate responsibility efforts as far as they have come.

The flipside of the poor political climate is that civil society has not evolved sufficiently to put pressure on the government. One of the few tools available to citizens has been industrial action, which Bangladeshis continue to use frequently to express their dissatisfactions.

But Akbar Ahmed Haydory, a lecturer at Brac University, says strikes only paralyse and stymie governance improvements.

“In my opinion strikes are just a manifestation of bad governance in the same way corruption is,” Haydory argues. “A stable, participatory, and consensus-oriented functional democracy is the needed condition.”

Bangladesh is locked in a classic chicken-and-egg situation: without democratic institutions civil society has an unsteady footing, but without civil participation government edges away from accountability. And business is left without effective stakeholders.

“Most businesses’ corporate responsibility practices don’t rate highly,” says the University of Malaya’s Syeda Parnini. “No level of corporate responsibility style reporting is mandatory, and the absence of legal requirements is the main reason companies are not disclosing. The government should develop a strict legal mechanism by adopting ethical policies or codes of conduct that say how the corporate sectors should behave.”

How this might come about is still unclear, however. Saima Ferdous Chowdhury, a doctoral researcher in corporate governance from the University of Birmingham, and Christine Mallin, professor of corporate governance and finance director at the centre for corporate governance research at Birmingham Business School, suggest it will have to be via a holistic approach and a true understanding of how reforms could be implemented across Bangladeshi society.

Climate leadership

Meanwhile there are a few government initiatives worth underlining.

First, Bangladesh’s climate change adaptation is, according to Saleemul Huq, a member of the UN Intergovernmental Panel on Climate Change, the best in the world, and the government can take some credit.

Sheikh Hasina sees Bangladesh’s contribution to causing global warming as tiny, while the consequences it faces are dire. Thus, she is continually pressing the global community to come forward to help with money.

In the meantime, the country has developed a climate change strategy and action plan, built on six pillars – five of them related to impact management, and the other to low-carbon development. In 2010 the government created a climate change trust fund, allocating $300m to it in two years.

The government has established a number of projects – diversifying aquaculture, improving water management and rainwater harvesting to deal with uneven availability of water, and using new strains of heartier rice – in order to build resilience to the increased severity of storms to the country.

Bangladesh’s environment minister, Hasan Mahmud, says the government has made halting deforestation in coast areas a top goal, changing its forest management systems.

But while the government has many plans, it is trying to get money to fund the initiatives through the international aid community, rather than through legislation and taxation, enforcement of laws, and partnerships with local NGOs and businesses.

A final area in which the Bangladesh government has made strides is renewable energy. Improving the country’s energy supply is an imperative – the government itself stymied new electricity connections for residential and business customers for nearly a year because of supply shortages during 2010 and 2011.

The government has formed the Infrastructure Development Company Limited (Idcol), a financial institution, to develop solar systems and help with installations – already 1.3 million Bangladeshi homes have installed solar with Idcol’s help. Bangladesh has set itself the goal of having 500MW of solar online by 2015, ten times the amount in early 2012. 

The big issues remain

Of course, these good projects do not impact on the political leadership’s core governance, accountability, corruption, and transparency issues. Neither does it lend stability in a country that is not yet 50 years old and still at the mercy of regular political turmoil.

Akbar Ahmed Haydory of Brac University explains: “The lack of trust and respect between the two [political parties and their leaders] has infected almost all of our institutions. Professional bodies – journalists, lawyers, doctors, business forums – are all divided along respective party lines. This bipolar situation is the outcome of a lack of democracy with the two major political parties.”

Hasina doesn’t see the country she governs this way. At a May 2012 forum, Hasina was reported by local newspaper the Daily Star as saying that Bangladesh has successfully cast off former negative images of terrorism, militancy, corruption, and even the perception it is plagued by cyclones and floods. Its “democratic processes” are the reason it has been able to do so, she said.

The desire for strong rule of law and rules-based markets is to some degree an Anglo-American precept. But Chowdhury and Mallin say Bangladesh’s “entire governance system” is dysfunctional, so broken that no single code or law could improve the governance standard. Instead, cultural, educational and ethical shifts are needed, they say.

As most of the pressure thus far to embrace corporate responsibility and its accompanying values has come from outside Bangladesh, in large part from the international garment and banking industries, perhaps continued globalisation will have to be counted on to bring the necessary cultural and ethical changes.

It could be considered a bitter irony or a sign of hope that just last month Bangladesh businessman Latifur Rahman received the Oslo Business for Peace Award 2012. Rahman’s achievement, it seems, consisted of the following: his companies have clean tax records; one company, Transcom Group, pays the highest corporate tax in Bangladesh.

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