Photo: A Bangladeshi policeman (L) looks on as government party
activists (R) wield sticks against activists of the Bangladesh National Party
in Dhaka on Jan. 5.(HASAN RAJA/AFP/Getty Images)
Widespread violence and strikes across Bangladesh will soon enter
their third month, extending a stranglehold on the economy that has cost the
country billions. The world's second largest ready-made garments exporter,
Bangladesh began the year courting investment to diversify its primarily
textile-oriented manufacturing base to include low-end electronics and
automobile assembly. But opposition political forces led by the Bangladesh
Nationalist Party began an extended campaign of social unrest following the
anniversary of last year's disputed Jan. 5 elections. The military, which has
been the historical mediator of Bangladesh's deep political divisions, has
repeatedly denied calls from the opposition to intervene and preside over fresh
elections. The country faces an extended battle of attrition between the
Bangladesh Nationalist Party and the Awami League government. The unrest
challenges the growth the national economy and textile industry have
experienced in recent years.
Bangladesh is a poor, developing nation situated at the north of the
Bay of Bengal. It is almost entirely surrounded by India and shares a short
border with Myanmar. The country sits along the fertile floodplain of the
Ganges River Delta, and its geography has greatly affected its economic
development. Bangladesh is one of the most densely populated countries on
Earth, but the same swampy, fertile land that supports its growing population
has also made infrastructure development notoriously difficult, resulting in
one of the most bottlenecked transportation systems in the world.
Since the country gained independence from Pakistan in 1971,
Bangladesh's history has been marked by deep political divisions, frequent
military coups and decades of instability. This instability has helped keep the
country poor and wages low. These circumstances gave rise to a textile
manufacturing sector looking to take advantage of Bangladesh's favourable labour
costs and geographic position within the broader Indo-Pacific region. But
Bangladesh is still a victim of its weak political system and deep social
divisions between the nationalist and centre-right and conservative Islamist
elements of its society, resulting in the violent social unrest that has
gripped the country for much of the current year.
The months leading into 2015 saw the Awami League enter a cautious
dialogue with the opposition led by the arch rival Bangladesh National Party.
Western capitals — including Washington and several EU members — that had
decried the January 2014 elections and the Awami League's violent suppression
of rival political demonstrations used their economic support to persuade
Bangladeshi Prime Minister Sheikh Hasina's government to seek a compromise.
This support is necessary for Bangladesh's economy; the European Union and
United States are two of the largest markets for the country's ready-made
garment exports. Especially concerning for Dhaka was the lifting of
preferential trade conditions as a result of the controversy surrounding the
2014 elections. A primary motivator that influenced Hasina's government to
negotiate with the Bangladesh National Party was Washington's decision to
rescind Dhaka's Generalized System of Preferences status and EU threats to do
the same.
The Awami League's cautious re-engagement with the Bangladesh
National Party and the potential for a more politically and socially stable
Bangladesh did not just offer benefits for the country's textile and garment
industry. New Delhi was one of the few backers of the Awami League government
in 2014. The closer ties between India and Bangladesh led to power transmission
deals and the settlement of a long-lived maritime boundary dispute — one that
expanded Dhaka's claims to a section of the Bay of Bengal, which may hold
untapped deposits of natural gas, a significant boon to the electricity-starved
economy. Dhaka also began expanding special economic zones along the coastal
regions, wooing Chinese and Japanese investors drawn to Bangladesh's low wages
in addition to its loose safety and environmental standards.
However, buoyed by rising international interest, Hasina's Awami
League offered only token concessions to the opposition, which is led by the
Bangladesh National Party's Begum Khaleda Zia. Noting the strong economic
drivers behind the Awami League's outreach, the opposition coalition, which
includes Islamist organization Jamaat-e-Islami, remained steadfast in its call
for fresh elections overseen by a neutral caretaker Cabinet and its demand that
Hasina step down as prime minister. The impasse carried over into 2015, with
the opposition striking directly at the government's greatest vulnerability:
the national economy and Bangladesh's highly vulnerable infrastructure system.
The Economic Impact of Unrest
Bangladesh's opposition parties, led by the right-of-centre
Bangladesh Nationalist Party and its traditional Islamist partner
Jamaat-e-Islami, launched a series of strikes, blockades and violent clashes
coinciding with the first anniversary of the Jan. 5, 2014, national elections.
Last year's polls represented a significant shift in Bangladesh's
post-independence history. The incumbent centre-left Awami League sidelined the
opposition through a series of constitutional changes, which include removing
the military's ability to legally intervene in the political system, and by
prosecuting Jamaat-e-Islami's leaders. The Bangladesh National Party and its
political allies boycotted the elections, allowing the Awami League to claim a
landslide victory despite criticism from the international community.
Bangladeshi Unrest and the Textiles Industry
Bangladesh's population of more than 150 million people relies on a
congested and limited network of rail, road and ferry ways to move goods and
people throughout the country. Groups of protesters burning tires and piles of
trash have formed blockades across the country, effectively halting the
movement of goods and people, often for days at a time. The economic impact can
be seen everywhere. Crops have rotted in the field, garment factories have
closed because of lost contracts and unemployment is rising as workers return
from the cities to rural villages unable to find work. Domestic estimates place
the economic cost of the unrest of the past three months at nearly $10 billion,
a staggering sum given that Bangladesh's GDP is $150 billion.
Neither Hasina nor Zia have shown a willingness to negotiate.
Traditionally, the military has been the arbiter in Bangladesh's often-chaotic
political disputes, but the military leadership wants to avoid getting mired in
the conflict for now because it could risk triggering greater unrest and
violence. Zia's current strategy is to either force Hasina to capitulate or
push the military to act, but the Awami League and the military are not likely
to change their positions without a significant increase in violence and
unrest.
Moreover, the military might not be the deciding factor in
Bangladesh's current episode of unrest. During the past decade, professional
organizations representing textile bosses have gained influence. Textiles and
ready-made garments represent a significant portion of Bangladesh's economic
activity, accounting for more than 60 percent of the country's industrial labor
force and more than 80 percent of its annual exports by value. They are Dhaka's
primary source of foreign currency revenue, which helps to lessen its negative
trade balance. (Bangladesh still imports much of the basic resources needed for
its garments trade, such as cotton, yarn and cloth, in addition to foodstuffs
and fuel.)
Leaders of the three largest trade associations — the Bangladesh
Garment Manufacturers and Exporters Association, Bangladesh Knitwear
Manufacturers and Exporters Association and Bangladesh Textile Mills
Association — have enjoyed close ties to the Awami League and the Bangladesh
National Party governments. Both parties have been careful to cultivate these
relationships. But the Awami League now faces rising demands from the
associations regarding better tax benefits, looser wage and safety
restrictions, and subsidized electricity and fuel to offset losses from unrest.
The associations also met with the U.S. ambassador to Bangladesh on March 5 to
aid efforts by foreign governments and corporations to appeal to economic
partners, rather than political ones, to pressure the government and the opposition
to resume peaceful negotiations.
Economic Pressure Unlikely to Force a Deal
Bangladesh's current bout of political instability and violence is
likely to continue during the months ahead. Political polarization, especially
between the Bangladesh Nationalist Party's camp and the Awami League
government, will remain as both sides extend their brinksmanship. Hasina seeks
to exhaust opposition supporters, relying on arrests, crackdowns and threats of
legal action against Bangladesh National Party and Jamaat-e-Islami leaders. The
Bangladesh National Party hopes to make the economic pain unbearable, though it
risks alienating the business community and Western governments as well; U.S.
Secretary of State John Kerry has repeatedly asked the opposition to stop
resorting to violence, even as he thanked the current Awami League government
for its help in combating terrorism in late February. This is where the Awami
League's slight advantage over the opposition become apparent, at least in its
own eyes. The ruling government's stronger ties to neighbouring India, better
counter-terrorism record and traditionally strong links to labour unions have
all contributed to its decision to maintain its absolutist stance.
Recent statistics from the Bangladeshi government's Export Promotion
Bureau show that garment exports are still rising, with year-on-year growth of
7.8 percent in January and 6 percent in February. While industry associations
have tracked a nearly 50 percent decline in short-term orders from
international companies — to the benefit of competing industries in Vietnam,
Cambodia and Laos — Bangladesh's textile and ready-made garment industries have
shown a remarkable resilience, even despite the political uncertainties of the
past two years. The military remains cautious about triggering a widespread
backlash against a coup and agitating rising Islamist tendencies. But with the
economy still growing and support declining with every Bangladesh National
Party call for strikes and shutdowns, there is not enough incentive for the
military to get involved in a difficult and chaotic political competition it
has not been able to resolve in the past 40 years. With the military repeatedly
announcing that it has no plans to end the current impasse and the Awami League
choosing to consolidate its power at the cost of delaying investment and
economic revitalization, Bangladesh sees no quick or easy exit from
instability.
First published in STRATFOR Global Intelligence, March 20, 2015
