The interim government of Bangladesh formed a 12-member committee led by Dr. Debapriya Bhattacharya to prepare a white paper on the state of Bangladesh's economy. The purpose of the white paper was to provide a clear assessment of the current state of the economy, detailing on what happened in the last 15 years and why. The committee submitted a report titled "White Paper on the State of the Bangladesh Economy" to the Chief Advisor on December 1, 2024. This report is very timely and relevant for future economic policies and planning and as such it deserves a closer examination.

Strengths of the report

A key strength of the report is its comprehensive data collection from various sources, including primary and secondary data, gray literature, and stakeholder consultations. Despite the complexity of analyzing the economic situation and data limitations, the authors completed the report within the 90-day timeframe.

The report covers various critical aspects, structured into 23 chapters under five major headings: macroeconomic issues, structural challenges, social issues, institutional aspects, and policy outlook. Each chapter is authored by professional economists and social scientists.

This report highlights several critical issues that demand the interim government's immediate attention. It illustrates how the economy has been severely damaged by financial mismanagement, poor macroeconomic policies, corruption, and ill-conceived policies. Furthermore, it identifies various channels of widespread corruption, including the misappropriation of bank loans, illicit financial outflows, money laundering, politically motivated non-viable projects, poorly designed projects, inflated project costs, non-competitive tender processes, cronyism, favoritism, and the misuse of power. The report effectively underscores the erosion of institutional integrity and the nexus between politicians, businessmen, and bureaucrats, which is particularly evident in the banking, energy, and infrastructure sectors. This nexus has contributed to the rise of crony capitalism and oligarchy.

Weaknesses of the report

a. Selective use of data and information. While the report is comprehensive and that the authors have assembled a large amount of data, limited information is provided about how they collected it, what methodology they used, how they selected the data, what inclusion and exclusion criteria were used, and how they validated the information and data that they gathered. Many reports from international organizations such as the International Monetary Fund (IMF), the United States Department of Agriculture (USDA), the Food and Agriculture Organization of the United Nations (FAO), the International Food Policy Research Institute (IFPRI), the World Economic Forum, and the International Finance Corporation (IFC) highlighted the social and economic progress of Bangladesh but were either ignored or interpreted differently by the authors. For instance, several World Bank reports recognized Bangladesh as an "outstanding" economic performer and referred to it as "an inspiring story of growth and development."

b. Overlooks social progress. Despite the report's breadth, it overlooks numerous literatures, which highlighted Bangladesh's progress in social development, including food production, calorie intake, infant and child mortality rates, gender parity, life expectancy, and disaster risk management. The selective use of data and findings may cast doubt on the reliability and validity of the report's conclusions. A balanced analysis of both positive and negative aspects of the economy is essential for a genuine assessment of the past regime. Despite being less than potential, Bangladesh has achieved reasonably good progress in many areas that warrants recognition and discussion.

c. Ignores external challenges. Bangladesh's economic downturn began during COVID-19 and worsened after the Russia-Ukraine war in 2022. While poor governance and economic mismanagement are partly responsible for macroeconomic instability, global factors such as high fuel, food, and fertilizer prices, supply chain disruptions, and high interest rates of US dollar have significantly affected Bangladesh's economy. For example, the price of urea rose from USD 238 per metric ton in 2021 to USD 599 in 2023. While the prices of imported goods (such as wheat, edible oils, and fuel) have risen significantly, the prices of Bangladesh's exports have only increased slightly. As a result, the terms of trade has gone against Bangladesh. During 2021-22, the import-price index increased by 5.06 per cent, while the export-price index increased by 3.23 per cent. This adversely affected the current account balance and macroeconomic stability. The report seems to ignore or undermine such external challenges and their cascading effects on Bangladesh's macroeconomic stability, resulting in a one-sided analysis.

d. Validation of data. Another important aspect is the reliability of data sources. The report heavily relies on gray literature, including newspaper articles that have not been scientifically reviewed, raising concerns about the reliability of the data. The authors did not provide a confidence level for the sources used, making it unclear on how they evaluated the reliability and validity of data and information presented.

e. Estimation of social protection misallocation. Although the white paper aimed to provide a transparent assessment of the current economic state, in many instances, the authors' opinions overshadowed the factual analysis. For example, Chapter 1 reports that 73% of social safety net benefits are misallocated, meaning that they are received by non-poor beneficiaries. However, it is unclear what the basis for this information is, as the relevant Chapter on poverty and social protection (Chapter 13) lacks primary data to support this claim, and such a claim is not made elsewhere in the document.

f. Estimation of illicit outflows of money. This report estimates that between 2009 and 2023, Bangladesh experienced approximately USD 234 billion in illicit outflows, averaging about USD 16 billion per year. This estimate is based on the Global Financial Integrity (GFI) reports. Over 70 percent of illicit money outflows occur through trade, primarily due to over- and under-invoicing. According to GFI, Bangladesh lost an average of USD 8.27 billion annually from 2009 to 2018 due to trade mis-invoicing, and the authors have extrapolated this data to 2023. Illicit money outflows are a common problem in developing countries worldwide. According to another GFI report, illicit outflows of money from developing countries range from 14.4% of total international trade in Swaziland to 51.9% in Gambia. As per this report, illicit outflows from Bangladesh are among the lowest in the world at 17.3% of total international trade, and also compared to neighboring countries, e.g., China (21.5%), India (19.8%), Malaysia (20.8%), and Pakistan (18.7%). Although even a single dollar of illicit outflow of money is unacceptable, estimating these outflows based solely on the GFIR coefficient is an oversimplification and may not yield accurate results. This is a serious issue for Bangladesh's economy and warrants a deeper analysis, including identifying loopholes in regulatory frameworks and institutional mechanisms that facilitate the generation and outflow of illicit money. Additionally, it is essential to examine the business, investment, and political environments that foster these illicit outflows of money from Bangladesh.

g. Estimation of magnitude of corruption. This report estimates the magnitude of corruption - ranging from USD 14 billion to 24 billion (1.61 to 2.80 lakh crore BDT) out of the USD 60 billion invested in various development projects over the past 15 years. The authors arrived at this estimate based on a report by Transparency International, Bangladesh (TIB), which conducted a study on corruption in development projects implemented by the Roads and Highways Department. Notably, projects below BDT 1,000 crore were included, while large and mega projects were excluded from this study. Since the TIB study focused only on particular types of projects, when generalizing the same rate of corruption to different sectors and project sizes, the authors should have provided their expert judgment regarding how confident they are in this estimate. Different sectors may have varying modalities of implementation, decision-making, and policy-making processes, which could affect the prevalence, volume and nature of corruption.

h. Mismatch between analysis and recommendations. There is also a gap between analysis and recommendations. Many chapters presented extensive lists of generic recommendations without systematically analyzing the issues at hand, rendering these recommendations somewhat subjective. For instance, the suggestions to "promote evidence-based policymaking and facilitate the development of targeted adaptation strategies" and to "integrate climate change considerations into national agricultural policies and development plans" lack a thorough examination of existing policies and plans regarding climate change adaptation. Similarly, in the final chapter, the authors presented an interesting set of recommendations, including Mid-Term Planning, a Strategy for LDC Graduation, and Hosting a Forum for Inclusive and Sustainable Development. While these suggestions are important for the Interim Government, questions arise as to the origins of these recommendations. As this is a concluding chapter, the recommendations should be grounded in an analysis of the main chapters presented earlier. As these issues were not discussed previously, making the recommendations here would be considered more as reflections of the authors' subjective opinions rather than conclusions drawn from the report itself.

Improving clarity. This report could benefit by including an executive summary that distills the key messages from each chapter. While the Foreword attempts to provide a summary, it does not encompass all the important points from every chapter. To enhance readability, the authors may consider eliminating jargons such as "A Development Promise in Flux," "statistical artifact," and "foggy visibility."

Conclusion

Despite the good efforts of authors and comprehensive coverage of the subject, this report may not hold scientifically robust. Integrating diverse perspectives on development strategies and analyzing the pros and cons of various development strategies and approaches-what works and what does not-will make the findings of the report more relevant and useful for the government, development partners and other stakeholders. Despite these shortcomings, the report remains a vital document for understanding the economic challenges that Bangladesh is facing now.

Professor, Department of Economics, International University of Business Agriculture and Technology (IUBAT), Dhaka, Bangladesh. E-mail: golam.grasul@gmail.com