Bangladesh's economy groans under weight of politics

CHITTAGONG, Bangladesh, Jan 31 (Reuters) Bangladesh's economy is a picture of stark contrasts and so are the choices it faces.

The South Asian nation of 140 million people is one of the poorest on earth, where nearly half the population lives in extreme poverty, surviving on less than a dollar a day.

It is also one of the world's most corrupt nations, ranked at the bottom of a global corruption index for five years this decade.

It has slipped seven places to 88 in a ranking of ease of doing business in 2006.

On the other hand, the predominantly Islamic country is forecast to achieve a record 7.0 per cent growth this year, pushed by surging garment exports and foreign remittances.

Annual per capita GDP growth doubled in 1990-2004 compared to the 1980s and infant mortality and population growth rates have been falling.

This, even as the country's bitterly divided politicians focus on what analysts and business leaders say is personal aggrandisement, one-upmanship and economic disruption.

Now, which way the country goes depends on how the current political limbo -- caused by elections being put off after weeks of violent protests by opposition parties -- is resolved, analysts and business leaders said.

''If we can put our house in order soon and achieve political stability, 9 per cent growth should not be a difficult target in the next two or three years,'' said Kazi Kholiquzzaman Ahmed, an independent economic expert.

That would mean impartial polls and the next government turning its attention to fighting corruption, tackling a chronic power shortage and boosting infrastructure to help Bangladesh realise its dream of being another Asian Tiger economy.

''Otherwise, we could be in for a long period of struggles,'' Ahmed added.

FIGHTING ODDS Bangladesh, which was East Pakistan until the 1971 liberation war, embraced liberal economic policies in the 1990s.

The country has been governed by the pro-market Bangladesh Nationalist Party (BNP) and the socialist Awami League in turns since the end of military rule in 1991.

But such is their animosity that the leaders of the parties have not spoken to each other in nearly a decade.

''We are always flying against the wind. Whatever we have achieved is despite the politicians,'' said M Fazlul Hoque, president of the Bangladesh Knitwear Manufacturers and Exporters Association, a nearly 4 billion dollar industry.

The industry, whose products include T-shirts, innerwear and socks for almost every major global brand, is expected to grow more than 30 per cent in the year to June 2007, Hoque said.

Along with woven garments like shirts, denims and trousers, it accounts for nearly 80 per cent of the country's total exports, which touched a record 10.5 billion dollars in 2005/06.

But if Bangladesh was not hit by a series of crippling political blockades and violent strikes that led to the January. 22 polls being postponed, growth this year would have been much higher, he said.

In Chittagong, the country's commercial capital and main port, containers were piled up for days as political parties blocked transport around the country demanding fair elections.

''If buyers lose confidence it's a huge problem. It is very difficult to quantify the degree of that loss,'' Hoque said.

''Some buyers didn't feel safe to visit Bangladesh.'' ''SEEKING MATURITY'' The recent blockades and disruption by the Awami League are seen as symptoms of all that is wrong with the country's political priorities.

''Bangladeshis are very humble and hard working as a people.

Labour is cheap and workers are happy making small money,'' said M. Amirul Haque, a Chittagong businessman with interests in shipping, cement, real estate, sea food and commodities.

But political intransigence had blocked major investment plans that would have generated thousands of new jobs, he said.

His list of examples are glaring: A plan by India's Tata conglomerate to invest 3 billion dollars, the biggest in Bangladesh, was frozen; New Delhi's decision to bypass the country for a gas pipeline from Myanmar; and opposition to build private ports in Chittagong and privatise its airport management.

''It has become a habit for political groups to oppose projects to score points and hurt their rivals who may be implementing those projects,'' said M A Latif, vice-president of the Chittagong Chamber of Commerce and Industry.

Such is the obsession with political conflict that neither of the two main alliances were heard talking of their plans, if any, for the economy ahead of the elections.

Senior BNP leaders refused to comment but some in the Awami League seemed to accept responsibility.

''We are a Third World country, we are a young democracy, we are learning, we are in the process of maturing,'' said A B M Mohiuddin Chowdhury, the mayor of Chittagong and a senior Awami League leader, responding to accusations the league was disrupting the economy for political gain.

''We will overcome these problems but it will take time.'' REUTERS SY RK0940