Co-authored with FARRIA NAEEM

Remittances have emerged as a key driver of economic growth and poverty reduction in Bangladesh, increasing at an average annual rate of 19 percent in the last 30 years (1979-2008).

Revenues from remittances now exceed various types of foreign exchange inflows, particularly official development assistance and net earnings from exports. The bulk of the remittances are sent by Bangladeshi migrant workers rather than members of the Bangladeshi Diaspora. Currently, 64 percent of annual remittance inflows originate from Middle Eastern nations.

Robust remittance inflows in recent years (annual average growth of 27 percent in FY06-FY08) have been instrumental in maintaining the current account surplus despite widening a trade deficit. This in turn has enabled Bangladesh to maintain a growing level of foreign exchange reserves.

These days, that title alone is probably enough to have most of you continue reading.

Pakistan's leap into international news headlines has mostly been a result of a series of unfortunate events. The global spotlight has also extended to Pakistan's education system, and the tone of that coverage has mirrored that of Pakistan’s other problems. A recent New York Times article described the growth of madrassas in southern Punjab, claiming that lack of access compelled citizens to turn to these schools as a last resort to educate their children.

Rather than contributing to this debate, I wanted to discuss education in Pakistan from a different angle by talking about the problem solvers. It seems like an appropriate time to write on these issues considering the recent World Bank approval of the Sindh and Punjab Education Sector Projects, two credits totaling over $650M to support the wide-scale education reform programs in these two major provinces.

Bangladesh’s export earnings are mostly determined by the export of readymade garments (RMG) to North American and European countries with 75% of total export earning coming from this sector. Quite understandably, the economic crisis in those countries unnerves us.

Fortunately, the clothing sector has remained more or less unscathed by the global crisis even as the trepidation among the entrepreneurs, policy makers and economists is still very high. During the last fiscal year (2007-08), the overall growth of the export of RMG was 16.16% which increased to 23.48% between July 08 and January 09 of the current fiscal year.

Readymade garments are the largest export industry and determine the dynamics of total export earnings for Bangladesh RMG is still growing at a satisfactory rate. There is no strong indication of any negative impacts of the global economic crisis on RMG as of today, but the future continues to be unpredictable.

Co-authored with FARRIA NAEEM

There is widespread belief among Bangladeshi media, civil society and think tanks that collusion exists in the supply chain of many essential commodities, and many blamed this for the price hike in the first half of 2008. Keeping prices low is a high priority for the government. It is therefore important to measure the presence of market collusion through empirical evidence and design appropriate policy responses to mitigate its impact on prices in order for the government to continue to meet its election promise.

Bangladesh is a net importer of major food items. In the absence of market influences and duties, domestic and international prices are expected to be similar. The convergence may not be exact due to transportation and taxation costs but price should follow similar trends as movements of international commodity prices do not of domestic and international markets do not often vary.

We examine and compare the co-mol prices of four essential food items (coarse rice, flour (atta), salt and soybean oil) over time to look for signs of market influences.

The global economic downturn and the consequent pessimistic outlook for exports in developing countries like Bangladesh have reinvigorated voices for protectionism. Even pro-trade minds have vented their skepticism about trade liberalization, as if the punch of the ongoing crisis could be shielded with the help of an embargo on trade with the rest of the world!

Such thoughts, derived from the gloomy prospects of exports, ignore the potential benefits drawn through the imports and disregard the lessons learned from history- that economic isolation leads to further impoverishment.

To answer this question we have examined the dynamics of the HIV epidemic, the economic and social impact, and the fiscal burden of HIV and AIDS in South Asia. We published the findings in the book “HIV and AIDS in South Asia: An Economic Development Risk,” launched in New Delhi on February 27. At the launch, we discussed the risks to development with Dr. Rangarajan, MP and Chairman of National Institute for Public Finance and Policy, and Sujatha Rao, Secretary and Director General for the National AIDS Control Organization in India. We conclude in our report that the impact of HIV and AIDS in South Asia on the overall economic activity is likely to remain small, while the direct welfare costs of increased mortality and lower life expectancy is more substantial, accounting for 3 percent to 4 percent of GDP in India and Nepal, respectively. The economic impact on individual households affected by the disease is substantial. In addition to shortfalls in income, which in some cases can be very significant, HIV and AIDS are also associated with an increased demand for health services. Dr Rangarajan commented on several adverse consequences, including neglect of health conditions, indebtedness, the additional burden on women and children’s education. The extreme case, he noted, is that of the AIDS orphans, for whom very little has been done until now in Asia.

Afghanistan needs more well-trained Afghan soldiers and better Afghan police, but the question is who will pay for them? The country cannot afford to pay the additional costs out of its own limited budget resources—any further money coming from this source will be at the expense of much less funding for urgent development priorities like educating children, improving basic health, building public infrastructure, etc. Will the international community commit to provide predictable funding for a number of years for Afghanistan’s security sector? This is a critical backbone of the state, whose development is essential to over time progressively replace international military forces which are far more costly. Creating security forces without the ability to pay for them will lead to obvious problems. And while expanding the Afghan security forces, it is critical to ensure that sound oversight and accountability mechanisms are in place.

The smaller economies of Bangladesh, Nepal, and Sri Lanka continue to show optimism for their economies based on good remittance inflows and export indicators that demonstrate strong growth in 2008. Policymakers have used these statistics as evidence to believe that they have been relatively unaffected by the current global downturn. 

The global financial crisis hit South Asia at a time when it was barely recovering from a severe terms of trade shock resulting from the global food and fuel price crisis.The food and fuel price shocks had badly affected South Asia, with cumulative income loss ranging from 34 percent of 2002 GDP for Maldives to 8 percent for Bangladesh. Current account and fiscal balances worsened sharply and inflation surged to unprecedented levels.