Hasina's hubris

South Asia's miracle economy rested on fragile foundations

In fast-paced developments spanning a month, Bangladesh is facing a crisis of epic proportions, which threatens to tip a country known for its economic miracle into turmoil. Just eight months into an unprecedented fourth term, Sheikh Hasina, 76, the longest-serving Prime Minister who presided over the country’s journey from being an economic basket case to attaining middle-income status by 2026, has reportedly fled to India. The immediate cause of the current crisis can be traced to the mismanagement of roiling student unrest over government job quotas. But the violence, in which nearly 300 people have died since trouble began in July, are symptomatic of key weaknesses in Bangladesh’s political economy —fragile political institutions and a shallow economic foundation — that stand as a cautionary tale.

Both contributed to Sheikh Hasina’s growing unpopularity, which a fourth straight-term election victory in January inadequately camouflaged. To be sure, Ms Hasina’s authoritarian proclivities against critics and accusations of corruption of her regime and family are not new but they were mostly overlooked as the economy grew rapidly on the back of a competitive advantage in the textile industry, especially ready-made garments exports, which lifted some 25 million people out of poverty and played a key role in the empowerment of women. Bangladesh’s per capita income was higher than India’s over the last few years, and it leads South Asia on several human development indicators. But as the pandemic struck and global demand slowed, the fault lines widened. Growth in gross domestic product slowed and the balance of payments worsened.

Last year, the country was forced to opt for an International Monetary Fund bailout. To sustain the momentum of its pre-pandemic growth and to generate jobs, Bangladesh needs to widen the ambit of private-sector investment beyond garments exports, which the country has struggled to do. This deficit has, in turn, increased the importance of public-sector jobs, where quotas were reportedly cornered by people connected to the ruling Awami League. The Supreme Court’s ruling against introducing job quotas came too late to quell a movement that had expanded into wider anti-government protests, rooted in Ms Hasina’s autocratic rule. Her fourth-term victory reflected this; it was achieved on the back of a widespread crackdown on Opposition leaders, a boycott by the main Opposition Bangladesh Nationalist Party, an abysmally low voter turnout of 40 per cent, and accusations of rigging.

As Ms Hasina, daughter of the country’s founder, Sheikh Mujibur Rehman, flies to India, the development cannot be viewed with complacency by New Delhi. As South Asia’s second-largest economy, Bangladesh is India’s largest trading partner in the region. Through different regimes, Ms Hasina has been a good friend to India, providing critical assistance in tracking and neutralising Islamic militants, sorting contentious border issues and allaying an upsurge of anti-Indian sentiments that characterised relations in the 1980s. Muhammad Yunus, Bangladeshi Nobel laureate and a critic of Sheikh Hasina, has urged New Delhi to jettison its hands-off stance on developments in Dhaka. But given the febrile nature of politics in Bangladesh and with the military, which has launched 29 coups since 1975, back in charge, waiting and watching the developments would be a prudent move for India.