‘Fundamentalist Economy in Bangladesh’: An Analysis

An article on ‘Fundamentalist Economy in Bangladesh’ by Dr. Abul Barakat, Professor of Economics, Dhaka University, appeared in The Daily Inqilab on 27 April 2005. On reading the summary of the article, I became interested in reading the full text. Thanks to Dr. Nazmul Huq Rabi, Managing Director of Institute for Development and Research, for providing me with the full text of the article.

We are used to regard a teacher of a university with great respect. We would like to look upon a university teacher in the same way even in future. But when an ‘eminent’ teacher assumes the role of a propagandist rather than taking a neutral and impartial approach in a discourse, it naturally raises a lot of questions. The key condition for presenting something in a fair way is to have an objective approach. However Prof. Dr. Abul Barakat in his article ‘Fundamentalist Economy in Bangladesh’, I am sorry to say, could not maintain that and I shall make an attempt to prove that in my discussion.

Dr. Abul Barakat, in his article, has mixed up and amalgamated the basic difference between Islamic way of life and worldly materialism. He wrote: “They (the fundamentalists) have invested in the short and long term projects from which it is possible to earn large profits. That means, though they are showing their keen interest in the Hereafter, they are more conscious about worldly life than many others”. [Prof. Dr. Abul Barakat, Bangladeshe Maulobader Orthoniti (Fundamentalist Economy in Bangladesh), Samaj Orthoniti O Rastro, Mukti Bhavan, 22/1 Purana Paltan, Dhaka 1000, April 2005, pp 19-20].

Without questioning the authenticity of this statement, I would like to say that if Dr. Abul Barakat had clear knowledge about the teachings of Islam and its lifestyle, he would have hesitated to make such a comment.

Everyday we say in our prayer: Rabbana Atina Fiddunia Hasanataw Wafil Akhirati Hasanataw- Our Lord! Give us good in this world and good in the Hereafter [2 (Surat Al Baqarah):201]. In Islamic beliefs, the Hereafter is not insignificant rather worldly life of a Muslim is the way for success in the Hereafter.

Thanks to Dr. Abul Barakat for analyzing the economic condition in the post-independence Bangladesh, especially for his comment ‘the gap between the promise [by the progressive leaders] and the reality’ [p 9]. During that period poverty has increased. In his words: “During the last 33 years some people have become owners of huge wealth and resources while a large section has become pauper; resources were not mobilized for productive purposes, unearned income looked for more sources of unearned income; lives of some have enhanced in elegance while the difficulties and deprivations of various kinds of the vast majority have increased; high-rise buildings have been built, while the number of slums have increased. Real government spending in public welfare has decreased, while it has increased in unproductive sectors; foreign interference has increased, but local and indigenous initiative has decreased; government expenditure in unproductive sectors has increased, at the same time has increased the distance between the public and the public servants; election expenditure has increased, but good governance and effectiveness of the elected institutions have decreased; the power of black money has increased, while the compassion of the politicians towards the people has decreased. Disparity between the rich and the poor in education has increased, but the actual government funding in the basic education sector has decreased; poverty related diseases have increased, so is the cost of healthcare, but the competence of the public health sector has decreased” [p 12].

“This trend of development during the last 33 years has clearly divided our country of 14 crore into two groups: In the first group are the powerful minority whose number is maximum 10 lakh … a situation where as against 10 lakh powerful are 13 crore and 90 lakh powerless, helpless, disadvantaged and deprived people” [p 10]. For this situation the writer has accused “a self-destructive plundering culture that has invaded all sectors, including economy, politics, education and culture” [p 10]. In his own words: “The characteristics of this plundering culture are black money, terrorism, illegal weapon, muscle power, bribery corruption, maladministration, oppression and repression etc.” [p10].

Dr. Abul Barakat rightfully pointed out: “In the post-independence Bangladesh welfare oriented politics did not flourish as expected” [p 13]. Naturally the question arises: who were inseparably linked and associated with this plundering culture? For whom the progress of welfare-oriented pro-people politics did not get momentum, necessary impetus and vigor? Who were at power during that period? During that period the people who were at power were the advocates of secular, left and so-called progressive ideas.

Coming to the discussion on fundamentalism, Dr. Abul Barakat mentioned eight business and financial sectors and said that fundamentalist political parties are being financed from the income of the establishments of these eight sectors. In his words: “Part of the profit goes to organizational activities” [p 17]. More so, he said: “Many a people think that armed terrorist religious communal forces of the country get all the money to run the organization from outside the country” [p 17]. “They got huge amount of foreign money in the 70s and 80s” [p 17], Dr. Abul Barakat said though he did not provide any proof or evidence to support his claim. How far academic is such generalized and sweeping comment is a big question.

Dr. Abul Barakat has presented a balance sheet of the fundamentalists’ economic activities in Bangladesh. In his opinion: “Now the net profit from fundamentalist economy in Bangladesh is approximately Taka 1200 crore” [p 17]. He has given a breakup of Taka 1200 crore: 27 percent from financial institutions like banks, insurance companies and leasing companies, 20.8 percent from non-government organizations, 10.8 percent from commercial organizations, 10.4 percent from healthcare including pharmaceutical industries and diagnostic centers, 9.2 percent from educational institutions, 8.3 percent from real estate business, 7.5 percent from transport business and 5.8 percent from news media and information technology [pp 17-18]. The percentage of net profit, in his words, ‘pattern’ is based on ‘assumption’ [p 18].

The information and the statistics provided by Dr. Abul Barakat do not in any way represent the true picture rather these are utterly imaginary. In order to prove the futility of his claims we shall analyze a few of his claims. He claimed that Islamic banks, Islamic insurance companies and Islamic leasing companies make net profit of Taka 325 crore (27 percent of Taka 1200 crore) [p 18]. His claim is not at all true. Let us examine the matter in depth. At present there are six Islamic banks, five Islamic insurance companies and one Islamic leasing company in Bangladesh of which the sponsors and directors of one Islamic bank come from progressive and secular background. None of its sponsors and directors is fundamentalists rather they are known in the society for their opposition to fundamentalism.

Of the five Islamic insurance companies, only one as a successful business establishment has issued public shares. In 2004 this insurance company after deducting Taka 15 crore 76 lakh as tax and appropriation has distributed profit of Taka 90 lakh among the shareholders. In 2004 the net profit earned by the other four Islamic insurance companies, after keeping reserve of Taka 2 crore 64 lakh as appropriation, did not have taxable income or sufficient profit to distribute among shareholders.

The only leasing company as a successful business establishment till now did not issue public shares. This leasing company after deducting Taka 1 crore 26 lakh as tax and appropriation made profit of 1 crore 47 lakh. The leasing company, however, made provision to issue bonus shares equal to the amount of profit. It means the shareholders of this Islamic leasing company did not get any profit in cash in 2004.

Of the six Islamic banks, if we leave the Islamic bank whose sponsors and directors come from progressive and secular background and are known in the society for their opposition to fundamentalism, we have five Islamic banks. In 2003 these five Islamic banks after deducting Taka 119 crore 50 lakh as income tax and appropriation distributed Taka 70 crore 45 lakh as profit among the shareholders. In the same period one Islamic bank made a net loss of Taka 39 crore. It may be mentioned here that the first Islamic bank that was established in Bangladesh in 1983 and which now has 151 branches, its 58 percent ownership is held by foreign nationals and organizations notable of which is the Jeddah-based Islamic Development Bank (IDB).

So where do we stand? Islamic insurance companies made a profit of Taka 90 lac. Islamic banks made a profit of Taka 70 crore 45 lakh that was distributed to the shareholders. The lone Islamic leasing company made a profit of Taka 1 crore 47 lakh. The leasing company, however, made provision to issue bonus shares equal to the amount of profit. That means Islamic banks, Islamic insurance companies and the lone Islamic leasing company’s net income, after deducting the amount paid to the government as income tax and other appropriations, is Taka 72 crore 82 lakh which the shareholders received. Yet Dr. Abul Barakat in his article has claimed that Islamic banks, Islamic insurance companies and the lone Islamic leasing company made net income of Taka 325 crore. In his words, this is the net income of the fundamentalist financial institutions.

Now the question is whether there is any scope for the financial institutions to transfer any money to any political party for carrying out its political activities? Dr. Abul Barakat is definitely aware that these financial institutions have been established under the statutory rules as in case of banks under the Bank Company Act 1991. All banks are to operate under the supervision of Bangladesh Bank, the country’s central bank, and financial institutions whose shares are transacted in the share market and available for buying and selling, they must follow the rules and regulations of the Securities & Exchange Commission, besides they have to follow the rules and regulations of Dhaka Stock Exchange and Chittagong Stock Exchange. The accounts of the financial institutions are approved by the annual general meetings, besides profits and appropriations also are to be approved by annual general meetings. It is evident from this that there is no scope of transferring money from the financial institutions to somewhere else without recording transaction in the books of account.

Dr. Abul Barakat claimed that the net profit from the fundamentalist non-government organizations and commercial organizations is Taka 380 crore (31.6 percent of Taka 1200 crore. 20.8 percent of non-government organizations and 10.8 percent from commercial organizations) [p 18].To keep the readers in confusion, he did not explain which organizations specifically represent non-government organizations and which represent commercial organizations As an honest academic researcher he should have provided a list of such organizations but possibly he did not do it intentionally.

Dr. Abul Barakat claimed that the net-profit earned from the healthcare sector, including pharmaceutical industries and diagnostic centers, amounts to Taka 125 crore (10.4 percent of Taka 1200 crore) [p 18]. In 2004 the annual profit of the pharmaceutical industry at Shafipur after paying income tax was Taka 2 crore 86 lakh that was distributed among 10,000 shareholders. The clinic at Dhanmondi belonging to the same group is a Trust organization. In 2004 it made a profit of Taka 4 crore 10 lakh after paying income tax. Even if there are a few similar organizations it is impossible that the net profits from this sector will add up to Taka 125 crore. It is thus evident that the claim of Dr. Abul Barakat that the fundamentalist economy earns Taka 125 crore annually from healthcare including pharmaceutical industries and diagnostic centers is fantastic. The statistics are imaginary having no link with truth.

Dr. Abul Barakat claimed that the net profit from the fundamentalist educational institutions is Taka 110 crore (9.2 percent of Taka 1200 crore) [p 18]. This is an unrealistic proposition, utterly impossible. The Madrasas of the country mainly depend on Zakah, Sadaqah and donations. Everyone knows it. It is not clear to us how Dr. Abul Barakat calculated this figure of Taka 110 crore. The few schools, colleges and universities that have been established in the private sector by the country’s eminent Islamic scholars, educationists and social workers are all Trust organizations. Therefore, no person can take profit from such educational institutions and the country’s law also does not permit that.

Dr. Abul Barakat claimed that the net profit from the fundamentalist news media and information technology sector is Taka 70 crore (5.8 percent of Taka 1200 crore) [p 18]. The daily published from Moghbazar was never a profitable establishment and there have been periods when journalists and workers of this daily have not been paid salary and other allowances for consecutive eleven months. Possibly only one daily published by the circle who believes in Islamic social transformation is running successfully. The fundamentalists also do not have any news agency or private television channel. It is not understandable how Dr. Abul Barakat reached the figure of annual net profit of Taka 70 crore from the fundamentalist news media and information technology sector. He did not explain it either.

Dr. Abul Barakat claimed that the net profit from the fundamentalist real estate and transport sectors is Taka 190 crore (15.8 percent of Taka 1200 crore. 8.3 percent from real estate business and 7.5 percent from transport business). He did not mention the names of the real estate houses and transport business organizations with which the fundamentalists are associated. The figure of Taka 190 crore as income from these two sectors as mentioned in his article is imaginary like the statistics of other sectors. There is no doubt about it.

Dr. Abul Barakat claimed that it is “possible to engage 5 lakh party members for full time if only 10 percent of the annual net profit of fundamentalist economy of Taka 1200 crore can be used in organizational activities. This is what they (the fundamentalists) do and give cross- subsidy in other sectors” [p 20].

Let us examine the matter in depth. 10 percent of Taka 1200 crore is Taka 120 crore with which the fundamentalist party gives full time employment to 5 lakh party members. What does it mean? It means one party member would get Taka 2400 per annum for ‘full time’ employment, monthly Taka 200 only. How reasonable is such salary structure and how much it reflects the socio-economic condition of the country that only Dr. Abul Barakat would better tell. If cross-subsidy is given to other sectors then Taka 120 crore would not be available for full time employment of party members. It that case, it would not be possible even to give Taka 200 to a party member per month for full time employment.

I am obliged to say that the article of Prof. Dr. Abul Barakat is nothing but a concocted story devoid of truth. It is not a well researched analytical economic discourse. The author cannot avoid the accusation that by this article he has confused the people.#

Note: Taka is Bangladesh currency, US $ 1= Taka 65, Lakh means one hundred thousand, Crore means ten million.

1st  October 2001