Hartals drain Bangladesh’s potential
Over the decades hartals have become commonplace in Bangladesh’s politics. There have been a variety of claims about the economic impact. However, data on hartals is scarce and the long-term impact of decades of hartals is hard to fathom. Moody’s recently warned that the current unrests pose continued economic risk. It too did not quantify the risk due to a lack of solid data on the number, quality, and impact of strikes. This is an ideal candidate to visualize the little data available to help us understand what kind of damage to Bangladesh’s economic development hartals may do.
Bangladesh GNI vs India GNI over the last 40 years (click on India in the legend to add or remove it from the graph)
The shutdown of significant parts of economic activities and public life, and subsequent severe negative economic consequences are a deliberate part of hartals. Peculiarly, there is not much data available about their impact or even the exact number of Hartals. Some articles and studies are available but a central, authoritative source of data is missing. One of the best sources is a study by the UNDP ‘Beyond Hartals’ from 2005, which investigates the hartals of the 1990s.
Economic impact of Hartals
Bangladesh GNI without hartals (a day of hartal equal to a day of lost GNI)
A core finding of the UNDP study is that the hartals of the 1990′s in Bangladesh may have reduced the annual GDP growth by 3-4%. These figures are merely inferred from the number of hartal days to working days and the total annual GDP. The authors calculated a 4.5% GDP loss per year on average over the decade. The study discounted this figure to 3-4% because a day of Hartal is not necessarily equivalent to no economic activity. Certain sectors and regions may not be affected or can recoup losses with overtime and work on holidays.
Bangladesh GNI without hartals (a day of hartal equal to a 0.25 days of lost GNI)
Some authors suggest that the impact of hartals is even less than the number of days may indicate. The counterargument to this, something Moody’s report implies, is that the damage may actually be greater than the mere loss of production on hartal days. Hartals discourage vital foreign direct investments and are obstacles for exporters competing in the global market place. Unsurprisingly, Bangladesh has a very low foreign direct investment ration of only 0.9 per cent of GDP in 2012.
Political instability exacerbated or instigated by hartals furthermore impedes infrastructure development in electrification and transportation, for example. Stability and infrastructure are undoubtedly substantial factors for the economical growth of Bangladesh. Lastly, the local private sector is discouraged to invest in such an uncertain environment. Garments production for example is sensitive to unrest, which obstructs reliable production and timely export of goods, which is essential to sophisticated, modern supply chains of foreign buyers.
These indirect factors make a case that a day of hartal may not be straightforwardly a day of lost economic activity and could have significant negative secondary effects. These could be even worse for the long-term development of the country than the mere direct loss of economic activity by a hartal.
Bangladesh GNI without hartals (a day of hartal equal to 2.00 days of lost GNI)
Visualizing the impact of hartals despite the immense uncertainty of its effect and lack of data is challenging. The above charts used guesstimates, a mix of available data and informed guesses. They highlight how hartals may have hampered Bangladesh’s economic development in case they slightly, fairly, or greatly affect it. The scenarios were built with the freely available GNI (Gross National Income – an alternative to GDP) data from the World Bank.
After collecting data for the number of nationwide hartal days over the last decades we can calculate how much better the economic development without hartals would have been. Three alternative scenarios are considered, a) a slight impact with each day of hartal equaling a quarter of a day of lost GNI, b) a fair impact with each day of hartal equaling one day of lost GNI, c) a knock-on effect outweighing the loss of production with each day of hartal equal to losing 2 days of GNI. The losses (or lack of) are calculated to compound over the years similar to interest.
In the charts the scenarios are labeled as follows:
- Bangladesh – GNI data from World Bank
- Bangladesh no hartal * 0.25 - A day of hartal equals 1/4 day of GNI loss
- Bangladesh no hartal - A day of hartal equals a day of GNI loss
- Bangladesh no hartal * 2.0 - A day of hartal equals two days of GNI loss
- India – GNI data from World Bank
The data, i.e. the hartal days every year, used for calculating the economic scenarios are collected from the UNDP study and the Financial Express Bangladesh. Some approximations had to be made like fixing the work days to 296 across the four decades and the last five years of data are missing and GNI growth for all scenarios are equal.
It is important to remember that these visualizations’ intent is merely to highlight the magnitude of the alternative scenarios and do not present a firm scientific study. However, if you have better data or improvements feel free to contact me.
Putting it all together
The remarkable insight from this thought experiment is that even the conservative scenario (a quarter day economic loss per day of hartal) projects a cost of 25% GNI over the nearly 40 years! That is a difference of GNI $780 (actual) to $978 (potential) per person in 2011. Bangladesh could have become a lower middle income country last year and surpass $1,000 GNI per person per year without hartals.
The most ambitious scenario illustrates a potential GNI 5.5 times greater than today at $4,358 per person per year in 2011, the same level as Thailand. It would catapult Bangladesh ahead of India and in the upper middle income region of countries by World Bank definition. Granted, this is highly speculative and not achievable by merely not having hartals. It would require positive additional changes like advanced infrastructure from a more stable political system, better governance and accountability. Taking these factors together it becomes conceivable though that Bangladesh could be rivaling Thailand economically per capita.
Despite all the uncertainty and speculation the different scenarios projecting changes over four decades illustrate how much in one or two generations could be achieved. Small improvements like a ban on hartals could put the country on a different trajectory of accelerated growth with tremendous impact on the economy and for the people.
You can make up your own mind which scenario – if any – you find believable. I hope this little experiment gave some food for thought to see hartals for what they are – hurting a country and its people over generations.