This month’s news cycle was dominated by the student-led protests for quota reforms in government jobs, which ultimately turned deadly and underscored a dark few days in the country’s history. The economy took a backseat in the face of the aforementioned event, but many sectors were hurt by the curfews and internet blackouts. On a more positive note, remittances did relatively well in June, but export figures are yet to be published for the month following calculation errors. Reports say the government is losing out on earnings from tobacco sales, while the Asian Development Bank has lowered its GDP growth estimates for Bangladesh. This has been a month where a good volume of positive news has been drowned out against the background of the negativity surrounding the quota reform protests.
Quota Reform Protests. The only place to start from a political news point of view for the month can be the government job quota reform protests that shook Bangladesh to the core throughout July. These were among the largest organized protests in the country’s history. The protest ultimately led to a reduction of the government job quota, down from 56% to 7%, but tragically, the protests turned deadly across the country, with violent clashes between protestors, the student wing of the ruling Awami League, police, and the army. More than 200 people have died, with thousands more injured or arrested.
Historical Context. After Bangladesh’s extremely violent war of liberation in 1971 which led to independence, the families of those who fought in the war – freedom fighters – were given certain special privileges. Among these privileges were quotas for university admission, and government jobs. For government jobs, until 2018, 56% of government jobs were in quota, with 30% quota given to children and grandchildren (it was initially just the children of freedom fighters, and then their grandchildren were added later as well). The other 26% of quota went to other groups such as women, persons with disabilities, etc. In recent years, however, the 30% quota for families of freedom fighters had been a strong talking point. In 2018, there were significant student protests to bring down the quota percentage. As a result of the protests, Prime Minister Sheikh Hasina ordered the cancellation of all quotas in October 2018 as a response to the widespread protests.
June Legal Judgment. On 5th June 2024, the Bangladesh High Court reinstated the 30% quota for the children and grandchildren of freedom fighters, deeming the 2018 abolition by the government illegal.
Student Protests. After the controversial reversal by the High Court, there were some protests in June, but they were small and stopped due to the religious Eid festival. However, at the beginning of July, the protests picked up steam again, with students from Dhaka University and some other universities holding rallies and demonstrations on 1st July. Over the next few days, more demonstrations across the country in different universities and institutions took place, including blockades in key areas such as Shahbagh and in the Dhaka-Aricha Highway. As more and more people took to the streets and more universities nationwide joined in the protests, some statements from the government did not help matters, with the Home Minister, for example, saying that protestors are ‘crossing their limits’ on 11th July. Around this time, the Prime Minister also made a somewhat controversial statement in a press conference, asking the students if they would prefer the quota be in favour of the families of razakars (term used for people who supported Pakistan in the Liberation War) rather than families of freedom fighters (which she later tried to backtrack from). From 14th July deadly clashes broke out around the country in various universities and other areas between the protestors, the Chhatra League (the student wing of the ruling Awami League) and the police, who were deployed in numbers to keep the situation under control. Different universities across the country, such as Dhaka University, Rajshahi University, and Chittagong University, seemed to be at the epicenter of these clashes. From 16th July, reports of people being killed in the protests started, with the shooting of Abu Sayeed, a student at Begum Rokeya University, being shot by police multiple times despite being unarmed, and the incident being widely shared on social media. He would later succumb to his injuries. Clashes continued over the next few days, with people killed every day, and hundreds being injured. On 18th July, the Border Guards were deployed. The next day saw among the most brutal of days, with around 100 people dying across the country in various extreme clashes. 19th July was also the day that some of the strongest demonstrations took place against the brutality and attacks by the police and Chhatra League. That is also the day that curfew was imposed and a total internet shutdown (which would last a week) started.
July Quota Reform Judgement. On 21st July, in a historic decision, the Supreme Court verdict stated that 93% of government jobs would be on merit, effectively bringing down the overall quota from 56% to 7%, and the 30% quota for freedom fighter families down to 5% (with the remaining two percent reserved for transgender, persons with disabilities, and ethnic minorities).
Death Toll and Present Situation. On 28th July, some of the quota reform movement coordinators officially called an end to their demonstrations but asked for a thorough investigation into the killings, and arson. Others nonetheless vowed to continue with their program until justice is served for those who were killed in the violence. As of 29th July, internet access had been restored but on a somewhat limited scale, with speeds also not back at 100% and some websites such as Facebook still blocked. Daily curfews (with stated non-curfew hours) continue in many places around the country, including in Dhaka. More than 200 people have died, with thousands more injured (including a reported 1,600 who needed hospital treatment), and over 6,200 people arrested in more than 500 incidents.
Economic Cost of Protests. While the loss of human life in the protests has undoubtedly and categorically been the biggest disaster, the ramifications on the economy as a result of the shutdown of services, internet outage, and curfews have also been significant, with various sectors of the economy facing concerning daily losses. The ready-made garments sector, the country’s biggest source of exports, is reportedly losing up to around USD 150 million daily. The steel sector is reported to be facing losses of a total of USD 110 million, while e-commerce and f-commerce companies stated that they are losing around USD 5 million in revenue daily. Call centers are also facing daily losses of around USD 3 million daily.
GDP Growth. The Asian Development Bank (ADB) has lowered their GDP growth estimates for Bangladesh in their latest Asian Development Outlook July 2024 Report. Their latest estimate is for 6.5% growth, down from their 6.6% estimate in April, which are both lower than the government’s target of 6.75%. The ADB’s forecast comes after the several days of disruption of economic activity that took place in Bangladesh because of the quota reform protests. They attributed the lower estimate due to a lack of growth in the industrial sector.
Banking. The central bank has maintained a tight monetary policy, keeping all policy rates and crawling peg rates unchanged over the first half of the current fiscal year. The new monetary policy has also called for stopping the printing of money for spending purposes by the government in a bid to keep inflation rates to within 6.5% (it was 9.72% year-on-year in June). A statement from the central bank said that they intended to stop currency swaps with banks and streamline open market operations as a method to tighten their monetary policy measures, as well as enhance import liberalization by removing Letter of Credit (LC) limits for all products except luxury goods. While the initiative towards trying to control inflation is good, given the recent shutdown of economic activity which led to losses in many sectors, their effectiveness will be challenged. Further, while removing letter of credit limits for most products sounds good in theory, there is a risk that without any limits, it will also make it more difficult for authorities to track exact amounts of money coming in and out of the system, so monitoring mechanisms should be strengthened in this regard.
Exports. As of 29th July, export data for June was still not available, owing to the shock of the central bank’s correction of the export figures. Usually, the previous month’s export figures are available within the first few days of every month. However, recently, Bangladesh Bank data showed that actual exports in the current fiscal year period from July 2023-April 2024 were almost USD 14 billion short of the value of goods published by the Export Processing Bureau. Anomalies include duplication errors to miscalculations of the value of fabrics and miscounts of sample items for exports. While some room should be made for slightly imperfect figures when it comes to issues like exports, it is worrying that such a huge mismatch has been found, especially in light of the already regular suggestions of overestimating figures to inflate GDP growth rates and other indicators in their annual calculations of Bangladesh’s economic indicators.
Remittances. Remittances for the month of June stood at USD 2.54 billion, up around 15.6% year-on-year. This brings Bangladesh’s remittance overall for the just-completed fiscal year (July 23-June 24) to USD 23.91 billion, a growth of 10.66% on the previous fiscal year. The overall amount was boosted in the last couple of months of the fiscal year due to workers abroad sending more money to Bangladesh thanks to a narrowing between the formal and informal exchange rates due to the flexible exchange rate now in place.
Development Loans and Funding. Prime Bank, a local Bangladeshi bank, has signed an USD 90 million agreement with the International Finance Corporation aimed at supporting Medium Micro, Small, and Medium Enterprises (MSMEs) who focus on imports and exports, aiming to increase their access to finance and catalyze economic growth. Bangladesh’s SME sector currently contributes 25% of the country’s GDP and employs 24 million people across the sector, and is estimated to grow by up to 35% by 2030.
Tobacco. It has been asserted that the government is losing out on millions in tobacco revenue due to unethical practices of companies. Tobacco prices were raised in the recently announced budget (in June). One tactic tobacco companies use is to raise production just before a price hike, and then after the price hike, sell from the same units, leading the government to lose out on revenue. For example, after the price hike, a 20-pack of Marlboro was raised to Tk. 324 (USD 2.76) from Tk. 310 (USD 2.64). However, some companies are selling at the new price but since it is from their old stock, the price printed is still the old one of Tk. 310 (USD 2.64), leading the government to lose out on revenue from that stock of cigarettes. It is reported that Bangladesh lost out like this on Tk. 2 billion (approx. USD 17 million) in one month alone.
Aside from the protests covered in the above Political section, nothing significant to report.
July 2024 will go down as a historically significant month in Bangladesh’s recent history, given the huge student protests over the quota reforms for government jobs reserved for the families of freedom fighters. While the Supreme Court decided to bring down the overall quota from 56% to 7% (and from 30% to 5% for families of freedom fighters) – essentially giving the protestors what they were demanding – the heavy-handed approach by police and the border guards, as well as from the student wing of the ruling Awami League, resulted in deadly clashes that left more than 200 dead by the latest count, as well as thousands injured (many critically). These constitute the most violent clashes seen in many years in the country.
However, regarding what the repercussions might be in the medium to long-term, we urge caution. History has shown that protests like these in Bangladesh (while they may not be on the scale as this) tend to burn bright briefly, and then fizzle out, as people get back to the realities of struggling on with their lives in the face of a plethora of social and economic issues such as a lack of jobs and employment opportunities, high costs of living, overpopulation, etc. People looking forward to a change in regime are likely to be disappointed. However, there is no doubt that the economy, in most sectors, has taken a significant hit.
While the immediate dollar cost of that hit can be quantified, what cannot be is the reputational hit that Bangladesh has taken from international customers and buyers due to not being able to fulfil orders (exports), fulfil tasks (freelancing, due to lack of internet) and, politically, in terms of a seeming lack of democracy. This is an area that we shall be carefully monitoring over the following months.
On the economic front, the discrepancy in the export figures of the Export Promotion Bureau is a source of concern not least given existing concern that the government has long displayed a tendency to inflate economic development indicators. More widely, we will keep a keen eye on how the economy recovers from the setbacks surrounding the quota protests, and whether international customers begin to look elsewhere for more reliable services (physical or virtual). Politically, we will watch carefully to see how the government tries to recover reputation-wise from what many see as poor or mismanaged (at best) and shambolic or criminal (at worst), handling of the recent quota protests. A key part of this will likely be what progress the government makes in terms of arresting and punishing police officers and members of the Awami League’s student body over the violence against protestors. The Prime Minister’s promises to hold everyone accountable cannot be mere lip service – any perceived failure in this area is likely to instigate renewed protests and damage the PM and Awami League further.