Of GDP growth, a think tank’s Response and responsible journalism

A few days ago I read the clarification by the Finance Minister Mr A M A Muhith stating that a section of journalists was trying intentionally to create a distance between the Centre for Policy Dialogue (CPD) and himself. I was taken aback by the Hon’ble Finance Minister’s comments that came a day after CPD’s press briefing on state of the Bangladesh Economy where it presented an analysis after examining a number of proxy variables and questioned the estimated GDP growth of 6.7 per cent for FY2010-11.

The private think tank releases such analysis twice a year which examines growth outcomes and also presents an overview of macroeconomic aggregates. After all that was not his type – I first thought to myself. I rang one of my former colleagues at CPD and asked if they really said so. “Do you really believe so?. After all, you were here” he countered.  We are researchers not politicians, what would be our political motive, he exclaimed. I got curious and rang one of my journalist friends. He laughed and said the minister was provoked. Good lord! The minister was provoked and said “If they (CPD) said it, then the comment is unfair, wicked and politically motivated,”.

My friend told me that the journalist drew the minister’s attention by saying that CPD had rejected the government’s GDP estimate of 6.7 and that it was politically motivated.

The Bangladesh Bureau of Statistics (BBS) recently made a preliminary estimation that GDP growth would reach 6.7 per cent in FY 2010-11. According to CPD, it implies that Incremental Capital Output Ratio (ICOR, the higher the ICOR, the lower the productivity of capital) is expected to be 3.7 in FY 2020-11, a significant improvement from last year’s 4.3. At the same time, the BBS readjusted the GDP growth of FY 2009-10 to 6.1 per cent.

Here comes the question as the GDP growth has been readjusted for the third time. It is pertinent to mention that every revised figure was supported by the crop sector. Interestingly, food grain production in FY 2009-10 witnessed only 3.1 per cent growth while the crop sector’s GDP registered 6.1 per cent growth.  The table below explains it all.

Table 2.1.2: Various Estimates of DGP Growth for FY 2009-10

Source: CPD analysis on State of the Bangladesh Economy in FY 2010-11 second Reading. Compiled from BBS and MoF data.

Would it be wrong if one raise one’s eyebrows seeing this repeated revision? There is a serious mismatch between the estimated GDP growth and total investment figures. BBS said investment in FY 2010-11 will be 24.7 per cent of GDP. Taking into account Incremental Capital Output Ratio (ICOR) of last five years (FY 2006-10), CPD came to the conclusion that GDP growth would not be more than 6.3 per cent. CPD has termed it an “investment less growth”. It also fears that small industries will not be able to achieve the expected growth (7.5 per cent of GDP) as the first half of FY 2010-11 has registered 9.4 per cent decrease in production. This also seriously questions the BBS’s estimate.

Now what could be an appropriate response of a think- tank like CPD? Just sit back and relax perhaps and clap – certainly not. The role of think- tanks is unique – they often offer public policy debate, research, advice and analysis on different issues, operate non-profitably and independently from the influence of government & political parties. They help government understand and make informed choices about issues of international and domestic concerns. Sometimes think tanks play even critical roles – help build trust in government as well as in public institutions.

Readers may follow CPD’s budget analysis – it praised the budget but identified four major challenges in implementing it. I must say that helped me a lot to build trust in the proposed budget. CPD founder and its Chairman Professor Rehman Sobhan had been one of the advocates of “Dual Economy” theory that contributed to the birth of Bangladesh. He had also been a close associate of Bangabandhu Sheikh Mujibur Rahman, and a member of the first planning commission of Bangladesh. And CPD as a think tank also works closely with several ministries including commerce, finance, agriculture foreign affairs etc. Like most other think tanks – CPD is also a nonprofit organization. Its present executive director is also a member of the Planning Commission’s Expert Group on Sixth Five Year Plan. Now what would be CPD’s political gain!According to a 2005 research conducted by Philadelphia based Foreign Policy Research Institute (FPRI www.fpri.org), there were more than 1500 think tanks or political research centres in the US, half of which are university affiliated. In 2011, the number is certainly much higher. While in Bangladesh the number of think tanks is very few – a large number of those claiming to be so are often conservative and politically biased.

It would be unjust to compare Bangladesh with US. Still, the difference in number is significant as these think tanks have largely influenced US public policy and has promoted informed policy debate.  While in Bangladesh, successive governments have often come down heavily on independent think tanks when they differed with the government. It is not possible for a minister to find out the truth all by himself unless he is informed by fellow institutions and people. But unfortunately, the common phenomenon in countries like Bangladesh is that our leaders are not always informed well.

Research organizations and think tanks in this respect, can play a critically important role in unearthing the weaknesses of the government and recommend appropriate policy measures. I am not saying that CPD was right in slashing down the GDP, but as a common reader I found CPD’s questions a bit logical. CPD totally depends on secondary data retrieved mainly from  BBS, MoF etc. Although BBS has refuted CPD’s claim, it did not give any answer to the odds raised by CPD. BBS can clarify its estimate and revision by stating the methodology used and answer the eyebrow raising questions. In the near future BBS and CPD can give it a try to sit together with a full set of information and set up an example of public- private partnership without any budget allocation:)

The way the hon’ble finance minister first reacted on CPD’s analysis has worried us. Another government high-up described CPD as “buddhir pukur”, certainly not a note of applause for the research organization. Such attitude questions government’s ability to welcome and accept criticism. But thanks to the minister who realized that the GDP duel was an ignited one. After all he is young by heart who smiles even after knowing that tons of pressure is waiting for him in the coming days. He is the person who does not have any demand but has to meet everyone’s and above all make the common people happy. At the same time people expect responsible and unbiased journalism. Our journalist friends must shun the idea of negativism in presenting news. A provocation may create a lead news, but its consequences are far-reaching.

Reference

State of the Bangladesh Economy in FY2010-11(Second Reading). Centre for Policy Dialogue (CPD), Dhaka. 13 June 2011. http://cpd.org.bd/downloads/IRBD_FY11.pdf

This appeared in the Financial Express on 29 June 2011 – click to read