The New Nation - Internet Edition

Issue of banking coverage

ABOUT 87 per cent of the total population is still left out of the banking system despite the proliferation of the private sector banks over the last two decades. The Bangladesh Bank governor recently disclosed at a function that only 13 per cent of the population use banking services with 19 million accounts and urged the commercial banks to come up with 'innovative schemes' to widen their coverage and services. The poor coverage of banking services indicates rising social inequality and only 13 per cent people control most of the wealth, as one economist pointed out.

This, too reflects that most of the people do not have 'enough disposable income' to save. The banks are also not offering any incentive to small savers. One economist pointed out that during the Pakistan period banks were found wooing even school students to open bank accounts and helped develop the habit of saving among younger generation. But the banks, nowadays, totally forget this vital aspect and rather go preferably for business only with 'rich clients'. If the banks concentrate more on inclusion of people, they could perform more corporate social responsibilities than what they are doing now.

The banks should expand their operations to the rural areas for bringing more people under their coverage and help reduce exploitation of the poor loan-seekers from a section of micro-credit providers. The roles of two banks - Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank - are worth mentioning in this connection for the development of the rural areas, but they are dependent on refinancing scheme of the central bank. They should be independent and focus more on recovery, as the agriculture credit recovery is quite 'satisfactory'. Though banks take pride in higher recovery of rural credit, there is a gradual decline in net capital flow to the rural economy.

Increasing productivity in agriculture

THE main challenge facing the agriculture sector of Bangladesh today is higher productivity. The population is projected to nearly double at its present rate a few decades from now. Thus, food production must also double progressively in this period to keep on maintaining a balance between the food output and the greater demands for food by the burgeoning population in the backdrop of the global environment where food prices are climbing amid scarcity.

According to a recent report, a revolution in foodgrain production can occur in Bangladesh if only the areas under high yielding seeds are expanded from the present 20 per cent. In that case, it should be possible to produce an additional 3 crore metric tonnes of rice. The Bangladesh Agricultural Development Corporation (BADC) is presently the biggest supplier of the high yielding seeds followed by organisations in the private sector. Capacities of both the BADC and the private sector should be bolstered to produce the high yielding seeds in far greater quantities and to distribute the same efficiently.

Apart from the application of high yielding seeds, changes must be brought about in the management of irrigation. Recently, it was found out that excessive water is used for irrigation when better results can be experienced from using less water. Researches to develop seeds to withstand drought, floods and salinity are now on. Seeds developed to meet such situations will have to be popularised and extensively used. Farmers are also found excessively using the urea fertiliser when they can use far less to get the same or even better results. Thus, they need to be trained on using the inputs correctly. In all areas of agricultural production, new and innovative techniques will have to be encouraged to promote higher productivity from the croplands.

Humanities group disappearing from many schools

Dolly Akter

It was one of the happiest days in Mahins life. The result of his Masters degree examination was published and he did well. Delighted, Mahins parents thought their hard time was over as their son obtained the highest degree and would soon get a job to bring happiness and prosperity to their family. But that was not to be.

Mahin, the eldest in the family, tried heart and soul with his MA degree in Political Science to have a job but he could not manage one. So, his family continues to suffer. Our son has obtained the highest degree of the land. We had thought he would get a job to pull us out of the misery,regrets Mahins father Ashraf Ali.

Ali, his wife and three children live in a colony in Royerbagh area. Ashraf used to work in Adamjee Jute Mill. Since the closure of the countrys largest jute mill a few years back, he remained unemployed. Its really difficult for me to bear the education expenses of my three children,Ali says.

This is the age of competition. Qualification cannot always ensure a job. Besides, my Masters degree is in Political Science, which couldnt help my cause in getting a job,a frustrated Mahin says.

He further says, I even dont have the opportunity to work as a private tutor because guardians always look for science students. They think students with arts background wont be able to teach well. So, Ive decided not to let my sister study humanities.

Mahins sister, Salma, is a student of class eight. She says, Though my brother was a very good student, he is not finding any job. Therefore, Ive made up my mind that Ill study Commerce from class nine.

There is nothing unique in Salmas case. Many guardians are these days reluctant to let their children study arts for various reasons. Students are also unwilling to read humanities. As a result, the number of students in Arts group in schools is decreasing day by day.

The headmaster of Jatrabari Ideal School says 400 students got registered this year in class nine of his school and of them 275 are in Science group, 110 in Business studies and only 15 in Arts group.

He says students have to read fewer books in science and commerce. The syllabus of commerce group is not as wide as of humanities. And on many occasions, Arts students do not get expected results even after working hard. Therefore, students are becoming less interested in studying humanities.

A senior teacher of the same school says many guardians these days simply force their children to study science for practical reasons. But many talented students find science hard and ultimately fare badly in their examinations.

Syeeda Tahmina, an official at Dhaka Education Board, says the standard of education in Bangladesh is not good and there are problems in its system too. After doing well in arts, many young people just remain unemployed, leaving their parents frustrated.

A guardian, who is in Bangladesh Navy, says he will never let his children study humanities because he thinks less talented students usually study humanities. There is no alternative to science if anyone wants to become a doctor or an engineer.

A senior teacher at Government Laboratory High School says only science education can prepare Bangladesh to face the challenges of the 21st century.

Ehsanul Kabir, headmaster of Agradoot Bidya Niketon High School, says todays kids want to secure good marks by studying less. But an arts student has to study and memorise more.

He further says in his school out of 85 class nine students only one has been registered in arts group. You cant provide separate teachers for just one student.

The assistant headmaster of the school feels sorry for the fact that arts group is gradually disappearing from schools. Well forget our history if arts group disappears. The country wont get good politicians and economists if this happens,he says.

A teacher of the University Laboratory School, Dhaka, says, if the arts group is to be discarded from secondary schools it will have to be done through a process. In this regard, he mentions the unified education system.

Will the arts teachers lose their jobs if arts group disappears?

A teacher says they are unlikely to lose jobs. Instead, well be accommodated in other classes.

An arts teacher at Lalmatia High School says the standard of education will fall if the arts group does not have enough students.

Asked about it, former Dhaka Education Board chairman Professor Monirul Islam says if anyone wants to build himself in his own way at this competitive age everybody should be cooperative.

Another official of Dhaka Board says, Nowadays weve science everywhere. Look at the Bangladesh Civil Service (BCS) examinations. If you want to succeed, you need to know science because science and mathematics are compulsory here.

A senior official of the Education Ministry says, Things are not that much bad. As far as I know the number of arts students in rural schools is still high. Many of them fare well in their exams. But they cant have higher education from good institutions for lack of opportunity.

There are many schools in the country where science cannot be taught for lack of laboratory facilities. So, its not right that arts group will disappear. However, in urban areas guardians are taking more interest in science due to competition,he says.

Inflation: It's not all about commodities

Ruchir Sharma

FOR much of the past decade, the emerging markets of Brazil and Turkey were considered identical twins. Following their long history of high indebtedness and hyperinflation, which led them to the edge of the abyss in 2002, both economies embarked on a path of structural reform and staged remarkable recoveries. They appeared to share a common destiny, with their stock markets and currencies trading in sync. Till oil did them part.

The commodity-price explosion led by oil since late 2007 separated the fate of resource-rich Brazil, and resource-poor Turkey. Their divergent paths are symptomatic of the way the world has been operating this year. The only axis around which the global economy revolves is oil. In the first half of 2008, stock markets of most oil-exporting countries soared to new highs, while those of oil importers plunged 15 percent on average.

Brazil has been a significant beneficiary of the oil-obsessed world; commodities account for nearly half of its exports. Turkey, in contrast, is one of the worst-performing markets this year due to an extremely large oil-import bill and no other major commodity export to offset the oil shock. The market value of the Brazilian oil giant Petrobras is now larger than the entire market capitalisation of Turkey. Within the developed world, too, the performance gap between energy stocks and the rest of the market is massive. In fact, today's outperformance in the energy sector has surpassed that of the 1970s. The only other time one sector was able to pull so far away from the broader market was in early 2000, when tech stocks topped the league tables.

But oil could sow the seeds of its own destruction. The price surge is causing a widespread inflation problem, even in oil-exporting countries. It's telling that the markets of Brazil and Russia have over the past several days joined the global bear run. In the United States, shares of energy companies are declining despite forecasts of ever-rising oil prices.

The message from the marketplace is that oil and other commodity prices have reached a point where they are choking economic growth. While the commentariat is fretting over inflation, it's interesting to note that market indicators most sensitive to inflation are rather well behaved. Gold prices have for many months been locked in a narrow trading range, with the ratio of gold to oil prices at a record low.

This suggests that high oil prices are acting more as a tax on growth rather than stoking inflation fears; in the latter case, people would be scrambling to buy gold. Similarly, the yield on inflation-protected securities issued by the US government has been fairly stable, reflecting well-anchored inflationary expectations.

All these signs refute warnings that the world faces a return to stagflation. In the early 1970s, global inflation surged above 10 per cent and remained high throughout the decade, as higher oil and food prices triggered a vicious price-wage spiral. A major difference between now and then is the spread of the free market. In today's globally integrated world, production can move swiftly to the lowest-cost factory, trade flows freely, and it is difficult for workers to demand wage increases that are not supported by productivity growth.

The attitude of central bankers is the other big difference. Policymakers across the world are now intensely focused on taming inflation at any cost, as illustrated by the fact that nearly two dozen central banks have tightened monetary policy since late April, when oil prices jumped higher at an even more frenetic pace.

Rising interest rates will resolve the near-term inflation problem at the expense of global growth. Red-hot emerging-market economies will cool off for a while, easing demand pressure on commodity prices. Global economic growth is likely to slow to a below-trend pace of 3 per cent in the second half of this year from over 4 per cent in 2007 with emerging market growth too likely to come off the boil from 8 per cent last year to 7 per cent in 2008. This is what cyclical downturns are all about: periods of below-trend growth are necessary to cleanse the system of budding excesses so that the structural uptrend remains intact. And the scale of today's price excesses should not be exaggerated. To put the current situation in a long-term perspective, average inflation in emerging markets is currently running at 8 per cent, up from a record low of 4 per cent in 2005 but still well below the 20 to 30 per cent levels of the 1970s and '80s.

Today's global economic structure doesn't allow the stagflationary impulses of the 1970s to build for long. The main risk to the world economy in the months ahead is a substantial slowdown in global growth rather than a rise in price pressures. A downturn should take the edge off commodity prices. There is a limit to which commodity-exporting and -importing countries can diverge. Turkey and Brazil may yet be reunited.

Georgia in Russia's bear hug

David Clark

EUROPEAN UNION foreign ministers meeting in emergency session today to discuss the situation in Georgia should begin by asking why it took the outbreak of war to focus their attention. They had no cause to be surprised.

The warning signs had been apparent for at least a year, and the Georgian government had made strenuous efforts to raise the alarm. This time last summer a Russian jet violated Georgian airspace and dropped a missile north of Tbilisi in what appeared to be a botched attack on a Georgian radar installation. Russia denied involvement, but two separate independent investigations found otherwise.

Despite this, Georgia's plea for diplomatic support fell almost entirely on deaf ears.

Whether or not the incident was planned in order to test international reactions to an escalation of Russian military action in Georgia, Moscow clearly took encouragement from the absence of a response. With western governments preoccupied elsewhere - not least with Iran, where they need Russian support for a negotiated solution on the nuclear issue -- Russian strategists evidently concluded that they enjoyed a free hand in their "near abroad".

In April, Vladimir Putin announced that Russia would be strengthening official links with Georgia's two breakaway regions, Abkhazia and South Ossetia, including opening formal relations with their political bodies and strengthening trade ties.

This only confirmed what had been apparent for several years -- that Russia is actively supporting secessionist forces instead of respecting its mandate and behaving as an honest broker. But it ripped away the final pretence that its role in Georgia is one of peacekeeping.

Other steps of escalation quickly followed. Russia moved 400 troops into Abkhazia under the pretext of working on a railway project. Russian planes started shooting down Georgian aerial drones.

There was an increase in armed attacks by Russian-backed forces in South Ossetia, including a roadside bomb that injured six Georgian policemen and an attempt to assassinate the head of the pro-Tbilisi provisional administration of South Ossetia.

None of these incidents received much coverage outside the region, so the impression has been created that Georgia initiated the current fighting with an unprovoked assault on South Ossetia. This is quite false. It has surely been a big misjudgment on Georgia's part, but resort to offensive operations came at the end of a long period of rising tension in which Russia had done everything it could to stir up trouble and provoke a reaction.

The history behind Georgia's "frozen conflicts" is long and complex, and there is certainly fault to be found on all sides. The wars that followed Georgia's independence were brutal affairs in which members of all communities were to be found among the victims and perpetrators. It is therefore understandable that Abkhazians and South Ossetians are suspicious of Tbilisi and want guarantees about their security. It is also true that Georgia's president, Mikheil Saakashvili, has turned out to be something less than the model democrat he first seemed. Many former admirers have been shocked at his increasingly authoritarian leanings.

But complexity is no excuse for abdicating moral judgment in situations of this importance. If responsibility for the conflict is not a black and white matter, the picture is not uniformly grey either. By any reasonable measure, the impact of Russian policy has been uniquely destructive in generating instability and political division in the Caucasus.

The events of the early 1990s notwithstanding, Georgia's treatment of minorities that have remained under its rule has been generally good. Whatever his faults, Saakashvili is no Milosevic - and wild Russian allegations of genocide have no independent support. Under approp-riate international supervision, it would be perfectly possible to turn his offer of autonomy for Abkhazia and South Ossetia into a workable constitutional settlement that guaranteed the security and fundamental rights of people living those territories.

The problem is that considerations of this nature form no part of Russia's vision for the region. It talks about defending the people of South Ossetia, but the Kremlin's aims are geopolitical rather than humanitarian.

It seeks to restore the sphere of influence it regards as Russia's birthright, which it lost with the collapse of the Soviet Union (a "major geopolitical disaster", according to Putin).

There is no place for an independent Georgia (or Ukraine or Moldova) in this mental picture.

When Russian leaders talk about the benefits of "sovereign democracy", they are talking exclusively about their own sovereignty and not at all about democracy. The countries on their borders have no right to foreign policies of their own if they conflict with Russia's. This is especially true of energy supplies, where Georgia's role in maintaining the only east-west pipeline route free of Russia's monopolistic grip causes double offence. This is about the Kremlin's attitude to us, too.

So how should western countries respond? The question arises most immediately in relation to Nato, where Georgia hopes to take a step closer to joining by securing a membership action plan. Sceptics within Nato, like Germany, will see the conflict as evidence that Georgia is an unreliable partner best kept at arm's length. This is entirely the wrong way of looking at it.

Georgia's security concerns are real, and Russia is the cause. The onus should therefore be on Russia to reduce the security fears that drive the desire for Nato membership by withdrawing unwanted troops and becoming part of a political solution to the frozen conflicts. If it will not do this, it has to accept the consequences.

Beyond this, everything depends on what happens next. There are troubling signs in some of the victory statements coming out of Moscow yesterday that Russia may feel emboldened to impose a punitive settlement, perhaps by annexing territory.

This is not something that the EU and its allies should be prepared to tolerate. As so often with bullies, the Russian government's behaviour disguises deep insecurity and a craving for respect. This makes it more susceptible to our opinions than we often think. Further aggressive steps against Georgia would certainly be a reason to reconsider whether Russia should continue to enjoy the prestige that comes with membership of the G8.

Another possible response ties in nicely with our current Olympic obsession. Russia is due to host the Winter Olympics in 2014 at Sochi and hopes to use the event, like the Chinese, as an expression of its power on the world stage. There would be very good grounds for asking the International Olympic Committee to consider whether a country that was actively working to dismember a neighbour only a few kilometres from Sochi was an adequate standard-bearer for the Olympic ideal.

Too often European governments succumb to the fatalism of believing that Russia is beyond influence. That is perhaps the real reason why they chose to ignore the warning signs in Georgia until it was too late.