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CHAPTER: 1
INTRODUCTION:
Hartal, originally a Gujarati expression, was popularized by Mahatma Gandhi in the 1920s and
1930s when the national leader institutionalized the term by categorizing a series of antiBritish
movement under the given name Hartal. It is a mode of appealing to the sympathies of a
government to change an unpopular or unacceptable decision. In the 21
st
century, Bangladesh
still continues the legacy of Hartal, which has become a constitutionally recognized political
method for articulating any political issue (Banglapedia).
1.1 ORIGIN OF THE REPORT:
This report was assigned as part of the Business Communication Course of Department of
International Business of Master of Business Administration (MBA) program. In accordance
with the specifications of this program, the author has to complete a term paper at the end of the
course.
The assigned project, titled Effects of Hartal on the economy of Bangladesh has been
completed and report has been prepared under kind supervision of Academic Course Instructor
Mr. Prof. Muhammad Mohiuddin, Professor, Department of Management Studies, Faculty of
Business Studies, University of Dhaka.

1.2 OBJECTIVES OF THE REPORT
The main objective of our term paper is to analyze the effects of hartals on the economy of
Bangladesh. If we describe it more specifically it will be as follows-
1. To find out trends of hartal over the years
2. To measure the economic cost of the hartal
3. To figure out how GDP growth rate is effected by the hartal
4. To find out how badly Ready Made Garments sectors is affected by the hartal
5. To figure out how does government lose its revenue due to frequent hartal
6. To unearth how the small businesses and general people are affected by the hartal.

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1.3 SCOPE
As per the requirement of the term paper, the author mainly focused on the few parts of the
macroeconomic of Bangladesh. The parts that have been covered in this report are comprised of
only the effects of the hartal on the economy. There are so many sectors that also affected by the
frequent hartals such as society, education, transportation, life of the people etc which are not
covered in this report.

1.4 LIMITATION
I had to face several constrains when I prepared this report. Some constrains are given below:
Limited source of data
Lack of time.
Lack of knowledge about different aspects of the macroeconomics.
1.5 HISTORICAL BACKGROUND:
Strike is regarded by economists as a serious harmful to economic performance. The widespread
phenomenon of political instability in several countries across time and its negative effects on
their economic performance has arisen the interest of several economists. Aisen and Veiga
(2011), in a study of 169 countries and using 5year periods from 1960 to 2004, find that
escalated levels of political instability are associated with lower levels of GPD growth rates.
Alesina et al. (1996) concluded that countries having a high tendency of government collapse are
significantly associated with lower growth rates than otherwise. Exploring four dimensions of
political instability, namely, mass civil protest, politically motivated aggression, instability
within the political regime and instability of the political regime, Pin (2006) show that
different dimensions of political instability affects economic growth in a different facet (in a
study of 98 countries in the 1984- 2003 period).
Unfortunately, hartal politics has become pervasive in Bangladesh. It has become part of our life.
While in 1947-58 period, the average number of hartal per year including local hartals was 1.5
days, in 1967-70 period 12.7 days, in 1971-74 period 12 days, it became 14.4 days in 1975-86
period, 81.6 days during 1987-90 period, 72 days during 1991-94 period, 93 days during 1995-98
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period, 110.6 days during 1999-2000 period. During 2001-2006 period a total of 173 days of
nationwide hartals were enforced. The big question is: how can a country of 160 million people
with a density of 1,000 people per square kilometer, and with more than 40% of the population
still below the national poverty line, afford to undergo so many days without economic
activities? How the total economy of Bangladesh is affected due to this frequent hartal? This
report will discuss those issues in later parts.

1.6 METHODOLOGY:
Basically secondary data sources were used to prepare this report. I have visited various
Agencies websites such as International Monetary Fund, Centre for Policy Dialogue (CPD),
UNDP and read their publication regarding current scenario of the economy of Bangladesh to
collect data. Furthermore, I used different articles published on daily newspapers to gather
information.

















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CHAPTER: 2
HARTAL EFFECTS ON THE ECONOMY OF BANGLADESH:
General strikes or hartals, as it is called in Bangladesh, certainly extend a devastating blow to the
economy. Over the decades hartals have become commonplace in Bangladeshs politics. Hartals
are not a new subject to Bangladesh. What has changed is their frequency and destructiveness.
There have been a variety of claims about the economic impact of the hartals. Many articles and
reports mention the harmful impact of hartals on the economy. Some attempts have been made to
calculate the economic cost of hartals. The purpose of the chapter, therefore, is not only to
estimate the economic cost of hartals, but to provide a qualitative analysis of their impact.

2.1 TREND OF HARTAL OVER YEARS IN BANGLADESH
While in 1947-58 period, the average number of hartal per year including local hartals was 1.5
days, in 1967-70 period 12.7 days, in 1971-74 period 12 days, it became 14.4 days in 1975-86
period, 81.6 days during 1987-90 period, 72 days during 1991-94 period, 93 days during 1995-98
period, 110.6 days during 1999-2000 period. During 2001-2006 period a total of 173 days of
nationwide hartals were enforced. Historical evidence shows that during the present democratic
system initiated in 1991, the average number of Hartals per year has been more than three times
higher (46 per year) compared to earlier regime.


0
20
40
60
80
100
120
140
160
180
200
Numberof Hartal Days in Every Government Period
Avg. Hartal Days per year
Source: The Dailystar Newspaper
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The total number of the Haltal is not available in this Awami League government regime but it
has already passed 130 marks (up to March 2013). However, eight stylized facts about recent
Hartal trends in the current period (2013)
1. Frequency (incidence) of Hartals have increased significantly
2. Hartals are now being called even during the weekends
3. Hartal, for an economic cause, has become more uncommon
4. Hartal opposing parties are also more active during the Hartal periods
5. More decentralized Hartals have emerged, e.g. at District, Upazilla level
6. New actors are entering as Hartal protagonists in addition to the traditional
political actors
7. Causalities and violence in Hartals have become more manifest
8. Remarkable number of deaths of members of the law enforcing agencies in
connection with Hartals
2.2 MEASURING THE ECONOMIC COST OF HARTALS
Opinions differ on the direct costs of hartals. According to a World Bank estimate in 2001,
economic losses on account of hartal during 1995-99 period stood at USD 10 billion, the per
hartal loss being US$50 million. Though UNDP estimated the cost of hartal on a longer term
basis, however their findings seem to be in line with the World Bank. According to the UNDP
estimate, hartal on an average took away 4.5 per cent of GDP per annum during 1991-2000
period. The UNDP also thought this figure to have exceeded 9 per cent per annum on three
occasions during last decade.
The Bangladesh Development Update April 2013 of World Bank predicts that GDP in the fiscal
year 2013 is likely to fall to around 6 percent compared with 6.3 percent in the fiscal year 2012.
Moreover, historical experience suggests that in Bangladesh Hartals are more frequent during the
last year of an elected governments tenure (FY96, FY02 and FY07). As a result that economic
performance in final year tends to be depressed compared to its preceding year. Economic
performance in terms of GDP growth, manufacturing sector growth and export in all three
previous incidents argues in favour of the above statement. As a result the growth rate of GDP is
expected to be fall in the range of 0.2-0.9 percentage points.
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According to the Survey of Dhaka Chamber of Commerce & Industry (DCCI), A day of
shutdown causes a loss of Tk 1,600 crore to the countrys businesses of all segments from
exports to retail shops. In addition to that, they said, the country faces, on average, 40 days of
shutdown a year, which means the financial losses stand at Tk 64,000 crore or 6.5 percent of the
countrys gross domestic product (GDP). They ended by saying that if there were no political
unrest, Bangladesh could have achieved GDP growth at 12-13 percent instead of the existing 6-7
percent.

If we combine all those information then we can easily understood that this year GDP growth
rate will fall due to the frequent hartals. Here, the figure shows the expected GDP growth rate of
FY 2013.

2.3 HARTAL EFFECTS ON DIFFERENT SECTORS:
Now the question is how GDP of Bangladesh is affected by the frequent Hartal? To answer this
question we have to look at the effect of the hartal at different levels. The survey result of DCCI
can give us a overall overview how the GDP is influenced by the Hartal and its effects on
different sectors.
A recent study of Dhaka Chamber of Commerce and Industries (DCCI) said hartal causes a loss
of Tk 16 billion per day while ready-made garment sector becomes the worst hit by strike
programmes, suffering a loss of Tk 3.60 billion. The total revenue loss of the country amounts
Tk 2.50 billion in a daylong hartal, it showed. Wholesale market, shopping malls, showrooms
5.74
5.83
6.7
6.3
6
5.2
5.4
5.6
5.8
6
6.2
6.4
6.6
6.8
FY2009 FY2010 FY2011 FY2012 FY2013
(Expected)
Bangladesh GDP Growth Rate over the Years
Bangladesh GDP Growth
Rate
Source: CPD, UNDP
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and small shops lose Tk 6 billion a day while the education sector loses Tk 500 million, financial
institutes Tk 500 million, insurance companies Tk 500 million, transport and communications
sector Tk 600 million, tourism sector Tk 500 million, production sector Tk 1 billion and other
sectors approximately Tk 650 million in each of hartal days.


2.4 HARTAL EFFECT ON RMG SECTOR:
This section discusses the impact of hartals on Bangladeshs export sector, in particular on the
readymade garments industry, which accounts for 76% of the countrys foreign exchange
earnings. The ongoing political turmoil has started taking its toll on country's apparel sector and
is feared to cause fall in orders by nearly 30 per cent by the end of the current year, factory
owners said to a reputed daily newspaper of Bangladesh. They said many buyers have started
shifting orders to India, Myanmar, Vietnam and Cambodia even at higher prices than Bangladesh
to get uninterrupted supply of clothes in the coming spring and summer seasons. Foreign buyers
usually negotiate purchases for spring and summer collections in April to June and confirm
orders by July and the factory owners make shipments until December. Fearing more volatility
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of political situation in the coming days, buyers' present attitude is not to take risk of shipment
failure which may cause a drastic fall in orders in rest of the months of the current year. Many
buyers recently cancelled their visits to Bangladesh, fearing risk of their personal security and
they have already started sourcing their goods from other destinations at higher prices than
Bangladesh and planned to remain competitive in the market through slashing their profits.
On the other hand if the factory owners fail to manage orders, many small and mid-level units
may be forced to declare lay-offs and thousands of workers would then lose their job. According
to the survey of DCCI, the garment sector takes the hardest blow, counting a Tk 360 crore loss
from a one-day shutdown.
Moreover, a series of hartals in recent days, have pushed export trade, specially in apparels, into
a tight corner with some 500 tonnes exportable items up for costly air shipment each day to meet
the timelines set by international buyers. Because many exporters have been missing their
shipment deadlines as goods-carrying trucks and covered vans failed to reach Chittagong port
due to frequent shutdowns and the accompanying violence. One official of Biman Bangladesh
said to a daily newspaper that Biman operates 32-37 flights everyday and almost all of the flights
carry RMG goods, totaling the quantity to 400-500 tonnes daily on average. The garment
exporters have been left with no choice but to go for air shipment, which involves much higher
cost compared to shipment by sea, to maintain the lead time set by the buyers and keep
reputation of the industry intact.
The difference of cost is huge. The charge for shipment of a dozen light-weight goods is only
ten cents ($0.10) via sea cargo, while an airfreight charges $5-$20 for the same quantity of
goods. And, it is the exporters obligation to send goods to the buyers at own cost if the shipment
date is missed, said Nasir Uddin Chowdhury, former vice-president of Bangladesh Garment
Manufacturers and Exporters Association (BGMEA).
2.5 HARTAL EFFECTS ON GOVERNMENT REVENUE:
Revenue collection of National Board of Revenue in the first eight months was well below the
target. Against a target of 18.6% the realized growth was 15.4%. It is apprehended that the
revenue collection shortfall in FY2013 could be about Tk. 3,000 crore. According to the data
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provided by the officials of the National Board of Revenue (NBR), it may not be able to achieve
its revenue collection target due to repeated hartals and political instability in the country as it
loses huge amount of revenue to a days general shutdown. The National Board of Revenue may
miss the revenue collection target of Tk 1,12,259 crore set for the current 2012-2013 financial
year mainly due to frequent strikes and overall political unrest in the country. Chittagong
Customs House calculated that the government lost a total of Tk 178.21 crore in revenues in 10
days of hartal in March. Dhaka Customs House lost Tk 1.48 crore, Jessore VAT
commissionerate lost Tk 3.15 crore and Sylhet VAT commissionerate lost Tk 45 lakh to 10 days
of hartal in this month.











According to official data, the NBR fell short of the target for the first eight months of the
current fiscal year by Tk 3,155 crore. In addition to that the deficit had increased further by Tk
4,800 crore in July-March as the country experienced volatile situation including 10 days of
hartal during March. Value-added tax experienced the highest deficit amounting to around Tk
3,000 crore in July-March followed by customs duties. According to a study conducted by the
Dhaka Chamber of Commerce of Industry, the government loses revenue to the tune of Tk 250
crore to a single days hartal.


Source: CPD
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2.6 HARTAL EFFECTS ON THE SMALL BUSINESS (WHOLESALER,
RETAILER, SHOPPING MALL ETC.):
The frequent countrywide programmers for observance of 'hartal' have dealt a big blow to the
shop-owners as their sales have dropped by over 50 per cent in recent weeks, business circles
said. The shop-owners also feared that many of them would be forced to close down their
businesses after failing to meet the needs for repayments of their bank borrowings at a high
lending rate as they could not open their business establishments for more than 50 days so far in
2013 due to hartals. According to the statistics of Bangladesh Shop Owners' Association
(BSOA), the shop-owners, at both wholesale and retail outlets incurred an aggregate financial
loss to the tune of about Tk 6.0 billion a day so far, on a rough reckoning, because of the
shutdowns.
The daily newspaper The Financial Express interviewed several shops owners. In the interview
session they said they have to pay their employees and workers as well as repay the installments
an of bank loans as they don't take the very difficult conditions our businesses these days into
any consideration. "We earlier used to sell trousers, short pants, bed sheets and three quarters as
both retailers and wholesalers, worth about Tk 0.1 million a day. But during the last several
weeks, the daily turnover plummeted to less than Tk 40,000," said Mohammad Nasir, owner of
Nadiya Garments at Bangabazar Complex in the capital. Branch manager of Butterfly outlet at
Bangabandhu National Stadium Market, Mustafiz Hossain said it has become very tough to find
customers during strike-hours as the people are afraid of going out for shopping amid political
violence. Owner of Alif Sharee House at Dhanmondi Hawkers A/C Market, M Jashim Uddin
said the ongoing political turmoil has forced them to keep their shops closed for most of the time
during the last several weeks. "How can we survive under such a situation? I find myself in a
difficult situation to repay my bank loan installment despite frequent reminders from my bank,"
he said. Rezaul Karim Siddiqui, owner of Kalam Electronics at Moghbazar, was bitter over the
current violent political situation. He said he paid the installment of his bank loan for March with
money taken from one of his relatives.

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2.7 HARTAL EFFECT ON THE LOWER INCOME PEOPLE:
According a report of published on the newspaper named The Dailystar, large number of daily
basis worker in the district are passing hard days amid uncertainty of income due to tough
political programmes like frequent hartal for the last couple of weeks. Daily wage earners
including construction workers, carpenters, rickshaw pullers, daily basis shop workers, transport
workers and mill workers have to bear the brunt of frequent hartal since late February. On usual
days, workers get job that earn Tk 100 to 350 daily, depending on the nature and amount of
work. But during the hartal days, only a small number of job seekers get work while others
returned home frustrated. To meet urgent family expenses, daily wage earners often take loan
from different NGOs on condition to refund it with interest in weekly installments Due to this
financial crisis, some of them are not able to give payment of the weekly installments to refund
the loan that she took from an NGO. Now, they had to spend up their small savings to meet
family expenses as they missed job for days during the last three weeks. On the other hand,
during hartal, employers tend to give lesser amount as wage as laborers outnumber the available
jobs.
Democracywatch and ActionAid Bangladesh conducted a survey on 1000 poor city dwellers in
year 2000. The specific objective of the survey was to determine the extent of income loss and
sufferings of the poor city dwellers. On an average, each respondent has observed about 123
hartals and 69 per cent of the respondents tell that they have incurred income loss/damage of
their properties due to hartal. The main reason of income loss is due to the shut down and
income decrease due to hartal (66 per cent). While in normal times, a respondent would work 10-
12 hours, during hartal, their average daily work is halved, and consequently, earning drops by
average 60 per cent.



Average Hours Worked and Daily Income in Normal Times and During Hartal
Occupation Normal Time During Hartal
Rickshawpuller 9.06 (102) 3.40 (45)
Poor footpath vendor 11.80 (90) 5.40 (34)
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Day labourer 9.40 (76) 4.70 (34)
Small shopkeeper 11.90 (105) 5.90 (43)
Garment worker 11.20 (67) 7.50 (38)
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CHAPTER: 3
OBSERVATIONS
After considering all the information discussed above, we can find out:
1. A day of shutdown causes a loss of Tk 1,600 crore to the countrys businesses of all
segments from exports to retail shops. As a result the growth rate of GDP is expected
to be fall in the range of 0.2-0.9 percentage points in this fiscal year.
2. Ready-made garment sector becomes the worst hit by strike programs, suffering a loss of
Tk 3.60 billion.
3. Due to this political turmoil and uncertainty, many buyers have started shifting orders to
India, Myanmar, Vietnam and Cambodia even at higher prices than Bangladesh to get
uninterrupted supply of clothes.
4. Cost of the shipment increases as exporters of Bangladesh have to deliver the goods by
air shipment to meet up the timeline.
5. Revenue collection of National Board of Revenue in the first eight months was well
below the target. Against a target of 18.6% the realized growth was 15.4%. It is
apprehended that the revenue collection shortfall in FY2013 could be about Tk. 3,000
crore.
6. According to the statistics of Bangladesh Shop Owners' Association (BSOA), the shop-
owners, at both wholesale and retail outlets incurred an aggregate financial loss to the
tune of about Tk 6.0 billion a day because of the shutdowns.
7. Earning of the Low income people also highly affected by this frequent Hartal as they are
not able to find the work.








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Conclusions:
Recent political strikes in Bangladesh are hampering its economic growth and threatening to the
progress. If economic growth hurt, it has a negative impact on peoples income. The recurring
hartal seasons give Bangladesh a bad image abroad and causing costs to business. It also has a
very significant impact on the GDP Growth Rate. Apparently, hartals have significant adverse
impacts on sectors such as Ready Made Garments, Government Revenue, Wholesale and Retail
store business etc. However, the cost of hartal will be higher in the long run.

Bibliography:
1. Bhattacharya, D. (April 13, 2013) Bangladesh 2013: A issessng Economic Implications
of the Present Political Shocks. Retrieved from
http://cpd.org.bd/downloads/Bangladesh2013.pdf
2. Uddin. J. (April 11, 2013). NBR may miss revenue target for unrest, strikes. New age.
Retrieved from http://www.newagebd.com/detail.php?date=2013-04-
11&nid=45786#.UXBXBKJTCuI
3. CPD study shows hartals affect $1.0b of GDP a year. (April19, 2013). The Financial
Express. Retrieved from http://www.thefinancialexpress-
bd.com/index.php?ref=MjBfMDRfMTlfMTNfMV85MF8xNjY5MDU=
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-12-14
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