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The Rise of Interest Politics in Bangladesh Author(s): Stanley A. Kochanek Reviewed work(s): Source: Asian Survey, Vol.

36, No. 7 (Jul., 1996), pp. 704-722 Published by: University of California Press Stable URL: . Accessed: 26/11/2011 05:58
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Stanley A. Kochanek

Ever since its creationin 1971, Bangladesh'surbanbased political, bureaucratic, military and eliteshave dominated political the processand have been accountable no one but themselves.Organized to groupsin Bangladesh existonlyamongthe 16% of thepopulation livingin urbanareas. These groups include political parties, student the community, tradeunions, businessmen, middle-class professionals, military, the the and civilianbureaucracy. rural In areas,social organization based on patronis clientrelationships dominated the largerlandowners.The increasingly by destitute, landless, and near-landless population thecountryside graduin is ally being organizedby nongovernmental organizations (NGOs) funded largely international by donors. Thereare thousands theseorganizations of spreadthroughout countryside theyremainhighlylocalized, nonthe but and with political, primarily concerned poverty alleviation. in has Influence a highly traditional societylike Bangladesh, therefore, been largely individual and fragmented, interest and groupshave played a verylimited direct role in thegovernmental process. Like otherorganizain divertionsand institutions Bangladesh, modern associations representing and gent social forces have been rudimentary insufficiently mobilized, in intervene thepolitto and organized, coherent do morethansporadically in has ical process. The government, moreover, notbeen interested encouraging these groupsto participate. Thus, most social forcesand demand devicesavailaction to groups found direct andviolence be theonlyeffective or able forcallingattention their to demands, redressing grievances, forcing in some degreeof accountability a traditionally unresponsive system.As a an confronted alfactionalized social forces result, weak,poorly organized, factionalized state. mostequallyweak,organized,
of StanleyA. Kochanekis Professor PoliticalScience,Pennsylvania in Thisarticle derived is from larger a of StateUniversity. study interest politics SouthAsia,and in for was supported a Fulbright by SouthAsia RegionalResearchFellowship fieldresearch in India,Pakistan, Bangladesh 1993-1994. and of of i 1996 by The Regents theUniversity California



of 10 following months politicalcrisisand In December1994, however, from intense came under pressure eliteof Bangladesh the stalemate, political thattheelite whichdemanded businesscommunity, emergent thecountry's Businessleadersdeconflict. to hostage political the stopholding economy Party (BNP) and theopNationalist Bangladesh mandedthatthegoverning of AwamiLeague (AL) meetundertheauspicesof theFederation position their dif(FBCCI) to settle and of Chambers Commerce Industry Bangladesh it the timesinceliberation the failed, marked first ferences.'Although effort it the had community madesucha demand; reflected signifithe that business and civilsociety theemergplace inBangladesh that havetaken cantchanges process. This new role, in ing role of thebusinesscommunity thepolitical the playedin ending political by was moreover, reinforced thepartbusiness development, the aims to outline origins, crisisin March1996. This article in and role of the Bangladeshbusinesscommunity the rapidlychanging, and processin Bangladesh theimpolitical patron-client patrimonial, largely process. on politics thegovernmental pact of interest ending resigned, H. of In December1990 thegovernment General M. Ershad rule almosta decadeof military-bureaucratic in Bangladesh.Ershad'sresigsupport, of withdrawal military was brought aboutby mass agitation, nation and with corrupt ineffective and growing donorunhappiness his increasingly rule to The government. end of Ershad'spersonalized brought powera neuwhich Shahabuddin Ahmed, headedby ChiefJustice tralinterim government in fair in truly election Bangla1991 thefirst succeededin holding February desh in twodecades. on centered five politthe key entered race,thecontest 76 Although parties of HasinaWajid,daughter ical forces.The AwamiLeague headedby Sheikh SheikhMujiburRahman,was the founder Bangladesh, the assassinated of a with majorto in and party thecountry was expected emerge bestorganized of ity. The AL had playeda decisiverole in thecreation Bangladeshand and of nationalism, secularism.Its on campaigned a platform democracy, was the BangladeshNationalistParty led by Begum chief competitor leaderof the the ZiaurRahman, assassinated KhaledaZia, widowof General of the during 1971 war and thepresident resistance movement Bangladesh nationalcalled fordemocracy, in Bangladesh 1976-79. The BNP program politicalforces ism, Islam, and social justice. The threeothersignificant

to From Crisis Crisis

1. Dhaka Courier, December2, 1994,pp. 8-9.



weretheJamaat-i-Islami, a staunch Muslimfundamentalist party; Jatiya the Party (JP)of General Ershad;and a melange leftist of parties.2 The electionresults were a majorshockto theAL. Although party the received 30.08% of thevote,it won only88 seats,and was defeated the by BNP, whichwon 140 seats withonly 30.81% of the vote. Ershad'sparty received surprising a 11.92% of thevoteand 35 seats,whiletheJamaat and won 19 seatsand 14.41% of thevote. Leftist other Muslimorthodox parties candidates parties wereable to winonly12 seatsand4.73% andindependent the short a of 6 seats and 8.05% of the vote. Although BNP fell slightly it in a when majority the300-seatlegislature, was able to form government for theJamaat-i-Islami helpedit elect28 of 30 seats reserved women. Defor of the spitetheBNP's preference a presidential system government, party in consensus support restoringparliamentary of a agreedto accepta political Bill system.Followingthepassage of theTwelfth Amendment in August womanprimeminister Bangladesh, of 1991, Khaleda Zia became thefirst to WhileKhaleda andthenation appeared be on theroadto a newbeginning. Zia's government rolein consolidating transiplayeda critical Bangladesh's and the in tionto democracy succeededin keeping military thebackground, herinexperienced to government proved be fragile, insecure, ineffective, and and by 1995 Bangladesh faceda newpolitical crisis. in is Legitimacy Bangladesh verycloselytiedto development policybut theBNP record was mixed. BNP economic policycloselyfollowed World Bank and International Monetary Fund (IMF) guidelines structural for reform,and althoughthe government's structural reform programwas a macroeconomic successuntil political the crisisof 1995-96,thisdid notresultin improved macroeconomicperformance. theone hand,theBNP's On economic policiesenabledBangladesh meetall theIMF and WorldBank to tax wereup, inflation down,government was targets; revenues deficits decreased, savings investment and increased, foreign exchange reserves wereat a record, interest and ratesweredown.3On theother was hand, Bangladesh its not rate an simply able to increase economic growth from averageof 4% (from1973 to 1993) to a targeted 6%. Economists arguethatBangladesh needsa minimum its growth of5.5% inorder offset population rate to growth It rateof 2.4% and liftits over50 million poor out of poverty. also needs to levelsof unemployment. Slow growth higher growth deal withitsrising
see Talukder 2. For an excellentanalysisof the fall of Ershadand the 1991 elections, and of Dictator:1991 Elections theProspects Civilian "The Fall of theMilitary Maniruzzaman, 65:2 (Summer1992), pp. 203-224, 211-13. PacificAffairs Rule in Bangladesh," D.C.: 3. See World Bank, Bangladesh: Implementing Structural Reform(Washington, of World Bank, 1993), and Federation BangladeshChambersof Commerceand Industry, Economy1973-1993,"Two Decades of FBCCI of "Growth Development theBangladesh and 1973-1993 (Dhaka,FBCCI, August1993).


increashas been attributed low levelsof investment, to inadequate savings, and ing bad debts,and mostimportant, politicalmanagement political poor upheaval. BNP economicreforms have changedthe status quo, but theyhave also createdenemieswhilefailing the same timeto attract at manysupporters. Public sectorlabor unionsresent loss of privileges the and have opposed retrenchment privatization. bureaucracy resisted and The has liberalization, deregulation, privatization threats its power,influence, perks. and as to and The middle class resents in foodandfertilizer cuts subsidies, thebusiness and community campaigned has against tariff reductions loss of tariff and protection. All groupshave opposedtax increases designedto raise the level of domestic resource mobilization. While groupresistance opposition and made thegovernment ambivalent and hesitant carrying its reform in out program, grouppressures not did threaten survival.Initially, BNP government its the succeeded neutralizing in a weak and dividedAL, getting students the under control, pushing and the Jamaat-i-Islami thebackground into its following original highprofile. Thus, despiteHasina's claimthat"we won theelection through people's mandate butwe suffered debaclebecauseofconspiracy,"4 AL was unableto come the up with powerful a it issuethat coulduse to topple BNP government. the AL also was unableto developan effective opposition strategy continually and lookedto thepastforissues,whichfailedto resonate withtheelectorate. The politicalclimatewas altered in 1994 when,for dramatically January in thefirst timesinceits defeat 1991,theAL was able to generate major a in political to elections Dhaka and challenge BNP ruleby winning municipal the and citiesin Bangladesh.The AL Chittagong, twolargest mostimportant victories were seen as a reaction theindecisiveness theBNP governto of and slow ecoment, resentment cuts in food and fertilizer over subsidies, nomicgrowth. The AL insisted theelections that that peoplehad the proved lost confidence thegovernment demanded immediate in and its resignation. The election results caused shockand alarmin theBNP, energized AL, the and revitalized opposition. the In MarchtheBNP wona surprise in in victory a parliamentary by-election a traditional stronghold, thepolitical AL and environment hostile and turned bitter.The AL refused acceptdefeat to and charged BNP withmassive the of rigging theresults.The by-election galvanized opposition demand the to creation a neutral of caretaker to elections government runtheparliamentary scheduled February for 1996. Whenthegovernment the the ignored demand, opposition Parliament tookto the streets pressthe issue. and boycotted to The result was a totalstalemate. Talksbetween government opposithe and
4. Daily Star (Dhaka), August 1993. 23,



tion,the intervention a 39-day arbitration of missionfromthe Commonwealth of Nations, new elections,and the direct intervention the of Bangladesh business community failed produce settlement. staleall to a The matebrought politicaluncertainty economiccrisis,and lasteduntilthe and March 1996 resignation theBNP government. unprecedented of The intervention thebusinesscommunity, of off moreover, touched a majorcontroversy and led to chargesthatbusiness was attempting become the to of kingmaker Bangladeshpolitics. The businesscommunity clearly had the come a long way from days of theAwamiLeague's socialistefforts to the as destroy Bangladeshi bourgeoisie a politicalforce.

Historically, BengaliMuslims playedan almost insignificant in trade role and in commerce British India. The limited trade and industry existed the in that eastern of districts Bengal werecontrolled BengaliHindu,Marwari, and by British traders."At partition," notedone observer, "there was nota single largescale industrial in enterprise East Bengalcontrolled a BengaliMusby lim norwerethey in present thejute trade, or inlandwatertransport."5 tea The PrivateSectorin East Pakistan of in Despitethecreation Pakistan 1947, thepattern ownership trade, in of and did commerce, industry notchangein any significant forBengali way Muslims. Lack of capital,a preference investment land,and theabfor in sence of a businessvacuumcomparable theone thatdevelopedin West to Pakistan in resulted bothapathy toward trade and industry a lack of opand for portunity BengaliMuslims. The partition Bengal intoEast Pakistan of andtheIndianstate WestBengaldidnotproduce samemassexodusof of the refugee traders industrialistsoccurred WestPakistan.Hinducapital and as in in East Pakistan in remained place and was onlygradually down over run time.Whatever existed, gap was moreover, quickly filled WestPakistaniby based entrepreneurs non-Bengali and of in Muslims. Development industry East Pakistan further was hindered inadequate lack by infrastructure, of mana and of lackofcapitalandcredit, agement know-how, shortage skilled labor, therigidities theregulatory of of created thenewgovernment Paksystem by istan. of As a result thesecombined of the factors, industrial development East Pakistanproceededvery slowly and remained largelyin non-indigenous in of hands. At liberation establishment Bangladesh 1971,theindustrial and
5. Rehman Sobhan,"Growth Contradictions and Within Bangladesh the Bourgeoisie," Journal of Social Studies, 9 (July1980), p. 3. no.

of Development a Bangladeshi Business Class


base was stillquitesmalland theindustrial sector contributed 7.8% of only thecountry's GDP. Of this, than less half(3.7%) was in large-scale industry. The large-scale sector was madeup of3,130registered and factories, industry was dominated largely consumer by goodsproducers, 791 including jute and cotton textile mills,574 chemical units, 406 foodcompanies.Many of and thesefactories come intoproduction late as theend of the 1960s as had as to partof AyubKhan's effort redress regional imbalances. Not onlywas theindustrial smallbutmostof theassetswerein nonbase indigenous hands. Although BengaliMuslimcapitalowned2,253 factories (74% percentof thetotal), theserepresented 18% of totalindustry only assets. Indigenously owned factories, therefore, were extremely small comparedto the53 publicsectorunits, whichaccounted 34% of theassets, for and thenon-Bengali (Pakistani) companies, whichcontrolled 47%. Foreign private capitalwas verylimited controlled and onlyone per centof theassets.6 Giventhesmallsize of their factories, a handful BengaliMusonly of limbusiness housescouldbe classified relatively as large. As seen in Table 1, a studyby Baranovlisted 16 Bengali Muslimhouses in 1969-70 with assets of Rs 25 millionor more,and Sobhanestimated that55% of these assetswereconcentrated jute and textiles.Manyof thegroupshad close in connections withthelargePakistani houses,and onlyone, theA. K. Khan group, was largeenough be ranked to amongthetop 30 all-Pakistan groups withRs 75 million assets.7 in Priorto 1971,thesize of BengaliMuslimhousescame nowhere nearthe size of thetop 20 Pakistan-based houses,mostof whomhad some assetsin East Pakistan.The mostactiveEast Pakistan-based houses wereAdamjee, Ispahani,Amin, Bawany, and Dawood. The Adamjees, Dawoods, and Bawanys were Memons,a Gujarati-speaking Muslim trading community. The AminswereChiniotis a com(PunjabiSheikhs), PunjabiMuslimtrading munity. The Ispahanis cameto Indiafrom originally Iranandbecameone of thefewMuslimindustrial the housesin Calcutta alongwith Adamjees. After their base toEast Pakistan unlike Adamjees, the the partition shifted they but, bulkof their investment was in theEast. Dawood, Adamjee,and Amin also were amongthe top fourhouses in Pakistanwithmanufacturing assets in 1968 of Rs 557.8 million Dawood,Rs 473.2 million Adamjee, for for and Rs 418.8 millionforAmin. Bawanyranked in withRs 237.4 eighth Pakistan and withRs 154 million.8 million, Ispahaniranked twelfth
6. ClareE. Humphrey, Privatization Bangladesh, study in a for submitted theCenter Privato tization theU.S. AgencyforInternational for Development, Washington, D.C., 1987,p. 41. 7. Sergei Stepanovich Baranov,East Bengal: Characteristics EconomicDevelopment, of 1947-1971, trans. from Russian(Dhaka: Jatiya Sahitya Prakashani, 1986), pp. 84-89. 8. Stanley Kochanek, A. Interest Groupsand Development: Businessand Politicsin Pakistan(Delhi: Oxford University Press,1983,),pp. 92-98.



1 TheLeadingBangladeshi BusinessHouses in 1969-1970

No. BusinessGroup 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. A. K. Khan Gui BakshBhuiya Zahurul Islam Md. FakirChand MaqbulurRahmanand ZahurulQayyum Al-Haj Muslimuddin Al-Haj Shamsuzzoha Khan BahadurMujibur Rahman Afil Sattar Ashraf Bhandari SafdarAli Ibrahim Mia SerajulIslam Chowdhury Mohammad Abdus Samad (Delta Group) Total

Assets Number of Estimated Companies (Rs Million) 12 5 14 10 9 6 5 4 7 5 4 6 7 7 4 5 110 75 65 60 60 50 50 50 45 40 30 30 30 30 30 25 25 695

SOURCE: SergeiStepanovich Baranov, East Bengal: Characteristics EconomicDevelopof 1947-1971 (Dhaka: Jatiya from ment, Sahitya Prakashani, 1986), transl. Russian),p. 13.

Development BengaliMuslimCapitalAfter of 1971 Followingthe 1971 war, the new Awami League government Sheikh of MujiburRahmannationalized onlythe47% of theabandoned not industrial assetscontrolled non-Bengalis by but (Pakistanis) also BengaliMuslimassets injute,cotton textiles, sugar, banking, insurance. and Overnight, size of the thepublicsector increased from 34% to 92% oftotalindustrial assetsin Ban12 gladesh,as well as 27% of the commercial establishments, banks with 1,175branches, boththelifeand general and insurance business.9Bangladeshembarked and uponits greatsocialist experiment, thenewlyemerging intotrade, real estate were to BengaliMuslimentrepreneurs forced retreat and speculation, construction.
Regime: A in Ahmad, Public Enterprise an Intermediate 9. Rehman Sobhanand Muzaffer of Institute Development of Study thePoliticalEconomy Bangladesh(Dhaka: Bangladesh in Studies, 1980),pp. 135-42.


The assassination Sheikh of Mujib in August1975 and thecollapseof the AL socialism. a from Awami League government brought gradualretreat Massiveandpersistent and of losses,low productivity, poormanagement the public sectorforceda rethinking Bangladeshi of industrial policy,and resultedin an effort revivetheprivate to and a gradual sector of shrinking the size of thepublicsector.The changescame in two stages. The first of set majorchanges came in 1975-81 under General ZiaurRahman, whoseindustrialpolicy was designedto revivetheprivate sectorby encouraging new investment by divesting stateof manyof the smaller and the public sector units.The result was a temporary of private burst sector investment the and gradual emergence a new class of entrepreneurs. even moredramatic of An in shift industrial policycamefollowing assassination General and the of Zia themilitary coup of March1982 led by General Ershad. In an effort imto prove the investment climate, acceleratethe industrialization process,and createmoreemployment opportunities, Ershaddenationalized Bengalithe ownedjute and cotton mills, announced newindustrial a policyto foster privatesector growth, begantoprivatize publicsector, embarked the and upona majoreffort liberalizetheregulatory to system.Thus, within10 yearsof liberation, Bangladesh's great socialist experiment came to an end,and public sectorcontrol industrial of assetsdeclinedfrom 92% in 1972 to 40% in 1988.10 Development theIndustrial of Elite The government's of post-1975industrial policyled to therapidgrowth a new family-based industrial elite. By the late 1980s, informed estimates of placed thesize of thisneweliteat about100-200 business groups whom smallbutgrowing. some 15-25 werequitelargeandtheremainder relatively Table 2 attempts construct listof thetop 14 business to a housesin Bangladesh and their relative Because of thelargedata gaps,no effort is ranking. made to developan exactorder. Insteadthehousesare grouped intothree categories thetop 5, thetop 10, and thetop 14. It is interesting notethatonlythree thetop Bangladeshi to of housesof 1969-70 listedin Table 1 survived be amongthetophousesof the1980s. to Thisold eliteinclude A. K. Khangroup, Zahurul the and the Islamgroup, W. RahmanJute(Khan BahadurMujiburRahman). The ZahurulIslam group has prospered and emerged the largest as industrial groupin Bangladesh. The A. K. Khangroup slipped has spawned newgroups-Pacific has two but Industries founded Morshed by Khan,nephew A. K. Khan,and theSidko of groupformed M. R. Siddiqui,son-in-law A. K. Khan. Similarly, by of for10. See StanleyA. Kochanek,Patron-Client Politics and Business in Bangladesh (New Delhi: Sage Publications, 1993),chs. 4 and 5.


2 The Top 14 Industrial Houses ofBangladesh

Number of Year Annual Companies Established Turnover* 24 23 17 18 15 9 10 4 5 5 5 4 14 3 1963 Pre-1947 1966 1971 1945 1956 1885 1972 1974 1958 1954 1969 1954 1933 Chairman Founder


Top 5 Zahurul Islam Ispahani BEXIMCO Anwar A. K. Khan Top 10 Muhammad Bhai (Panther) W. Rahman Jute Apex Pacific Square Top 14 Elite ERBA (AlphaTobacco) Karnaphuli Kumudini

628.6a Zahurul Islam b M. M. (Sadri)Ispahani 524.3c A. S. F. Rahman Anwar Hossain _d Muhammad Khan 400.0e A. M. Zahiruddin Bhai 705.5 Muhammad Rahman 10.0 Latifur 2,5 Elahi 650.0 SyedManzur Khan 542.5 M. Morshed Chowdhury 503.18 Samson 473.9 Ramzul Seraj HossainChowdhury 350.0h Hedayet 340.0 Mrs.Joya Pati Yusuf 385.9 AghaAhmed

and of of SOURCE: Basedon an analysis theMetropolitan Chamber Commerce IndusMembers try, Directory 1988. * Annual in turnover MCCI members' of companies Tk millions. a Zahurul in Islamis universally in as industrial group recognized Bangladesh thelargest contracts the thecountry. This group on during Mujib madea fortune government assets No in Tk period.Totalassets thegroup 1974were 500 million. dataoftotal of areavailable 1988. for b Unlike of livedin East a other Pakistani family large houses, major branch theIspahani assets of and after 1971war. The vastmajority Ispahani the Pakistan stayed behind at assets werelocated theEast. Informed in estimates placethe1972valueofIspahani from has one-half Rs 154 million the assetsof 1968. Theirpayroll dropped 20,000 which makes still one to them of thelargest employees 12,000in Bangladesh today, a but private-sector employers. Theymaintain verylow profile enjoyconsiderable influence. Tk and In 1988BEXIMCO salesandassets employed 6,500worktopped 1 billion they reached 3 billion. ers. In 1990theannual turnover Tk at turnover theAnwar of Estimates placethetotal Group Tk 1 billion. control a of In 1980thegroup haveregained employed 5,750people. Sincethen, they of nationalized assets. variety their a The W. Rahman Group really become largetrading only30% oftheir Jute has house, is of turnover a result industrial activity. units relatively are is the SquarePharmaceuticalsreally coreof thegroup.The other small. The Karnaphuli data is to Turnover areavailable Group estimated have 14 companies. foronlyone of these companies.


suchas Habibullah merZahurul Islam employees Khan and Ziaul Haq have own independent units.The same can be said of their broken away to form who bothare and MaqbulurRahman, Latifur Rahmanof W. RahmanJute family. partof an old tea plantation in houseto survive BanPakistani The Ispahanigroupis theonlyformer one of thelargest in gladesh. At thetimeof partition 1947,theIspahanis, to base from Calcutta families British in India,movedtheir Muslimindustrial close to theMuslimLeague and the was East Pakistan.Although family very of in the invested bothwingsof Pakistan, vastmajority Ispahaniassetswere houses,theIspahanisstayed locatedin theEast. UnlikethePakistani-based of a behindin Bangladesh after civil war. Although largeportion their the in the groupcontinued tradeand real estate,and assets were nationalized, former regained manyof their in withdenationalization 1982,theIspahanis one of thelargest industrial assets. Theycontrol companies 23 and remain a low profile is quietly and maintains very groups Bangladesh.The group in to beginning expand. had all Apex,and Pacificgroups, of thetopgroups ExceptfortheAnwar, (1885), Jute The their start prior liberation. oldesthousesareW. Rahman to Kumudini (1933), A. K. Khan (1945), and Ispahani(pre-1947).Fourgroups Zahurul of areproducts the1950s: Md. Bhai,Square,Elite,andKarnaphuli. of Islam,Beximco,and Alpha Tobacco are products the 1960s. It is also or are non-Muslim, to several non-Bengali, groups either interesting notethat werefounded West Bengal Muslims. Those non-indigenous groupsinby Md. Samclude: Ispahani, Iran-Calcutta), Bhai (IsmailiMuslims), (Muslims, and Mrs. Joya Pati of of son Chowdhury Square (Bengali Christian), to are Kumudini (Bengali Hindu). Others Bengali Muslimswho migrated Manzur Latifur Elahi ofApex (Calcutta), after East Pakistan partition-Syed (Assam),and theElite group(Calcutta). Most Rahmanof W. RahmanJute All in and diversified. of themajorelitegroups started jute andtextiles then werequitewelleducated.Exceptforthe and arefamily-based mostfounders elitelikeIspahani A. K. Khan,mostofthenewentrepreneurs and established in upongovernment patronage the fastand werehighly dependent grewvery form contracts, of loans,and credit. has groups, Bangladesh developed100 to 200 Beyondthetop 14 business on mostof whichhave also beenheavily dependent governsmaller groups, A of ment institutions. study 462 borrowers through development financing Institute Development of Studies(BIDS) proconducted theBangladesh by in of vides a usefulindicator the sourcesof entrepreneurshipBangladesh. were and Almost70% of Bangladeshi entrepreneurs drawnfromindustry servthe the the camefrom military, bureaucracy, transport, trade; remainder



ices, and the professions.11 elsewhere the Subcontinent, As on therefore, Bangladesh developed has family-based business groups a certain and degree of concentration economicpower. But a studyof Bangladeshbusiness of in groups 1984-85concluded wealth that was much less concentrated Banin gladeshthanin Indiaor Pakistan.The topfour groups controlled only9.2% in of theassetsin Bangladesh, whereas India theycontrolled 17.2% and in The larger listedin Table 2 constitute core of thenew indigethe groups nous Bangladeshi industrial elite. While manyof the new elite are drawn from old, established the businessfamilies, largenumber new groups a are fromthe patronage successiveregimes. Most top of thathave benefited groups politically connected interconnected family, are well and by marriage, and business The relationships. leadersof thenewindustrial are active elite in politicsand businessassociations, although size and character and the of theeliteare stillhighly fluid and dependheavily an individual's on political of the are connections theregime theday,itis clearthat mostsuccessful with thosewhohavebeenable to maintain connections significant despite changes in regime.Thispattern indigenous of entrepreneurial development had a has majorimpact thepattern industrialization, development associaon of the of tionallifein Bangladesh, theemergence thebusiness and of as community a forcein thepolitical process. Bangladesh inherited mixedtraditions British the of pluralism Pakistani and corporatism.Business associationsin Bangladesh continueto function within legal framework, the structures, traditions thePakistani and of period. Associationsare organizedunderthe Trade Organizations Ordinanceof in 1961, whichremained forceundertheLaws (Continuance Enforceand ment)Orderof 1971 designed provide to legal continuity thenew state. for The Trade Organizations Ordinance gives government powerto control the and regulate creation, the internal and of organization, activities business asin sociations the country. Despite the ordinance, however, number the of associations Bangladesh proliferated unrecognized in has and organizations abound. The immediate in environment Bangladesh was hostiletopost-liberation wardbusinessand its associations.Most tradeand industry the came under control the publicsector, of and a shattered sectorwas reducedto private
11. See RahmanSobhan and BinayakSen, The Social Background Entrepreneurship of in Bangladesh:An Occupational no. Profile Borrowers of fromDFI's, Research Report 71, BangladeshInstitute Development of Studies, January 1988. 12. Iftikhar Mostafa, Study theInternal "A of Organization BusinessGroupswitha Focus of on Bangladesh," unpublished dissertation, CornellUniversity, 1988,p. 107.

Pakistan 16.4%.12

Business Associations


indenting, estatespeculation, real contracting, smuggling.Officially, and in of ten Bangladesh 1971 had eight recognized chambers commerce, indusof of and remnant theold zonal committee the try associations, thetattered Federationof PakistanChambersof Commerceand Industry (FPCCI). controlled majorassociations, the Although pro-Awami League businessmen theAL government dividedand largely was indifferent them. Business to in to associations Bangladesh did not start recoveruntiltherevivalof the private sector thelate 1970sanddid notbeginto comeintotheir in own until the1980s. Theirdevelopment, however, beenerratic. has Like other groups in society-politicalparties, trade unions, student organizations, profesand sionalassociations-business associations haveproliferated areorganizabut tionallyweak, highlyfactionalized, have traditionally and played only a limited role in thepolitical process. The rehabilitation restoration businessassociations and of beganwiththe reconstructionthethree of mostimportant chambers commerce of locatedin Narayanganj, Dhaka, and Chittagong. These efforts wereparalleled the by creation a new apex association replacetheold FPCCI. As a result of to of thisprocessof transformation, mostimportant the associations representing in trade and industry Bangladesh becamethoselocatedin Dhaka,thecapital, and the portcityof Chittagong. Today the two largest chambers the are Dhaka and Chittagong Chambers Commerceand Industry of (DCCI and of CCCI), both which highly are politicized, poorly organized, dominated and in the by petty traders.Consequently, mostimportant businessassociation is Chamber Commerce Industry of and Bangladesh theMetropolitan (MCCI), in the chamber. The MCCI was founded 1904byBritformerly Narayanganj in ish merchants Narayanganj is theoldest,richest, bestorganized and and of elite in The MCCI speakson behalf theindustrial chamber thecountry. in some 80% of industry Bangladesh, and has come to represent including houses. The tradeand industry most of the large domesticand foreign reeach represent different MCCI, DCCI, and CCCI, therefore, interests, witheach other. gions,and businessgroupsand are in strong competition of overshadowed Federation the Untilrecently, thesechambers completely recof and Chambers Commerce Industry Bangladesh (FBCCI), theofficially of business. ognizedapex association Bangladeshi The FBCCI was little left Formedin 1973 at a timewhenthere industry in theprivate a the the sector little needfor federation, FBCCI was largely creation and real of of a smallhandful former of members theold East Pakistan zonalcommittheir Fromits very tee of the FPCCI as a way of enhancing prominence. was conflict has had diffithe and inception, federation plaguedby internal with chambers. inabilIts culty competing successfully theolderestablished



in has ityto establish itself thepremier as association thecountry beendue to breakdown, lack of resources its turbulent history, repeated organizational chambers.As a result, until reand staff, competition and from established chamber enjoyed special and no cently federation seenas justanother the was status. recognized under TradeOrganithe In 1993 theFBCCI had 175 members of associazationsOrdinance-56 chambers commerce and 119 industry are and tions.13 The overwhelming majority thesechambers associations of and limited no office staff, or verysmall,withfew members, permanent their or orgaresources. Theywerecreated represent founder arephantom to in growth Bannizations existonlyon paper. Sincetherateof industrial that of reflects neither a gladeshhas been quitemodest, number associations the nor consciousness senseof coland rising of business tide activity a growing Rather tendsto it lectiveinterest thepartof the businesscommunity. on of and reflect individualism particularism Bangladeshisocietyand its the businessmen. a leaderThe election theBNP government,changein thefederation's of ship,and the desireon the partof some of Bangladesh'smajorbusiness housesto createa morefavorable business climateled to an attempt ento process.As part thiseffort of the hancetheroleoftheFBCCI in thepolitical Islamgroup, is Bank,which ownedbytop BEXIMCO, andArabBangladesh businesshouses,combined withtheDCCI and theBangladesh Bangladeshi Garment Manufacturers Exporters and Association fund national to a conventionof some400 to 500 businessmen August1993 in Dhaka sponsored in by theFederation celebrate 20thanniversary its founding.14The purto the of by minister pose ofthetwo-day conference, which was inaugurated theprime and addressed theministers finance, of commerce, industry, planning, and by was to pressbusinessdemands theBNP government, on ventilate business counter government grievances, improve the image of the privatesector, that and to incentives complaints businesswas notresponding government an counter-voice thedominant played to role policies,andcreate independent policy.15 by theIMF and WorldBank in economic In his welcomingaddress to the prime minister, FBCCI President of sectorin Mahburbur Rahmanreviewed turbulent the history theprivate and to the Bangladeshsince liberation sought counter chargethatbusiness in to was "weak,docileand sometimes opporinept" itsresponse thegrowth of He to tunities presented it by theBNP government. blamedtheproblems of theprivate environment thepastandthegovernment's sector thehostile on
13. AnnualReport, 1993 (Dhaka: FBCCI, 1993). 14. See Two Decades of FBCCI. 1973-1993. in 15. This assessment based on interviews Dhaka,August1993. is


in its lackofurgency implementing declared policiesofprivatization, deregulation,and decontrol the economy. He demandedacceleration the of of privatization process, shift mostregulatory a of powersfrom government to labordiscipline, business associations, greater government to sickindusaid tries, higher and levelsof protection domestic for industry. chiefcause The of slow growth, insisted, he was notthefailure theprivate of sectorto respondto favorable government policiesbutthepoorperformance, and drift, lack of dynamism thegovernment. of Government-business relations, inhe sisted, mustbecomeless adversarial, withclosercooperation coordinaand tionbetween two.16 the Although prime the minister promised greater cooperation, convention delegates bothprivately publiclyoutlined whole list of problems and a confronting business-government relations. Theywereespecially critical the of government's political poor management inability control bureauand to the cracyand itsimplementation BNP policies.17The business of groupargued that BNP's decision-making was slow,personalized, highly the style and centralized.The prime minister totally dominated processand all decisions the werepassed up to herforfinalapproval.She and herministers, moreover, were poorlyinformed, inexperienced, did not always understand and the problems presented them decision.KhaledaZia, they to for pointed out,had never heldpublicoffice prior becoming to prime minister onlyfiveofher and in 40 ministers had previous had As even experience government. a result, whenall agreedto act in response business to demands, theydid notdo so either because theydid not wantto or because theydid not knowhow to weredivided direct administration the effectively. BNP ministers, moreover, intocliques and factions, spenta greatdeal of timein their parliamentary adon rather thaneffective focusedmostof their attention politics districts, in issues and becametoo engrossed narrow ministration, disregarded larger minister's from crisisto thenext.In theprime one drifted policies,or simply were unable to reach a consensusdue to personality absence, ministers weretoo inhibited conduct frank to a clashes,butwhenshe was present they discussion. Giventhehighly focusofthegovernment, business political argued, policy in and policyimplementation becameincreasingly concentrated thehandsof of that the bureaucracy, suffered froma variety problems which,in turn, made theprocessof policydevelopment implementation slow and and very in of resulted cumbersome. the First, multilayered system decision-making each minisand poorcoordination, duplication, delay;filesmovedup within to from assistant seniorassistant deputy to to try secretary joint secretary to
16. Two Decades of FBCCI. 1973-1993,pp. 12-17. 17. The following section based on interviews Dhaka withconvention is in delegates.



movedacrossto and back downagain. Theythen secretary minister then to in and one or moreof the 34 ministries 21 divisionsof thegovernment a Second,thesystem was processof coordination. complex, time-consuming provided guarded opinions highly riskaverse. Each level of administration the to refused and then forwarded papersto thenextlevel. Decisionmakers to act evenwhenthey theformal had authority do so, and all decisionswere became totally clogged. pushedto the top withthe resultthatthe system a that within system lackedadequateinformation Third, processoperated the rather than in basedon conjecture factand leadanddata,resulting decisions suffered from strong a sense of bureaucrats ing to arbitrary action. Fourth, action failedto takefollow-up transfers, often and insecurity to frequent due or simply refused act. to based on Tadbir relationships Fifth, pervasiverole of patron-client the for decisions be exchanged gifts, to entertainment, employcausedfavorable of the or ment relations, of loans,foreign trips, financing education personal in schoolsanduniversities; result a distortion the was sonsofofficials foreign withexcepas of national goals and priorities everypolicybecameriddled tions. Sixth,thebureaucracy opposedthebasic policiesof thegovernment designed to privatizeand deregulatethe economy,as these policies of alliesin public interests those bureaucratic and threatened bureaucratic key the sectorfirms. Efforts privatize to units wereblockeddespite publicsector and privatization actionswere huge losses and low productivity, previous the to undermined. bureaucracy continued see itFinally, entire continually of and selfas a regulator rather thana promoter private sector development, thusgovernment liberalization policieswereneverimplemented. the citedthepoor politicalmanagement, domiBangladeshbusinessmen red nant culture regulation, seeking, tape,and slow deciof rent bureaucratic low by sion-making compounded poor infrastructure, labor productivity, as natural disasters, law and order and problems havingcreateda frequent and difficult environment bothindigenous for sector development forprivate in by eign investment Bangladesh. This businessclimate,criticized the in FBCCI in August1993, becameeven moreunfavorable 1994 whenthe crisisandstaleby was government's non-performance compounded political to mateas theopposition once again tookto thestreets toppletheregime. of the But thenew crisisdid have theeffect strengthening businesselite's action. In October1994 SalmanRahman to stronger collective commitment and industrial trading of theBEXIMCO group, one of thecountry's largest of thathe would seek electionto the presidency the houses,announced in of a reflected majorshift theattitude the FBCCI. His decisionto contest in businesselite towardthe role of the federation the policy process. relationthe Although BEXIMCO grouphad enjoyeda veryclose personal Salman of Ershadand had receiveda variety benefits, ship withPresident


with Rahman'stravels hisbusiness and connections theEast Asiantigers had him thatbusinessin Bangladeshneededless personalrelations convinced with government and greaterreliance on organized collective action. Although had beenpresident theMCCI in 1989,he feltthat chamhe of the ber was too narrowly based to becomean effective for platform collective action, and thata well funded, professionalized federation wouldstrengthen thevoice of thebusiness community enhance rolein economic and its deci18 sion-making. Capturing control thefederation, of however, was notan easy task. Ever sinceits creation had been a largely it ineffectual, highly politicized, at and times moribund to organization which rising the business eliteprovided little support personnel, in money, leadership. or Mostpastpresidents werepetty traders drawn or from smaller the business housesof Bangladesh, were and concerned primarily withrecognition access to government protect and to their owninterests. federation, The moreover, dominated thesesmall was by traders who resented businessand werehighly big politicized.Federation electionswere traditionally manipulated competing by factions thatcontrolled largeblocs of votesby payingthemembership of manysmall, fees moribund chambers commerce of and industry associations located in the hinterland. Electoralconflict was usually so intensethatmost elections ended up in thecourts due to chargesof electoral irregularity. Given this most business leaderswerereluctant getinvolved to environment, prominent in theunseemly, petty politicsof thefederation. The October1994 federation a marked majorbreak elections, however, entered with past. For thefirst the timein yearsseveral the majorcandidates held its first electionin race forpresident theorganization and meaningful over a decade. Initially, candidates 13 the entered fieldbutfoureventually Of four seriouscontendwithdrew. theninewhoremained, wereconsidered ersandeach represented and interests. different economic, political, factional SalmanRahman, who enjoyedthesupport big businessand severalkey of in members theBangladesh His was cabinet, seenas thefavorite. chiefrival was RedwanAhmed, BNP member Parliament president theBana of and of gladeshGarment Manufacturers Exporters and Association, mostimporthe in and tant, dynamic, export-oriented industry thecountry. Ahmed, however, was opposedby sections his own party.The two other of majorcandidates wereMirzaAbu Mansur theHardware of Association Kazi Md. Shafique and of Islam, vice-president the FBCCI. Mansurwas supported ownersof by sick industries, AwamiLeaguers, of and members theJatiya and Party, Md. associations. Shafique. Islam was supported newlyenrolled by
18. Based on interviews withbusiness leadersin Dhaka,August1994.



In one of themostintensely fought elections federation in history, Salman Rahman emerged victorious winning of 598 votescast. RedwanAhmed 221 was nextwithonly123 votes,followed Mansurwith112 and Islam with by 83. Rahman immediately declared that wouldset aboutto raiseTK 20 to he the 30 million enablehimto builda secretariat professionalize organito and in zation.19 And shortly after election, openly the he intervened thepolitical processby attempting mediatethe conflict to betweenthe BNP and the AwamiLeague. Rahman declared theeconomy that couldnotafford polita ical crisis, called uponthegovernment theopposition enter diaand and to a logue under FBCCI sponsorship try to reconcile their differences. to Instability, hartal(general strikes), government and paralysis, argued, he had hurt efforts attract to foreign investment, slowedeconomic growth, hamand strung economy.20 the Although federation's the effort failed, represented first it the timein the history the country of thatthe businesscommunity attempted hold the to political eliteresponsible itsactions theeffect for and these actions werehaving on the economy. The intervention, however,sparkedan immediate response from Bangladeshi the intelligentsia, saw thebusiness who community'sgesture "understandable" simply"notacceptable." One critic as but "if that thebusiness argued community beginsto dabblein matters political, is in there really little is wrong theact." But "thefact that remains when that menin business suddenly themselves they perfectly tell that are suited the for in role of kingmaker politics, there reasonto worry."The crisis,insisted is thecritics, mustbe leftto thepoliticians resolveand notbusiness.2' to efforts businessand other Despiterepeated by groupsto breakthedeadlock,Bangladesh's politicians proved unableto resolvethecrisisand a stalemate ensued. All 147 oppositionMPs resignedfrom Parliamenton maDecember 1994,and thenext11 months wereconsumed political 28, by Minison neuvering general and strikes. Finally, November 1995,Prime 24, and terKhaleda Zia decidedto dissolveParliament hold new electionson declaredthey January 1996. The major opposition 18, parties, however, a caretaker wouldboycott elections werenotheldunder neutral any that govin the to ernment. the times an effort persuade opposiPostponing pollsthree tionparties participate, BNP failedto win agreement to the and, despitea the on 15. went aheadwith elections February It swept pollsbut the boycott, worse. The and in factmadematters failedto resolvethepolitical impasse, voted-were nearvoterless elections-no morethan15% of theelectorate accompanied widespread by rigging.
19. Dhaka Courier, October 1994,p. 18. 21, 20. Ibid.,December2, 30, 1994. 21. Ibid.,December9, 1994,p. 15.


to elections declaring indefian The opposition responded the"farcical" by nitestrike untiltheBNP government wereheld resigned new elections and under caretaker a government. Whenlastminute efforts initiated thepresby identof Bangladesh a dialoguebetween government theopposifor the and tionfailed, Bangladeshi interest groups openly joined theopposition parties in a massmovement demanding and fairelections free under neutral a caretaker government theonlysolution thecrisis. This was similar the as to to movement thattoppledthe Ershadgovernment 1990, but thistimethe in newlyemerging businesscommunity notsit on thesidelines.Faced by did an indefinite periodof general strikes werecosting economy estithat the an mated$60 million day,thebusiness a community onlyendeditsneutralnot itybutattempted play an activeleadership in themovement. to role On March11, 1996,theFBCCI issueda 48-hour ultimatum thegovernto ment demanding fresh elections under neutral a government, theBanglaand desh Garment Manufacturers Exporters and Association,the hardesthit industry thecountry, in issueda similar 72-hour ultimatum. bythepresiLed dentof theFBCCI, business extended deadline an additional hours, its for 48 calledfortheformation a citizens of committee, scheduled publicrally and a forMarch 16 to pressits demands.Exceptfora smallgroupof dissidents, thebusinesscommunity ralliedbehind federation gotthesupport and of the non-governmental organizations a widearray professional and of associations including doctors, lawyers, and teachers, writers, journalists.22 in thecase As of theanti-Ershad the movement, came whenofficers however, turning point of mostof thesecretaries, and employees thegovernment, issued including an ultimatum thegovernment resign to and holdfresh under the to elections of caretaker facean indefinite or strike all employees. of supervision a neutral The government's responsewas almostimmediate.On March 27, Prime Minister KhaledaZia askedthepresident form neutral to a caretaker governmentto conduct new elections May 1996. The 25-month-long by political crisisfinally cameto an endon March30 whenformer ChiefJustice Habibur Rehman in was sworn as chiefadvisor a caretaker of government following theresignation BegumKhaledaZia andhergovernment.23 elections of New wereset forJune12, 1996. The political crisisof thepast two yearsmakesit clearthatone of thefew ways of makingtheBangladeshi and political, military, bureaucratic elites moreaccountable to makethem is moreresponsive a widerconstituency. to The development civilsociety a moreeffective of and universe interest group
22. Ibid.,March 15 and 22, 1996. 23. BangladeshObserver, March31, 1996.




The is one wayof developing greater this senseof accountability. intervenin crisis political community the25-month business tionof theBangladeshi to by business movetheBanglaeffort organized represents of a larger part toorientation its deshpolitical system away from patron-client, patrimonial needsa Bangladesh collective responsibility. basedon greater warda system of and in interests voters secthe moregroup-oriented system which genuine acin and torsof civil societycan be reflected decision-making leadership In countability. thepast,policiesin Bangladeshwerebornin theideas of groups.This is beginof leadersand notin theinterests classesor organized like countries, facesits greatningto change. Bangladesh, mostdeveloping of withwhom the sectors society organized est challenge from modern, not but the challenges thepartially of can governments negotiate, from repeated out feel sectors whosemembers frozen ofthesystem. mobilized, unorganized in from social forces thepasthas led to shallowlevels Government isolation of Whileorganized of policysupport majorproblems implementation. and it in limits policyarenas, and defined of operate institutionally sectors society to demandgroupsthatcreatethe real threat orderand is the unorganized organized is The of stability. weakness thesystem theabsenceof effectively process. The newly of dominance thegovernmental groupsand notfeared mayreprecommunity Bangladesh of basedbusiness activated, indigenously political of of sentthebeginning thedevelopment a morestableandeffective order.