Editorial
Possible ripple effects of global crisis
We need to raise our antenna high
On the back of incredible bankruptcy of US financial institutions, the world capital market is caught in a dire state of collapse. Share prices of stock markets in US, Japan, Hong Kong, Singapore and Mumbai have registered sharp falls. Panic has gripped the financial world and the chain effect is startling and unprecedented, even though fundamentals in all the advanced economies are not equally bad.
We note though, the G-8 has unveiled a five-point plan of action in a bid to coordinate their response to the global financial crisis. The global approach should eventually be inclusive of the concerns of LDCs like Bangladesh, although these are, at the moment, peripheral to their principal agenda.
So far as the possible knock-on effects of the recession on our economy go, we are more or less insulated from the world capital market. But let's not wax complacent on the insulation factor. True, we don't have foreign investment in our capital market and institutional investment in overseas banks is not of any worrying proportion. But of course, if the stock market shares in a neighbouring country like India receive jolts this might put our investors under some mental stress. Dhaka and Chittagong exchanges have had some of their share indices going a bit down and that's where the Securities and Exchange Commission should counsel the investors against unnecessary panic. Bangladesh Bank, for its part, would do well to reduce the interest rate to bolster investment.
The most important concern, however, is we have had growing export markets in the US and other economies that have taken a severe battering from the financial crunch and the resulting recession threatening to aggravate into depression. For the RMG sector and some other export items, the predicted reduced consumer spending in the West might not lead to a drop in the demand for our merchandise because of their low prices. Still, we ought to closely monitor the winter market and be focussed on exporting knitwear.
Simultaneously, we have to keep a constant tab on manpower export and remittance earnings so that any change in the flows does not escape our radar screen with corrective measures taken to repair any chink.
The think-tanks, research organisations, media, government, Bangladesh Bank, commercial and foreign banks, Securities and Exchange Commission, government's regulatory bodies and the chamber and industry leaders must interact to put in place a contingency framework to meet the challenges of recession.
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