Non Trade Issues Shape Businesses

Businesses hurt by spreading of panic, Buying US jet is to comply decision strategic.

Bangladesh keeps the policy rate same and signals to continue contractionary monetary policy. Meanwhile, it is the deteriorating law and order condition that holds back businesses rather than the short supply of credit to the private sector. Investors and businesses are waiting for the next election. What is interesting govt machinery itself is causing confusion and complicating the situation.

Take for instance, a directive from the Police's special branch to stay alert ahead of July anniversary for possible subversive activities. The Chief of Police and even the Minister of Home Affairs played ignorant about such directive. The panic mongering is created by the govt itself. Police is supposed to provide assurance instead of spreading panic.

This lack of coordination and widespread extortion is hurting business confidence. It is a pity that this apolitical govt,which is largely formed through blackmailing, is facing this kind of troubles. Our restoration to democracy and pre COVID level economy will be challenging compared to Sri Lanka where all the parties reached consensus, ensured justice to all (including victims of ruling party) ,and held a free and fair election.

Meanwhile, as a desperate measure, Bangladesh pledged to purchase 25 aircrafts from Boeing to break the ice on the negotiation table before August 1 deadline. Bangladesh also pledged to buy US wheats for the next 5 years. Soybeans, cotton are also on the commitment list. It is interesting that head of the national flag carrier did not know the purchase of Boeing aircraft. But the ministry officials said it was a strategic move. So far the commitments are for next 5/7 years. It is not known with certainty whether Bangladesh economy will back on track in the next 4 years and the national flag carrier has expansion plan of such big number of aircrafts (Biman does need aircrafts, there is no need).But Boeing also makes combat aircraft. In association with SAAB, Boeing manufactures advanced jet trainer Red Hawk T-7. It has a base price of $20 million, but with spares, munitions, maintenance and training, the cost may reach around $50 million. 25 of such aircraft will cost the BAF, which is likely to retire its entire Chinese F-7 fleet, around $1.2 billion. Adding the purchase commitment of wheat,soybeans,cotton and other US goods (+ services) , Bangladesh's import from the USA may rise to around $4/5 billion in the next 1/2 years, significantly reducing the trade surplus it currently enjoys.

It does make sense buying the T-7 Red Hawk when the country is facing economic crisis and the BAF requires new jets to replace the aging fleet. It is within the budget and in compliance with the US demand from moving away from the Chinese military hardware.

Govt's poor management worsening the law and order,hurting businesses. Bangladesh's prevailing economic conditions and strategic consideration insinuate it is likely to induct US advanced trainer jet.