Event

On 30 December, the Election Commission announced that the ruling Awami League (AL) recorded a landslide victory at the general elections after its ‘Grand Alliance’ coalition secured 288 seats out of 298 parliamentary seats. The AL alone won 259 seats. The results have been rejected by the BNP-led (Bangladesh National Party) opposition which barely won 7 seats, blamed the AL for widespread vote-rigging and demanded new polls. The EU, UN and US echoed voting irregularities and also condemned violence on election day as at least 17 people died in clashes. On the other hand, China and India congratulated PM Sheikh Hasina for her new 5-year mandate. In the short term, the BNP is likely to launch protests across the country but they should be cracked down and have no effect on the economy. PM Hasina has rejected the BNP’s criticism and is expected to form a government by 10 January.

Impact

The poll outcome was not in doubt after the AL’s constant crackdown against the opposition over the past years and given the absence of a caretaker government in the run-up to polls. This is the 3rd consecutive PM mandate for Sheikh Hasina after those of 2009 and 2014. It confirms the new political direction in the country where the alternation between the two historical parties (AL and BNP) has been practically replaced by a single-party system. The BNP boycott of the 2014 elections and AL’s crushing victory at the latest polls highlight it and thus the decline of multi-party democracy in Bangladesh. The fact that the AL retains the power means overall continuity in government policies is expected in the next five years. There is indeed no reason to change Bangladesh’s socioeconomic success story marked by impressive macroeconomic resilience and poverty reduction. The consolidated political landscape combined with the country’s fast development and supportive government investment policy should allow the rising trend in FDI observed under Hasina’s rule to continue. Apart from western FDI in the fundamental garment sector, this is particularly true for investments in transport and energy infrastructures from huge player China with more than USD 35bn of committed projects related to the Belt and Road Initiative. Competition is expected from other key Asian investors, starting from the Indian neighbour, notably within special economic zones, which should confirm Bangladesh has become a more attractive place for foreign investments.

This being said, prosperity and political stability come at a cost: democracy has gradually eroded and the security situation has deteriorated on the back of rising Islam conservatism and a more authoritarian regime. No improvement is about to come in the coming years. The Rohingya humanitarian crisis is a risk to monitor in the future as the deal reached with Myanmar to repatriate 700,000 refugees could take time and raise domestic criticism, especially the planned transfer of 100,000 of them to a Bangladeshi island.

In spite of those risks and others such as weak public finances (explained by very low public revenue as public debt to GDP was rather moderate at 33% of GDP in 2017), high economic reliance on a single garment sector and vulnerability to climate change, the prospect of political stability and continuity means that Credendo’s MLT political risk rating (at 4/7) should remain unchanged this year.

Analyst: Raphaël Cecchi – r.cecchi@credendo.com