Unrest heightens Bangladesh's economic woes. Nation's dependence on foreign aid is seen by critics as part of the problem

Political turmoil is deepening Bangladesh's dependence on foreign handouts. Over the years, violent politics, compounded by a relentless cycle of floods and cyclones, have enfeebled the nation's economy. More than $1 billion a year in foreign aid has failed to boost Bangladeshis' per capita income above $160 a year (third from the bottom in world rankings.)

At the same time, a growing army of intellectuals and educated people contend that Bangladesh should learn to stand on its own. Foreign aid, these critics say, creates a dependent mentality and fosters government corruption.

But today, 18 years after gaining independence from Pakistan, this country of 100 million people faces one of its most dire years to date.

Just as Bangladesh was beginning to rebound from last summer's floods, in which hundreds of people were killed, opponents of President Hussain Muhammad Ershad launched a new effort in November to topple the government.

In the ensuing months, the economy has been paralyzed by 35 general strikes. By some estimates, businesses are losing $500,000 or more a day. Key garment and textile export industries are laying off workers. In rural areas, largely untouched by the political fray, signs of hardship are growing, economic observers say.

``Even if we had a stable economy and government, it would take us five years to get back to where we were last fall,'' says a business leader in Dacca.

Economic experts say the situation will worsen if unrest persists. Earlier this month, parliamentary elections marred by violence and fraud only hardened the stalemate between President Ershad and his foes.

The World Bank estimates that, in the next decade, Bangladesh will need more than $2 billion a year to stem worsening poverty. That could put the United State and other large contributors under pressure from critics who contend that foreign money is propping up an unpopular regime. (According to the World Bank, the US is providing Bangladesh with $190 million in loans and grants in 1988.)

Last year, US Rep. Stephen Solarz (D) of New York proposed legislation that attempts to link future US aid to credible elections, an effective Parliament, and a free press in Bangladesh. He is scheduled hold hearings on the proposals March 22.

Most donors, however, are reluctant to use aid money to nudge Ershad's one-time military government toward more reform. They say a cutoff or reduction would hurt many poor who rely on outside help. Ershad, who took power in 1982 in a military coup, has pleased Western countries by privatizing many industries and liberalizing the economy more than neighboring India or Pakistan.

Though the recent troubles have slowed distribution of foreign aid, Western observers say unrest is not yet at a level that troubles foreign donors.

``You look around the world where we're pouring in money, and this is not a bad situation,'' says a senior Western diplomat. ``This is quite a satisfying country to work in.''

But there is a growing chorus of voices for Bangladesh to wean itself off foreign aid. The country has bountiful resources, critics say: rich farmlands, an abundance of fish, and natural-gas deposits.

``This is one of the most fertile areas in the world,'' says a former official who remains close to Ershad. ``We don't have to be on the dole. It's just politics.'' Observers say food imports are unnecessarily large in order to line politicians' pockets.

Some Bangladeshis are taking the country's development into their own hands. The Grameen (countryside) Bank, one of the third world's best-known experiments in self-reliance, was set up in 1982 to answer a desperate credit shortage among the very poor.

Western donors have been prodding the government to restructure the country's financial system. However, in Bangladesh, many loans still go to the politically powerful. But three-quarters of the Grameen Bank's borrowers are women - who are repaying loans at a rate of 98 percent. Loans average $60 and are spent on endeavors such as beekeeping, running bicycle rickshaws, and other small enterprises.

The bank now has 350,000 members in 400 branches and in the next five years, plans to grow to 1,000 branches - using its own resources.

Recently, the Grameen Bank, which is 75 percent owned by its borrowers and 25 percent by the government, turned down $200 million from the World Bank to enlarge operations. Muhammad Yunus, a US-trained economist who heads the bank, says he dislikes the way the World Bank operates and fears interference.

``The donors are contributing to a widening and deepening of poverty here,'' says Yunus. ``The whole situation of giving and taking has to be redesigned. It's become a bureaucratic game on both sides.''

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