Can China be the next superpower?

China is celebrating her 70th anniversary of the founding of the People's Republic of China this year. It is a country with its unique culture and history which has over five thousand years of legacy. Many of us don't know that China is a country of great inventions, like paper, printing press, gun powder, compass, silk, wheelbarrow and many more.  Prior to modern civilization, Chinese used to believe that China is located at the center of the world and had played a very important role for many centuries before it lost its global dominance in the beginning of seventeenth century. The ‘land under heaven’ has not only shown extra-ordinary economic performance but also expanded her political and cultural influence across the continent in the recent past.

China was humiliated by the western super power for more than a century and its GDP fell from a third to a twentieth of the world total from 1840 to 1950. The People’s Republic of China was established in 1949 and Chinese Communist Party (CCP) has taken control of the economy under the influential leader Mao Zedong. The country enjoyed tremendous economic growth in this period but the structural and institutional inefficiency undermined the true potential and inequality on the rise in a communist state.   The deaths of Mao Zedong and Zhou Enlai in 1976 were followed by brief and bloodless power struggle that resulted, by 1978, in the ascension to power of Deng Xiaoping.

The present day China we are dealing with is the ultimate dream of Deng Xiaoping’s “second revolution”. Since the economic reform, known as ‘open door’ policy, started in 1979 the country has undergone radical economic transformations and gradually become ‘manufacturer of the world’. Now, China has entered the Xi Jinping’s “third revolution” which is distinct from the earlier revolution as it has purposed: the dramatic centralization of authority under his personal leadership; the intensified penetration of society by the state; the creation of a virtual wall of regulations and restrictions that more tightly controls the flows of ideas, culture and capital into and out of the country; and the significant projection of Chinese power.

The sleeping Panda has once again waked up to shake the world. China is already the largest economy in terms of GDP Purchasing Power Parity according to CIA fact book data. The country with a population of 1.3 billion is looking forward to change the world order within the next 30 years when she would celebrate the 100th anniversary of the founding of People's Republic of China in 2049. According to Michael Pillsbury, a China expert argued that it has started the hundred year marathon in 1949 to take over the Western hegemony. China has reemerged not only as an economic super power but also a global political change maker.

China has undertaken a great number of economic and geopolitical initiatives in the recent past. One of those initiatives is to revive the old silk route, once a major trading route connecting east to the west, China has developed the One Belt One Road (commonly known as BRI) initiative to demonstrate its econo-geo-political power and impose threat to the western hegemon. China has been investing heavily in key areas such as utilities, telecommunications, port construction and transportation in Asia and Africa. In line with that, China has already established Asian Infrastructure Investment Bank as an alternative to World Bank. The bank currently has 74 members as well as 26 prospective members around the world. The emergence of China as a global economic power is reconfirmed when Chinese RMB has been included in SDR basket in addition to the previously included four currencies – the U.S. dollar, the euro, the Japanese yen, and the British pound.

China is not far away from exercising its military power across the continents. China has the capability to produce from pin to plane to satellite and become the manufacturing hub of the world. China has already established military base in Djibouti along with unofficial military bases in Afghanistan, Cambodia, and Tajikistan. This growing military presence across the continent is not only to show the military power but also to protect the huge Chinese investment going into the region.

On the geo-political front, China has advanced significantly in the recent past. The country has been maintaining strong geo-political ties with Russia, Pakistan, Iran and many African and Asian countries. China has been trying to develop regional consensus in South-China sea conflict. Russia and China led the Shanghai Cooperation Organization (SCO) or ‘Shanghai Pact’ which is a Eurasian political, economic and security alliance. We are going to see a gradual transition from ‘Washington consensus’ to ‘Beijing consensus’. ‘Beijing consensus’ - the Chinese approach to international politics, no interference in domestic affairs, no military interventions, no trade embargoes, provides the developing world with a real alternative of building relations with other countries.

Traditionally Chinese are conservative with strong ‘Asian values’ and have long cultural and historical lineage. Like previous and current global power, the British and the U.S., China has started spreading its unique language and cultural diversity across the world through Confucius Institute. However, the organization has been highly criticized because of rising Chinese influences in the countries in which it operates.

Chinese business corporations, China Mobile, Tencent, Alibaba, Baidu, Huawei, Lenovo and ICBC (Industrial and Commercial Bank of China) are becoming part of the global business landscape. The U.S. has already realised the growing dominance of Chinese manufacturer in USA and across the globe and launched a trade war which could destabilize the world economy. It is evident that China is gradually opening up and starts to show its economic, political, and cultural superiority over the U.S., the global hegemon. According to one estimate, by 2030, China will represent 23 percent of the world economy, compared with less than 5 percent in 1978. If China rises to its zenith, it will be the first country with unprecedented development based on an indigenous, not Western-type, economic model. 

Dr. Md. Akther Uddin

Political business cycle and ailing financial sector

A political business cycle or opportunistic political business cycle that results mainly from the manipulation of various policy tools, fiscal and monetary policy, by  incumbent politicians hoping to stimulate the economy just prior to an election and thereby greatly improve their own and their party’s reelection chances. Expansionary monetary and fiscal policies such as tax cuts, falling unemployment, falling interest rates, new government spending on services for special interests, etc have politically popular consequences in the short run. Unfortunately, these very policies, especially if pursued to excess, can also have very deleterious consequences like hyper inflation, low rate of savings and private investment, decrease in international trade, increase in government's share of the GNP at the expense of people's disposable incomes, and financial instability in the longer term. 

According to the World Bank forecasts Bangladesh economy is expected to grow at the rate of 7 percent compare to the government’s target of 7.8 percent this year. Bangladesh has been enjoying an average growth of 6.2% for the last ten years. Bangladesh is streaming towards her vision to become an upper-middle-income country by 2021 and developed country status by 2041.She has been enjoying resounding growth mainly due to strong macroeconomic condition supported by international trade and foreign remittance. Unfortunately, financial sectors have shown the worst performance in a decade. Although,the internal debt has been dominating for a while but very unexpectedly external debts have skyrocketed by 141 percent to USD 54.73 billion in two years which was only USD 38.88 billion in 2016. Bangladesh bank posits that short-term foreign borrowings are mainly responsible for this sudden surge. However, the main cause of this is still unknown and many argue it might be connected with the upcoming national election. 

In the recent past we have observed a number of economic policy measures as the national election is approaching. First of all, we have seen a major monetary policy inconsistency at the eleventh hour of the government. Easy money before the election was more or less predictable. However, the government, one the one hand, pursuing banks to decrease their interest rates, on the other hand, interest rates on government saving certificates remain unchanged. Government has already raised more than Tk.80,000 crore through various saving certificates. Consequently, banking system has started to suffer from the liquidity constraint. It is more than evident that the government didn't change the interest rates policy on Sanchaypatra because they don't want to make middle class voters angry right before the upcoming election. 

Tax reform is another vivid example of intentional policy delaying. There is a clear budget deficit issue that needs to be addressed immediately. International multilateral organizations are also pushing to reform the taxation system to broaden the tax base. Government had developed a detailed plan but suddenly stepped aside just thinking of the upcoming national election. However, many prominent economists have welcomed this move as they argue the implementation of which would have pushed inflation upwards right before the election.

Non-performing loans (NPL) have been increasing alarmingly and recently crossed 10% threshold. A number of state banks and 4th generation private banks have been suffering acutely due to higher NPL. The amount of defaulted loans, including non-performing and written-off loans, as of June 2018, reached to Tk 1316.66 billion, with five state-owned banks accounting for Tk 562.83 billion, or 43 per cent, of the amount. To add an insult to injury, the government has recently amended the Bank Company Act 1991, provisioning for further family control over private commercial banks as four of a family, instead of two, were allowed to become bank directors for consecutive terms extended to three from two, turning banks into more of a family business.

The dire consequences of this Amendment have been widely debated in the mainstream news media.  For example, it is argued that recent changes in bank corporate governance structure could lead to the family-dominated board of directors who would definitely work for their own interest rather than depositors. This may increase huge ownership concentration risk as well as preferential credit disbursements for directors’ favorite and own business group. Consequently, this new practice could trigger an even significant increase in NPL which would ultimately lead to capital erosion and banking failure. Moreover, decreasing interest rate, liquidity crunch, fierce competition and market saturation could trigger massive banks’ failure which would affect not only the financial sector but also the real sector of the economy. It is more than evident that the government has amended the act right before the election year to make powerful bank lobbyist happy. 

There were already 58 scheduled banks in Bangladesh among them 32 conventional private commercial banks are now operating in the industry according to Bangladesh Bank. The role of banking and finance on economic growth is well-documented. However, too much finance could lead to detrimental consequences evidenced in the latest global financial crisis. Many economists already argue that we don’t really need any more banks saying the sector is already saturated and its overall health has been declining. Bangladesh has relatively low banking penetration compare to many developing countries. However, not surprisingly, most of the existing third and fourth generation banks are mainly concentrating on two big cities, Dhaka and Chittagong. In spite of this, at the eleventh hour, the government has given away license to four new banks merely on the political ground.

Hostile takeover has been on the rise in the recent past. A powerful business group from Chittagong is moving aggressively by taking control of several banks and insurance companies. Regulatory authorities and government are reluctant to take measures to control the misconducts in country’s vulnerable capital market right before election.   This would increase corporate malpractice and financial instability in the long run which could be detrimental to  the overall economy.

Against this backdrop, one can easily be skeptical about the future of financial sector in Bangladesh. Government has taken a number of policy measures which could bring unwanted consequences in the long run. This would not only affect the financial sector but also the real economy as both of them are highly integrated. The sheer greed of some ill-minded bankers and businessmen could drive the economy in the wrong direction and fall off a cliff edge. As political business cycle predicts immediately after the election is over (and the next election is far away), politicians tend to “bite the bullet” and reverse course by raising taxes, cutting spending, slowing the growth of the money supply, allowing interest rates to rise, etc. Thus the regular holding of elections tends to produce a boom-and-bust pattern in the economy because of the on-again-off-again pattern of government stimulus and restraint encouraged by trying to schedule an artificial boom at every election time.

DSE 2017

DHAKA STOCK EXCHANGE IN 2017

Buoyant but not resilient
Sharjil Haque

With the year 2017 drawing to a close, we are left with both positive and not-so-positive observations from the country's stock market. We all know that after the crash in 2010, the market has been in the doldrums for several years. To be sure, there were occasional rallies. But they fizzled out pretty quickly. There was hardly any real or discernable upward trend in the general market index for a long time.

Then again, to some extent, 2017 was different. We observed perhaps the longest rally in recent times, which eventually catapulted the benchmark market index (DSEX) over the psychologically-vital threshold of 6,000. The DSEX kicked off the year at 5,083, and climbed to a lofty height of 6,186 as of December 27. Apart from one notable correction in April, the market index sustained a predominantly upward trajectory. The index gained by around 21 percent, and if we take into account disbursement of cash dividends, total return will exceed 25 percent. Not bad for an economy where one-year risk-free rate is only 4.5 percent.

If anyone is keeping count, the average volume of trading activities and market capitalisation increased by around 40 and 22 percent respectively in 2017 compared to last year. So there's no doubt that we saw an unprecedented increase in participation and injection of fresh funds this year. Is this a favourable sign of a more resilient market performance?

For the most part, the recent rally was driven by the banking sector, which holds just over 21 percent of total market capitalisation (total value of all shares trading in the market). A banking-sector index, constructed in the same spirit as the general market index, showed us that the sector generated more than 50 percent return this year. Similar sector-specific indices reveal that non-bank financial institutions, pharmaceuticals and telecommunication gained handsomely as well. So at least arithmetically, the source of the overall rally is understood easily enough. After all, these three sectors constitute another 40 percent of total market capitalisation.

The economics of the rally, however, is less straight-forward. No doubt the prevailing political calm and low interest-rate conditions laid the foundations for market buoyancy. What is perplexing though is the sharp increase in turnover in bank stocks. At a time when the country's banking sector is in shambles, there is little economic justification for rapid inflow of money into this sector. No one needs reminding that bank balance sheets continue to deteriorate, with the central bank's ability to autonomously regulate the sector severely constrained. And to make things worse, a parliamentary body recently recommended passing the Bank Companies (Amendment) Act-2017 allowing greater number of directors from a single family in a bank's board as well as increasing their tenure. Common sense dictates that such regulatory changes will worsen the perennial problem of non-performing loans.

While we can see a logical case for sponsor-directors of banks to invest heavily in the market as they expected the amendment to the Bank Companies Act, we are less convinced of the motives driving small investors to the party. We suspect small investors simply followed the big ones (sponsor-directors), while low price-to-book values and speculation on dividend expectations added fuel to the fire.

It is also possible that investors felt the government will try to prop up the stock market before elections by bullying the central bank into easing monetary conditions. If history is any guide, this is a fairly reasonable expectation. Those of us following the market also hear reports that a section of investors is taking personal loans from banks and pumping it into stocks. And of course the market has long been a haven for so-called gamblers and/or some unscrupulous individuals to park black money.

Almost characteristic of our stock market, we observed episodes of unusual price hikes of certain manufacturing companies that are fundamentally even weaker than some banks. So much so that companies with face value of Tk 10 traded at prices several times higher than that. To make matter worse, some “Z” category shares (think of these as junk companies) displayed similar price movements. Herein lies the need for greater regulatory support so that we can weed out opportunistic gamblers looking to make quick profits.

The less said about regulatory support the better. We are yet to see the Securities and Exchange Commission strengthen its monitoring and enforcement system adequately enough to reduce malpractice and improve corporate governance. That 2017 saw the lowest number of Initial Public Offerings (IPO) was essentially due to new rules which lowered financial incentives for companies and made the IPO approval process even more tedious. Data from Dhaka Stock Exchange shows us that this is the only year during the 2009-2017 period when the number of IPOs fell below double-digits: it was seven to be specific. So much for encouraging companies to rely on the capital market to raise funds instead of just banks.

Another area where regulators made little progress in 2017 was bringing more quality stocks to the market. Attracting multinationals to the market must be at the top of regulator's priority list since it will build confidence of genuine investors, raise market liquidity, attract foreign investment and reduce influence of gamblers. We see the obvious disconnect between stock price movements and economic conditions and remain convinced that listing multinationals from sectors like Telecommunication, Financials, Energy and Packaged Consumer Goods will help mitigate this problem. We must remember that these foreign firms are here because there is a growing and profitable market here. But as long as they restrict their profits to a hand-full of employees and owners, they end up contributing to income inequality. Only when they offload 15-20 percent of their shares in the market will the common people enjoy some of their hefty profits.

So what does all this mean for the year 2018? While this year's rally appeared more buoyant than those seen in previous years, it still lacks resilience. Specifically, it remains delinked from economic fundamentals and vulnerable to short-term traders and corrupt individuals looking to make quick money at the expense of genuine or uninformed investors. The upshot is that investors should certainly not get used to the idea of 20+ percent return from the market every year. True, if the government does try to artificially prop up stock prices, the market might still have some way to go. But the scenario can change quickly if and when interest rates rise for some reason. And those who ingenuously took debt to invest in stocks without carefully looking at company financials, business model and management integrity might be the first to count losses.

 

Sharjil M Haque is a Doctoral student in Economics at the University of North Carolina, and former Research Analyst at the International Monetary Fund in Washington DC.

Finance-Growth or Finance-Greed? How fragile banking sector can destroy the economy?

Bangladesh is one of the fastest growing south Asian countries with a CAGR of 5.6% in the last ten years and has the vision to reach upper-middle-income country status by 2021. This growth was accompanied by a significant decline in poverty, an increase in employment, greater access to health and education, and improved basic infrastructure. As a result, the once poor country is now considered middle income[1]. The existing finance-growth literature shows the relative importance of finance on economic growth. Banking sector dominates the financial sector development as capital market has not yet developed (Beck and Levine, 2004; Levine, 2005). Bangladesh has experienced tremendous growth in banking industries after financial liberalization policy in 1990s[2]. Domestic credits to the private sector by banks have increased from 2.61% of GDP in 1974 to 44.26% in 2016. After economic reform and financial liberalization in the nineties1the economy has started to grow even faster[3].

Figure 1: Finance and economic growth of Bangladesh

The financial sector of Bangladesh has been experiencing a period of stagnation due to macroeconomic and political instability.  The non-performing loans (NPL) in the banking sector increased by Tk11,237 crore in the first three months of the current year. At the end of March, the total NPL stood at Tk73,409 crore which is 10.53% of total outstanding loans. Excess liquidity in the banks stood at Tk1,22,073 crore at the end of 2016 while it was Tk1,20,679 crore in 2015[4]. Declining non-interest income[5] indicates banking sectors heavy reliance on interest income. Consequently, interest rate spread (IRS) has started increasing since 2013. On top of that, the recent Banking Companies (Amendment) Act-2017 could add insult to injury[6].

A gloomy scenario banking sector stability in Bangladesh 

	2012	2013	2014	2015	2016
Bank capital to assets ratio (%)	5.42	6.04	5.85	5.43	---
Bank nonperforming loans to total gross loans (%)	9.73	8.64	9.37	8.40	9.20
Bank liquid reserves to bank assets ratio (%)	11.69	12.49	11.17	14.47	15.40
Net Interest Margin	4.54	3.73	2.29	2.34	---

Source: World Bank IBRD-IDA, GFD and Bangladesh Bank Financial Stability Assessment Report

On top of the above given scenario, we argue that changes in bank corporate governance structure could lead to the family-dominated board of directors who would definitely work for their own interest. This may increase huge ownership concentration risk as well preferential credit disbursements for directors’ favorite and own business group. On top of that, this new practice could trigger an even significant increase in NPL which would ultimately lead to capital erosion[7] and banking failure. Moreover, decreasing interest rate, excessive liquidity, unfair competition and market saturation could trigger massive banks’ failure which would affect not only financial sector but also the real sector of the economy. In the current macroeconomic situation, this is not a very unlikely scenario. Banks are currently sufferings excess liquidity risk due to lack of investment opportunities and political stability.

This is only the asset side risk. There is liability side risk as well. Due to lower inflationary expectation, the Central Bank has adopted the expansionary monetary policy to boost investment activities to stimulate output. Consequently, public and private commercial banks have already reduced their deposit interest rates which lead to deposit outflow from commercial banks to government's savings certificate where the interest rate is still significantly higher. Political pressure and upcoming election are the main two reasons of this policy inconsistency.  In the short run, banks may not face any problems due to already excess liquidity situation but gradual decline in term deposits due to lower interest rate and lack of public confidence accompanied by the increase in NPL would significantly reduce bank lending capabilities and bank stability. One of the potential consequences in this dire scenario is increasing bank M & A[8].  Therefore, it is recommended that financial regulators must take proactive measures in order to prevent the financial distress in the first place by imposing strict regulatory control and improving corporate governance. Furthermore, in the current economic situation, if the central bank issues new license to open more banks under political consideration, it will be detrimental to the overall economy. 

Since financial liberalization began, Bangladesh has not experienced any major banking crises but it does not mean that it is not going to happen forever. We have seen the havoc of banking crisis all over the world which destroyed the poor and made rich more richer. Fractional reserve banking, in simple language greed of rich, and unregulated banking industry are two main causes of the banking crisis. When the bank gives money as a credit that it actually does not have, then situations arise when it cannot pay the demands that are made upon it. Finally, I would like to conclude by quoting a prominent economist Dr. Asad Zaman:

"If we look at the benefits from banking, and compare them to the costs, it is very clear that on the whole the Western world has come to a great deal of harm as a result of this banking system." 

---

[1] Asian Development Bank, Bangladesh: Challenges and Opportunities in Moving to Upper Middle Income Status. Retrieved on 26^th November, 2017 from https://www.adb.org/news/features/bangladesh-challenges-and-opportunities-moving-upper-middle-income-status

[2] Financial Sector Reform Program (FSRP)

[3] Bangladesh enjoys a CAGR of 4.8% and 5.6% from 2000 to 2016 and from 2007 to 2016 respectively

[4] Bangladesh Bank Financial Stability Assessment Report April-June, 2017

[5] Non-interest income is bank and creditor income derived primarily from fees including deposit and transaction fees, insufficient funds (NSF) fees, annual fees, monthly account service charges, inactivity fees, check and deposit slip fees, and so on.

[6] The proposed amendment allows the doubling of the number of directors (currently 2 members are allowed to seat on the board from the same family) in a bank's board from a single family and extends the tenure of directors (As per the proposed legislation, the tenure of bank directors would be extended to nine years from the current six years).    

[7] Nine banks, including four state owned commercial banks, have faced serious capital shortage due to high NPLs. Retrieved on 5^th December, 2017 from https://thefinancialexpress.com.bd/economy/bangladesh/nine-banks-capital-shortfall-swells-to-tk-177b-in-q3-1512326793

[8] In a very recent public gather Finance Minister turning down the notion of a messy situation in banking sector riddled with irregularities and lacking good governance,. He said the banks failing to operate properly will go for merger. Retrieved on 28^th November, 2017 from http://www.thedailystar.net/country/bangladesh-three-new-banks-get-licenses-government-finance-minister-ama-muhith-1497235

Government for the people or for the corporate?

On the backdrop of American civil war Abraham Lincoln, one of the greatest proponents of democracy,  portrayed the fundamental of functional democracy by saying:

"Government of the people, by the people, for the people, shall not perish from the Earth."

Even after two centuries, the role of democracy in economic prosperity and equitable distribution of wealth is obvious. But when the corporate world starts dominating the democratic process, the government becomes more interested in protecting the rights of the business group rather than common people. 

In almost all national dailies reported that a parliamentary body today recommended for passing the Banking Companies (Amendment) Act-2017, which allows the doubling of the number of directors (currently 2 members are allowed to seat on the board from the same family) in a bank's board from a single family and extends the tenure of directors (As per the proposed legislation, the tenure of bank directors would be extended to nine years from the current six years).

Many scholars, policymakers, and prominent economists have already expressed their views by criticising this Act arguing it could prove detrimental to already fragile banking industry. We have seen rampant irregularities and malpractices while only two members of the same family are on the board. What will happen when there are four members of the same family. In brief, the interest of millions of depositors will be at stake. 

In the recent past, we have seen some unprecedented actions in the banking industry like hostile takeover of the boards of several banks by a Chittagong base powerful group when government and the regulator surprisingly remained silent.

It is argued that changes in bank corporate governance structure could lead to the family-dominated board of directors who would definitely work for their own interest. This may increase huge ownership concentration risk as well preferential credit disbursements for directors favourite and own business group. The non-performing loan has already exceeded the threshold for the last couple of years. On top of that, this new practice could trigger an even significant increase in NPL which would ultimately lead to capital erosion and massive bank failure. 

In the current macroeconomic situation, this is not a very unlikely scenario. Banks are currently sufferings excess liquidity risk due to lack of investment opportunities and political stability. This is only the asset side risk. While there is liability side risk as well. Due to lower inflationary expectation, the Central Bank has adopted the expansionary monetary policy to boost investment activities to stimulate output. Consequently, public and private commercial banks have already reduced their deposit interest rates which lead to deposit outflow from commercial banks to government's savings certificate where the interest rate is still significantly higher. Political pressure and upcoming election are the main two reasons of this policy inconsistency.  In the short run banks may not face any problems due to already excess liquidity situation but gradual decline in term deposits accompanied by the increase in NPL would significantly reduce bank lending capabilities and bank instability.

The government seems to be indifferent in spite of the clear financial disaster the Banking Companies (Amendment) Act-2017 can create in the near future. So, we as common folk ask: is the government for the people or for the corporate?

Poverty and inequality in Muslim countries

Among 57 OIC countries, there are 7 high-income OIC countries namely, Bahrain, Brunei, Oman, Qatar, Kuwait, Saudi Arabia, UAE for which no poverty and inequality data are available currently from WorldBank WDI. From remaining 50 countries data are available for the only handful of countries. More obviously these data are not up-to-date. By collecting base data available for all countries it is observed that only few countries have latest data, therefore, the latest available values are taken for showing the latest poverty and inequality situations in Muslim countries.

The graph shows a comparative picture of poverty in selected OIC countries. It is evident that at the lower threshold most of these countries seem to do well except Nigeria. However, with a higher threshold, almost all countries have more than  5% of the total population living below the poverty line except Kazakhstan, Malaysia and Turkey. For Bangladesh, Tajikistan, and Nigeria it is well above 15%.

 Gini coefficient, an accepted standard to measure inequality in literature. From the above graph we have seen a contrasting scenario from the poverty. Even though Kazakstan, Malaysia and Turkey have shown significant progress in terms of poverty reduction but the inequality remains a major concern. Kazakhstan is still better than other Muslim countries in terms of wealth redistribution  More striking is the case of Malaysia. For other countries, inequality coexisting with poverty.

The inequality situation is grave - class conflict now seems inevitable in many Muslim countries. We have already seen the first wave (Westerner call it Arab Spring) of a tsunami rapidly gaining momentum. The tremendous growth which many Muslim countries have enjoyed for the last two decades or so in spite of socio-econo-political instability is actually hijacked by the powerful elites. So even though we are singing the song of economic growth, in reality, we are bleeding slowly to death.

Notes: All data used in this blog are collected from World Bank WDI.

Why are Muslim countries lagging behind?

In the twenty-first century, innovation is the key to sustainable growth. The more innovative nations are likely to maintain their economic growth in the long run. The latest Global Innovation Index shows dire situations of Muslim countries across the continents. There is not even a single Muslim country at the top 30 of Global Innovation Index.

Malaysia, the top performer is placed at number 37. Turkey and Qatar are currently holding 43rd and 49th position in the league table. Not surprisingly the most populated Muslim countries are almost at the bottom of the index. This clearly shows why Muslim countries are suffering lower productivity growth which is reflected in overall economic growth.