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Nationalization and Subsequent Privatization in the history Bangladesh

Why nationalization strategies adopted by the government of Bangladesh backfired and privatization subsequently replaced it?

After Bangladesh evolved as an independent state in December 1971, many of the West Pakistani private entrepreneurs and managers (who were at the helm of both public and private enterprises in then the East Pakistan) fled the country. It left a huge vacuum in the corporate sector. 

With the birth of Bangladesh, there was a clear shift in economic and social policies, and thus almost all of the large private enterprises were nationalized to promote the new government’s core principle of socialism.

The management of nationalized enterprises were mostly entrusted to politicians having any previous administrative and management skills and experience. There were complaints against the new managers that many of  them used to sell out machines and smuggle the raw materials. Consequently many factories were closed due to ineffective administration or lack of raw materials.  On the other hand, production could not be brought back to previous levels at many struggling ones.

The government nationalized industries as part of its commitment to establish a socialist state as socialism demand for social instead of private ownership of the factors of production. However, the prerequisites for socialism were not present then in the country. There were not sufficiently large number of large-scale industries. The existing ones were mostly owned by the west Pakistanis.

The government had no way other than taking over the industries. There were lots of other things that government could do (to establish a socialist or at least a transparent capitalist state) which were not attempted. 

Therefore there was severe anarchy in the economy. A privileged group amassed huge wealth due to their close connection with the ruling party. Political connections were misused in trade, industry, business and more. 

However, changes of government in 1975 led to a reversal of economic policies. When Major General Ziaur Rahman (Zia) came to power, he initiated liberal economic policies and returned some of the small companies to their Bengali owners. Zia also established a divestment board, which resulted in 255 state-owned enterprises being divested or privatized between 1975 and 1981.

Source

Family firms, firm performance and political connections: Evidence from Bangladesh

ছফা, আহমদ (১৯৯৭), সাম্প্রতিক বিবেচনাঃ বুদ্ধিবৃত্তির নতুন বিন্যাস, খান ব্রাদার্স আন্ড কোম্পানি, ঢাকা।


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