U.S. Puts Pressure On Bangladesh As Opposition Boycotts Election

(Bloomberg) -- Bangladesh’s Prime Minister Sheikh Hasina is set to extend her 15-year rule in a boycotted election on Sunday. The question now is whether Western governments led by the US will punish the country for its democratic backsliding and push it closer to China.

The Bangladesh Nationalist Party, the country’s largest opposition group, and its allies said they will boycott the polls, which they say are a sham. They’re concerned about vote-rigging and have been calling on Hasina to resign to make way for a caretaker administration that can oversee the election.

The US, the biggest buyer of Bangladesh’s exports, has become more vocal in its calls for a free and fair election, imposing visa curbs on members of Hasina’s ruling party and law enforcement officials in September. Hasina, 76, will need to prevent the US from taking harsher steps that could hurt the economy more directly and complicate the International Monetary Fund’s lending program.

“The US applied so much pressure on Bangladesh for free and fair elections, through both carrots and sticks, and for so long, yet to no avail,” said Michael Kugelman, director of the South Asia Institute at the Washington-based Wilson Center. “Consequently, there is a possibility that the administration could respond post-election with harsher steps.”

Those measures could be “punitive actions in the space that would hurt Bangladesh the most,” which is trade, Kugelman added. 

About $9 billion, or roughly one-fifth, of Bangladesh’s clothing exports went to the US in 2022, with Walmart Inc. and Gap Inc. being the top buyers. The garment industry employs around 4 million workers and contributes about 10% to the $460 billion economy. 

The political environment in Bangladesh has been tense for months. Opposition supporters have clashed with police in mass protests calling for Hasina to step down. Human Rights Watch said in a November report that almost 10,000 opposition activists were arrested since a planned rally by the BNP on Oct. 28. Nobel Peace Prize winner Muhammad Yunus, who Hasina views as an opponent, was this week given a six-month jail sentence by a Dhaka court in a case his supporters say was politically motivated.

Hasina said in a televised speech Thursday that her Awami League-led government has created stability over three terms, improving the quality of lives of people. The government believes in the principle of “friendship with all” at the international level, she said, and has improved institutions in the country to protect freedom and sovereignty.

The US has stepped up its calls for free and fair elections. In May last year, Secretary of State Antony Blinken announced new visa restrictions on any Bangladeshi citizens believed to be interfering in the elections, such as rigging votes or using intimidation or violence. In September, the US imposed visa curbs on unidentified officials of the ruling party, law enforcement and political opposition. 

India has maintained strong ties with Hasina and is concerned that more assertive steps by the US will push Bangladesh closer to China, both of which already enjoy strong commercial and defense ties. 

When India and US defense and foreign ministers met in November in New Delhi, Bangladesh’s elections and the US visa curbs figured prominently in the talks, people familiar with the matter said, asking not to be identified since the discussions were private. India raised concerns with US officials that the sanctions could antagonize Hasina’s government, the people said. 

Peter Haas, the US ambassador to Bangladesh, also made a quiet six-day visit to India in the last week of December, meeting senior officials in Prime Minister Narendra Modi’s office, the people said. 

The US State Department didn’t immediately respond to a request for comment. In a regular press briefing on Wednesday, State Department spokesman Matthew Miller said the US is watching the outcome of the Bangladesh elections “very closely” but wouldn’t speculate in advance on “what actions we may or may not take in response to any development.”  

India and Bangladesh share a historic, cultural and linguistic ties, and New Delhi played a key role in the country’s independence from Pakistan in 1971 by deploying troops in support of the Bengali resistance force.

“As a close friend and partner of Bangladesh we would like to see peaceful elections there and we will continue to support Bangladesh’s vision for stable, peaceful and progressive nation,” Arindam Bagchi, a spokesman for India’s Ministry of External Affairs, said in his weekly press briefing on Dec. 29. 

Economic Strains

Although still an impoverished country with 172 million people, Bangladesh has made economic progress under Hasina. The country is one of fastest-growing economies in Asia, poverty rates have steadily declined, and it has a higher per-capita income than India. 

The pandemic and soaring commodity prices put the economy under strain in recent years, depleting its foreign exchange reserves and forcing Hasina to turn to the IMF for $4.7 billion in emergency loans. The economy is still facing dollar shortages, prompting Moody’s Investors Service and others to downgrade the nation’s credit ratings. 

The currency fell almost 6% last year, among the worst performers in Asia. Stocks declined 5%. The country’s currency dealers currently set limits on the exchange rate. 

“From the investor perspective, on top of the election outcome and post-election stability, eyes will be on the central bank’s action on stabilizing foreign exchange reserves and how the market responds,” said Salim Afzal Shawon, head of research at Dhaka-based BRAC EPL Stock Brokerage Ltd. “Investors will also assess how the US reacts after the election in terms of sanction possibilities.”

To keep the IMF funds coming, Hasina’s government has promised to raise taxes and interest rates. In December, the cash-strapped nation won approval from the IMF for the disbursement of $690 million in loans.

In its next review, “the IMF will likely be a bit more stringent with ensuring that the authorities meet the requirements,” Marcus Yiu, a Moody’s analyst, said in an interview. That would include fiscal reforms and freeing up the currency, he said. 

The main opposition BNP said it will press on with its demands and urged supporters to avoid paying taxes in order to halt what they dub “farcical” elections.

With the opposition set to boycott the elections, Hasina’s win now looks inevitable and her ruling Awami League party will likely face off against independent candidates and parties such as the Jatiyo Party, which was founded by the late military ruler Hussain Muhammad Ershad, who took power in a coup in 1982. 

Voters will elect 300 of the 350 seats in parliament in Sunday’s election. The remaining 50 seats are reserved exclusively for women and filled by a vote of 300 members, based on proportional representation.

If Hasina returns, as is likely, the risk is that she may “feel that she can conduct her governance in any way that she chooses, which leads to an abusive situation,” Meenakshi Ganguly, deputy director of Human Rights Watch’s Asia Division, said in an interview. “It leads to circumstances where there is no accountability whatsoever.”

--With assistance from Sudhi Ranjan Sen, Iain Marlow and Karl Lester M. Yap.

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