Bangladesh outpaced its South Asian neighbors, India and Pakistan, in terms of prosperity in 2023, although a concerning setback in the Freedom Index shadowed the triumph.

According to the report “Freedom and Prosperity in Bangladesh” prepared by the Atlantic Council’s Freedom and Prosperity Center, Bangladesh was categorized as “mostly unprosperous” in the Prosperity Index and “mostly unfree” in the Freedom Index.

Bangladesh fared better on the Prosperity Index than its South Asian counterparts, ranking 99th among 164 countries, while India ranked 146th and Pakistan ranked 150.

However, the freedom index paints a grim picture, placing Bangladesh on the 141st spot, whereas India is on 104 and Pakistan is on 113 in the list made for 2023.

This Prosperity Index considers various factors beyond GDP per capita, including health, inequality, environmental conditions, minority rights, and education. Meanwhile, the Freedom Index measures political, economic, and legal components.

The US-based think tank’s research found that strengthening basic freedom accelerates economic growth over the long term.

The report said, “January parliamentary elections solidified a shift toward a dominant-party system. The Awami League capitalized on an opposition boycott to extend its fifteen-year rule, with prime minister Sheikh Hasina poised to become the world’s longest-serving female head of government. While this signifies stability, dominant-party systems often face challenges that can undermine good governance. Ensuring healthy competition across politics, government, and the economy is crucial to mitigate these risks.”

These findings were revealed at the Prosperity and Good Governance Conference, jointly organized by the United States Agency for International Development (USAID) and The Asia Foundation on Monday (15 April).

Speaking at the event, US Ambassador Peter Haas said, “Out of the 164 countries the Atlantic Council has looked at, not a single country ranked ‘mostly unfree’ is also ranked ‘prosperous.’ This suggests that, in order to become prosperous, Bangladesh must then take bold steps to expand economic, political, and legal freedoms for its people.”

“Every country grapples with issues like corruption and securing economic and political rights. The key lies not in avoiding problems but in actively acknowledging and tackling them,” he added.

The keynote speaker, Director of the Atlantic Council’s Freedom and Prosperity Center Joseph Lemoine, highlighted the key findings from the report, which measures a nation’s economic well-being based on their democratic and governance indicators considered for its Freedom Index and Prosperity Index.

“The data shows that countries with greater freedom tend to enjoy higher levels of prosperity, while those with less freedom tend to have lower levels of prosperity. Countries that promote political and economic freedoms, along with strong legal systems, create an environment that’s more welcoming to foreign Investors,” said Mr. Lemoine during his keynote presentation.

“Freer countries receive significantly more foreign direct investment than those with less freedom. Overall, the Freedom Index suggests that a strong commitment to freedom is key to attracting foreign investment,” he added.

The conference brought together stakeholders from various sectors, including government, civil society, business, donors, academia, and think tanks.

The Atlantic Council, a nonpartisan nonprofit organization, aims to promote constructive US leadership in international affairs. Its Freedom and Prosperity Center conducts unbiased, data-based research on the relationship between prosperity and economic, political, and legal freedoms to support sound policy choices.

The Freedom and Prosperity Indexes are two separate indexes that rank 164 countries worldwide according to their levels of freedom and prosperity.

In recent months, Bangladesh’s economy has shown signs of recovery, particularly in export earnings and inward remittances. The volatility in the foreign exchange market has also begun to ease after over a year and a half. However, the Iran-Israel conflict has emerged as a fresh concern, posing a potential threat to the nation’s ongoing recovery efforts.

Businesses and economists have expressed concerns that if the conflict escalates and prolongs, it could have various repercussions on Bangladesh’s economy.

One such impact could be the destabilisation of the energy market and subsequent price fluctuations, akin to what occurred following the Russia-Ukraine conflict in 2022. This could lead to increased burdens on Bangladesh’s oil and LNG import bills due to inevitable price hikes.

They caution that the Red Sea shipping route, already affected by Yemen’s Houthi attacks, could face additional disruptions. This situation could potentially have significant impacts on global supply chains, especially if there are further complications at the Strait of Hormuz which sees one-fifth of global oil production flow through it daily. This could result in increased freight costs and shipping times.

“Further escalation means everything will be difficult for us and many others,” said Azam J Chowdhury, chairman of East Coast Group, a conglomerate engaged in diverse sectors ranging from oil and gas to ocean-going ships, as well as banking and finance, among others.

Azam said the price of oil has already risen by $1 per barrel, and it is likely to further increase if the conflict between Iran and Israel persists. The state-owned Bangladesh Petroleum Corporation (BPC) has generated approximately Tk4,000 crore in profits since implementing the automated monthly pricing formula. However, these profits might not be sustained if prices further increase. Therefore, the pressure on the balance of payments (BOP) will further intensify.

Dr Masrur Reaz, CEO of the private think-tank Policy Exchange of Bangladesh, said an unstable energy market could lead to price escalations and increase import bills. If the government fails to import energy at higher prices, there may be an increase in load shedding and economic losses.

He said the Red Sea route, already experiencing disruptions with ships rerouting via Africa, would further increase shipping time and costs if trade through the Strait of Hormuz is disrupted. This situation could potentially create a crisis for ships due to the additional time required to navigate through the African region.

While neither Iran nor Israel directly hosts Bangladesh’s migrant workers, the repercussions of the conflict will be felt in other Middle Eastern countries, notably Saudi Arabia and the UAE, where hundreds of thousands of Bangladeshis are employed, Masrur said, noting that the war’s impact on tourism and other service sectors in these countries will inevitably affect the livelihoods of Bangladeshi workers residing there.

“In the short term, expatriate Bangladeshis may not lose their current jobs, but new recruitment will likely be halted. As a result, the inflow of remittances will decrease, putting pressure on the balance of payments,” he said.

Masrur added that if the conflict persists for a year or more, Bangladeshis may indeed begin to lose their jobs.

Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), reiterated concerns about the rise in energy prices and maritime trade costs.

He said if the conflict escalates, the global economy would suffer negative consequences. Consequently, demand in the USA and EU markets could decrease, with the obvious impact to be felt on Bangladesh’s garment exports.

However, Md Sazzadul Hassan, chairman and managing director of BASF Bangladesh Limited, cautioned against premature conclusions, stating that the outcome depends on how the tension unfolds.

“In general, the ongoing shipping challenges are likely to worsen, and fuel costs may skyrocket,” he said.

Nonetheless, he said, since a large number of Bangladeshis work in the Middle East, any further escalation could potentially impact these workers.

Oil price after Iran’s missile attack on Israel

Iran possesses extensive oil reserves and ranks as the third-largest producer within the oil cartel OPEC. According to CNBC, an American business news channel, any disruption to its ability to supply global markets could result in elevated oil prices. The potential closure of the Strait of Hormuz could further exacerbate this situation.

CNBC reported on Monday that oil prices could surge to $100 per barrel and beyond if renewed fears of a regional war emerge.

“Any attack on oil production or export facilities in Iran would drive the price of Brent crude oil to $100, and the closure of the Strait of Hormuz would lead to prices in the $120 to $130 range,” reports CNBC quoting Andy Lipow, president of Lipow Oil Associates.

Meanwhile, Reuters reports a 1% decrease in oil prices on Monday, indicating the market’s downplaying of the risk of a broader regional conflict following Iran’s weekend attack on Israel.

Brent futures for June delivery dropped by 99 cents, approximately 1%, reaching $89.46 a barrel by 0933 GMT on Monday. Meanwhile, West Texas Intermediate futures for May delivery experienced a decline of $1.05, around 1.2%, standing at $84.61.

Earlier on 12 April, oil benchmarks had risen in anticipation of Iran’s retaliatory attack, with prices touching their highest since October.

The report indicates that the price of each barrel of Iran’s heavy crude oil in March 2024 reached $83.48, marking a $3.14 increase compared to the previous month.

Furthermore, the average oil price of OPEC in March 2024 reached $84.22, reflecting a $2.99 growth compared to the preceding month, as stated in the report.

United Nations (UN) Secretary General Antonio Guterres warned the international community Sunday against deeper descent into conflict, addressing the Security Council during a meeting over Iran’s weekend attack on Israel.

“Neither the region nor the world can afford more war,” Guterres said.

“The Middle East is on the brink,” he told the Security Council.

“The people of the region are confronting a real danger of a devastating full-scale conflict. Now is the time to defuse and de-escalate,” he added, calling for “maximum restraint.”

Late on Saturday, Iran launched a direct attack on its long-time arch foe Israel for the first time, firing a wave of more than 300 missiles and drones.

Nearly all of them were intercepted by Israel and others, including the United States, Jordan and Britain.

According to the Israeli army, 12 people were injured.

Iran said its attack came in response to a deadly April 1 air strike on Tehran’s consulate building in the Syrian capital Damascus that was widely blamed on Israel.

That attack killed seven Iranian Revolutionary Guards, including two senior generals, and prompted Iranian threats of retaliation.

The unprecedented exchange, marking a major escalation between the two countries, has sparked renewed fears of a broader conflict, including the potential for an Israel counterstrike.

– ‘Step back from the brink’ –

The United States said Sunday it will not join any Israeli counterattack on Iran, with President Joe Biden warning Prime Minister Benjamin Netanyahu to “think carefully” about any escalation.

The rising tensions come against the backdrop of Israel’s six-month-old war against Hamas in Gaza, which began after the Palestinian Hamas group’s unprecedented attack in Israel October 7 which resulted in the deaths of 1,170 people, mostly civilians, according to an AFP tally based on Israeli figures.

Israel’s retaliatory offensive has killed at least 33,729 people in Gaza, mostly women and children, according to the territory’s Hamas-run health ministry.

Since the start of the conflict, Iran-backed groups in Iraq, Lebanon, Syria, and Yemen have carried out a flurry of attacks on Israeli and Western targets.

Sunday’s Security Council session on the simmering crisis came at Israel’s request, with its Ambassador Gilad Erdan urging the council to “take action (and) condemn Iran for their terror.”

The body must “impose all possible sanctions on Iran before it’s too late,” he said.

Iran’s UN envoy Amir Saeid Iravani meanwhile insisted the Islamic republic was exercising its “inherent right to self-defense.”

“The Security Council… failed in its duty to maintain international peace and security,” Iravani said.

Therefore, Tehran “had no choice” but to respond, he said, adding that his country does “not seek escalation or war,” but will respond to any “threat or aggression.”

During his speech, Guterres repeated his condemnation of Iran’s strikes on Israel, and the Israeli attack on the Iranian consulate in Damascus.

“It’s time to step back from the brink. It is vital to avoid any action that could lead to major military confrontations on multiple fronts in the Middle East,” Guterres said.

He also repeated his call for an “immediate humanitarian ceasefire” in Gaza, which experts warn is on the verge of famine.