Domestic governance structure is increasingly affected by accelerating globalisation bringing about major changes in the national socio-political institutions. Many pre-existing/old institutions are either abolished or significantly altered. Altering or abolition of existing institutions has put serious pressures on domestic governance in Bangladesh, because it is defined as the 'processes and institutions, both formal and informal, which guide and restrain the collective activities of a group1' (Keohane 2002: 15). Hence, it is systematically related to the institutional characteristics of the state. In addition, the pursuit of hasty transnational integration generates mismatch even within the economic institutions, needless to say about political or societal realms.

New issues such as child labour, trafficking of child and women, trade unionism in the Export Processing Zone, and environmental standards are coming to the surface in the economic governance of Bangladesh, though its export market is concentrated on few items, such as ready-made garments and shrimps, which are susceptible to these constraints. Under these new pressures distinct national regimes of extensive labour rights and social protection have become almost obsolete. Nation-states, as perceived by the proponents of extreme globalisation like Ohmae and Reich, have become the local authorities of the global system. The spread of powerful international and regional actors in national politics and accommodation of national politics enmeshed within regionalisation and/or internationalisation has transformed the tools of national governance. Bangladesh national markets in capital, products and labour are more sensitive to the movements and crises of other markets2. To put it quite bluntly, Jahangir argues that Bangladesh experienced a phase of hegemony of the World Bank and IMF, the chaos of privatisation and liberalisation and the demise of the sovereignty of the state3.

As the process of globalisation accelerates, government experiences greater difficulties in trying to control events within the national borders. Those difficulties, summarised by the term diminished autonomy, show why tensions arise from the competition between political sovereignty and economic integration4. While governments in the developing world are constrained to challenge these pressures as they did in the 1950s and 1960s, tensions are evident at societal level. Haggard observes this incongruence in a limited sense. He mainly indicates the political impact of economic liberalisation as he points out; cross-border economic integration and national political sovereignty have increasingly come into conflict, leading to a growing mismatch between political structures of the world5. In short, the accelerating effects of globalisation changed the pattern of interactions among different forms of collective action organisations that provide a variety of governance services to diverse groups.

It raises a critical question: to what extent has globalisation produced integrative effects within Bangladeshi society? This requires dealing with the implications of these changes induced by globalisation from two dimensions: rule-changing capacity and end results. Because it is often argued that the process of globalisation would bring convergence in socio-economic and political practices and increase allocative efficiency by moving toward free market and 'getting the prices right'. It is against this background, the paper is basically an institutional analysis of the impact of globalisation based on empirical evidence.

Privatisation and Lack of Entrepreneurship
The problem of entrepreneurship continues to hinder economic development as it did in the 1970s and 1980s. What is observed is the development of trading and real estate business where rates of returns are quite high, or there was a flight of capital6. Despite faster pace of economic reforms towards market economy for more than a decade, private sector has not developed in the market due to poor level of entrepreneurship that is the key to private sector development. The privatisation launched through denationalisation and disinvestment has not contributed much to the strengthening and widening the scope of entrepreneurship in Bangladesh. Industrial policy has been changed several times. Particularly, the industrial policies in 1991 and 1999 undertook sweeping changes towards market reforms. More importantly, the government has vigorously replaced the public sector with private one. But, in reality, the vicious cycle of low savings and low investment continue to exist due to the country's dependence on foreign aid and increasing government's lending from domestic banks7. Despite undertaking considerable extent of deregulation of financial sector, medium and small size financial organisations have not been established.

Figure 1: Manufacturing Sector's share in GDP in Bangladesh (in constant price) Source: Bangladesh Bureau of Statistics

Figure 1 shows that the share of manufacturing sector in GDP has not witnessed any major changes in the post 1991 period. The contribution of manufacturing sector in GDP fluctuated between 10-12 per cent of GDP for the last 25 years. This disappointing picture of manufacturing sector clearly reflects the poor condition of entrepreneurship in Bangladesh.

Some argue that the issue of entrepreneurship is related to creativity. Bangladesh lacks the environment that stimulates creativity. The privatisation, denationalisation and disinvesture have set the process of 'de-industrialisation', instead of promoting entrepreneurship. Some point out that it is the legacy of British colonial rule for two centuries and Pakistani discrimination by concentrating industrial locations in the western part. They further argue that the devastating War of Liberation has largely reduced the capacity. However, this historical reason for the lack of entrepreneurship does not deserve much importance after three decades of independence. The question of creativity has some merits, but it must not be blamed for such a dismal picture of entrepreneurship in Bangladesh. Though creativity largely depends on national environment, the major problem lies with the systems of governance, marked by corruption, rent seeking and patronage. Sobhan rightly points out that discretionary intervention through the widespread use of personal connections hinder the growth of entrepreneurship8. Shafiquzzaman makes it clear that real entrepreneurs don't get opportunities as provided by the government through its policy reforms. In disbursing loan, personal contact and influences played a big role. Entrepreneurial capability was overlooked9. The persistence of a 'predatory state' syndrome has created a nouveau riche class in society. Changes of organisations and policies under the conditions of globalisation are not resulting in building a good class of entrepreneurs. This phenomenon is largely because of the continuity of traditional institutions that discourage the local entrepreneurs. Embracing globalisation before changing the existing values and norms in society creates the problem of incompatibility in adapting to the process of globalisation.

Continuing Trade Deficit: Problem of Market Access
Trade openness is a critical factor for accelerating the benefits of globalisation. Various studies particularly sponsored by the Bretton-Woods institutions demonstrate there are a number of beneficial effects of trade both at South-South and North-South levels. Traditionally, the GDP growth is the driving cause, but there are other benefits too. It is argued that trade liberalisation may promote efficiency in resource allocation, increase competitive capability by acquiring global standards of efficiency, broaden options for consumers, and can make use of international capital markets to increase private investment, and may result in familiarisation with new ideas, technology and products. All these benefits largely depend on the capacity to develop dynamic export sector and external markets for exports. The reality is, however, somewhat different in Bangladesh's case. The integration of Bangladesh economy into the world economy against the backdrop of recent policy reforms, has not enabled the state to exploit its comparative advantage in world trade.

Figure 2: Trade as % of GDP in Selective Developing Countries Source: World Development Indicators 2000 (CD Rom).

Figure 2 shows that trade in Bangladesh has lower contribution to gross domestic product compared to other developing countries like Malaysia, Sri Lanka and Zimbabwe.

The export-led strategy has faltered due to dwindling global market for its export items. Instead of expanding its export base through diversification of products and increasing the volume of existing items, the country faces the prospect of losing its traditional markets for readymade garments and knitwear (around 80 per cent of total exports) in near future. With the demise of Multi-Fibre Agreement (MFA)10 in 2005 under the WTO ruling, Bangladesh will lose its protected market in North America and Europe. Furthermore, the conditions of labour and environmental standards in exporting goods and services appear to be a serious blow for its search for external markets. These are new barriers of 'neo-protectionism' for a developing country like Bangladesh. More so, the trade liberalisation has facilitated more imports that results in huge trade deficit every year.

Figure 3 demonstrates that trade deficit is higher during 1990-2000 period compared to the previous era. At most, the dismal scenario with the trade deficit continues irrespective of following export led strategy. In this situation, some argue that the success of East Asian export-ed policies cannot be replicated in Bangladesh context. In East Asia it was high domestic savings and modest consumption and a lack of large domestic markets pushed those countries to follow export-led strategies.

Figure 3: Trade Deficit in Bangladesh Source: International Financial Statistics, 2000 (CD-Rom)

The economists in Bangladesh argue that the explosive growth of trade deficit is a direct impact of our ill-timed import liberalisation. Bangladesh's soaring trade deficit with India in the early 1990s is an example. The reason behind this situation is that the country has not developed an efficient and dynamic manufacturing sector. Industrial activism is minimal, if not stagnant. Only garments and urban construction sectors are booming because of no competition11. Consequently, private investors within the domestic industrial sector lack the capacity to compete with imports, which results in a huge trade deficit every year. This situation might be worse in the coming years given the constraints of market access for Bangladesh's export items. Here we observe a clear discrepancy in terms of the economic effect of globalisation policies initiated by the governments. Under globalisation, trade liberalisation is supposed to generate export-orientation and to expand external market in a significant way. Figure 3 shows that the average trade deficit of Bangladesh has considerably increased in 2000 compared to 1978.

Financial Volatility
Contrary to highly liberal policy regime for private foreign investment in Bangladesh, there was a frustrating amount of Foreign Direct Investment (FDI) in Bangladesh in the last decade12. All the incentives for privatisation and liberalisation have not been able to attract a minimum degree of private foreign investment in Bangladesh. Figure 4 shows that the FDI net inflows continue to be nil in Bangladesh until 1986 when it was only 0.01 per cent of GDP. Surprisingly it remained around 0.01 per cent until 1995. Later it increased to 0.72 per cent in 1998. On the other hand, Malaysia, Thailand and Sri Lanka received FDI at 6.9, 6.23 and 1.23 per cent of their GDP in 1998, respectively. While looking into the disinterest shown by the foreign investors to invest in Bangladesh, it is almost universally recognised that domestic socio-political institutions which are marked by bureaucratisation, rent seeking and corruption and political instability are the major bottlenecks. This clearly indicates that FDI as a driving force of globalisation as well as economic growth cannot be increased without improving governance in the country. The so-called liberal investment policy regime has simply faltered demonstrating another source of divergence between the rules and norms of globalisation and domestic governance as well as in terms of actual outcome of liberalisation in the country.

Figure 4: Net FDI Inflows into Bangladesh (% of GDP) Source: World Development Indicators, 2000.

Another example case is of capital market performance in Bangladesh. The recently instituted capital market to boost portfolio investment and domestic private capital flows is not functioning properly. This is illustrated by the 1996 capital market crisis in Bangladesh. Capital market was reorganised in 1993 as a direct outcome of the market-based liberalisation program of the government. The individual investors demonstrated much enthusiasm about this market. In a short time, the country's stock market experienced a crash in 1996 winter that resulted in huge losses to medium and small investors13. The sudden rise of stock price encouraged thousands of investors who lost out in an abrupt and dramatic down-slide. It was reported that 'after an unprecedented bull run lasting some five months at the Dhaka Stock Exchange, the DSE All Share Price Index, having reached the unsustainable level of 3627 points on November 16 1996, came crashing down, amidst widespread panic in the kerb market14.' The crash in capital market is followed by widespread agitation by the middle class investors. Subsequently, all share price index has been plummeting. Still the capital market is in shambles with a crisis of public confidence on this institution. It is widely held that a few sponsored directors of private companies artificially created the crisis. It is reported that four foreign companies played an instrumental role in the stock market crash15. These companies were assisted by the corrupt members of the Stock Exchange. The consistent downward trend in 1999 not only curtailed the profits of market players but also kept capital investments low. Given the volatile nature of capital flows, this crisis raises some crucial questions. First, is Bangladesh prepared for instituting such a fluid market device? What institutional mechanisms Bangladesh need to establish before opening capital market? Although the crisis and the subsequent behaviour of the share market shows that Bangladesh was not ready for instituting the capital market as such, the adequate institutional mechanisms could reduce the risks of the investors, mostly lower and middle class people.

Competition and Competitiveness
Competition is another cardinal norm of globalisation. Traditionally, it is closely related to the growth of entrepreneurship in a society that is considerably lacking in Bangladesh. In addition, because of market and information imperfections, there is a general tendency for market failure even in the ideal neo-liberal market-based system. In Bangladesh, imperfections have intensified because social conditions are marked by economic backwardness, lack of access to information technology, widespread illiteracy and government control over media. Thus, competition has not improved efficiency. It was expected that privatisation would decrease rent-seeking conditions in the country; but it has not occurred. Who will compete in the market, if there are not enough number of actors and proper infrastructure?
Apart from market and information imperfectness, there is one critical factor behind the absence of competition i.e., lack of capability. If a country lacks appropriate technological development and sound infrastructure, it is impossible for private investors to flourish and compete with domestic and international firms. Technology is both a public and private good. It is impossible for a poor nation like Bangladesh to develop basic technological capability through the private sector. There is a necessity of considerable state support to improve national capacity in technological and infrastructural capacity. Another factor is the social environment which is marked by rent seeking, patronage and corruption mainly sponsored by the state. Use of physical force is widespread from tender snatching to political nomination. In both cases, government has a critical role to play, but here again the dilemma is that if government continues to play a key role in developing markets and infrastructure then it may provide an environment for continued rent seeking behaviour and ineffective allocation of resources and resulting in continued lack of capability. So in what way should the country acquire local capability to generate competition in the market? It depends on the capacity of the government as well as private sector. Both have to work hand in hand to develop national capability. Ironically, the rules and norms of globalisation pathologically discourage governmental support for local capability entrepreneurship. This shows another disparity between domestic reality and globalisation.

Access to Information
Information and communication technology (ICT) is the driving force behind globalisation. More specifically, internet is the underlying institution in the whole process. But Bangladesh has not been able to acquire this technology in a meaningful way. 'Digital divide' is, rather, increasingly widened because of the low level of access to communication technology.

Figure 10 demonstrates how a limited number of people have access to telephone mainlines and mobile phones, which is basic infrastructure of information technology. In 1990 only 2.2 out of 1000 people had access to telephone lines, which increased to only 3.0 in 1998. A survey conducted by the Computer Council has revealed that there are around 0.5 million computers, in Bangladesh.

Figure 5: Access to Telecommunication in Bangladesh Source: World Development Indicators 2000 (CD Rom).

More surprisingly, there are only 60 thousand registered internet customers in Bangladesh, even though equipped with outdated computers16. It indicates that Bangladesh is still largely dependent on old and traditional types of institutions such as physical communication, radio, television, telex, fax etc. Most of the local banks and financial institutions overwhelmingly depend on these traditional modes. Very few public organisations and agencies are equipped with computers and Internet system. Thus the domestic traditional instruments and structures remain in fundamental divergence with those of globalisation in ICT.

Dependence on Informal Sector
Despite unleashing speedy economic liberalisation program during the last decade, two vital sectors of the economy trade and finance, are facing the problem with informal sector. Smuggling and 'hundi' system are two powerful traditional institutions in the country. There is widespread smuggling of goods along the Bangladesh-India and Bangladesh-Myanmar borders. It is estimated that the informal trade between Bangladesh and India in 1992-93 was US $ 313 million while at the official level, trade it stood at US$ 356.9 million in which Bangladesh imported US $ 299 million17. In the financial sector, underground banking system operates in a rampant way through 'hundi' system and informal credit from individual moneylenders. Still people prefer to borrow from and invest money in the informal sector.

Since independence, it was repeatedly emphasised that privatisation would decrease the role of informal sector in Bangladesh economy. Unfortunately, the rapid and comprehensive economic liberalisation in the early 1990s has not been accompanied with meaningful reduction in the informal sector. Bangladesh's illegal imports from India are on the increase, while the trade in formal channel is declining (illegal import volume is almost the same as from legal sources). Hundi is still playing an effective role in trade transactions18. Human smuggling has added yet another dimension. The smuggling and trafficking of human beings from Bangladesh, particularly child and women, has increased in recent years. The growing involvement of organised criminal gangs has been exacerbating this problem. Many problems stem from the public distrust in the market since there is no certainty that they could earn profits through investments. More so, the financial institutions like banks, insurance companies and specialised agencies do not cater for the needs of local entrepreneurs, particularly those who want to start the small and medium scale enterprises. Expensive collateral, payment of bribes, political and bureaucratic linkage are required to obtain loans from the banks. So the persistence of these informal structures like smuggling and 'hundi' are clearly at odds with the elements of globalisation.

Political Instability and Criminalisation
Democratisation is a powerful norm of political globalisation since it promotes domestic peace and stability. In Bangladesh, despite the establishment of parliamentary form of government and the withdrawal of military from politics, the process of democratisation contrasts with existing socio-political norms in the society. They are reinforced by perennial political instability, social chaos and street violence. The political process is largely criminalised and fractious in the absence of true democratic practices. Political leaders are guided more by personal and inter-party rivalry than socio-economic issues. Anarchy and terrorism are widespread. The party system remains extremely hierarchical and the leadership is exceedingly personalised. Politics is tainted with terror and physical force. Money is also another determining factor for the popularity of political leaders. The traditional forms of political actions such as protests, processions and demonstrations as seen in other democratic countries are largely ineffective in Bangladesh. The widespread use of hartal (strike) to destabilise sitting governments has hindered the growth of healthy environment of democratic politics. For example, the country was shut down for more than 300 days in the 1990s during the two political regimes. Thus, we observe that the ascendancy of traditional political rules and norms in institutional arrangements and governance mechanisms considerably generate divergence with globalisation that emphasises democratic conventions, rule of law, accountability, transparency, merit and devolution of power.

Dependence on Aid
Although aid flows have been reduced in recent years, the overall indebtedness of the country is quite high. Figure 6 shows that in 1982 Bangladesh had outstanding debt of US$ 5232.5 million, which increased to US$ 12768.5 m in 1990. By 1998 it reached a staggering figure US$ 16375.6 million. External debt of Bangladesh is 35.1 per cent of GNP in 1997, while debt service ratio is quite high (10.6 per cent in 1997). Some argue that domestic resource mobilisation has increased in a great deal to finance annual development budget in the recent time, but this comes from government's borrowing from domestic banks.

Figure 6: Annual Domestic Borrowing from local banks by the Government of Bangladesh Source: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries 2000, Volume XXXI (China: Oxford University Press, 2000), p. 59. Available at: http://www.adb.org/Documents/Books/Key_Indicators/2000/default.asp?p=ecnm (29 January 2001).

Figure 7: Annual External Indebtedness of Bangladesh (in total outstanding and disbursed debt) Source: As of figure 6

Still annual development program (ADP) for Bangladesh cannot be framed without reference to the aid commitments made in the donors' consortium meeting in Paris every year.

Aid utilisation also deserves our attention. It is alleged that foreign aid in Bangladesh has not been properly used for development. It is estimated that 75 per cent of foreign aid received by the country during the last three decades was 'plundered' by people from outside the target group. Foreign and local consultants, agents, bureaucrats, politicians and high incoming urban people have divided up this 75 per cent aid among themselves19. In contrast, the apologists of globalisation argue that privatisation and deregulation would reduce aid dependence and ensure better utilisation by increasing trade and investment in the country. Aid dependence as an economic norm has been persisting with a thriving exclusive class of political, military and bureaucratic elite along with nouveau riche created by the long spell of autocratic rule. This phenomenon is in conflict with the norms of globalisation that trade and investment would reduce the dependence on aid.

Underdevelopment and Poverty
It is often argued that economic globalisation promotes economic growth and thus reduces poverty through the so-called trickle-down effect. Several economic indicators may be shown to understand the level of development in Bangladesh. These indicators show a gloomy picture of economic development in Bangladesh. It is true that Bangladesh has registered improvements in few economic indicators, such as low inflation rate, low fiscal deficit, more favourable external balance, and domestic resource mobilisation. In addition, bumper agricultural harvests always stabilise the economy. However, the overall development picture remains quite dismal. According to the Human Development Report 1999 and 2000, Bangladesh ranks 150th and 146th, respectively, in terms of both human development index (HDI) and GDP per capita (adjusted purchasing parity of domestic currency with dollar).

Figure 8 shows that Bangladesh has not experienced any significant growth of GDP in the last 10 years. Instead, we find that the country witnessed a period of high GDP during 1975-1990 periods. The difference between the two periods can be found in the nature of the trend because while the GDP growth rate before 1991 was more erratic, it has stabilised during the last few years. However, it has not affected the overall development process. While there has been some minor improvement in living standards in the 1990s, the outcome is somewhat worse than in the mid-1980s, when rates of economic growth were lower. There has been a stagnation in productive employment opportunities, despite a slightly higher rate of growth²⁰.

Figure 8: Annual Gross Domestic Product Growth in Bangladesh (Percentage) Source: World Development Indicators 2000 (CD Rom)

Figure 9 shows the extent of annual increase in GNP per capita in Bangladesh. In the last three decades Bangladesh has failed to double its per capita GNP while countries like Malaysia, Sri Lanka, Thailand and China increased the same in many times.

Another dimension of Bangladesh's underdevelopment is massive poverty. Although the people below the poverty line declined from 70.6 per cent in 1973-74 to 46.5 percent in 1995/96, the incidence of poverty is still very high21. According to the Human Development Report 1994, with 78 per cent of its people in poverty during 1980-1990 and 93.2 million people identified as poor, Bangladesh accounted for 7.2 per cent of the world's poor22. According to Asian Development Bank, in Bangladesh

Figure 9: Annual GNP Per Capita in Bangladesh Source: World Development Indicators 2000 (CD Rom)

poverty rate of 47.5 per cent is 49.7 per cent in urban and 47.1 per cent in rural areas23. As a result, economic development remains very low, despite wide ranging changes in national policy and actions towards economic and political liberalisation.

Thus, the results of globalisation in terms of economic development are depressing. It has little role to play in creating dynamic environment for national development in isolation. The benefits of globalisation are hardly felt in society. Changes brought by globalisation are not helping performance of political and economic structures in Bangladesh. It appears that neither the global factor, nor the traditional ways, help accelerate development in Bangladesh.

Conclusion
Clash or Convergence of Values?
There have been mixed outcomes of globalisation in Bangladesh. Neither the positive end results in terms of developmental effects nor institutional convergence take place in a substantive way. At the heart of continuing poor performance of the state and market organisations and failure of policy reforms are the disintegrative effects of globalisation. It manifests in the mismatch between the rules and norms of globalisation and the pre-existing governance mechanisms and institutional pattern at the domestic level. This divergence is most evident in political and societal governance mechanisms. This creates further pressure on domestic governance. As we observed that the process of globalisation has contributed to the precedence of some international set of values and practices over the preferences or policies of Bangladesh state. Extreme globalisers and the international donors community emphatically argue that domestic governance, for that matter, 'good' governance plays a crucial role for adapting to the process of globalisation. Our empirical evidence suggests that globalisation itself hinders this adjustment process as it transforms the domestic norms and rules in a standardised way and creates incompatibility in rules and norms of governance. To put it differently, the agenda of globalisation in Bangladesh has not addressed the domestic realities