Political Economy of the Rohingya Crisis: Understanding the Economic Challenge for Bangladesh

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In a world where economic development often overshadows humanitarian concerns, Bangladesh has demonstrated exceptional humanity by welcoming millions of Rohingya refugees from Myanmar. This act of compassion averted what could have become a textbook example of genocide and mass annihilation. Since 2017, over 750,000 refugees have entered Bangladesh, with at least 1.1 million Rohingyas now seeking refuge in 34 camps across the country. While the government of Bangladesh and various international organizations initially rallied to support the Rohingyas, the critical question arises: has Bangladesh consistently received the necessary foreign aid in the years following this massive influx?

While international aid has offered some relief, the strain on local resources and services has impacted the well-being of both local residents and refugees. In light of the ongoing challenges posed by the COVID-19 pandemic and the Russia-Ukraine war, there has been a global increase in the prices of essential goods, including food. Bangladesh has not been immune to these price hikes. Consequently, extending the necessary support to the sizable Rohingya population places a significant financial burden on Bangladesh, as only 70 to 75 percent of the required funding for this substantial population comes from external donors. This means that Bangladesh must allocate a substantial amount of its own resources to cater to the needs of the Rohingya population each year.

Political Economy of the Rohingya Crisis: Understanding the Dynamics

The Rohingya crisis, characterized by the forced migration of Rohingya Muslims from Myanmar to Bangladesh, has not only triggered a humanitarian response but also carries profound economic and political implications. The Rohingya crisis is not a localized issue but rather entangled in a complex web of geopolitics. Myanmar’s strategic importance to neighboring nations like China and India, its natural resources, and energy infrastructure projects, including pipelines, have influenced the international response to the crisis. Understanding these geopolitical intricacies is crucial to comprehending the crisis’s protracted nature.

On the other hand, the financial demands of providing comprehensive assistance to Rohingya refugees are staggering, with billions of dollars required annually. Despite the diminishing flow of foreign aid, Bangladesh continues to bear an immense economic burden, exceeding $1.21 billion (equivalent to more than Tk 12,782 crore in Bangladeshi currency) each year solely for the Rohingyas. This financial challenge underscores the uncomfortable interplay between economic politics and humanitarian crises in refugee management. It serves as a stark reminder that the world’s attention has often shifted from the Rohingya crisis, leaving both the Rohingya population and Bangladesh grappling with a daunting economic structure for the foreseeable future.

The political economy of the Rohingya crisis highlights the intersection of regional and international interests. Delving into the role of countries, such as China, India, and Russia, in responding to the crisis unveils the broader implications and responsibilities related to the humanitarian situation. Analyzing the response of these nations can offer insights into how global politics shapes the fate of displaced communities. Understanding the political economy of the Rohingya crisis goes beyond its humanitarian dimensions. It reveals the intricacies of geopolitical interests, economic consequences, and the complex dynamics within the region.

Economic Challenges of Hosting Rohingya Refugees in Bangladesh: A Comprehensive Analysis

Declining Foreign Aid

Since 2017, Bangladesh has taken on the role of the primary host for Rohingya refugees, accommodating over a million displaced individuals. Initially, international assistance and foreign aid played a pivotal role in addressing the humanitarian crisis. However, starting in 2020, there has been a consistent decline in the level of foreign aid provided. This reduction in support places a substantial financial burden on Bangladesh, as the country now has to shoulder a significant portion of the necessary aid. This analysis delves into the consequences of this decreasing foreign aid on the Bangladeshi economy and examines the reasons behind the international community’s apparent withdrawal from its responsibilities.

In 2018, foreign aid amounted to $655 million, falling short of the required $951 million by 31 percent. In 2019, the aid totaled $699 million, compared to the necessary $920 million, resulting in a 24 percent deficit. The foreign aid deficit reached 40.5 percent in 2020, with the requirement being $1,058 million and the actual aid being only $629 million. While the deficit reduced somewhat in 2021, it still stood at 28.1 percent. Foreign aid reached $678.5 million against a requirement of $943 million that year. However, in 2022, the disparity between the achievement and requirement grew significantly. By that year, Bangladesh had to cover more than half of the necessary aid, with foreign funding amounting to just $433 million against the $881 million requirement.

International Humanitarian Aid for the Rohingya in Bangladesh
Year Requirement

(in $ Million)

Funded

(in $ Million)

Funding Shortfall

%

2017 (Sep.- Feb. 18) 434.1 317 27%
2018 (Mar 18- Dec.) 951 655 31%
2019 920 699 24%
2020 1058 629 40.5%
2021 943 678.5 28.1%
2022 881.0 433.1 50.8%

This data demonstrates a consistent decline in foreign aid since 2020, indicating that international donors are reducing their support, thereby imposing financial pressure on Bangladesh. Simultaneously, the decreasing funding levels suggest a waning interest from the international community in addressing the Rohingya crisis.

Budget Reallocation

Accommodating a significant refugee population inevitably requires a reshuffling of the national budget. To address the needs of Rohingya refugees, the government of Bangladesh has redirected funds from its development budget.  Since 2017, the government has allocated over Tk 9,376.54 crore to support the needs of the refugees, a considerable portion of which, more than Tk 9,000 crore, has been dedicated to assisting Rohingya individuals who sought refuge in Bangladesh after enduring severe persecution by Myanmar’s military forces.

This reallocation of resources signifies the government’s commitment to providing aid and support to the Rohingya refugees. However, it’s crucial to recognize that diverting funds from the development budget can have wider implications on Bangladesh’s economic progress. The development budget typically encompasses essential initiatives that contribute to the country’s growth and well-being, such as infrastructure projects, education, healthcare, and other critical sectors. As a result, this shift in budgetary priorities may impact the pace of economic development in Bangladesh, potentially slowing down progress in crucial areas. This trade-off between humanitarian obligations and developmental goals underscores the complex economic challenges faced by the country.

Impact on Local Labor Market

The influx of Rohingya refugees has left a distinct mark on the local labor market, exerting a direct influence on its dynamics. The refugees are willing to offer their labor at lower wages compared to local workers, which has led to growing discontent among the native wage earners. The impact on the local labor market is twofold. On the one hand, the availability of a large pool of Rohingya labor willing to work for lower wages can result in wage depression among the local workforce. This can lead to job dissatisfaction and hinder the ability of local citizens to earn a decent livelihood. On the other hand, the refugees, while willing to work, may find themselves in precarious working conditions with low wages, lacking the protections and benefits typically enjoyed by regular workers.

Moreover, the financial implications of hosting the Rohingya population are substantial. With no substantial source of income, the government is compelled to allocate significant funds, approximately $490 million or Tk 3,992 crore annually, to support the refugees. This financial commitment, while vital for meeting the basic needs of the Rohingya, adds to the economic challenges faced by the country.

Environmental Costs

The presence of Rohingya refugee camps in ecologically fragile regions has resulted in pronounced environmental consequences. These refugees require shelter and firewood, leading to substantial environmental degradation. The demand for shelter and firewood has led to deforestation and habitat disruption, impacting the local ecosystem. This not only threatens the biodiversity of the region but also jeopardizes the sustainability of forest products, which are often critical for the livelihoods of local populations.

The economic toll of this environmental damage is significant, amounting to Tk 2,204.67 crore. This underscores the interconnectedness of the environment and the economy, where environmental degradation can translate into tangible financial losses. Moreover, the adverse environmental effects can persist long after the refugee crisis is resolved, underscoring the long-term consequences of such situations.

Socio-Economic Strain

The influx of Rohingya refugees has placed significant socio-economic strain on the Cox’s Bazar district in Bangladesh. According to data from the Cox’s Bazar district administration, the district’s population stands at 2,078,427. Remarkably, this means that there is approximately one Rohingya resident for every four Bangladeshi nationals in the area. The presence of the Rohingya population has led to various socio-economic repercussions, particularly in terms of resource utilization and economic activities.

To make ends meet, many refugees have resorted to activities like selling forest wood and engaging in fishing, even entering the transport sector. These actions have had direct implications on the local economic landscape, as the refugee population competes with local labor and resources, potentially leading to wage disparities and resource depletion.

The strain on Bangladesh’s economy is already pronounced, with substantial financial investments required for managing the refugee population. For instance, the construction of barbed wire fences around Rohingya camps has cost Tk 100 crore, and an additional Tk 381 million has been allocated for the Bhasanchar shelter project. Moreover, there is a need for an estimated Tk 8,000-10,000 crore to provide essential food and clothing for the Rohingya refugees for at least one year.

The impact on the country’s per capita income is a noteworthy facet of this socio-economic strain. The absence of income sources for the Rohingya population has contributed to this economic challenge, affecting the overall income metrics for both the refugees and the local population. This situation underscores the need for substantial financial resources to support the refugee population while maintaining the broader economic stability of Bangladesh.

To summarize, the economic challenges stemming from hosting Rohingya refugees in Bangladesh are undeniably intricate, requiring a nuanced understanding of the multifaceted issues at hand. The confluence of factors, including dwindling foreign aid, budget reallocation, labor market shifts, and environmental costs, underscores the profound implications for the nation’s economic landscape. Bangladesh’s earnest efforts to address the crisis and repatriate the Rohingya population to their home country are commendable, yet the insufficient international support and decreasing aid pose formidable obstacles.

To forge a sustainable solution, a collective and concerted global effort is imperative. The Rohingya crisis is not solely a burden for Bangladesh but a shared responsibility demanding coordinated action from the international community. Addressing the root causes, advocating for increased aid, and facilitating the safe repatriation of the displaced population are crucial steps toward alleviating the economic strain on Bangladesh.

As we contemplate the political economy of the Rohingya crisis, it becomes evident that a comprehensive resolution is not only a moral imperative but also an economic necessity. The international community must recognize the interconnectedness of geopolitical and economic factors in tackling the crisis. By fostering collaboration and commitment, we can aspire to a future where the Rohingya people regain a semblance of normalcy and Bangladesh can alleviate the economic challenges that have arisen from this protracted humanitarian plight.

– S. M. Saifee Islam is a Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA).

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