Bangladesh extortion crisis hits businesses and fuels inflation

DHAKA — Extortion by political groups in Bangladesh has reached a new and chaotic peak a year after the fall of Sheikh Hasina, with economists warning that it is fueling inflation and business leaders saying it is creating a climate of fear.

While extortion was a fact of life under Hasina as well, the business community says there used to be a predictable system, overseen by affiliates of the then-ruling party, the Awami League. But following a mass uprising last July that culminated with Hasina resigning and fleeing the country on Aug. 5, that order fractured, giving way to a decentralized practice involving multiple political groups.

While allegations were initially focused on local affiliates of the Bangladesh Nationalist Party (BNP), more recently supporters of Jamaat-e-Islami and student groups, the latter having led the uprising against Hasina, have faced similar accusations, along with opportunists unaffiliated with any political party.

In a recent case, a gang led by a former senior figure in the Students Against Discrimination group allegedly coerced an ex-Awami League lawmaker into paying about 50 million taka ($400,000).

While precise data is hard to come by — not least because such crimes often go unreported due to fears of retribution or lack of faith in the police — at least 70 cases of extortion were reported every month in the first half of this year in the Dhaka metropolitan area, according to police data. That compares with 59 cases for all of 2022 and 22 in 2021.

“From media reports, it’s clear that extortion incidents are on the rise,” said Tawohidul Haque, associate professor at the Institute of Social Welfare and Research, University of Dhaka. “It stems from political groups exploiting powerful narratives for their gain. First, the Awami League monopolized the spirit of the 1971, Liberation War, to justify extortion, and now other parties are doing the same with the narrative of the 2024 uprising.”

Extortion targets range from large businesses made to pay tens of millions of taka for “security,” to individuals and small business owners shaken down according to their ability to pay. Those that refuse to pay can be physically harassed, have their business disrupted, have false allegations made against them or be publicly shamed over connections to the Awami League.

Nasirul Islam, a builder who lives in central Bangladesh, said that under Hasina’s government, he regularly had to set aside a portion of his income as extortion payments to politically connected figures.

“After she (Hasina) fled, the old extortionists also disappeared,” he said. “I thought, good riddance. But no … all sorts of new extortionists are emerging from other political parties, and it’s impossible to keep up with everyone’s demands.”

Economists warn that the spread of extortion harms the economy by disrupting supply chains, pushing up costs and keeping inflation high. “This is not import-led inflation,” said Fahmida Khatun, executive director at the Centre for Policy Dialogue. “When a producer incurs these additional costs, their overall cost of doing business rises.

“Even when supply is sufficient, prices may triple between farm and market due to multiple layers of extortion.”

According to Bangladesh Bank, year-on-year consumer price inflation stood at 8.48% in June. However, the 12-month average inflation rate was around 10.03% in June and 10.13% in May, indicating that prices have remained high despite a recent decline in the headline figure. That compares with a figure of just under 10% in the first half of 2024.

Protesters block a square in Dhaka on May 10 as they demand the ban of the Awami League, the former ruling party. Those that refuse to give in to extortion threats are sometimes publicly shamed over connections to the Awami League.   © Reuters

Anwar-Ul-Alam Chowdhury, president of the Bangladesh Chamber of Industries, said the country’s business community is “deeply concerned” about extortion, amid the country’s fragile law-and-order situation.

“The government has failed to ensure the safety of both citizens and industries. There is still no clear road map for when the situation might stabilize, or when the next elections will be held. A lot hinges on that,” Chowdhury told Nikkei Asia. “The extortionists are taking advantage of the power vacuum. They’re emerging not only from various political parties but also from outside the political sphere.”

Chowdhury further warned that unless the government strengthens its administrative capacity and demonstrates a “genuine commitment” to restoring order, the cycle will continue. “The uncertainty is already driving up unemployment and stalling investment. As long as this persists, extortion will remain a widespread problem — and we will all continue to bear its consequences,” he added.

The issue has begun to draw the attention of the interim government, with finance adviser Salehuddin Ahmed attributing the recent inflation to extortion throughout the supply chain. “The significant gap between production costs and consumer prices is a major concern,” he said last December. “This is due to extortion occurring at multiple levels.”

Still, Rushad Faridi, an assistant professor of economics at the University of Dhaka, cautions against drawing too strong a link between extortion and inflation. Inflation “is a structural issue and connecting [extortion] directly to inflation is difficult because it’s a completely informal sector and there is no clear idea of how much extortion happens and how much prices increase,” he said.

As cases of political extortion continue to make headlines, most senior political leaders have publicly distanced themselves from the practice. The BNP, for instance, has suspended more than 4,000 party members for various offences, including extortion. Leaders of other parties have also taken clear positions against the crime.

However, Bangladesh’s business leaders and economists see little respite from widespread extortion as long as the country continues to suffer from weak governance and fragile law and order.

“In such an environment, everyone tries to seize opportunities,” Khatun said.

The article appeared in asia.nikkei