Eminent economist Dr. Birupaksha Paul remarked that despite the considerable hype surrounding digitization, progress has not matched expectations. He pointed out that Bangladesh trails behind India in this domain and even lags behind Nepal in terms of internet access. Dr. Paul emphasized that the actual progress doesn't align with the loud drumbeats of publicity. 

Dr. Birupaksha Paul, an economics professor at the State University of New York and former chief economist of Bangladesh Bank, asserts that Bangladesh's macroeconomic development hinges on knowledge integration preceding economic integration. He further emphasizes that the appointment of a knowledgeable or innovative individual as the head of a financial institution is crucial, as failure to do so may lead to bureaucratic processes dominating decision-making. 

In a recent exclusive interview with Barta24.com, Dr. Paul addressed various contemporary issues within Bangladesh's financial sector. The second part of the interview focused on topics such as leadership within top financial institutions, the inclusion of marginalized individuals in financial activities, the risks associated with digitization in the financial sector, and strategies for transitioning. The interview was conducted by Ashraful Islam, Planning Editor of Barta24.com. 

Barta24.com: When discussing leadership within the country's top financial institutions amidst the era of technological dominance, what aspect should be given serious consideration? 

Birupaksha Paul: During my tenure at Bangladesh Bank, Governor Dr. Atiur Rahman championed a modern, digitally-driven approach. He believed that modern technology has the power to empower the poor, citing examples such as farmers using cellphones to sell produce and access market information. This empowerment extends from digitization to both financial and physical inclusion. Dr. Atiur Rahman's visionary leadership led Bangladesh Bank to receive prestigious awards such as the Green Bank and Digitalized Bank accolades. While awards are not the sole measure of success, they signify the strides made under his tenure. 

Unlike some instances where awards didn't correlate with economic performance, Bangladesh Bank's recognitions reflected genuine achievements. Anecdotes about Dr. Rahman's determination, such as his reaction to seeing towering files at a bank, highlight his commitment to modernizing processes. It underscores his proactive approach to addressing challenges and driving innovation within the financial sector. Indeed, passion is crucial. A bureaucrat might simply follow protocol, focusing on the contents of circulars rather than envisioning transformative change. Conversely, when an innovative leader takes the helm, significant shifts occur. This phenomenon is evident globally. Failure to appoint a knowledgeable or innovative individual to lead institutions like Bangladesh Bank may result in bureaucratic stagnation rather than progress.

Barta24.com: Tell us about your experience as Chief Economist of Bangladesh Bank.

Birupaksha Paul: I teach in the United States, where modern advancements, including the integration of artificial intelligence, are embraced. Bringing these ideas and practices to Bangladesh was successful, as they resonated with the leadership at the time, particularly with Governor Dr. Atiur Rahman. Despite not being from a bureaucratic background myself, our shared forward-thinking mindset facilitated a strong partnership. Dr. Rahman's non-bureaucratic background further enhanced our compatibility in driving innovative changes within Bangladesh Bank. It seems that Dr. Rahman may have encountered unexpected challenges, possibly related to international digitization. Despite his best efforts, such as modernizing Bangladesh Bank, he faced setbacks, including potential cyber threats. However, it's essential to recognize that not all his actions should be deemed failures because of these challenges. While the current situation might be calmer, it underscores the complexities and risks inherent in navigating the digital landscape.

Barta24.com: The recent stagnation in Bangladesh's progress on the Financial Inclusion Index contrasts with the rapid advancements observed previously. 

Birupaksha Paul: There was optimism about the country's economic position, prompting discussions, including with Bangladesh Bank, about the potential for issuing credit cards to stimulate consumption. However, despite initial considerations, this proposal did not materialize. While other nations have implemented similar measures for higher-income individuals, the idea faced obstacles in Bangladesh and was ultimately not implemented. Sajeeb Wazed Joy, as the son of the current Prime Minister and her ICT advisor, possesses a strong drive and understanding of the new generation. He advocates for digitization as a means to achieve greater societal inclusion. However, despite the hype surrounding digitization efforts, Bangladesh still lags behind India in this regard and even trails countries like Nepal in terms of internet access. Despite the increasing noise, tangible progress remains elusive, a sentiment echoed by practical experience.

Barta24.com: The digital system has played a significant role in integrating marginalized individuals into Bangladesh's economy through financial activities. Can you share more about your experience with this? 

Birupaksha Paul: The digital system is indeed making a significant contribution to the financial empowerment of marginalized individuals by providing them with access to financial services. With everything accessible on a single phone, individuals can easily access information such as current reserves and currency rates. However, despite these advancements, inclusive banking remains essential for fostering an inclusive economy. Unlike in some countries where even elderly individuals can buy stocks from home, Bangladesh's capital market still lacks such accessibility and development. 

Indeed, finance comprises two key sectors: banking and capital markets. Unlike in America, where significant development has occurred in both sectors, in European and subcontinental countries, if the banking system fails to be inclusive, it may become exclusive, benefiting only a select few. This exclusivity undermines the creation of a truly inclusive economy. Evidence suggests that despite advancements, a significant portion of deposits is dominated by the wealthy, indicating a lack of inclusivity. It's disheartening that 47% of adults remain unbanked. Regarding Dr. Atiur Rahman's efforts, criticism is not uncommon, even in developed nations. For instance, President Obama faced ridicule for his push for universal health insurance, often mocked as "Obama care." 

However, as President Clinton noted, there's nothing ironic about providing compassion through such initiatives. Similarly, criticisms were voiced regarding the concept of the 10 taka account, with some arguing that it failed to truly integrate farmers and marginalized individuals into the banking system. Instead, it left half of the population excluded from banking services, highlighting the lack of inclusivity in both banking and credit distribution. 

The focus should be on ensuring equitable access to finance and banking services, as some individuals continue to amass significant wealth while many others remain underserved. The discriminatory distribution of credit prevents individuals, such as those starting small businesses like bakeries, from accessing the necessary loan support. This lack of inclusive credit distribution hinders our society's progression towards truly inclusive economic growth. The slowdown in growth, from 8 percent to 5 percent, reflects this challenge. Achieving robust economic growth requires an inclusive approach that supports and empowers all segments of society. 

Barta24.com: How can the crisis be overcome?

Dr. Birupaksha Paul: Implementing reforms in the economy is crucial to inject fresh momentum. While the banking sector has traditionally held significant importance, recent remarks by economist Wahiduddin Mahmud describe it as "bleeding in the heart." However, it's essential to recognize that the heart of the issue lies within two sectors: banking and the capital market. The deficiencies in the capital market, coupled with a lack of accountability for wrongdoing, have eroded public confidence in it. The perpetrators of financial misconduct typically avoid the capital market due to its transparency requirements, such as holding annual general meetings (AGMs) and being accountable to shareholders. These structures foster accountability and development within the corporate sector.

However, within the banking sector, accountability is often lacking. Depositors and borrowers remain disconnected, with no direct accountability between them. Without reforms in these areas, such as enhancing accountability and transparency within banks, our growth prospects will be severely hindered. 

Barta24.com: What risks do you foresee in the digitalization of the financial sector? 

Dr. Birupaksha Paul: Firstly, it's crucial to recognize that technology knows no boundaries; it operates on a global scale. As such, Bangladesh must be prepared to manage its share of global risks. Just as universities understand the risks inherent in their work and invest in protections, countries like the United States also allocate significant resources to combat hackers and ensure cybersecurity. Similarly, investing in anti-piracy measures is essential for safeguarding ships. Unfortunately, this level of preparedness is often overlooked in Bangladesh, leading to vulnerabilities. 

The recent incident involving the theft from Bangladesh Bank's reserves tarnished the reputation of esteemed individuals like Atiur Rahman. Some bureaucrats may argue that academics are ill-suited for such roles, but examples from around the world, particularly in the United States, demonstrate the positive contributions academics can make. Individuals like Bendamon, recruited from institutions like Princeton and Harvard, have held key positions in Bangladesh's central bank and government, highlighting the importance of appointing knowledgeable individuals to lead. 

Companies often appoint CEOs and MDs based on their expertise and global experience, as demonstrated by many Indians leading American companies. However, in Bangladesh, we face challenges in finding qualified individuals due to a focus on loyalty over merit. Without proper protection and forward-thinking leadership, we fail to address critical issues such as environmental sustainability and urban planning. While Bangladesh struggles with a maze of wires and cluttered cities, Singapore exemplifies orderliness and strict regulations. 

For instance, chewing gum is banned in Singapore, and the country has swift justice for drug offenses. Failing to prioritize such aspects can impede long-term growth and prosperity. During our period of high growth, countries like India experienced impressive economic expansion, with experts like Kaushik Bose describing India as a "sweet spot." While we may not need to emulate every aspect of India's economic model, there's value in adopting successful strategies. Despite India's size and complexity, smaller nations like Bangladesh have the advantage of agility and can implement reforms quickly. Just as Singapore surpassed Malaysia by leveraging its strengths, Bangladesh has untapped opportunities to enhance efficiency and inclusivity through initiatives like digitizing land records and expanding financial inclusion. 

Such measures can mitigate injustices and improve access to information. However, challenges persist, as illustrated by the story of a villager who lost access to government funds after losing their phone. Without adequate safeguards in place, vulnerable individuals face hardships. Just as the proliferation of liquor stores in Europe led to an increase in funeral homes, our society must prioritize long-term planning and compassion to address systemic issues and ensure a brighter future for all. 

Barta24.com: Many attribute the hacking incident at Bangladesh Bank to the vulnerabilities associated with digitization. Should we reconsider our approach to digitization in light of this assessment? 

Dr. Birupaksha Paul: It's concerning that while we invest in various packages from Neelkhet, we neglect to prioritize purchasing antivirus software. The amount stolen by hackers, around 660-664 crores, is significant, but it pales in comparison to the larger sums that flow through banks daily. During Dr. Atiur Rahman's tenure, defaults amounted to 60 thousand crore taka, but under current circumstances, it has escalated to one and a half lakh crore taka. It appears that some bureaucrats are exaggerating the impact of the hacking incident. Due to the hacking incident being discussed in a New York court and delays in the CID of Bangladesh submitting its report, the truth behind the matter remains obscured. This delay has created a situation where individuals either face unwarranted blame and consequences or evade accountability altogether. It's crucial to identify those responsible and address any underlying issues contributing to these delays. If Bangabandhu's daughter hadn't come to power and prolonged the trial, it might not have happened at all. While there's an ongoing international process regarding the money stolen by hackers, it's imperative to ensure that capable individuals lead the efforts. 

Loyalty alone should not be the criteria for appointing individuals, as it can sometimes overshadow other important qualities such as morals and academic skills. There's a cautionary tale about the dangers of blind loyalty, illustrated by the story of a pet monkey overzealously trying to eliminate mosquitoes and accidentally harming the king. 
Leadership positions in institutions like Bangladesh Bank should be filled based on merit, not just ranking. It's concerning that Bangladesh has been singled out for corruption rankings among 190 countries worldwide. While some may attribute this to conspiracy theories, it's crucial to focus on accountability rather than deflecting responsibility. Introducing a culture of ethical conduct and knowledge-based decision-making is essential in such institutions. Prioritizing knowledge inclusion is crucial before achieving financial inclusion, ensuring that our talented individuals remain in the country and are incentivized to contribute to its growth. Additionally, measures should be taken to encourage talented individuals abroad to return and contribute to the nation's development. 

Unfortunately, there's a tendency among some to adopt a "third class railway passenger" mentality, where individuals resist others from advancing, akin to blocking the train's doorway and preventing others from boarding. This mindset hampers progress and must be addressed to foster a more inclusive and collaborative society. 

Barta24.com: Are we considering moving away from digitization due to concerns about hacking?

Dr. Birupaksha Paull: In Bangladesh, when weavers lose their jobs due to mechanization, they often accept it without protest, even though the machines continue to operate. In contrast, in America, I've observed efficient systems where artificial intelligence scans customers at multiple counters simultaneously. However, some may resist technological advancements, akin to the mentality of "Nandalal" or "Devdas," clinging to the past rather than embracing change. Regarding the Padma Bridge project, while there's genuine concern for those affected by its construction, sailors must also adapt to evolving circumstances and consider transitioning to other professions. This reflects the inevitability of change in the world.