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Research Executive Summaries Series

Management accounting and development: privatisation, accounting, and regimes of control in a less developed country (LDC) Vol. 1, No. 15

By Shahzad Uddin, School of Management, Queen’s University, Belfast Trevor Hopper, Manchester School of Accounting and Finance

Management accounting and development: privatisation, accounting, and regimes of control in a less developed country (LDC)

Audience The project findings will be of interest to policy makers, economists, advisors and decision-makers at funding organisations such as the OECD, International Monetary Fund, and World Bank, and also to advisors of governments of LDCs. Overview of Project This paper reports an intensive case study of PC - a soap manufacturing company located and established in what was then East Pakistan. PC was nationalised following the granting of Bangladesh's independence in 1971 and privatised in 1993. Theoretically it is informed by Burawoy's contributions to labour process theory, especially how the consent of labour is manufactured through internal states, internal labour markets and games, and how regimes of control in less developed ex-colonial countries are transformed by state and production politics. How the role of accounting systems may shape and be shaped by these processes is also traced. In addition to the reported case-study findings, the paper draws from Burawoy's (1979, 1985) theorisation of management controls of labour processes which develops a political economy of accounting in LDCs. It addresses: 1. How, if at all, accounting helped achieve control at the point of production, whether based on consent or coercion? 2. Whether / how state politics involving political parties, classes, trade unions, and external financial institutions interacted with labour resistance at the point of production to transform controls, including accounting? 3. Whether the historical transformation of accounting in enterprises in LDCs, especially ex-British colonies, can be modelled? Related research Abdeen, 1980 Anderson & Lanen, 1999 Frucot & Shearon, 1991 Rahman & Scapens, 1986 Ansari & Bell, 1991


Management accounting and development: privatisation, accounting, and regimes of control in a less developed country (LDC)

Findings Taking three distinct episodes in the transition of PC’s history, the following features are noted:

3. New despotic regimes and privatisation (1993 – 1999) • PC was fully privatised in 1993 with one family controlling and owning 75% of its shares.

1. Colonial despotism and private ownership (1959-1971) • Established in 1959, PC operated as a private company in (West) Pakistan. It relied on foreign capital, which had control of the company, its employees and their possessions. • Financial accounting reports, although important for controlling overall performance, were unnecessary for controlling employees. • Colonial powers granted limited labour rights and collective bargaining power. Control was coercive, arbitrary, physical, sometimes violent and racist. • The colonial government exerted little control over PC and a company state emerged. • Accounting was unnecessary for controlling employees but financial reports were important for controlling overall performance, securing remittances to company headquarters overseas, and satisfying external reporting requirements of the parent company. • Over time trade unionism and labour resistance led to riots and strikes, and colonial powers granted limited collective bargaining and labour rights. • Following a brief war, Bangladesh was granted independence from (West) Pakistan in 1971. • By 1971 PC had increased its product range, production, and profits. • Public and political turmoil accompanied Bangladesh’s struggles for independence from West Pakistan. Many West Pakistanis, including PC’s owners abandoned their enterprises and left a managerial vacuum. • Significant industrial restructuring was essential.

Conclusions On the evidence of PC, the changes in political and economic regimes resulted ultimately in the abandonment of production politics and a rise in crony capitalism.This was due to pressures from: • a rising business class • agencies of external capital.

2. Hegemonic regimes and public ownership (1971-1993) • Legal-rational boundaries and bureaucratic controls, regulated by the state and based on western economies were introduced. • 1975 was, politically and economically, a particularly turbulent year for Bangladesh – 25% of GDP went to inefficient public enterprises, and fiscal crises ensued. • After 1975, Bangladeshi governments increasingly turned to structural adjustment policies (Government of Bangladesh, 1976, 1985, 1990), influenced by World Bank and IMFpressures to adopt programs of market liberalisation and privatisation. • PC came on to the privatisation lists of government in the late 1980s, and was partially privatised in 1988. • PC flourished and was profitable.

Diagramatic representations of the researchers’ developed models are included.


Management accounting and development: privatisation, accounting, and regimes of control in a less developed country (LDC)

Published papers Uddin, S and Hopper,T.A Bangladesh soap opera: privatisation, accounting, and regimes of control in a less developed country, Accounting, Organization and Society, October 2001 - November 2001. Uddin, S and Hopper,T. Hopper ,Accounting for Privatisation in Bangladesh:Testing World Bank Claims, Critical Perspectives on Accounting, Oct 2003,V.14, N.7, pp. 739-774. Hopper,T,Wickramasinghe,TD and Rathnasiri, C. Japanese Cost Management Meets Sri Lankan Politics: State Regulation and Management Controls in a Privatised Utility, The Accounting,Auditing, and Accountability Journal,V.17, N.1, pp. 85-120, 2004. Hopper,T. and Wickramasinghe,TD.A Cultural Political Economy of Management Accounting Controls:A Case Study of a Textile Mill in a Traditional Sinhalese Village, Critical Perspectives on Accounting,V.16, N.4, pp. 473-503. Hopper,T.,Wickramasinghe,TD,Tsamenyi, M. and Uddin, S.Accounting in Developed Countries: the State They’re in, Financial Management, June 2003, pp. 14-19.


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December 2005

The Chartered Institute of Management Accountants 26 Chapter Street London SW1P 4NP T +44 (0)20 7663 5441 F +44 (0)20 7663 5442 E

REF: TE020V1105

Management accounting and development privatisation in an LDC