ADB Vice President Bindu Lohani also emphasises favourable investment climate in Bangladesh for growth acceleration
By Rezvi Newaz
He is optimistic that Bangladesh will soon attain the status of a middle income country. But the problem even after reaching that level may be what is widely called middle income trap that has affected quite a number Asian countries.
Bindu Lohani, Vice President of the Asian Development Bank, in an interview recently, said knowledge-based economy could help Bangladesh to overcome the challenges and the country needs to make policy actions and investments for the purpose. He touched on a wide range of issues including the Padma Bridge project. Asked if the ADB would reengage itself with the project, he made it clear that their assistance was not sought yet.
How is Bangladesh doing on the economic front and what is your impression about the country’s development pursuit after talks with officials concerned?
Well, if I have to put all my feelings in one sentence, it’s very positive: An economic growth of 6-plus percent over a long period of time. The country’s macroeconomic fundamentals are also great. I just had talks with the minister (Finance Minister AMA Muhith), a very knowledgeable person, who was our executive director back in the 1970s. We discussed the relevance of knowledge economy for Bangladesh. I personally believe Bangladesh will become the middle income country within a few years. But what is more important is that after becoming a middle income country you may fall into the middle income trap like many Asian countries. We discussed what needs to be done to avoid such trap.
Would you please tell me the purpose of your visit and how ADB’s engagement with Bangladesh is increasing?
The purpose of this visit is to launch a report on economic impacts of climate change, particularly on South Asia. Bangladesh is a very good place to do that (make exercise). Some of the findings are not only interesting but also frightening. The report says South Asia may lose up to 9.4% of GDP, and Bangladesh may lose 4.8%. Even if half of the projection is correct, it is still talking about approximately 5% loss and if you grow at 6% and lose 5%, you are not growing very well. So, climate change is a global agenda and every country should participate in and most importantly look into how the country will be able to take both mitigation and adaptation actions. Because the timetable for doing that is 2050 and 2100, but we need to start now.
May I draw your attention to Bangladesh’s performance in the knowledge-based economy, especially ICT and innovation – what is your assessment?
On the knowledge-based economy, what I am saying is based on our understanding of the South Asia and Bangladesh. It needs to do more particularly in ICT, innovation and higher education. I am not saying that it is not happening. The government has a very good plan to do well in ICT, at the higher level education and innovation. But we have to do that and do it quickly so that you can be competitive with other countries in the region and globally. Having said, let me mention that the government officials are very aware of the fact. It’s a matter of how soon and how much resource they can allocate. I am very happy that the government knows this well.
The government, especially Prime Minister Sheikh Hasina, has undertaken a huge programme for IT revolution. But in your report we find Bangladesh is in the bottom. What’s the reason?
Well when you measure those, you are comparing (Bangladesh) with other countries. So when you compare it with lower five, your number may be three, but if you compare with a whole list of Asian countries I think it is still standing low. This is based on data. Sometimes, I do agree, database may not be perfect. But I would not worry whether I am sixteenth or seventeenth; what worries me is how I get into the first quarter, the second quarter or the third quarter. You know you can be that precise second and third, forth and fifth, but put them by block, and it’s very clear that these areas need to be addressed if Bangladesh wants to become a middle income country in future.
How would you evaluate the performance of Bangladesh after independence – if I may say, from ‘71 to ‘90 and then from ‘90 to 2014?
I will not exactly put the timetable, but what I can say is that the country went through a difficult time in the beginning like a new country There will always be in the economy a little bit of ups and downs, but in the last 15-20 years a constant positive growth, 6% plus, I think is remarkable achievement. There are not many countries in Asia which are having 6% growth. China has, maybe, a 7.4%, the Philippines may have 7%. But you are doing extremely well, compared to many other Asian countries.
I wanted to know your reaction to the issue of growth trap for 20 years or so, at 4%, below 4%. Now we are moving at a relatively faster pace. What is your observation?
I said when I use the language ups and downs. It means you know you were (growing at) 4% and have now moved to 6% and still you want to do more like 7% and there is a potential to get there. But one needs to see how to structure the policies, how to do the reforms, and how to do the investment rightly to get there.
Bangladesh is doing well in education, if you talk about primary education. But if we look at tertiary or secondary level, performance is not good. Is it the reason why Bangladesh is at the bottom of the list?
Because when we talk about knowledge-based economy, the indicator we use is higher education. I am very aware that the ADB has been involved in primary, secondary education where Bangladesh has done many good things. It can be a model even. But this knowledge economy is talking about tertiary education, and in my discussion with the education minister, (I found him to be) he is very positive and very dynamic, very committed and he knows that this needs to be done in future. So, we had a meeting of mind. Saying that, yes, I do agree and I want to do more and we will certainly do. I mean if the ADB can help (in that area), we’ll do that.
Now. May I ask what your observation is about the establishment of BRICS Bank? Is the ADB welcoming it or how you are going to cooperate, either?
This BRICS Bank, of course, covers many regions, but the ADB is Asian. So among the BRICS initiators we have two members, China and India. If you look at the infrastructure needs of Asia, it’s (the amount required) pretty good. The number may be $8 trillion for the next 10 years. From that perspective having more money, more institutions bringing more money is good. But what we have also learnt in the ADB for the last 40 years is that development is a complex field. You have to think about environment, safeguard, governance issue, settlement and resettlement. And therefore a new bank will have to be concerned about the same international level, so that it can be internationally cooperative with other international institutions. The third thing I will say is certainly when there are programmes, projects from this new bank; those need to be compatible with our policies and lines of action. We certainly will cooperate. But it’s too early to say all the things as that new development bank has just been established. When it would start (operation), then it’ll be clearer to talk upon.
What’s about the Chinese initiative to establish Asian Infrastructure Investment Bank or AIIB?
Answer: I would say the same thing for the Chinese initiative for an Asian Infrastructure investment Bank. As the infrastructure need is so huge, resources are needed, we understand that, it is understandable. But again I’d say as I have said for BRICS Bank, I hope this new bank will also take care of the international standards of safeguards, settlement, resettlement of child labour issue. So if its policy is compatible with international institutions like ours, when that happens, we’ll be able to do business together.
You are perhaps aware that FDI is a big concern for Bangladesh. What do you think, why it is not coming to an expected level? At the same time local investors are also shy. So, what is the way forward?
This issue came up for discussion in meeting with the finance minister. The private sector (participation) has not increased as much as the country would like to. We have to make the environment favourable. We have to make sure that FDI or outside investment when they do it here they feel they can manage the risk. So a bit of work needs to be done from both sides. On the side of ADB also since we see the potential of doing it, we are looking into as our vice president Laxmi Venkatachalam said we are looking at some opportunities. I fully agree that Bangladesh has potential to attract more (FDI), but when a private investor thinks to invest, he doesn’t look into only one country but looks at all the other countries. So, how Bangladesh can be competitive and favourable — that kind of homework you need to do.
You know the government has decided to build the Padma Bridge, as huge project, with own fund. I guess you have gone through the recent World Bank report which reflected certain realisation that the global agency should have been engaged with Padma Bridge project. How do you think about this position?
I’ll be very straight forward –Padma Bridge is a very important project for Bangladesh. It should be built. The decision that the government has taken to build it with own finance is laudable. If the government can do this complex project on its own certainly my opinion is it’s an important project and it must be done.
Is there any scope for ADB’s reengagement with the Padma bridge project in future?
This issue has not come up in the discussion with the finance minister. The government has not asked for any assistance for Padma Bridge project yet.