The True Optimist

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“The rising share of services is a good sign – but only if this is associated with the rise in high value services – this is the direction that we should head for.”

Born in 1951 in Bangladesh Dr. Khan Ahmed Sayeed Murshid (K.A.S. Murshid) studied in Dhaka University and obtained his PhD in Economics from Cambridge in 1985. At present he is the Director General of Bangladesh Institute of Development Studies (BIDS), which was ranked amongst the top 100 think tanks in the world by a prestigious ranking body based in the University of Pennsylvania. By taking charge of BIDS, he follows in the footsteps of noted luminaries in the Economics profession such as Prof. Nurul Islam, Prof. Rehman Sobhan and Dr. Mahabub Hossain. Dr. Murshid is a career economist, researcher, scholar and international consultant. He is well known for his expertise in the area of food security, food markets and market institutions. He has consulted for top development agencies, mostly in South and East Asia and is a well-known expert on Cambodia. IBT caught up with Dr. Murshid recently at his office to discuss Bangladesh’s fascinating development journey.

The Bangladesh Development experience has been paradoxical: the first two decades were under a command regime and next two decades were more market friendly. In last two decades and a half, we have witnessed rapid growth that was mainly private sector led. What is your take on development challenges and achievements of Bangladesh over the years?
This is a very good story but not necessarily one that we understand very well. We certainly know the broad outlines of what happened and where we are. We are not very certain as to how we got here or what the key elements were that led us from a “basket case” to a Low Middle Income Country”.This story could engage many scholars for years! My take? Well, to start with one can clearly identify the key successes over the decades, and with hindsight these now seem absolutely awesome – particularly in the face of mountains of adversity attributable to both God and Mammon. Our success in population planning, child immunization, education, particularly of girls is nothing but momentous. Our success with the Green Revolution that has finally ushered in an era of food security could hardly have been predicted. We have now arrived at a stage when we are not short of savings, we are not short of foreign exchange, and of course, we are not short of food. This has been possible because of the hardwork and genius of our farmers, our women garment workers, our poor workers abroad – these are the real heroes of the Bangladesh story. However, this story has just begun – I have no doubt that despite huge odds, Bangladeshis will continue to excel in every field – all we need is a bit of peace and some sympathy. You have seen what our young cricketers have done – and there is no reason why such feats cannot be repeated in every field – we have the talent and we have the will.

After the 1990s there appears to have been a structural change in our economy: with agriculture giving way to industry and services. How do you view this change?
This is usually what happens when an economy takes off. If it did not happen, we would be disappointed – in fact, this trend needs to be strengthened even further so that we can rapidly move to a higher productivity plane. However, this does not mean that agriculture is not less important – it remains of critical importance to our economy because of its strong linkages with employment and with the non-farm sector. Around 50% of the rural population still depends on agriculture for work. Another major structural shift in the economy has been in services – the fear here is that much of these services remain confined to activities that are of low value and informal in nature. The rising share of services is a good sign – but only if this is associated with the rise in high value services – this is the direction that we should head for.

Is our large population a problem? How can we address this?
For many, many years, population has been regarded as a problem for poor countries including our own. Even today, every second development article starts by noting that Bangladesh has a very large population relative to land – as if that is a huge, critical problem. In practice, Bangladesh’s population has turned out to be of some advantage – we are now deriving the fruits of the ‘population dividend’ – marked by the abundance of a large share of young people in the country. These are the people who are working in the garments factories, going abroad to work in large numbers, swelling the non-farm and services sectors – indeed Bangladesh has now become a veritable beehive of activity – so in this sense, population has been a blessing. But of course, it is also a huge challenge – think of the problems faced in terms of health services, education, infrastructure, energy etc. – these are services that everyone wants – but it is no easy matter to respond to these needs. We require billions of dollars of investments in many, many areas – we have done well so far but the real job would be to figure out what to do next, where to get these huge resources that we now desperately need to move to a high middle income country.

Can Bangladesh jumpstart to transforming itself into a manufacturing hub?
What I think is that we have to very carefully understand where our comparative advantages lie. Bangladesh is a unique country, and we are not predictable. We can certainly look at other countries for inspiration and example but probably this would not be of much use to us in charting out our path. I believe it is important to have a long-term view of development goals and strategies. My own feeling is that we would need to move quite quickly to high-value, knowledge-based activities – but this can only be done through massive, high quality education, research and training. I believe our comparative advantage will come not from land or natural resources but from the high quality of our people – our people are smart, intelligent and if properly trained and equipped, we can excel in any field. This is our endowment, and this is where we need to focus with all our might. Whether we can be or want to be a manufacturing hub or some other hub, the market will decide. If we do become a manufacturing hub it would have to be in high-value manufacturing that does not require a lot of land and that does not devastate our limited natural resources through environmental pollution and degradation.

Why is FDI so tardy?
First, most economists ask why we expect FDI to come to Bangladesh in the first place. Actually, I see no reason for FDI not to come to Bangladesh – despite all our problems, red tape, bureaucracy, inefficiencies, and so on. And this is because, FDI has been happily travelling to a number of countries that are frankly no better, and in some cases, a lot worse than ours on all counts. Take the example of Pakistan, Myanmar, Cambodia or Laos. Is the situation in these countries better than ours? I know each of these countries at first hand as a development consultant – and I cannot figure this out, atleast not in terms of the usual explanations like high costs of doing business, etc. So this is a mystery – the only thing that I can point to is “image’ – and that too because I do not have a good answer. I think international bodies and multilateral agencies habitually point to a number of problems (the usual gas, energy, roads, ports kind of argument) but my impression is that they too have no clue. So my advice is don’t worry too much about it – let’s promote domestic investment first, regional investment second and then other investments last, if at all. The reason why domestic investment is better is it is less fickle, and it creates capacity. The most important reason is domestic investment captures our own economic space – this is crucial – once the economic space is compromised domestic private sector tends to get squeezed out and even marginalized by more aggressive, better resourced non-domestic entities – so yes, in this sense, I am an economic nationalist. As you can guess, I am not an unqualified fan of FDI – we should select FDI carefully and allow in only those that we need (for reasons of technology transfer or market share, etc.).Blanket encouragement to FDI? Bad idea!

How do you think we should handle the public sector enterprises and banks?
I am not sure I know of any public sector entity that has performed in a stellar manner – unless of course you are talking of BIDS! OK, seriously, I don’t think we have managed to grope our way into a viable, effective model for running public enterprises – I am not sure any country has for that matter – we hear that the public sector is doing well in Vietnam and China. Perhaps we should seriously examine their models and see if there is anything there. Unfortunately, the role of these entities seems to be to operate as a conduit for, shall we say, highly questionable operations. I guess, if we were to wake up tomorrow morning to find that there were no public enterprises left, it would not exactly cause us to lose sleep. But on the other hand, there may be a lot of future plunderers and opportunists lurking out there who may in fact slide into deep depression as a consequence.

Government is going to produce a new industrial policy and expects to target a GDP share of 40%. Is this achievable by 2021?
We have five or six years left, and the economy is moving quickly. We have seen how countries like China have performed. Vietnam is trying to emulate that model. Can we do it? Business as usual will not be enough for that. We need concerted, large-scale investments combined with a hugely scaled up governance and project implementation capacity. There are very large opportunities out there of which both the private and the government are aware – the trick will be to convert the opportunities into reality. There are so many imponderables here that I would rather not predict. There is however every reason to hope – there is a quiet optimism in the country and a sense that “all is possible”.

Any final words for us?
I am a man of incorrigible optimism when it comes to Bangladesh. I think my generation – the generation that squarely faced the brunt of the violence and disruption during our liberation war – will not back off from any challenge. The younger generation is even better than us – they are clever, better educated and smarter – so this is our strength – and believe me, this is not just a cliché. Let the world be warned – WE ARE COMING!

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