Understanding the effect of a 10-year tax break on Bangladeshi skills development institutes
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Unemployment has been a major issue for the global economy. If you’re a college/university student who has had some exposure to the idea of the current job market status, you’ll know that landing a job nowadays is tougher than finding a needle in a haystack. Unemployment has been a big threat especially in developing countries like Bangladesh. Even with staggering numbers of graduates passing every year, the Bangladeshi economy has fallen victim to the wrath of unemployment. While there are a lot of other factors involved in it, a key driver of the unemployment rate is an unskilled workforce. “Unskilled” does not always refer to the lack of skills, rather the lack of “right kind of skills”. “Skills” is a subjective term and varies from person to person, industry to industry. A trait that might be a skill to some may not be to another. For example, physical agility can be a very important skill to a football team coach, but it is insignificant to a CA firm recruiter.
However, developing the right kind of skills needs proper guidance, appropriate training tools, and environment as well as a better understanding of what the trainee’s targeted job requires and some general skills that are important to all humans, e.g. communication skills.
To solve the issue of this skill deficient workforce, the Bangladesh government has decided to take an initiative that promises to bear fruitful results in the future. As of June 2021, there are speculations that the Bangladesh government is likely to grant a 10-year tax break to all skill development institutions. The idea is to motivate private investors to make investments in this sector, which will facilitate the formulation of an enhanced and highly skilled workforce, capitalizing on the available population density. This initiative shall be valid for 30 different types of skill development institutions. These include training in poultry farming, fisheries, agriculture, preservation of food, footwear, garment design, garment finishing, patternmaking, leather, ceramics, refrigeration, science and technology, automobile, shipbuilding mechanical, nursing, pharmacy, animal health and production services, dental, integrated medical, radiology and imaging and ultrasound.
As per skill development analysts, the initiative is expected to achieve the Sustainable Development Goals by the year 2030. The Finance Minister of the country, AHM Mustafa Kamal brought this proposal to the table at the Parliament during the allocation of the national budget for the fiscal year 2021-2022 on 17th June 2021. Executive Director of South Asian Network on Economic Modeling, Professor Selim Raihan stated that they have been demanding full tax exemptions for such training institutions so that these organizations can avail the provision of smooth training and education in areas related to the field at affordable costs. According to The Business Standard, he was quoted saying, “I congratulate the Government’s initiative to offer full tax exemptions for training institutes. Investors will be encouraged to establish more institutes across the country, and it will build more skilled manpower.”
Significance of the tax break for the future of Bangladesh
Now, why is this elusive tax break so important to the Bangladeshi economy and the quality of Bangladesh’s workforce? Well, there are numerous reasons behind this. First of all, the global marketplace is becoming more and more competitive by the day, and gone are those times when only providing labor would do the trick for developing countries. Nowadays, ensuring the quality of work is highly important to ensure the competency and survival of the Bangladeshi workforce and the industries associated with them, e.g. Ready-made Garments (RMG).
Experts claim that focusing on skills development and modernizing the current education system to suit the demands and requirements of the 4th Industrial Revolution and cope with its challenges is of vital importance for averting the threat of potential job losses. They also recommend the adoption of a need-based curriculum and urge potential job seekers to focus on subjects that will match the demands of the industry.
At a dialogue titled: “Fourth Industrial Revolution: Future Job – Skills – Career for Bangladeshi Youth” arranged in Dhaka, the experts made a few important remarks. President of India-base Overseas Research Foundation (ORF), Samir Saran, said that Bangladesh is currently the 48th largest economy in the world with a GDP per capita of $1,800. The goal for the South Asian region in the next 15 years would be to turn this income from $1,800 to $10,000, which includes Bangladesh too. He stressed that wage increments, living standard enhancements, and human development indices are currently the core issues of the South Asian region. Samir Saran also added that in order to gain wage-earning capabilities, efficiency, and mainstream the economy in the value chain at a global level numerous inputs are required.
Education and skill development are two of the most important inputs here. Dr. A.K. Abdul Momen, Foreign Minister of Bangladesh stated that although unforeseen advancements in technological realms open gates to a world of new opportunities and enhance efficiency beyond the horizons of imagination, they do come with their fair share of drawbacks. A leading aspect of that is the potential requirement of reskilling the workforce, as the debut of emerging technologies often wipe out the room for many labor-intensive jobs and require a “differently skilled” and often more technologically adept and educated workforce. But is our workforce capable of capitalizing on this massive opportunity?
It is an immense challenge ahead for the education and skill development system, especially for those in developing countries like Bangladesh to develop and prepare a highly flexible workforce, one that possesses adequate skills and has the knowledge and adaptability to take advantage of the new technologies in a dynamic workplace. This concern was brought up by the Managing Director of Muhammadi Group, Rubina Huq, who told Dhaka Tribune in a session, “There are graduates but we cannot appoint them as they are not employable. This is because of the mismatch between the industry needs and education subjects.” She further added, “There is a disconnection with the academia and if they cannot cope with the automation, people will miss the chance.” Rubina Huq urged students to be more selective and rational of the subjects they pick, emphasizing their alignment with the industry needs.
Why Singapore is a good example | Steps developing nations could take
In the world of skill development initiatives and campaigns, Singapore leads by example. Approximately, 540,000 Singaporean residents have been aided by initiatives supported by SkillsFuture (SSG) in 2020 and an additional 40,000 in the preceding year. Allegedly, a subtotal of 14,000 enterprises benefited from these initiatives. The SkillsFuture national movement was introduced in the year 2015 with the target of building a culture of skills development and lifelong learning. The efforts of this initiative have enabled Singapore to build a robust and sizable education and training ecosystem that enabled the public to react quickly to minimize the damages from the pandemic. Two programs, SGUnited Program and SGUnited Mid-Career Pathways Program, both of which are part of the National SGUnited Jobs and Skills Package, have been introduced to provide people with new learning and training opportunities, enhancing their employability.
Till December 2020, the programs had about 9,800 trainees, of which 7,200 belonged to the SGUnited Skills Program while the remaining 2,600 belonged to the SGUnited Mid-Career Pathways Program. This entire process is something developing countries can look up to and attempt to simulate. Preparing the people for an unpredictable tomorrow with the provision of skills that will aid them to adapt to the changes in the fast-moving labor markets of the future is crucial. The achievement of this objective is only feasible through quality education. Education is the backbone of a nation and the foundation for skills and adaptability. Only with a properly educated workforce can a country move towards sustainable growth. Quality education does not represent bookish literacy, but rather intellectual nourishment paired with job-related lifelong learning opportunities and personality development programs. For this to be attainable, a strong commitment and partnership between business, government, and schools are a must-have.
Importance of a Future-Focused Workforce
Job-specific skills have emerged as a topic to be taken more seriously. The issue calls for a workforce that is focused on what the future demands of them. In the era of digitization, the job market is dynamic and workers must be able to adapt to not only domestic shifts but also to alterations in the global economy. This requires a highly flexible workforce with advanced and fungible skills. Secondly, employees with the right skills can assist their organizations to be more productive and competitive, aiding the economy and where it stands from a global perspective. And thirdly, a highly skilled workforce is a poverty-free workforce and one that is capable of attending to a high standard of living.
Studies lead to the evidence that social, cognitive, and technical skills have an impact on earnings, wages, premiums, and employability. Individuals with the right skills will either be on the priority list to be recruited for top-level jobs or have the knowledge, expertise, experience and technical soundness to successfully run their own business, creating a plethora of jobs for others to pursue.
In the end, it is easy to see why the decision to grant tax breaks to skills development institutes taken by the Bangladesh government is one that is of vital importance and one to be appreciated. The initiative could potentially act as a game changer for the Bangladeshi economy and the wellbeing of its workforce – both at a domestic and global level.