Page 62 - IBT October 2020

Macro-economy BANGLADESH IN
Conquesting
the Constraints
From being called "A bottomless basket", Bangladesh has come a long way to become
one of the world's greatest economic success stories. At the start of the new decade, we
are faced with some unprecedented challenges, and how we deal with them will become an upper middle-income
determine our growth momentum. country by 2031 and a developed
country by 2041.
Several factors facilitated this
achievement; policy support from
the government and hard work of
Bangladeshi people are the major
factors. Continuity of supportive
policies is pivotal to ensure good
economic performance. It
provides predictability to the
investors. It also saves resources.
If there are any interruptions or
abrupt changes in government
policy, it will have impacts on
investor confidence, especially in
the case of foreign investors. If
policies change frequently,
project implementation is
hampered and sometimes stalled.
This leads to wastage of
resources.
By Fahmida Khatun Secondly, many sectors have
Executive Director, Centre for Policy significantly benefited from these
Dialogue (CPD)
policies, including agriculture,
industry and the services sector.
Over the last decade, Bangladesh And the people of Bangladesh
has seen consistent and stable have been able to take advantage
growth. Its growth rate has been of that support. As a result, the
much higher compared to its agriculture sector has managed
peers in South Asia. This has to see positive changes. Our food
allowed Bangladesh to be production has been
categorised as a high performing awe-inspiring, and we have been
economy. As a result, Bangladesh able to achieve food sufficiency.
has been able to meet up all three Only about five per cent of our
criteria required to be considered food requirement is imported.
for graduation from a least Even during the pandemic, the
developed country (LDC) to a agricultural output has been
developing country. It is expected excellent. Production of rice and
that Bangladesh will become a other agricultural commodities
developing country by 2024. It has been very good which has
has also graduated from a helped the country to pull
low-income country to a lower through during COVID-19. So, the
middle-income country. people behind the three sectors
Bangladesh now aspires to
56
Bangladesh have been working
South-East Asian countries.
in the Middle-Eastern and
They have helped us earn a
large volume of foreign
exchange income.
Although the growth
because of the coronavirus
momentum has taken a hit
pandemic, we have to remember
that this is an unprecedented
and unavoidable circumstance.
The global economy is reeling
from the pandemic so we
should not be too hard on
ourselves.
COVID-19 has disrupted the
production system and supply
chain within the country.
Domestic demand has been
hampered. The shock has also
come from external sources;
exports have declined,
remittance initially declined.
Fortunately, both the sectors
have bounced back. Exports
have increased recently.
(agriculture, industry, service) Remittance inflow has
have been playing an increased significantly during
instrumental role in facilitating the last two months. But
the economic achievements. COVID-19 has been a challenge
Speaking of the industrial this fiscal year (FY 2021) and
sector, over 80 per cent of our the immediate past fiscal year
export income comes from the (FY2020). As a result, our
readymade garment (RMG) projected growth rate which
sector. The entrepreneurs was to be 8.2 percent for
deserve a lot of credit for the FY2020 has declined to 5.24 per
success of the apparel sector. It cent according to the
is also the four million workers Bangladesh Bureau of
who extend their labour for the Statistics.
industry. They have been a Our exports have bounced back
major driver of industrial thanks to increase in RMG
growth, exports and foreign exports in recent months, a
exchange income. Similarly, the diametric scenario from during
government has been the height of the pandemic
supporting the sector since the which saw a lot of cancelled
emergence of the industry in orders. It has been reported that
the 80s. Global opportunities almost 80 -90 percent of the
like Multi fibre arrangement cancelled orders have been
(MFA), which provided duty-free reinstated.
export of Bangladeshi RMG also Similarly, following the
helped. outbreak of the pandemic and
The contribution of the services worldwide lockdowns,
sector has been increasing thousands of migrant workers
steadily. The sector accounts for have returned to Bangladesh
over fifty of the Gross Domestic after losing their jobs. The
Product (GDP) of Bangladesh. migrants still continue to return
Semi-skilled and low skilled as the economic conditions of
human resources from their employers have declined.
Workers who are still employed
money to their distressed families
abroad have been sending more
during the pandemic. Moreover,
the returnee migrant workers
have brought back all their
savings. So, the volume of
significantly.
remittance income has increased
Therefore, after lockdown for two,
we have seen a gradual opening
health alerts are still on,
up of the economy. While the
economic activities are
increasingly coming to normalcy.
If this trend continues and if
there is no spike of COVID-19,
Bangladesh's economy will do
well.
However, there are numerous
challenges that we have to be
aware of. The pandemic has
affected all the countries in the
world. So, the nature and speed
of our recovery will significantly
depend on how other countries
recover from the crisis. Besides,
we have to look into the perennial
weaknesses of our economy. To
ensure the continuity of high
growth, we have to ensure that
infrastructural development
meets the demand of the
investors. Investment is pivotal
for continuation of growth
momentum and higher income.
Unfortunately, the private sector
investment has not been so
promising. Had it been higher, it
would have created more
employment and enhanced
economic growth further. If the
domestic private sector
investment does not pick up,
foreign investors will not be
encouraged to invest. Modern
infrastructure, skilled human
resource, efficient bureaucracy,
corruption-free business
environment, policy stability, and
low political risks are essential to
attract investment. Currently, we
are ranked poorly in the global
competitiveness index published
by the World Economic Forum. We
will have to work towards
overcoming the limitations to tap
the full potentials of the economy.
These factors will determine our
LDCs could not capitalise on
supply side constraints and l
same opportunities due to
of capacity. However, we have
to do better. We need to addr
the infrastructural constrain
and administrative
in decision making.
complications including delay
Once Bangladesh graduates
from the LDC category, it wil
in terms of duty-free market
lose its presidential treatme
access. If Bangladesh graduat
in 2024, it will get another
three years as a grace period
prepare for smooth graduation
Unemployment so that when in 2027 trade
Despite high growth, youth preferences are finally
unemployment is high. Though withdrawn, the country is wel
the national unemployment rate prepared to cope with the new
is 4.2 per cent, youth circumstances. Hence, the
unemployment rate is 10.6 per country has to prepare from
cent. We need more investment now on to adjust to the new
for job creation. Every year about reality. It has to be strong
20 lakh job seekers enter the enough and competitive enough
labour market. But our economy International to export by paying duties an
is not large enough to absorb trade still can sustain its export
everyone who enters the job After independence, Bangladesh volumes and income.
market. Therefore, the used to be identified as an The preparation will also be
growth trajectory over the next on technology and livelihoods employment strategy should be aid-dependent country because taking advantage of new tr
decade. As the country is in the for better adaptation to climate focused not only on creating more we were highly dependent on benefits even after LDC
path of double graduation change. We also have to urge jobs in the public and private foreign aid. We needed a large graduation. However, that
mentioned at the outset of this the developed countries to sector, but also create amount of foreign funds to deal requires fulfilment of s
article (from LDC to developing enhance support towards opportunities for with a war-affected economy. compliances in areas such a
and from lower middle-income adaptation. We need technology self-employment. This will require However, over the last five labour, environmental, and
to upper-middle income for innovations for climate enhanced access to finance. The decades, we have graduated human rights issues.
country) maintaining high tolerant agriculture, and we from an aid-dependent country There is an urgent need fo
economic performance will be have to invest in embankments, government will need to allocate to a trade-dependent one. export diversification. Our t
critical. Diversification of the shelters, and job creation for resources for the youth who want
to start their own businesses. Currently, the share of trade in is concentrated on only
economy and reduction on a the affected people who will Bangladesh GDP is around 37 few items, mostly on RMG. It
narrow export basket are badly suffer due to sea level rise Besides, we need to redesign our
needed for the country. At the which is the result of global education system according to per cent while the share of extremely risky to have such
same time, performance on warming. contemporary market demands. foreign aid is about 2 percent of narrow export basket.
social indicators such as In addition to climate change, We have to change the mind-set GDP. internal and external sock ca
education and health outcomes there may be other external of having a university degree by Also, due to the policies which create a serious crisis.
will also be determining factors shocks which could affect everyone. We have to expand were taken in the mid-'80s and government has identified
for Bangladesh’s Bangladesh's economy. vocational training and early 90's which made a shift thrust sectors which have
transformation. It will also COVID-19 is an ongoing job-specific training. Now that the towards market economy and potential to expand. But the
depend on how we address our challenge. The global economic fourth industrial revolution has trade liberalisation there has progress towards diversif
vulnerability due to the impact meltdown of 2008 is another dawned upon us, and the been a gradual increase of is still not encouraging. The
of climate change. Of course, example. So, external factors pandemic has forced mass trade, mainly through RMG sectors will have to be
Bangladesh is a victim since can play a role in the pace of adaptation of technology, there exports. As an LDC, Bangladesh supported with substantiv
climate change is the result of Bangladesh’s growth. While we will be more demand for high has been provided the duty-free policy measures.
the actions by the developed are optimistic about having a skilled human resources. quota free access to the
countries. Therefore, we have to higher growth, the domestic Technology can be an enhancer as European and many other
adapt to the effects of climate and unpredictable external well as a divider. Unless it is markets in the world. And
changes. Bangladesh has been factors on which we have no accessible by all, inequality will Bangladesh could utilise the
successfully doing so. However, control can slow down the increase. And if growth is not opportunities provided to LDCs,
there has to be more investment momentum. equitable, it is not sustainable. whereas numerous African