Wednesday, November 13, 2019

Bangladesh’s journey towards economic freedom

Monday, February 18, 2019 - 838 hours ago

The country has improved to 41st among 193 countries, up from the 43rd position since last year, according to the World Economic League Table, published annually by the Centre for Economics and Business Research, or CEBR, in London.”We expect annual rates of GDP growth to average 7 percent between 2018 and 2033. This will see the country climb 19 places in the World Economic League Table to become the world’s 24th largest economy by 2033,” said the report. Other Asian economies will rise during this period, with South Korea becoming the 10th largest, Indonesia (12th), Thailand (21st), the Philippines (22nd) and Malaysia (25th), all making the top 25. Bangladesh since 2007 has had more people of working age than non-working, known as demographic dividend, and by 2040 this window of opportunity to accelerate economic growth would start to close. Now, more than 65 percent of the population is of working age, between 15 and 64. Now, more than 65 percent of the population is of working age, between 15 and 64. Yet, Bangladesh is unable to exploit the full potential of the demographic dividend as it cannot create adequate number of jobs for the working-age population, according to economists and population scientists. They suggested taking up measures including large-scale investments in education and health sectors to cash in on the demographic dividend. Some of the East and South-East Asian countries have invested heavily in human resource development, in particular education and health, to achieve a higher economic growth rate during their time of demographic dividend when most citizens work, they said. According to investors and trade analysts, private sector investment has gone through a dull and stagnant situation causing slower job growth in 2017. They came up with the suggestion of new investments (both private and public) to increase productivity and employment, which are badly needed to maintain the GDP growth.

According to Bangladesh Bureau of Statistics (BBS) data, in the last fiscal year, Bangladesh has registered a 7.28per cent GDP growth with a continuous upward trend. For the current fiscal, the government has set a target 7.4per cent GDP growth.”As a businessman, my passion is to expand to create new employment. Due to some constraints, which include getting loans and utility services connection, it is not happening now,” a businessman, who has employed over 4,000 people, told the media.

On the other hand, there is fear of political instability ahead of the next election scheduled to be held in 2019. These issues put a pause on new investment from both home and aboard, he added.

According to Centre for Policy Dialogue (CPD), a local think tank, Bangladesh needs an additional investment of Tk6,000 crore in the private sector to reach a 7.4per cent GDP growth target.

“To retain the GDP growth, Bangladesh has to recover from going through sluggish trend by increasing private investments from home and abroad,” said Policy Research Institute (PRI) Executive Director Ahsan H Mansur.

More jobs will push up the overall production capacity of Bangladesh resulting in higher growth. But the question is, are the industries engaging the youth and fresh graduates?

Only 1.4 million jobs were created in the country between 2013 and 2016, whereas the figure was 4 million between 2010 and 2013, according to BBS data.

Besides, the RMG sector, the largest export earners, has seen lower job creation as it is going through a safety correction. “Job creation in the apparel sector was not at expected level due to ongoing safety inspection, while the expansion was slowed by the safety investment,” Abdus Salam Murshedy, managing director of Envoy Textile told the Dhaka Tribune. With about 7 million people underutilized, Bangladesh observes the World Population Day 2017 today with the theme “Family Planning: Empowering People, Developing Nations”.

The country could add only 1.4 million jobs between 2013 and 2015-16 fiscal year, down from 4 million jobs it had added between 2010 and 2013, according to the latest data of Bangladesh Bureau of Statistics' Labour Force Survey.The sluggish job creation has raised questions about the high economic growth figures being recorded, with some economists terming the phenomenon “jobless growth”.But it will pick up as the safety inspection is to end by June this year, he added.  “There is hope to increase foreign and local investment this year as the government has pledged to improve business environment by ensuring services under one stop service to boost the investors’ confidence on Bangladesh,” PRI Executive Director Ahsan H Mansur said.

But the government should give priority to the sector as well as the investors and should complete the projects to reap the benefits, he added.

FDI from the Asian countries can be an advantage for Bangladesh as China is shifting business due to rise in workers’ wage, which is also helping attract investment from other countries like Japan, said the economist. As the global economy is recovering slowly, we have to come up with new strategies to utilize the advantage to sustain the growth rate, he added.

As of last year, Bangladesh became the fourth largest FDI host among Least Developed Countries with $2.3 billion in inflows. Bangladesh has been extraordinarily successful in growing its economy and spreading the benefits of that growth across society. Since the 1980s, the country has averaged 5per cent–6per cent annual gross domestic product growth.

This growth was accompanied by a significant decline in poverty, an increase in employment, greater access to health and education, and improved basic infrastructure. As a result, the once poor country is now considered middle income.

To reach the next level, Bangladesh needs to improve the country’s reliable energy supply, revise business policies that stunt the development of non-garment exports, and improve property and land rights registry systems to protect investments, according to the recent publication, Bangladesh: Consolidating Export-led Growth. To overcome these obstacles, strategies should be developed to decrease the economy’s reliance on low-cost exports, such as garments. This includes focusing on higher education and technical and vocational skills training, the publication noted. Bangladesh also needs to more fully embrace technology, including increasing access to the internet, cell phone banking, digital property registries, and other innovations.

Another challenge faced by the country is the problem of underemployment. The proportion of workers employed in the informal sector—where high underemployment, low earnings, and poor working conditions are common—rose to 87per cent in 2013. Women continue to get paid less for the same work and have fewer labor opportunities. While the country’s economy is strong, and employment opportunities are increasing, the pull to work overseas remains strong in Bangladesh.

The medium to long term strategies which can be implemented and monitored on a periodic approach is very essential towards the growth. The timely review will help analysis of the resources and inputs in order to achieve the required optimum utilization will enable the country move towards achieving the status of medium income country in the medium term achievement and help us reach the long-term achievement of attaining the status of a developed economy. As it seems, we are on the right track of progress but there needs to be more concerted efforts on the part of both public and private sector to work hands on hands for the optimum positioning in order to achieve the growth perspectives.

The writer, a banker by profession, has worked both in local and overseas market with various foreign and local banks in different positions

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