Bangladesh needs to be serious to get the fourth pillar for its growing economy giving much importance to financial sector development to successfully make the country one of the top 20 economies of the world, says Asian Development Bank (ADB).
"Financial sector development can be the fourth pillar of the Bangladesh economy," said ADB Country Director Manmohan Parkash in an interview with UNB noting that Bangladesh economy is largely driven by domestic consumption, remittance and trade.
He said preparing a 10-year roadmap for financial sector development based on three pillars of financial integration, fiscal transparency and financial resilience could help further catalyse Bangladesh economy, and financial markets.
"It'll also protect the economy against external shocks," ADB Country Director said adding that if there is a better financial integration any crisis can easily be dealt with because of the same standards and similar rules in place.
Citing the examples of Singapore and Hong Kong, he said their GDP is more than that of Bangladesh despite being very small countries because they have a very strong financial sector. "If you can have a strong financial sector, it can actually become another driver to the Bangladesh economy."
Parkash, however, said developing a strong financial sector is not something that Bangladesh can achieve in six months or one year, and there are lots of international experiences that can be brought in.
"Probably, you need a 10-year roadmap that can help you take full advantage of the financial sector," he said adding that the openness of information brings confidence among all.
Parkash, who joined the ADB in 2002, said Bangladesh is seen as a model for growth today even in difficult global economic outlook and Bangladesh will stand out by growing at record 8 percent in 2019 and 2020.
The growth is expected to moderate across most of the developing Asia at 5.7 percent in 2019 and 5.6 percent in 2020. However, according to the ADB, South Asia will buck this trend growing at 6.8 percent in 2019 and 6.9 percent in 2020.
"This is actually very good news (Bangladesh growth) - which also means that the continued political calm, sound macroeconomic policies of the government, pragmatic steps that have been taken and right development priorities are contributing to this whole thing," said the ADB Country Director.
Taking Advantage of 3 Things
Parkash, who oversees the implementation of the ADB Country Partnership Strategy for Bangladesh (2016-2020), said the country's GDP crossed $300 billion this year and the ADB wishes it reaches $1 trillion by 2030.
To achieve this, Parkash said, Bangladesh will have to take full advantage of its demographic dividend, exploit its locational advantage by enhancing its connectivity with east, west and north, and promote trade and investment by developing a resilient and strong financial sector.
"A strong financial sector helps regional and international market integrate, attract long-term investments, PPPs, and deepen and broaden economic integrations," he said.
Domestically, Parkash said, it helps improve financial sector stability, increase the efficiency and liquidity of markets, and strengthen the regulatory environment.
Responding to a question, the ADB Country Director said Bangladesh has done very well as far as trade integration is concerned but one thing Bangladesh needs to do more is financial integration.
Talking about young population, Parkash laid emphasis on making them a skilled labour force and making them employable so that they can contribute to the economy.
The ADB Country Director said Bangladesh's remittance inflow is currently on the low-end as its skill base is low.
He said almost 12 million Bangladeshis are living abroad and they are remitting US$ 15 billion annually. "With the same number of people by 2030, I hope, you can get almost US$ 100 billion worth of remittances."
Parkash said Bangladesh capital market is developing after stocks market debacles in late 2010 and early 2011.
"Fortunately, after that, some good measures and actions have been taken," he said recalling the time the government had requested the ADB to provide assistance.
Parkash said today not many people are coming from outside and investing because they do not know whether and how they will get the money back and whether the companies are adopting good corporate governance.
With better financial integration, there will be lower amount of remittances coming through informal channels, he said. "Also, the cost of doing business will go down. The cost will be largely dependent on how the financial structuring has been done."
The ADB Country Director said financial literacy promotes sustainable market development.
He said more informed and rational individual decisions develop a more competitive and fair market. "It incentivises financial industries to be more innovative to develop new products and services to meet clients' new demand."
Parkash said financial literacy helps create new wealth and benefits individual citizens who must manage longevity risk with better wealth management.
He said to gain a full advantage of new regulatory regimes, financial education is necessary to encourage people to change their behaviours and become more serious about their wealth management using these new financial instruments.
Parkash said financial education is critical for strong and effective investor protection. "Indeed, even financially literate individuals sometimes make mistakes."
With financial sophistication, he said, the number of people deceived by fraudulent investment operations reminds us that financial education does not fully provide protection against fraud, and investor protection must be pursued under a better implementation framework by regulators.
He said financial literacy will teach people how to create new wealth and how to make the best use of opportunities that are available. "That's why financial literacy goes hand in hand with investors' protection."