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The World Economic Forum (WEF)'s Competitiveness Report 2017-18 has indicated that Bangladesh has made significant gains in several areas of macroeconomic environment as well as in health and primary education. This has apparently facilitated our continuing growth despite many existing challenges. Bangladesh's competitive ranking has moved upwards and we are now being ranked as 99th out of 137 countries -- a rise of seven notches from the last count. We have moved upwards and are now ahead of Pakistan which occupies the 115th position. India (40th), tiny Bhutan (82nd), Sri Lanka (85th) and Nepal (88th) are, however, ahead of us.
The WEF, also known as the Davos Forum, has been publishing such rankings since 1978, on the basis of cross-country benchmarking analyses of several factors and in-depth study of institutions and infrastructure. They use them to determine prospect of long-term growth and potential prosperity of countries.
Economic analysts have noted that compared to the previous situation, this progress in rating has been particularly possible because of our improvement within the paradigm of institutions by 2.6 per cent over the past year. In fact, according to Centre for Policy Dialogue (CPD), Bangladesh has displayed movement forward in terms of score on all 12 pillars related to assessment.
We appear, however, to be still seriously lagging behind in technological readiness. According to analysts we are still at the "nascent stage" in matters related to creating an IT-enabled business environment. This has been compounded through deterioration in matters of intensity of competition, reduced competitiveness regarding professional retail services and poorer competitive networking. Economists are of the opinion that if we are to progress in these fields, we need to ensure competition by implementing rules and regulations, including effective enforcement of 'The Competition Act'.
It would be worthwhile to note here that Bangladesh has bettered its position pertaining to innovation and sophistication factor - the 11th and 12th pillars respectively of the global index. Some of the innovative factors that have apparently helped us include the establishment of economic zones and the introduction of one-stop services. These have direct bearing on the creation of employment and the generation of prosperity, both in rural and urban areas, with implications for our foreign trade and potential investment.
INTERESTING REVELATIONS: Interestingly, it has been revealed that 51 per cent of the respondents mentioned that the monitoring and supervision of the Central Bank had deteriorated in 2016. In addition 29 per cent respondents felt that the capital market was still influenced by illegal activities. Another 45 per cent had expressed dissatisfaction with the pace of work on the fast-track projects. Some had even mentioned that this was unnecessarily enhancing the cost of creating infrastructure. Fifty-eight per cent of the respondents had also expressed their scepticism about the Special Economic Zones being able to meet the need of the investors within the desired time frame.
These observations need to be considered with great seriousness. We cannot, for example, overlook the fact that the bureaucratic mindset is definitely contributing to the slow movement of decision-making. This, in turn, juxtaposed with lack of transparency, is affecting accountability and contributing towards corruption.
In this regard, it would be appropriate to suggest that the relevant authorities need to focus more seriously on improving the quality of our educated workforce, particularly with regard to the use of technology and digitalisation. This will help us to assist them in changing the way they work. It is also clear that poor work ethics appears to have emerged as a new form of constraint in certain sectors - not only in the upper reaches of the garment industry but also in sectors like leather. This has to be tackled carefully.
We also need to pay greater attention to removing infrastructure bottlenecks like freeing seaports from congestion and ensuring continuous power supply to industrial units. The Prime Minister has emphasised on the importance of these two issues more than once. There has been some improvement but much more remains to be done.
The next is the question of financial governance and the need to overcome the challenge of rise in the number and volume of classified loans. Bad loans ate up 51 per cent of the operating profits of banks in the first half of this year. This, according to bankers, is bound to bring down the dividends that shareholders can expect to receive at the end of the financial year. It will also have an impact on the interest rate. Between January and June this year, according to newspaper reports based on central bank statistics, the operating profit of banks edged up 11 per cent to Tk 103.55 billion (10,355 crore) but net profit slumped about 33 per cent to Tk 18.45 billion (1,845 crore). The net profit of banks is calculated after deducting provisioning against bad debt and tax.
Most of the state-owned banks are in a bad shape, and some private banks are also proving to be vulnerable. An example of this is the Farmers Bank which has registered a net loss of Tk 130 million (13 crore) against the operating profit of Tk 240 million (24 crore). The foreign banks have made operating profit of Tk 12.28 billion (1,228 crore) and net profit of Tk 6.25 billion (625 crore).
Nevertheless, it would be worthwhile to note here that the overall profit situation of most of the state-owned bank, except Sonali Bank, has improved this year. The net loss of Sonali Bank was Tk 12.57 billion (1,257 crore as opposed to the five other Stae-owned Banks who made net profits ranging from Tk 100 million (10 crore) to Tk 1.27 billion (127 crore). The much-troubled BASIC Bank also made a net profit of Tk 140 million (11.40 crore) as opposed to net loss of Tk 480 million (48 crore) a year earlier.
FORECASTS OF WORLD BANK, ADB: These factors appear to have persuaded the Asian Development Bank (ADB) to suggest in the last week of September that Bangladesh's economic growth would be around 6.9 per cent in fiscal 2017-18. The World Bank(WB) has also forecast a possible growth for the same period at about 6.4 per cent. These forecasts are below our government's projected growth rate of 7.4 per cent.
Both the World Bank and the ADB have singled out some reasons for their downward assessment in income growth. They have singled out slowdown in income growth both in agriculture as well as wage employment. They have also taken into consideration the reduction in the volume of remittances received from abroad. In this regard, consideration has been given to the prevailing violence in Syria, Iraq, Yemen, Libya and also to uncertainties created because of the imposition of sanctions on Qatar by Saudi Arabia and three other Arab countries. This has reduced recruitment of foreign workers.
The assessment carried out by these two multilateral institutions have gained more credibility because of the destruction of infrastructure, housing and agriculture in the calamitous monsoon flooding that affected the lives of nearly 7.1 million in different parts of the country. Added to that now, most unfortunately, has been the unwarranted serious situation created by the influx of more than half a million Rohingya refugees into Bangladesh from the Rakhine State in Myanmar. They will need not only healthcare and shelter but also food and other related support pertaining to humanitarian well-being. This will involve massive expenditure from the government exchequer without any return.
One also needs to refer to the World Bank Development Update report about two other significant aspects. It has been mentioned that Dhaka division accounts for 45 per cent of all industrial jobs and 37 per cent of all service-related jobs. Congestion as well as lack of access to land is apparently affecting firm-productivity increases and expansion. The second refers to the fact that micro-enterprises, along with household establishments, account for 98 per cent of all economic units in the country and half of the jobs which offer subsistence earning in the absence of formal jobs. Both these factors need to be monitored and necessary measures taken to enhance the prospect of productivity. More small and medium-sized enterprises can add to the creation of jobs. This will, of course, need streamlining and reform of the regulatory measures that are hindering the growth and expansion of micro-enterprises.
In addition, strong macro-structural policy reform, institutional and market reform and private and public investment will be necessary for increasing productivity and employment. This is a must if Bangladesh is to take advantage of the global recovery and sustain growth in the long term. This will help us to reduce poverty and boost shared prosperity.
The writer, a former Ambassador and Chief Information Commissioner of the Information Commission, is an analyst specialised in foreign affairs, right to information and good governance.