Since 1947, Bangladesh has been struggling to develop a strong industrial economy. Examples of such economies include the member countries of the Organisation for Economic Co-operation and Development (OECD). Notably, resource-scarce nations such as Japan, South Korea, and Taiwan inspire Bangladesh to aspire to become an innovation epicentre of global value chain. However, despite numerous efforts, progress has been very limited. Moreover, whatever progress has been made faces the risk of premature deindustrialisation, particularly due to the rise of China, as well as advances in automation, AI and robotics. In retrospect, Bangladesh's industrial economy development appears to be constrained by ten persistent myths.
REVERSE ENGINEERING: There is a belief that Japan and South Korea developed their industrial economies through reverse engineering. Let us assume that we reverse engineer a best-selling Toyota car or a Canon photocopier. Even if Toyota and Canon do not prevent us from doing so, due to a lack of scale, scope, and ecosystem advantages, our cost of production would be higher, resulting in losses. Japan's industrial success did not emerge from apparent reverse engineering. Instead, it occurred because Japan succeeded in outperforming the originators in the race of incremental advancement and reinvention.
TECHNOLOGY TRANSFER: Governments, industry, and the academic community often refer to the issue of technology transfer. Let us assume that all technology patents are opened to Bangladesh and full cooperation is provided to turn them into products. Does this mean that Bangladesh will succeed in generating sustainable profit from them? Highly likely, the answer is no. It is worth noting that as many as 94 per cent of patents are never used. Besides, irrespective of their merit, all patented technological innovations emerge in a primitive form, generating losses. Success depends on understanding the dynamics, making rational decisions to filter out most options, selecting only a few, and driving their evolution to win the global race.
IMPORT SUBSTITUTION: Since long, Bangladesh has been offering preferential treatment to import substitution across an array of industries, from automobiles to consumer electronics. However, this has not succeeded in developing a high-performing industrial economy. One of the major reasons has been decreasing local value addition, predominantly from labour. Another reason is the need for expanding markets to achieve the required scale advantage, given the growing role of capital machinery and intellectual assets.
PROTECTION AND PREFERENTIAL PUBLIC PROCUREMENT: The extreme form of protection and preferential public procurement is offered to state-owned enterprises. However, none of the enterprises under the Bangladesh Steel and Engineering Corporation or the Bangladesh Chemical Industry Corporation has become globally competitive. Instead, as reported in the media, 81 per cent of Bangladesh's state-owned enterprises and agencies are facing financial risk. On the other hand, preferential public procurement of locally developed reverse engineered alternatives runs the risk of getting poorer quality at a higher cost, due to lack of evolution, scale effect and ecosystem effect.
FOREIGN DIRECT INVESTMENT: There are two major types of foreign direct investment. The first type encompasses those that produce products by utilising local inputs, predominantly labour, for the export market. The second category includes multinationals that manufacture their products by importing designs, intermediate inputs, and manufacturing processes to serve the local market. Due to decreasing local value addition from labour, FDI in export-oriented manufacturing has been weakening. On the other hand, multinationals serving the local market are mostly interested in repatriating their substantial profits. Hence, the contribution of foreign direct investment to building a strong industrial economy is negligible.
EXPORT-ORIENTED MANUFACTURING: Despite being a role model of export-oriented manufacturing, the ready-made garments industry has failed to become an innovation hub for textile machinery or apparel design. As a result, due to decreasing value addition and the growing role of imported capital machinery, its success suffers from a limited capacity to progress.
PRODUCT DEVELOPMENT AND STARTUPS: There has been a new hope that product development and startups may lead to a strong industrial economy. Hence, successive governments have extended R&D grants, equity funding, and preferential loans for this purpose. Some experts even promote the impression that startups have succeeded in product development and that commercialization is the main issue. Accordingly, they argue that the government should facilitate commercialisation through preferential public procurement. Unfortunately, success in product development is not about reverse engineering or prototype development. Instead, it hinges on driving evolution by making successive versions better and cheaper. So far, such evidence is insignificant.
MICRO, SMALL, AND MEDIUM-SIZED ENTERPRISES: Before the advent of the industrial revolution, micro- or cottage-based industries were the backbone of Bengal's high-performing industrial economy, which significantly contributed to this subcontinent's production of 25 per cent of global manufacturing output in 1700. Due to the growing role of technology in products and production processes, these enterprises have been losing their competitiveness. Unfortunately, there has been a lack of focus on scaling up their products through incremental innovation and reinvention. As a result, despite the possibility, micro, small and medium-sized enterprises have been failing to scale up and become global innovation epicenters of their products.
SCIENCE AND ENGINEERING EDUCATION AND RESEARCH: Due to the belief that there appears to be a linear correlation between engineering graduate density, quality of education, publications, R&D funding, and the strength of innovation and the industrial economy, Bangladesh has accelerated investment in this area. As a result, Bangladesh's engineering graduate production has increased from about 1,000 in the 1980s to over 50,000in 2023. There has been similar success in publications and accreditation. However, their contribution to Bangladesh's industrial economy is insignificant, as a growing number of them remain unemployed or underemployed.
INDUSTRY AND ACADEMIA COLLABORATION: In a recent media report about graduate unemployment reaching nearly one million, experts opined that Bangladesh's greatest challenge is no longer expanding access to higher education. They have called for urgent reforms linking universities with labour market demand. As Bangladesh has been pursuing an import-driven technology, labour-centric industrial economy, theory-centric education offered by universities appears to be irrelevant for operating and utilising imported technologies. Due to the industrial economy's strategy and policy, industry-academia collaboration becomes unbridgeable.
Although colonial rule added fuel to the industrial revolution that destroyed Bangladesh's once fine industrial outputs, notably muslin, since 1947 there has been no notable progress in developing a strong industrial economy. It seems different groups, including government, industry, academics, lenders and development planners engaged in promoting different models, either due to ignorance or vested interest, are indulging in myths. As a result, despite numerous attempts, Bangladesh has not succeeded in becoming an innovation epicentre of any products at the global scale, creating high-paying jobs for graduates.
Among many other reasons, these myths have been playing a vital role in adopting non-performing policies, misdirecting the nation's precious resources and compelling the youths to leave the country. Hence, for developing high-performing industrial economy, Bangladesh must pay attention to wealth creation from technology possibilities to be in the global race to migrate the innovation epicenters in selected areas.
M Rokonuzzaman, Ph.D is academic and researcher on technology, innovation and policy. Zaman.rokon.bd@gmail.com