Bangladesh can emulate Vietnam's development experiences by adapting their policies to its context in the changing paradigm, including increasing investment on innovation and technology, research and skills development, according to a study report.
The report, revealed in a virtual event Friday, identified other lessons from Vietnam experiences Bangladesh could emulate. Those are flexible exchange rate to keep export competitive, competitive tariffs to attract foreign direct investment, well-connected global value chain and comprehensive policy reforms and regular update.
Titled 'Vietnam's Superb Export Performance: Lessons for Bangladesh', the report of Policy Research Institute of Bangladesh (PRI) mentions that Vietnam spends 5.0 per cent of its GDP on education and training, 2.0 per cent on health and 6.0 per cent on social protection.
"As compared to this 13 per cent of GDP investment, in human capital, Bangladesh spends 1.9 per cent on education, 0.7 per cent on health and 1.0 per cent on social protection accounting for a mere 3.6 per cent on human development," says the report, discussed by eminent economists, policymakers and business leaders.
At 0.53 per cent, Vietnam's R&D spending is modest and ranked 53rd out of 92 countries. In comparison, Bangladesh spends a mere 0.2 per cent on R&D and doesn't have any focus on R&D, innovation or technology acquisition.
Chairman of PRI Dr Zaidi Sattar, Vice Chairman Dr Sadiq Ahmed and Director of PRI Abdur Razzaque prepared the study report.
In his welcome speech, PRI Chairman Dr Zaidi Sattar said Vietnam pursues export-led growth which is actually trade-led growth bolstered by three new distinctive features of modern international trade.
"These are unfettered foreign direct investment (FDI), expansive regional and bilateral free-trade agreements (FTAs), and cross-border global value chain (GVC) integration," he said.
He noted that much of Vietnam's export success came from FDI-led manufacturing sector.
"The government and local entrepreneurs also welcomed FDI without any reservation," he said.
And Vietnam has never bothered about domestic value addition.
"The biggest export product of Vietnam is electronics and it is imported from other countries," he said, indicating importance of re-export trade in growth arithmetic.
Vice Chairman Dr Sadiq Ahmed made presentations on key parts of the report.
Planning Minister MA Mannan drew a difference between socio-political ethos of the two countries, saying Vietnam is a one-party-led state but Bangladesh is not.
"A one-party state has stability and continuity and consistency of policy," he said.
The minister also observed that colonization helped build their infrastructure.
He said there need to be study on incentives and subsidies in Bangladesh-how much the country has benefited from the expenditure.
Noted economist Rehman Sobhan pointed out that Bangladesh had access to GSP facility on the US market and EBA on the EU market for more than two decades. Bangladesh has also duty-free access to many countries, including India.
"Why (then) Bangladesh could not take advantage of all these privileges?" Prof Sobhan questioned.
Bangladesh, he concluded, had many opportunities which Vietnam is acquiring now.
Managing Director of Apex Footwear Ltd Syed Nasim Manzur said FDI has to be welcomed.
He expressed his support for FDI-facilitated growth rather than FDI-driven growth, but said "FDI is a must for growth".
He noted that consistency in policies played an important role in Vietnam growth which has not been present in Bangladesh.
The prominent businessman said Bangladesh can't remain protectionist and still expects participation of FDI in the growth.
"Tariffs must be brought down to be competitive with global business," he told the virtual meet.
He also stressed mind shifting in policies and improvement in connectivity and logistics.
Dhaka Chamber of Commerce and Industry (DCCI) President Rizwan Rahman said in the middle of the pandemic, overcoming different challenges, Vietnam has overtaken Bangladesh to become second-largest garment exporter in the world, which was somewhat expected.
He said Vietnam has also expertise in exporting machinery, mechanical appliances, nuclear reactor, boilers etc which has seen a growth of 41 per cent recently. At the same time, Bangladesh possesses really small light-engineering industry that has seen an impressive 81-percent growth compared to previous year.
"If Bangladesh wants to be competitive alongside its neighbours after LDC graduation, the country needs export-product diversification as well as local market development," he said.
He suggests learning from Vietnam, Bangladesh should also try its best to sign different types of bilateral and multilateral agreements with countries and regions to increase exports.
Mr Rahman also said, "While negotiating FTAs, it should be ensured that Bangladesh just not only benefits from those markets that it is trying to make agreements with, at the same time, own markets should also be opened for those countries."
Besides, Vietnam spends around 12 per cent of its GDP for human development while Bangladesh spends significantly lower in that sector, which needs to be increased, he added.
Mentioning that the USA had imposed trade embargo on Vietnam for about 20 years for political reasons, Mr Syeduzzaman said in 1986, the country came up with Doi Moi (economic reform strategy) which transformed its economy from centralised character into socialist-oriented market economy.
Under the initiative, Vietnam encouraged free-market incentives, private businesses, foreign investment, and foreign-owned enterprises for development of economy.
Through different trade agreements, joining regional trade blocs and carrying out other economic reforms, Vietnam will become a top manufacturing hub, especially next to Korea and Japan, within the next decade.
He also noted that the country has seen good growth in sectors like electronics, food processing, chemicals, leather goods etc, which has made it an attractive destination for investors.
Barrister Nihad Kabir questions whether relevant authority in Bangladesh keeps touch or knows anything really about foreign investors here.
She also questions the country's negotiating capacity for making the most of free-trade deals.
Meanwhile, former BGMEA president Rubana Huq, underlining the importance of product diversification, said instead of always protecting RMG sector, focus should be on how and where to diversify.
Stating that there are multiple sectors Bangladesh can go into for diversification, she said investors can go for manufacturing recycled yarn and polyester staple fibre for RMG sector while light engineering and automobile industry also have great potentials.
Referring to higher productivity in state-owned industries in Vietnam, she said Bangladesh needs to focus more on improving productivity for better industrial output.
Arguing the necessity of incentives for the RMG industry, she said, "It's not that I am in favour of incentives, but when there is low productivity and less investment on human capital, incentives are needed."
Emphasising improved negotiating skills for better export, UNDP Country Economist Dr Nazneen Ahmed said Vietnam linked economic policies with its foreign policy which allows that country to negotiate better internationally.
The country also stressed international integrations in its Socio-Economic Development Strategy 2011 in a bid to brand the country's potential on the global market, she said.
"Bangladesh can learn a lot from Vietnam-how it develops its economic diplomacy to attract more foreign investment," she added.
In the meantime, referring to similarities in setting export-led growth strategy between the two countries, , Policy Exchange of Bangladesh Chairman Dr Masrur Reaz said Bangladesh maintained over 6.0-percent GDP growth over the past 10 years while Vietnam registered similar growth rate for over 30 years.
However, he said, "Vietnam has signed about 13 FTAs with countries and regions while Bangladesh only signed one PTA (preferential trade agreement) and for that reason Vietnam gets better competitive advantage in the global market than Bangladesh."
Comparing logistics infrastructure and lead time for export and import of the two countries, he said logistics cost in Bangladesh is as high as 50 per cent while the target should be within 5.0 to 7.0 per cent.
Regarding export, it takes about 168 hours per consignment compared to Vietnam's 55 hours, and in terms of import, its 216 hours needed for Bangladesh while it takes 56 hours in Vietnam, he noted.