The Financial Express

At inflection point in development path!

At inflection point in development path!

If we are going to lose half the national productivity due to want of quality people, who will take Bangladesh to the next stage of development and at least retain the achievements so far?

That's what has been apprehended in a recent report published by the World Bank and the International Finance Corporation (IFC).

The Covid-19 crisis has by this time exposed the weakness of the country's growth model that once leveraged low-cost labour in the international markets. Now, this model, as observed, faces multiple threats -wage pressure, technological change, environmental and social compliance and erosion of trade preferences.

"Bangladesh is at a critical inflection point in its development path," states the report styled 'Creating Markets in Bangladesh: Unleashing the Private Sector to Sustain Development Success' that has mainly diagnosed the country's private sector.

The country could have averted certain uncertain path confidently and in no time, had there been, among other things, a large pool of skilled and educated manpower to embrace high value economic activities. For that to happen, public spending on education and research, alongside healthcare, should have been increased sharply whereas it is 'among the lowest in the world'.

Thus, human capital gaps reduce the productivity of Bangladesh's future workforce by more than half, according to the World Bank Human Capital Index. Even a few years before the pandemic, 74 per cent employable young women were unemployed and the ratio for males was still not very low, 54 per cent.

High unemployment, as is the case today, is not just a dormant humanitarian issue, rather a definite wastage of generations comprising millions of human faces.

Nearly half the Bangladesh population is vulnerable to falling back into poverty, says the WB-IFC's diagnostic report. It still has not taken into account the data of the new poor after March 2020.

So, reimagining the country's developmental model is recommended for ensuring Bangladesh's post-Covid-19 recovery when crisis management has become another crisis.

The global agencies offer solutions by suggesting reform agenda to strengthen and modernise the private sector and help the country move to the next stage of development.

The private sector has also been criticised for it 'has not moved beyond its initial success and becoming increasingly concentrated and inward looking, seeking to maximise rents from existing markets instead of embracing openness and competitiveness'.

Bangladesh's private sector has been constrained by what the report called 'one of the world's most burdensome business environments, underpinned by a regulatory governance regime that is unpredictable, nontransparent, and discretionary'.

Furthermore, the pandemic may destabilise the financial sector, the report warns and cites a wave of defaults by influential firms, along with loan rescheduling and restructuring. It is argued that increasing vulnerability of the banking sector contributes to declining private sector investment and threatens macroeconomic stability. Despite all such challenges, Bangladesh has the scope to 'take concrete steps toward future change' to capitalise on possible opportunities. That, according to the report, requires 'increasingly sophisticated, innovative, and diversified manufacturing and agribusiness sectors, as well as an emerging value-added services sector supported by modern infrastructure'.

In short, creating a level-playing field for businesses, restructuring and modernizing the financial sector, and removing infrastructure constraints are the key.

Among a number of suggestions made in the report is establishment of an independent banking commission to review stability issues and adopt a reform road map. It is explicitly unlikely notwithstanding a series of scams in the banking sector in the past decade. Innumerable suggestions, even excepting the ones from local constituents, be it for addressing development concerns or seizing fresh opportunities, remain shelved over the years.

The latest report is one of many, which has euphemistically defined a 'significant, comprehensive strengthening of governance' as a prerequisite for delivering the reforms. It nevertheless doesn't deal with public ownership of the reform agenda.


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