Though Bangladesh has been moving ahead and the country's economy has also been registering a persistent level of growth, the question that still arises is how sustainable the growth is. There is no doubt that the economy will continue to grow defying all odds, as reflected by the pandemic-time trend. Even so, the pace or rate of growth may have to face seasonal or occasional fluctuations in the near future as happened in the past. There may be unseen and unpredictable external and internal shocks. To absorb the shocks, the economy needs some strong instruments and policy adjustments. These will largely depend on identifying and promoting new drivers of the economy in the gradually changing world where traditional and protected drivers are unlikely to run the wheels of economy.
The drivers of an economy may be divided into two categories, though this type of classification is not universal. One is broader components and policies of the economy, while the other includes real sectors and sub-sectors. In Bangladesh, private investment and trade policy are two core drivers of economic growth for the last three decades in terms of the first category. Agriculture output, ready-made garments and workers' remittance are the main drivers in terms of real sectors.
A number of unfolding global developments have, however, already compelled the country to think seriously about the new drivers of economic growth.
Bangladesh is now in the final phase of graduation from the Least Developed Country (LDC) status by 2026. The graduation will ultimately remove all the preferential trade benefits the country has been enjoying so far. That's why LDCs are jointly pushing an agenda to extend the preferential trade schemes for graduating LDCs, for at least six years after graduation. In the upcoming ministerial conference (MC12) of the World Trade Organization (WTO), this will be a tough negotiation for the LDCs.
The climate change challenges have also put the current model of growth generation in different countries under question. In the latest international conference on climate change, countries have renewed their commitments to reduce carbon emission and enhance green activities. Developing countries are less interested in a gradual shift from the current resource-extracting and environment-polluting growth process on the plea that millions of people are still in abject poverty and they need to be uplifted. So, there is little alternative to compromise with the environment and climate for the time being. Developing nations including Bangladesh also demanded adequate compensation from the developed world to reduce carbon emission. Nevertheless, for the sake of long-term sustainable development, Bangladesh also needs to reduce carbon emissions.
The outbreak of the Covid-19 pandemic has also changed the global landscape in many ways and compels the nations to rethink the growth process. The pandemic makes it clear that without changing the patterns of development, people of the planet will have to suffer more in the near future.
Against this backdrop, rethinking the growth process and identifying the new drivers of growth have become an important task for all the stakeholders. In Bangladesh, Foreign Investors Chambers of Commerce and Industry (FICCC) has come up with its thoughts in this regard by joining hands with Policy Exchange, a local think tank. FICCI, which is a unique platform for foreign investors and multinational entities in Bangladesh, has undertaken research to identify the new drivers of economic growth in the future. According to the research, three new growth drivers are agribusiness, digital economy, and green finance. FICCI is scheduled to come up with the report today in Dhaka.
The research report attributes Bangladesh's resiliency and prosperity to increased private sector involvement, remittances, economic liberalisation and trade integration. It mentions that building on its achievements, Bangladesh intends to become an Upper-Middle-Income country by 2031 and a Developed Country by 2041, but it must initially overcome fundamental economic restrictions.
The report 'focuses on agribusiness, digital economy, and green financing for climate-smart investments' and tries to 'understand what is best to unleash their global and domestic competitiveness, taking into account global trends, Bangladesh's diversification needs and national priorities.' The goal of the research, as already explained by the researchers, is to provide insight into these markets which can be strengthened and improved for export markets in light of the best practices of the successful countries.
Identifying the potential new growth drivers mainly from the perspective of investment is a welcome move. FICCI argues that these three sectors or areas 'open investment opportunities to accelerate Bangladesh economy forward.' It indicates that foreign investors are looking for new areas to invest in Bangladesh.
Though the government has taken a number of initiatives to attract Foreign Direct Investment (FDI), the inflow in the country is still very low. The net inflow of FDI stood at $2.50 billion in the last fiscal year. So far, the highest amount of FDI came in FY19 when the net annual inflow reached $3.89 billion. It is not only the supportive broader policies and relaxed regulations but also promotion of the right sectors is necessary to attract foreign investment. That's why the research finding is important and also different from many others. Being a critical stakeholder of Bangladesh economy, the foreign chamber sets a new example to present the areas of interest of the foreign investors with strong research findings. At a pre-launch event, FICCI leaders thus asserted that the chamber wants to 'continue the momentum of the three growth drivers to bring in more FDI' and also 'to have more engagement with the government.'
Bangladesh has already demonstrated strong prospects in the agri-business and digital economy. Clear evidence is there that a transformation from traditional farm activities to diversified agri-business is on the way. Local entrepreneurs and investors are gradually investing on a bigger scale in agri-business. Again, digital financial activities are also flourishing in the country. Now, green finance can support both the agri-business and digital economy. Policymakers need to look into these three new growth drivers deeply.