Bangladesh appears to be too much complacent on its achievements these days. Such complacence is understandable, but too much of that may be harmful. Bangladesh has a long way to go and the path is not easy. In some cases, the economy is still on a razor's edge. Our growth rate of 7.0 per cent per annum or better is underpinned by two factors - one is the surging export over a decade and the other one is the increasing inflow of remittance amounting to over USD 14 billion per annum from the non-resident Bangladeshis (NRBs).
The export growth was mainly the result of globalisation. Bangladesh did not enjoy any extra facility in marketing its export, neither from the European Union (EU), nor from the United States (US) - the largest economy of the world. EU offered us the generalised system of preferences (GSP) facility which was offered to other Least Developed Countries (LDCs) also.
The EU is the largest market for Bangladesh's export, followed by that of the US. In the US market, Bangladesh did not enjoy even an equal facility. Rather, this country was discriminated against in tariffs when compared to the same from other LDCs' exports. African countries enjoyed duty-free, quota-free (DFQF) access to the US market under a separate act called AGOA (African Growth Opportunity Act). But Bangladesh did not have anything like that for RMG. The country was, however, offered GSP facility for some of its exports which was suspended four years back. Bangladesh performed good with regard to its export to the US market because of its cost competitiveness even by paying more than 15 per cent duty on average.
Whatever Bangladesh did, it could do so by using the World Trade Organisation (WTO) route of globalisation. The country ardently hoped that the successful conclusion of Doha Round of Multilateral Trade and Investment Liberalisation would open up a whole range of opportunity for Bangladesh, but due to non-cooperation from the advanced economies, especially from the US, the Doha Round did not reach a successful conclusion. Rather, it was abandoned in the middle and now no one who favours globalisation hopes that the WTO route will make any headway any more.
The countries, which once advocated strongly for a global free trade and investment regime, have now one back on what they used to say. They are now looking for growth and expansion of their economies by using opportunities from within. Increasingly, the world trade is coming under a threat of the competitive tariff walls. The first was started by the US, now other economies are also following the suit. In this situation, the worst loser economies will be the ones like Bangladesh, whose growth was underpinned by the export-led strategies.
What can Bangladesh do when its exports come under additional tariffs? Bangladesh can do and should do what other countries are doing - forging economic unions regionally, and signing as many free-trade agreements (FTAs) as possible with the existing and potential trading partners. Whoever wants to extend hands to Bangladesh, Bangladesh should extend its own hands in return. Because, it might not have too many friends around to help it grow economically. The single stumbling block before the Bangladesh economy is the limited market access with regard to its exports. By joining the economic unions and becoming partners in the FTAs, Bangladesh can overcome this problem, at least, to some extent.
If Bangladesh thinks that it will grow on its own, it will be a mistaken idea. A small economy like us cannot grow on its own, it can only grow at the expected rate by becoming partners with others. Having access to the markets of bigger economies should be Bangladeshi's preferred strategy. Once Bangladesh can become a full or associate member of economic blocs like Association of South EAST ASIAN Nations (ASEAN) or the newly-signed 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) confidence of the investors here will go sky-high.
More foreign direct investment (FDI) will flow in. But partnerships with small economies like Nepal, Bhutan or even Sri Lanka will not help us that much. Because these economies together cannot offer us what markets like Canada or Japan can offer us. Accessing to the Chinese market should receive a priority consideration from our policymakers. If china wants an FTA, Bangladesh should seriously consider it. We need to remember that China has the will and capacity to help us. The country is already helping many LDCs and developing countries under its OBOR (One Belt-One Road) programme. Bangladesh should act timely. It must forget the way it did its trade in the past since the whole trading pattern is changing too fast across the globe.
In the coming days, there will be free trade among the economies belonging to the FTAs or economic groupings. For others, there will be tariff walls. Bangladesh's achievement should be measured by how much it can increase its export growth in the next few years. Countries that are small and mostly isolated from the global system are the ones still remaining as the LDCs. The fact is that the small economies graduated from LDC status to that of the developing ones with the help of other big economies. The East Asian countries are the good examples in this regard. Could Taiwan, Singapore or Korea reach the present level in terms of economic strength without help from the US or Japan or both the giant economies?
Support from the monetary policy is also important for helping the economy transact through the desired growth path. In an economy like Bangladesh, the monetary policy should be supportive to its investment needs. This can be attained by keeping the interest rate low. The recent move by Bangladesh Bank towards reducing the cash reserve ratio (CRR) and that of adjusting the rate of repos downward are the steps in the right direction. The next agenda on the table for Bangladesh should be its tax regime. The corporate income tax should be rationalised downward so that its economy remains globally competitive.
Abu Ahmed is Professor of Economics, University of Dhaka