Bangladesh needs to do more - especially at the policy levels - for a strong presence in the club of developing countries. Sometimes, policy-level actions thwart development efforts.
The last two decades were the decades of transformation for the country's economy in terms of achieving a greater degree of economic growth. Bangladesh's race to higher economic growth was underpinned by a higher growth in export and increased volume of remittances from its overseas workers. The surge in export was the result of globalisation that tore down many of the tariff walls among the trading countries. As a least developed country (LDC), Bangladesh enjoys many facilities offered by the advanced economies. One such facility is the GSP (Generalised System of Preferences) offered by the European Union (EU). This scheme made rooms for the export of Bangladeshi garment products with no or little tariff to the EU countries, along with other conditions with regard to value addition to the export items also greatly relaxed and reduced.
As Bangladesh has become known as a hub of garment manufacturing industry, countries like Canada and Japan, from outside the EU bloc, also look to Bangladesh as a potential sourcing country for their readymade garment imports. Bangladesh's RMG (readymade garment) export has now surged to more than $28 billion per annum. If it can maintain the average growth of last decades in value, it may reach $40 billion within the next few years. The United States (US) is the second largest market for Bangladesh's RMG products even after paying higher taxes than some other countries with similar exports to the US market.
So far it has been good for Bangladesh with regard to its export, but the future may not be that much rosy. USA, being the second largest export market for Bangladesh, is contemplating even a higher tax on the imports, including RMGs, entering from other countries. The US grants waiver to tariffs, but it is only in cases of imports from countries of their choice. There is hardly any hope that Bangladesh will receive any special consideration in this regard from the incumbent US administration. There is a real threat that Bangladesh will have to pay more tariffs in the coming days with regard to its exports to the US market.
The global trade pattern is changing very fast. Now the big economies - especially the US - are no more interested in promoting global trade by using the World Trade Organisation (WTO) system. There will be free-trade blocs among the interested countries, but the world as a whole will not be a free-trade world. There is a likelihood that the countries like Bangladesh will be left behind and made isolated.
Hence, Bangladesh should not wait any more to see Doha Round coming to a successful conclusion or look to WTO route to find a freer world for its exports. Bangladesh can and should negotiate its own free-trade agreements (FTAs) with trading partners and other interested countries. The proposal on the table from China needs to be considered in this regard.
Accessing to export markets will be the determining factor for consolidating Bangladesh's status as a developing country. Graduation to the group of developing countries is important, what's more important is the consolidation of the position. Bangladesh made mistake in depending too much on the WTO route for having market access. A country like Vietnam that liberalised its economy much later than Bangladesh has already negotiated more than a dozen of FTAs, whereas Bangladesh has not signed a single one. Unless it becomes a partner with other economies in economic management and trade, Bangladesh will not receive the expected investment - be it from within or without.
Bangladesh economy cannot grow beyond the rate of 7.0 per cent in absence of a surge in investment. But without a growth rate of 7.5 per cent or beyond, it cannot expect to consolidate its position as a developing country within the stipulated time.
Apart from pairing with other economies in multi-dimensional economic and trade forums, Bangladesh needs to see that its fiscal and monetary policies at home lend support to the strategy of high growth rate. At times, these two policies are found to be working at cross-purposes rather than being supportive of each other.
Bangladesh needs massive investment in infrastructural development that should primarily come from within - both from the public and private sectors. The government alone cannot make available all the funds required for investment. Hence, private sector needs to be taken as partner - in some cases as the dominant partners. Sourcing long-term capital for infrastructure from the capital market can be another idea. The market should be used as a conduit for the required supply of capital to the economy.
Abu Ahmed is Professor of Economics, University of Dhaka.
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