The Financial Express

Made in Bangladesh vision

Made in Bangladesh vision

Made in Bangladesh has been an age-old dream. Just right after the independence, Bangladesh started with import substitution strategy. Despite initial success, the import substitution strategy failed to establish a strong industrial base in making Made in Bangladesh a global brand. Although handicrafts and jute products out of local ideas, labour, and natural resources carry truly Made in Bangladesh label, their demand is not highly scalable for developing large industrial clusters, creating high-income jobs. On the other hand, contract manufacturing of apparel for global brands has turned Made in Bangladesh label a household name in the western world. Hence, what are we after? Are we after China's Made in China 2025, or India's Make in India or our age-old Import Substitution strategy? Let's look into different approaches in pursuing Made in Bangladesh vision. Let's figure out what it takes to develop a strong industrial economy, create high-income jobs and drive prosperity out of Made in Bangladesh. 

Let's begin with Made in Bangladesh label carried by many of our handmade products. These are indigenous products. For centuries, we have been producing them. Their designs are from of our own ideas. They are made with our locally developed processes with locally available materials and labour. Often, we term them indigenous products or products of cottage industries. But unfortunately, we could not succeed in creating a large number of high-income jobs in designing and making them. We could not develop large industrial clusters out of them either. In fact, the relative role of these products carrying Made in Bangladesh label to drive our economy has been falling. Hence, it may not be unfair to state that if we attempt to scale up this model, perhaps, Made in Bangladesh will not succeed in developing a strong industrial economy to make Bangladesh a developed economy.      

Import substitution is another option, often termed as a leapfrogging strategy. It's about to replicate many state-of-the-art industrial products, starting from mobile phone to automobile, for carrying Made in Bangladesh label. Unlike handicrafts, ideas and knowledge of these products in the form of the overall design, intermediary components, capital machinery, production processes, and also expertise are imported to produce replicas of foreign products. To promote this strategy, less developed countries have been offering financial incentives in the form of tax differential, subsidies, and many more. Furthermore often, intellectual property infringement issues are overlooked. However, despite a long history, more or less none of the countries, including India or Bangladesh, could develop a strong industrial base out of it. For example, Bangladesh steel and engineering corporation had many enterprises producing import substitution of many products, starting from a razor blade to television set. But none of them has scaled up into a globally competitive industrial unit. There could be an issue about inefficiency and corruption of state-owned enterprises. But what about private enterprises assembling television or household electronic products in the 1980s. Why could not any one of them survive, let alone turn Made in Bangladesh into a global brand?

The question could be about Make in India. Just after the independence in 1947, India adopted the import substitution strategy. India offered diverse incentives and protections to build a globally competitive industrial economy out of it. Yes, India learned how to replicate many foreign products. But the economy was falling behind, as locally produced replica could not keep pace with the global race. For example, while India was making cars and using them, advanced countries kept improving them. As a result, products produced as part of import substitution-carrying Made in India level-kept falling behind the global race. Consequentlly, India gave it up and started opening up the economy to global competition. India's Make in India appears to be a newly packaged old import substitution strategy. Some people are arguing to be different this time. How will it be? Will it be by giving up the domestic market to local production of foreign companies? Well, that is not all that bad as long as it creates high-paying local jobs. But, how will Make in India create high-paying jobs? Suppose if Make in India keeps relying on public incentives to add value out of local labour and natural resource, will this programme succeed to expand the economy out of the knowledge and ideas of a growing number of local graduates?

Well, how did Japan succeed in building a robust industrial economy? Is it not due to imitation of foreign products? How is it different from import substitution or Make in India? Often, Japan's path of building an industrial economy is misunderstood. Apparently, in post-WWII, Japan was after imitating western products. But the reality had been different. Instead of replicating or imitating, Japan mostly focused on reinventing the products once invented by Europeans and Americans. Their radios, TVs, tape recorders, VCRs, cameras, or microwave ovens emerged at the beginning of a journey of reinventing them. Invariably, they appeared in primitive form, as they were reinvented around emerging technology core. Unlike India or many other less developed countries, Japan did not just focus on making them. Instead, they focused on improving the underlying technology core and redesigning reinvented products to make them increasingly better and also cheaper. Consequentlly, they took over Western markets and also caused disruptions to some of their technology icons by offering better-performing reinvented products at less cost. On the other hand, in its long journey of import substitution, India could not take over the edge in any product invented by the West.

There could be an argument in favour of import substitution citing Bangladesh's pharmaceutical industry. Due to Trade-Related Aspects of Intellectual Property Rights (TRIPS), Bangladesh, as a least developed country, got the privilege to reengineer and replicate some patented drugs. As a result, the cost of copying them has been far less than original producers incur, as Bangladesh's generic producers do not incur the R&D cost, which is even in the tune of more than a billion dollars for a single drug. Furthermore, the shelf life of a drug is often more than 10 to 20 years. Hence, Pharmaceutical companies have attained some success by acquiring the capability of replicating patented drugs and keep making them. But industrial products like smartphones or cars are highly amenable to further advancement, either through the addition of features, enhancement of existing features, or change of technology core.

In contrary to pharmaceutical, for the industrial economy, there is a patent issue. But even if we succeed in getting around the patent, the shelf-life of the replicated version of many products is less than one year. In fact, due to that reason, Apple is compelled to keep releasing successive better versions of its magical iPhone at regular intervals-making the previous versions obsolete. Hence, attaining the capability of making is not enough. On the other hand, limited scale advantage does not favour producing products just for the local market. To access the export market, Made in Bangladesh must comply with IPR issues, and make the product better and cheaper. How is it feasible to make it better and cheaper? Well, through subsides, someone can make replicated products cheaper. But is it a success or failure? Does it help to develop a strong industrial economy to drive economic prosperity in making Bangladesh a developed country? But what about low-cost labour? Its role is insignificant, as labour contribution in total cost is less than 10 per cent in many products.  Well, even upon giving tons of subsidies, how will you make Made in Bangladesh a better alternative?  

To achieve the aspiration of advancing economic prosperity out of Made in Bangladesh, we should go back to the basics of wealth creation in the industrial economy. In addition to capital and labour, we should focus on ideas. As opposed to making copies or producing inferior imitations, we should focus on reinvention. The good thing is that all major industrial products have been going through an endless journey of evolution as rolling waves of reinvention. Each intersection of two waves gives an entry opportunity and allows new entrants to build momentum out of a flow of ideas for offering a better alternative at less cost. It's time to join this reinvention race to develop a globally competitive Made in Bangladesh brand while establishing a strong industrial base out of knowledge and ideas instead of just giving incentives and subsidies for adding value out of labour.

 M Rokonuzzaman, Ph.D is academic and researcher on technology, society and policy.

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