MIC status by 2021: Challenges and opportunities

Once in a while a phrase comes along that captures the imagination of the people. In Bangladesh today, that phrase is achieving the status of middle-income country (MIC) by 2021 to mark the country's 50th year of independence.

According to the World Bank report, Bangladesh's economy is likely to grow between 6.4 per cent to 6.8 per cent in 2017 and 2018. But several studies show that to achieve the goal of middle-income status by 2021, average annual Gross Domestic Product (GDP) growth rate will have to rise from the current 6.0 per cent to 7.5-8.0 per cent, while sustaining remittance growth at 8.0 plus per cent. To secure the GDP growth rates projected, the investment rate will need to expand from 28.9 per cent in fiscal year (FY) 2015 to around 34.4 per cent by FY 2020. Unfortunately, investment, export and remittance that are considered as important drivers of economic growth in Bangladesh, currently are in a sluggish mode.

INVESTMENT AND INFRASTRUCTURE SCENARIO: In FY2016, investment as a share of GDP was 29.7 per cent, lower than the target for the fiscal year. Private investment which typically accounts for about 75 per cent of total investment has been stagnating for last few years. Industry experts say that the deterrents  that discourage investors include time-consuming bureaucracy, poor socio-economic and physical infrastructure, unreliable energy supply, corruption, low labour productivity, undeveloped money and capital markets, high cost of doing business,  complicated tax-system, frequent changes in policies on import duties for raw materials, machinery and equipment, delays in decision making, etc.

In 2014, the World Economic Forum evaluated and rated Bangladesh's infrastructure at 127th amongst 144 countries. Because of weak infrastructure, the entrepreneurs have to wait for many years for connectivity of gas and electricity after setting up their industries. According to the report, getting electricity in Bangladesh takes 428.9 days and costs 2860.9 per cent of income per capita. The country now produces 2,700 MMCF of gas per day against a demand for more than 3,300 MMCF. There was no industrial gas connection in the country for the past five years. Additionally, more than 20 per cent of the population (about 31 million) is connected to the power grid, and companies often have to use their own back-up power generators because of the high susceptibility to blackouts. Poor infrastructure also makes it difficult to transport goods across the country.

So often we hear complain from the business community about congestions and inadequate infrastructure at Chittagong sea port and at Benapole land port. About 92 per cent of Bangladesh's seaborne trade is done through the Chittagong port. Due to congestion, and inadequate infrastructure, the container ships have to wait long at the port. As a result, the companies concerned have raised the container fare of Chittagong-bound cargo vessels. It takes around 15-20 days for unloading goods at the port. Lingering problems at Chittagong sea port had been causing serious adverse impact on the country's trade and commerce and raised the cost of doing business.

The World Bank's Doing Business report 2018 showed that Bangladesh achieved slightly more points than last year's but still its ranking slipped for fall in some indicators in addition to starting business. Bangladesh's grade registered major fall on -- starting a business, 131 from last year's 122; getting credit, 159 from 157 last year; protecting minority investors, 76 from 70; paying tax, 152 from last year's 151. Starting business here is difficult, particularly because the initial spending on getting licence and permits is very high, according to the report. The report also points out changes in regulations affecting 10 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Those factors, combined with high levels of corruption, make Bangladesh one of the hardest places in the world to conduct business.

Therefore, for faster growth to move to the next level and realise the goal of becoming a middle-income country by 2021, the country needs to reform its business regulations, and put more emphasis on reducing infrastructure and energy deficiencies, reducing corruption, simplifying customs procedures, making land acquisition easier, improving access of private sector companies to credit and making the security situation more stable.

EXPORT: According to the Export Promotion Bureau (EPB), Bangladesh earned $34.83 from exports in the fiscal year 2016-17. Of the amount, the RMG sector alone earned $28.15bn which accounts for over 80 per cent of total exports, followed by several other products including agricultural products, frozen food, jute and jute goods, and leather. Exporters and trade analysts say that due to narrow export basket and infrastructure bottlenecks, we are losing our competitiveness to some countries such as India, Vietnam and Pakistan. They predict the country will face heightened competition in readymade garment (RMG) export and therefore, sustaining the current high export growth will be an uphill challenge in the coming years.

Over the past 10 years, garment exports had been increasing at a year-on-year rate of over 13 per cent. But in 2016-17, country witnessed an increase of only 1.69 per cent year-on-year, according to the Export Promotion Bureau (EPB), which was the lowest in the past 15 years. Some other sectors also saw a decline in their year-on-year export performance. They include frozen and live fish, vegetables, fruits, flowers and dry foods (by 1.74 per cent to $526.45 million); petroleum by-products (by 17.93 per cent to $243.77 million); leather (by 16.30 per cent to $232.61 million); and bicycles (by 16.83 per cent to $82.46 million). On the other hand, leather and leather goods exports grew by 6.29 per cent to $1.23 billion, jute and jute goods by 4.66 per cent to $962.42 million and footwear by 9.90 per cent to $240.88 million.

Since export has been a key driver of economic growth and constitutes the single-largest source of foreign exchange earnings, we have no alternative but to find new markets for export. Even though there are huge trade opportunities in the region, Bangladeshi exports to Asian countries are still low due to absence of proper preferential trade agreements and quality products. Exporters and trade analysts say that removing non-tariff barriers, signing trade-friendly bilateral agreements and proper usage of preferential trade deals can boost Bangladesh's exports to the region.

Therefore, while we diversify our products and look for alternative markets for our readymade garments and reduce dependency on North America and Europe markets for export earnings, at the same time we need to be innovative and use labour and capital more productively to move "up the value chain" into exports of more technologically advanced products, like information and communication technology (ICT) goods, electronics, toys, etc.

REMITTANCE: According to the Bangladesh Bank, country received US$13.6 billion remittance in 2016, which is much low from $15.3 billion in the year 2015. Remittance has not only fattened our foreign reserves but also helped us to improve the social and economic indicators like nutrition, living condition and housing, education, health care, poverty reduction, social security, and investment activities of the recipient households. The sector, which comprises 11 per cent of our GDP and is one of the major driving forces of our economy, unfortunately never got the proper attention of the authorities concerned.

According to the Bureau of Manpower, Employment, and Training (BMET), the vast majority of Bangladeshi workers, who migrated since 1976, are unskilled and semi-skilled people. Just imagine, if these people were all skilled like plumbers, electricians, drivers, nurses, medical assistants or professionals like doctors, engineers, lawyers, IT specialists, etc., what impact it would have had on our foreign exchange earnings.

Time has come to focus on how we can develop our human resources and thus increase our remittance earnings. Our education system is still expensive for a large segment of the population and the quality and curriculum do not effectively serve the goals of human resources development. What we need is an education system with a curriculum which will produce a skilled person after he/she passes SSC and HSC. Keeping in mind the demand of our economy and the changing global economy we have to develop a linkage between our education system, on the one hand, and the job market, on the other. We need to include vocational courses, Information and Communications Technology (ICT)-based education from junior level (class 6) to higher secondary (class 12) and accordingly syllabuses should be updated reflecting the market demand so that they can hold advantageous positions for job in local and foreign market.

CONCLUDING THOUGHTS: Prime Minister Sheikh Hasina is optimist that the country will reach middle-income status by 2021. But the sole pursuit of GDP growth or per capita income shouldn't be the government's only objective, nor should GDP or per capita income be considered a definitive measurement of human welfare. Per capita income indicates the income each person would have if Gross National Product (GNP) were equally divided among the population of a country, which, actually, is not the case. It does not measure people's well-being and the development success of a country. It is an average estimate which hardly shows how income is distributed among the population but doesn't indicate whether they are living fulfilling life or not.

We should not neglect the story of more than a quarter of the population (26 per cent) living below the poverty line, earning less than $2.0 a day, 67 million people who don't have access to improved sanitation and over 45,000 children under five years old who die annually from diarrhea. More than 26 million people lack access to a safe water source and two-fifths of children are chronically malnourished. We should not forget the communities who live around open air sewage systems and have limited knowledge of hygiene. Excessively focusing on economic indicators, such as GDP growth and per capita income, takes our attention away from the real measurement of a country's and people's progress - our overall well-being.

Therefore, what Bangladesh needs is to focus on big ideas, big thinking  to identify the drivers of future growth and on creating conducive and supportive environment for businesses to work, commerce to take place and economic activities to flourish. The country needs a leadership which will work with a sense of urgency to bring a total transformation of the country: build a people-centred economy where all citizens will have equal access to education, health care and social security, and ensure good governance and redistribution of wealth - moving money from those who have too much of it to those who have too little.

afsarulhaider@gmail.com