Bangladesh's breakthrough moment: A Vietnamese diversion?  

Imtiaz A. Hussain   | Published: February 28, 2019 21:51:57 | Updated: March 04, 2019 20:31:49

Describing Vietnam's phenomenal growth since its unification, Peter Vanham isolated three key facilitating factors, in a "World Economic Forum on ASEAN" article (September 2018): embracing trade liberalism "with gusto"; facilitative domestic reforms, such as deregulation and lowering business costs; and heavy public investments on human and physical capital. Shifting from being "one of the poorest in the world" at the time of its unification in the mid-1970s, Vietnam, according to Vanham, has become "one of the stars of the emerging markets universe." The key was the turn to reforms from 1986, economically and politically.

That description could be, in fact, should be, Bangladesh's. We were also "one of the poorest in the world" at the time of our own independence, and for much of the 1970s. Our phenomenal rise into the second largest RMG (ready-made garments) exporter also makes us "one of the stars of the emerging markets." Our growth-rate, having crossed the 7.0 per cent threshold last year, is also a few decimal points here or there of Vietnam's growth-rate, and political reforms, with more democratic elections since then than Vietnam's, placing us even a few yards ahead of Vietnam.

Yet, the same zing is just not there. Something or the other is simply not connecting for us. Applying Vanham's three forces might expose what that might be.

His first factor might just be one of them, perhaps the crucial key. Our 10.7 per cent average tariff-rate, one of the highest in the world, is almost three-and-a-half times higher than Vietnam's 2.9 per cent. In a neoliberal atmosphere, this matters. We are not only not opening up our full economy to the same competitive forces as Vietnam has done, but the outcomes emanating have also been less efficient: competition kills the weak and lets the superior-skilled and better-endowed enterprise succeed. Not only these, but shielding the weak ripples across the economy just as competition does, while the growth of inefficient enterprises not only fattens the economy, but also unnecessarily so. Incongruent interpretations of whether the Accord- and Alliance-based reforms have transformed our RMG plants (our top, nay, only export-driver), and if so, to what extent when the top RMG-exporting country, China, is facing mounting labour costs, full-blooded competitive Bangladesh plants should have been exploiting this opportunity by now. By not doing so, we have opted to feed the two dynamics whittling away at our comparative advantage: China off-shoring its own RMG plants, and in the scramble among possible host-countries, Vietnam edging Bangladesh as the more lucrative of the possible off-shore locations; and Vietnam's more competitive RMG industry presenting more durable future prospects than ours in a two-way tussle.

All these trade-related dynamics feed into the second of Vanham's factor. As alluded to, our own domestic reforms show more stickiness than Vietnam's. On the economic front, as just observed, we show more protectionism, and because we do, certain institutions and policy-making infrastructures have either not been touched, or if in fact brought under reform consideration, refuse to budge given the stubbornness of that past stickiness. Whether it has been the absence of soft infrastructures, such as borrowing facilities and banking reliability, or hard ones, such as adequate highways connecting plants to ports, storage capacities, and so forth, or simply the paucity of such inputs as regular energy supplies to keep the factories functioning, we are paying dearly.

We are doing so unnecessarily, a point that could not but be heeded by our government. Over the past 2-3 years, the country has embarked upon an ambitious megaproject crusade, as if to establish in one fell swoop the key missing infrastructures. Although the crucial ones, such as energy supplies, highways, railways, bridges, and ports, are at the heart of this campaign, they should eventually open up other transactions within the country, in turn, softening the dominance of the RMG sector in our gross domestic product (GDP). By contrast, Vietnam's exports almost equal the totality of its GDP value. Breakthroughs here, for example, through the growth of an army of even family-owned restaurants, hotels, and other low-waged production or service-centered enterprises around the new infrastructures to satisfy the massive growth of traffic would more than nudge the domestic economy. When Varhan speaks of Vietnam, having "few spare workers," we hope in the 3-5 years ahead that will also be the case for Bangladesh.

Clearly, though, these megaprojects have to more than deliver since they are also compensating for the sluggish reform-pace. A drastic downward spiralling average tariff-level would seal the case to make Bangladesh's economic transformation show that same zing as in Vietnam.

That would routinely enhance greater consideration of our human and physical capital. Our typical factory worker, indeed citizen, is far better endowed today than ever before: physically, with nutrition, in child mortality rates, and particularly population growth-rate, and materially, better clothed with higher earnings and more savings. Sliding towards a mere replacement level, the Bangladesh population growth-rate has scored a victory more global than just local, a battle Vietnam did not have to wage with as much intensity as the densely populated Bangladesh, filled as it is with too virile people. Translating these accomplishments (to which must also be added the battles to conquer food-scarcities), the market-power can be a triumph in the making provided we play our cards right. As consumption expands, so too much tax-coverage, scarcities of sorts, and even more in the string of soft infrastructures (to cover health, education, vocational training, and insurance) to match the megaproject crusade supplying the hard infrastructures of physical plants, highways and gateways.

Resembling Vietnam is not a chimerical exercise. In fact, it may just become a secular long-term outcome, much like newest European Union (EU) members resembling more their original counterparts today than would have been expected when the European integration streak began in the 1950s. Many countries between Bangladesh and Vietnam happen to be going in the same direction, with similar instruments at their disposal, and a net resource-base (after liabilities have been discounted), not all that far apart. Cambodia and Myanmar, like Bangladesh, are newcomers on a pathway that Indonesia, Malaysia, the Philippines, and Thailand have been treading for a little longer.

Galvanising them has been India's Eastern approach, as in its highway with Myanmar and Thailand, pipeline with Myanmar, but broader still the 1997 BIMSTEC (Bay of Bengal Initiative for Multi-Sectorial, Technical, and Economic Cooperation) integrating efforts, and in the pipeline a Kolkata-Ho Chi Minh highway. That highway would go through Bangladesh's newly-built Padma Bridge and related highways, inducting Bangladesh further into this integrative scheme. Our commitment in principle to this dynamic only needs back-up policy measures that open us up to more cooperation and integration. Our best could still lie ahead; and when it comes, its glow could rival Vietnam's, if not more resplendently.

So when we next look out of the window (any one), it would do us well to grab some of the opportunities passing us by, loosening our strictures, and imagine the big-picture of which we remain only a part.

Dr. Imtiaz A. Hussain is Professor & Head

of the Department of Global Studies & Governance

 at Independent University, Bangladesh.


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