Due to the declining role of labour in producing economic outputs, Bangladesh's economy is already under growing pressure. The labour cost differential is no longer enough for export and import substitution. Hence, the government has been offering increasing incentives, including cash incentives for export and high tax differential for import substitution. Although LDC graduation is a huge accomplishment, it will erode preferential treatments in the major export markets and limit the protection now being given to import substitution. To offset it, Bangladesh must look for ways to reduce production costs and improve quality.
To figure out how Bangladesh can sustain economic growth in the post-LDC period and beyond, we need to go to economic value creation basics. An economy can grow by both importing and producing ideas. So far, Bangladesh has been importing ideas and using them to add value through labour and natural resources. As stated, profit-making possibility out of labour-based value addition to imported ideas has been shrinking. Furthermore, experts are apprehensive of further erosion in the post-LDC period due to eroding preferential treatment. Hence, the focus should be on creating economic value out of the local production of ideas. To have sustained growth, particularly during the post-LDC period, in addition to importing ideas, Bangladesh should look for means for producing ideas and integrating them into products and processes so that value creation ability expands. To draw a lesson, we should investigate the underpinning of sustained growth enjoyed by Japan, South Korea, and Taiwan. Unlike many other developing countries, these countries deliberately focused on producing ideas and profitably trading them in the global market. Treating as external effects or spillovers to human capital and physical capital comes no closer to capturing the essential attributes of ideas that opened sustained growth paths to these countries.
The challenge for Bangladesh is to push the country to a stage where the economy starts unfolding value creation out of locally produced ideas-serving both domestic and global markets. It's time for Bangladesh to think beyond labour, infrastructure, energy, education, and human capital index. Instead of looking into ideas as an external factor and public good, there should be close attention to the role of ideas and explicit measures for increasing the local supply of ideas and their utilisation in products and processes. Although there has been an acknowledgment of ideas as an endogenous factor in contemporary thinking of economics, the economic value out of ideas not only depends on the local supply of ideas. Profiting from ideas in the globally competitive market economy is highly uncertain and also volatile. Hence, we should also look into the economic value creation dynamics out of ideas.
Furthermore, the supply of ideas and their utilization can take place in more than one stream. In addition to pursuing big ideas, we should also focus on the invention of millions of little ideas (for example, better ways to sew a shirt or grow, harvest, and package fruits), that make persistent economic growth possible. Here are a few examples.
GRASSROOTS LEVEL INNOVATION: People in farming or in aquaculture-among others-are after learning from experience for improving quality and reducing cost. Often, they organise whatever basic materials they get to implement their ideas. For example, ideas for using a small stick to give support to tree or plant branches could value. Of course, these ideas do not sound like great innovations. But the economic effect of millions of producers and users of such ideas could be significant. If such grassroots ideas keep adding 2 per cent extra to the rural economy, the compounding effect of it over 10 or 20 years could be significant. Hence the focus should be on fostering creativity, idea production, integration, and diffusion at the grassroots level. Our primary level education should take special measures to build such innovation capacity among millions of students.
CORPORATE OPERATIONAL INNOVATION: The corporate innovation culture primarily depends on importing great ideas. Ideas are imported in the form of design of products, capital machinery, operating procedures, and also as standards. But the lesson of other countries tells that learning in operation could be used to produce a series of small ideas, and integration of those ideas in production can improve the quality and reduce the cost.
PUBLIC SERVICE INNOVATION: Improvement of public service through innovation has a huge potential for reducing governance and regulation and empowering citizens. It's encouraging that the process has started. We need to scale up and deepen. As opposed to technology import and integration, the focus should be on developing a culture of producing ideas and utilising them to improve public service delivery.
PRODUCTION PROCESS ENHANCEMENT AND CAPITAL MACHINERY INNOVATION THROUGH IDEAS: Bangladesh largely relies on importing capital machinery. Fortunately, the ongoing development of component technologies has been offering the opportunity of developing ideas and retrofitting solutions for improving production processes. Particularly, the integration of ideas in the form of sensors, software, and actuators is a growing untapped opportunity for leveraging local ideas in production. Similarly, ideas for reorganising a sequence of operations like sewing a shirt also offer opportunities to create economic value in production process innovation. Such possibilities are equally waiting in farming and other sectors of the economy.
INCREMENTAL ADVANCEMENT OF PRODUCT: So far, producers in Bangladesh are busy replicating foreign products. In some cases, they imitate. Unfortunately, often the imitation is a poorer version. It's time to focus on producing ideas and using them for the incremental advancement of products we produce so that users find redesigned products more suitable to serve their purposes-preferably at less cost.
LATERAL ENTRY IN THE INNOVATION RACE OF EXISTING PRODUCTS THROUGH REDESIGN: Products are not static. Irrespective of the greatness, every product has been going through an evolution. One of the areas Bangladesh should focus on is to produce ideas for participating in the evolution race of major industrial products. Hence, the focus should encompass participation in the evolution through innovative ideas of redesign.
STARTUPS AND DISRUPTIVE INNOVATION: Startups have been major actors in producing a flow of ideas and using them for fueling creative waves of disruption. Unfortunately, startups in Bangladesh are mostly after imitating foreign ideas and implementing them through the integration of imported technology-mostly information technologies. Their belief appears to be that the sheer benefit of digitization is sufficient enough for profitable revenue. Hence, they are after advertisement and direct subsidies for increasing customers and also valuation. But such an approach does not open the path of producing economic value out of local ideas. Hence, there is a need for changing the focus of startups from imitation, subsidies, and valuation to creating a flow of ideas and their utilisation for turning great ideas into profitable disruptive innovation through the flow of incremental ideas.
SCIENTIFIC DISCOVERY AND TECHNOLOGY INVENTION: This is a very long and risky path for creating economic value from the local production of ideas. Unfortunately, the academic community of Bangladesh appears to be in support of pursuing this approach-the linear model. The more prudent approach should be for improving existing or emerging products through scientific research.
In addition to countering erosion of preferential treatment in the post-LDC era, Bangladesh is also required to address growing unemployment among university graduates, attain sustainable development goals, and meet 2031 and 2041 aspirations. It appears that the existing focus on skill development, infrastructure development, economic zones, and expansion of education is not sufficient to address these four development issues. Of course, progress along these lines is useful. There should be well-articulated strategies and policies and their implementation so that Bangladesh starts making progress in deriving economic value from production and utilisation of ideas-including millions of little ones and a some great ones.
M Rokonuzzaman, Ph.D is academic and researcher on technology, society and policy.