Originally posted in The Daily Star on 22 March 2021
Bangladesh has made a transformative journey during the last five decades since its independence in 1971. Steady economic growth, and achievements in the social arena, including primary school enrolment rate, immunisation against early childhood diseases, reduction in infant mortality rate, and significant progress on water and sanitation are some of the accomplishments of the country which has set examples for many countries. Another transformation of the economy has been in the area of trade openness. The economy of Bangladesh has integrated into the global economy through exports, imports, remittances and foreign direct investment. More than 60 percent of the economy is globally integrated. This indicates the strength of the economy which is capable of taking part in global economic activities.
As we celebrate the achievements of the last 50 years, we also have to work towards consolidating what has been achieved during this period, improve upon where there have been limitations and prepare for the new realities in an ever-changing global setting. The country has done so much, but so much is also left to be done. Among those, five issues will need special attention in its journey during the next decades.
First and foremost is the issue of inequality. Economic and social progress are faced with the challenge of unsustainability due to high inequality. The experience so far has been that as economic prosperity of the nation has increased, inequality has also risen. There are certain pockets of poverty that are lagging far behind and where the benefits of various government and non-government programmes hardly reach. Among these are urban slums, coastal belts and other ecologically vulnerable areas. There is also a divide between rural and urban income distribution. One of the reasons for this is that income earning opportunities for people, particularly the youth, are limited. Not everyone who enters the labour market get an employment. So, growth has not been able to create adequate jobs. Private investment, which is a major source of employment, has remained low and stagnant. The other reason for inequality is the concentration of income and wealth among a very few people in society. This wealth is not necessarily earned by them. Much of this is ill-gotten. A significant part of this wealth goes out of the country. It does not come under taxation or any other public scrutiny.
This brings us to the second issue which is to establish good governance. Improvement in governance is essential for economic progress. Of course, one might point out that so far the Bangladesh economy has progressed despite governance deficiency. Enabling national and international policies and hard work and resilience of Bangladeshi people have transformed the economy into one of the fast-paced economies in the world. The economy could withstand domestic and global challenges such as political unrest, natural calamity and global financial meltdown. So, the lack of good governance did not stand in the way for its economic growth. Such complacency may be a bit too farfetched.
There are a number of strong cases which indicate that lack of good governance is hindering progress in those specific sectors. Private investment, banking sector and domestic resource mobilisation are examples where lack of good governance has negative implications. Despite investment friendly policies in place, the share of private investment is hovering around 24 percent of the gross domestic product (GDP), and foreign direct investment is not encouraging either. Cost of doing business is high and global competitiveness is low. Poor quality of services, lengthy process, corruption, bribery and rent seeking discourage investors. In case of “Ease of Doing Business Index” of the World Bank, Bangladesh has been consistently lagging behind some of the competing countries in the world market such as China, India, and Vietnam. The banking sector is burdened with high non-performing loans (NPL). Much of this NPL is due to wilful defaulters who are powerful. Running away with public money from the banks by bank officials themselves has added a new dimension to the problems in the banking sector. Another important area where poor governance has been influencing its performance is the tax collection effort. Despite high economic growth, Bangladesh’s tax-GDP ratio is only 7.9 percent (in fiscal year 2020). While a large number of eligible taxpayers are outside the tax net, there is also huge tax evasion by wealthy people who get away without paying the due amount. Therefore, improvement in governance and institutional reforms can reduce corruption, and establish accountability and transparency in economic management. This will improve the quality of development.
Third, the future growth will be determined by the level of technological adoption. In the past, the adoption of technology in the agriculture sector had contributed to increased food production and achieving food self-sufficiency in Bangladesh. Poverty alleviation in Bangladesh has been facilitated significantly by technological innovation. The use of computers and mobile telecommunication has improved efficiency and opportunities not only for the urban people but also for farmers and women in the rural areas. However, technology is evolving fast. Artificial intelligence, robotics internet-of-things, and blockchain are moving into our workplaces. The ongoing Covid-19 pandemic has accelerated the pace of the fourth industrial revolution (4IR). Employment will be reduced due to the introduction of technology. Work opportunities in many sectors will totally be lost. Developing countries will be more vulnerable to automation than developed countries. It is apprehended that this will stagnate wages and give rise to further inequality. However, there will also be opportunities for new jobs due to technological change. There could be higher demand for new products and services due to which new skills and new jobs may be required. So, Bangladesh has to prepare itself as the 4IR is already knocking on the door.
Fourth is the investment on human capital. In fact, how Bangladesh will benefit from the 4IR will depend on its preparedness in terms of educating and training its human resources and providing access to technologies. With the current level of public investment in education, young graduates do not gain the required skills for the job market. In the new context of technology-based work, more government investment in ICT education is required. A digital divide is already being observed during the ongoing pandemic. This may accentuate further if the poor do not have access to technology and opportunity for learning technical skills. The youth are the most important human resource for Bangladesh. It can benefit from its demographic dividend by engaging the trained and skilled youth in the economy. Experts suggest that Bangladesh’s demographic dividend will continue till 2040. Therefore, involvement of the youth in the economy is crucial at this moment.
Fifth, tackling the impact of climate change will be the most important task of Bangladesh. With high population density, Bangladesh is extremely vulnerable to natural disasters such as floods and cyclones. The impact of global warming manifested through sea level rise will be massive and will inundate the coastal regions of the country. Large investments in technologies will be needed to tackle such climate-related vulnerabilities. Bangladesh has already shown leadership in international forums on climate issues. It will have to continue to claim its share in climate finance as a victim of climate change.
Dr Fahmida Khatun is the Executive Director at the Centre for Policy Dialogue.
Views expressed in this article are those of the author and do not necessarily reflect the position of her organisation.