Current trends and future direction of the Bangladesh economy

Coordinated role of the government and private sector could ensure balanced, equitable and sustainable development of the Bangladesh economy

Currently Bangladeshi economy is going through a transformation period from the LDC towards a Developing economy. Hope to be graduated from the LDC list by 2024. To achieve this status Bangladesh has already being qualified in all the three criteria namely GNI ($1272 and above), Human Asset Index (72.8 and above) & Economic Vulnerability Index (25 and below) of the UN CDP. Poverty rate has been declined from 31.5 percent in 2010 into 23.2 percent in 2016.

At the same time Bangladesh economy is transforming from agricultural economy into an industrial economy during last couple of years. Transformation of Bangladeshi economy could be observed as follows:

From the above table it is observed that, contribution of Agriculture sector was highest (51%) followed by the service sector (41.28%) to Bangladesh GDP in 1971. Contribution of the Industry was the lowest one i.e. 7.68% of Bangladesh GDP. Service sector maintained a slow but steady growth since the independence of Bangladesh. Contribution of the industrial sector is rising slowly but contribution of agriculture sector is going down in percentage of GDP. By maintaining this trend latest contribution of service, industry and agriculture sector in 2017 was 53.48%, 27.25% and 13.42 % respectively.    

Contribution of the agriculture sector does not mean that agriculture sector is producing less in volume, but it is producing much more crops and products than that of the 1971, as size of Bangladesh economy is growing up agriculture’s contribution is becoming less competitive. Major Manufacturing industries of Bangladesh are RMG (Knitwear and Oven Garment) the top most export earning sector of Bangladesh. Last year RMG sector earned USD 30.6 billion 83.49% of Bangladesh’s total export i.e. USD 36.66 billion.

Besides RMG other major contributory industrial sectors of Bangladesh are leather and leather goods, pharmaceuticals, textiles, light engineering, plastic products, electrical and electronics and software development etc. Agriculture sector is dominating by the agro-crops contributing about 72 per cent of total production. Fisheries, livestock and forestry sub-sectors are contributing about 10.33%, 10.11% and 7.33% of agriculture production respectively. Significant contributory crops are Rice, Jute, Sugarcane, Potato, Pulses, Wheat, Tea and Tobacco etc.

Significant services subsectors are the Transportation, IT Enabled Services, Outsourcing, Telecommunication, Tourism and Hospitality Management, Business Consultancy / Intermediaries, Consultancy Services, Amusement, Entertainment, Testing Laboratories, Infrastructure Development, Filling Stations, Distribution Channels, Aviation Service, Automobile Service, Technical and Vocational Institutes, Advertising and TV Commercials etc. Other than the above mentioned subsectors Bangladesh have many more sectors like agro processing, infrastructure development, power generation, tourism and hospitality management, blue economy etc. to contribute further.

In short run Bangladesh is going to be graduated from the LDC list by 2024 and by the year 2041 Bangladesh will be a developed economy. With all these prospects in mind we must have to be preparing ourselves to fix up few challenges like;

1.    Poor Performance in Ease of Doing Business: Bangladesh is performing worst in the Ease of Doing Business Index. Bangladesh is standing behind all the South Asian countries at 176 (2019) whereas war affected Afghanistan and Military rolled Myanmar etc. countries are in front of us.

2.        Shortage of Industrial Infrastructure: Bangladesh is facing shortage of port facilities; Congestion in Chittagong Port made us a slower nation. Traffic Jam, Unavailability of electricity, Gas and Other utility Connection etc. industrial infrastructure shortage is threatening Bangladesh’s projected prospects.  

3.     Standard of Bangladeshi Products: Many sectors of Bangladesh is suffering from poor quality of products, absence of international quality certification, absence of modern laboratory facilities etc. are the major challenges to expand Bangladesh’s export basket.

4.     Diversification of Exportable Product Basket and New Markets to be explored: Bangladesh has to diversify its product basket as well as its export markets too. New market should be explored for the existing products. Newer products must be added into our product basket to face post LDC challenges of preference erosion.

5.    Shortage of Skilled Manpower and Professional: Bangladesh has shortage of skilled labor as well as skilled mid-level managers. Therefore we are losing a significant amount of foreign currencies by recruiting foreign professionals here in Bangladesh. We must develop mid-level managers to save our outbound remittances in near future. Demographic dividend will be meaningless if skills manpower could not be developed.

6.     Signing FTAs to Reinstall Existing Preferences: Bangladesh will loss all the preferential markets access facilities into the global market soon after its graduation from LDC in 2024 (other than the EU, till 2027). Stringent Role of Origin, implementation of IPR and other rights will be a cause of Bangladesh becoming non-competitive in global market. To avoid all these negative effects Bangladesh should sign FTAs with all of its major trade partners before 2024.  

Graduation will not only offer challenges but also offer some positive phenomena like increasing chances to get low cost investment credit from international sources, getting more FDI & other forms of investments, increasing Bangladesh’s importance in several global platforms like UN, WB, and WTO etc. Losses will be occurred automatically soon after its graduation in 2024 but we must have to be prepared to explore the prospects of graduation. Therefore 2019-2024 period is very important to take actions for ensuring

a sustainable graduation and beyond.  

Government alone cannot run the economy if private sector of Bangladesh do not uphold the development visions. Therefore government should accept Private Sector as their development Partner not as peasant.

Business community has a great role in capacity building, product diversification, attracting FDI, avail foreign investment credit, achieve international standard certification, establish laboratories, build infrastructure, explore newer avenues of business etc. Thus a hand to hand role of government and private sector could ensure balanced, equitable and sustainable development of Bangladesh economy.   

 

The writer is Executive Director,

DCCI Business Institute (DBI)

Current trends and future direction of the Bangladesh economy

Coordinated role of the government and private sector could ensure balanced, equitable and sustainable development of the Bangladesh economy

Currently Bangladeshi economy is going through a transformation period from the LDC towards a Developing economy. Hope to be graduated from the LDC list by 2024. To achieve this status Bangladesh has already being qualified in all the three criteria namely GNI ($1272 and above), Human Asset Index (72.8 and above) Economic Vulnerability Index (25 and below) of the UN CDP. Poverty rate has been declined from 31.5 percent in 2010 into 23.2 percent in 2016. At the same time Bangladesh economy is transforming from agricultural economy into an industrial economy during last couple of years. Transformation of Bangladeshi economy could be observed as follows: From the above table it is observed that, contribution of Agriculture sector was highest (51%) followed by the service sector (41.28%) to Bangladesh GDP in 1971. Contribution of the Industry was the lowest one i.e. 7.68% of Bangladesh GDP. Service sector maintained a slow but steady growth since the independence of Bangladesh. Contribution of the industrial sector is rising slowly but contribution of agriculture sector is going down in percentage of GDP. By maintaining this trend latest contribution of service, industry and agriculture sector in 2017 was 53.48%, 27.25% and 13.42 % respectively. Contribution of the agriculture sector does not mean that agriculture sector is producing less in volume, but it is producing much more crops and products than that of the 1971, as size of Bangladesh economy is growing up agricultures contribution is becoming less competitive. Major Manufacturing industries of Bangladesh are RMG (Knitwear and Oven Garment) the top most export earning sector of Bangladesh. Last year RMG sector earned USD 30.6 billion 83.49% of Bangladeshs total export i.e. USD 36.66 billion. Besides RMG other major contributory industrial sectors of Bangladesh are leather and leather goods, pharmaceuticals, textiles, light engineering, plastic products, electrical and electronics and software development etc. Agriculture sector is dominating by the agro-crops contributing about 72 per cent of total production. Fisheries, livestock and forestry sub-sectors are contributing about 10.33%, 10.11% and 7.33% of agriculture production respectively. Significant contributory crops are Rice, Jute, Sugarcane, Potato, Pulses, Wheat, Tea and Tobacco etc. Significant services subsectors are the Transportation, IT Enabled Services, Outsourcing, Telecommunication, Tourism and Hospitality Management, Business Consultancy / Intermediaries, Consultancy Services, Amusement, Entertainment, Testing Laboratories, Infrastructure Development, Filling Stations, Distribution Channels, Aviation Service, Automobile Service, Technical and Vocational Institutes, Advertising and TV Commercials etc. Other than the above mentioned subsectors Bangladesh have many more sectors like agro processing, infrastructure development, power generation, tourism and hospitality management, blue economy etc. to contribute further. In short run Bangladesh is going to be graduated from the LDC list by 2024 and by the year 2041 Bangladesh will be a developed economy. With all these prospects in mind we must have to be preparing ourselves to fix up few challenges like; 1. Poor Performance in Ease of Doing Business: Bangladesh is performing worst in the Ease of Doing Business Index. Bangladesh is standing behind all the South Asian countries at 176 (2019) whereas war affected Afghanistan and Military rolled Myanmar etc. countries are in front of us. 2. Shortage of Industrial Infrastructure: Bangladesh is facing shortage of port facilities; Congestion in Chittagong Port made us a slower nation. Traffic Jam, Unavailability of electricity, Gas and Other utility Connection etc. industrial infrastructure shortage is threatening Bangladeshs projected prospects. 3. Standard of Bangladeshi Products: Many sectors of Bangladesh is suffering from poor quality of products, absence of international quality certification, absence of modern laboratory facilities etc. are the major challenges to expand Bangladeshs export basket. 4. Diversification of Exportable Product Basket and New Markets to be explored: Bangladesh has to diversify its product basket as well as its export markets too. New market should be explored for the existing products. Newer products must be added into our product basket to face post LDC challenges of preference erosion. 5. Shortage of Skilled Manpower and Professional: Bangladesh has shortage of skilled labor as well as skilled mid-level managers. Therefore we are losing a significant amount of foreign currencies by recruiting foreign professionals here in Bangladesh. We must develop mid-level managers to save our outbound remittances in near future. Demographic dividend will be meaningless if skills manpower could not be developed. 6. Signing FTAs to Reinstall Existing Preferences: Bangladesh will loss all the preferential markets access facilities into the global market soon after its graduation from LDC in 2024 (other than the EU, till 2027). Stringent Role of Origin, implementation of IPR and other rights will be a cause of Bangladesh becoming non-competitive in global market. To avoid all these negative effects Bangladesh should sign FTAs with all of its major trade partners before 2024. Graduation will not only offer challenges but also offer some positive phenomena like increasing chances to get low cost investment credit from international sources, getting more FDI other forms of investments, increasing Bangladeshs importance in several global platforms like UN, WB, and WTO etc. Losses will be occurred automatically soon after its graduation in 2024 but we must have to be prepared to explore the prospects of graduation. Therefore 2019-2024 period is very important to take actions for ensuring a sustainable graduation and beyond. Government alone cannot run the economy if private sector of Bangladesh do not uphold the development visions. Therefore government should accept Private Sector as their development Partner not as peasant. Business community has a great role in capacity building, product diversification, attracting FDI, avail foreign investment credit, achieve international standard certification, establish laboratories, build infrastructure, explore newer avenues of business etc. Thus a hand to hand role of government and private sector could ensure balanced, equitable and sustainable development of Bangladesh economy. The writer is Executive Director, DCCI Business Institute (DBI)