As Bangladesh has already graduated to the list of developing countries, the leading economics researchers opine that it should now focus on economic diplomacy to confront the challenges of losing grants, low-interest loans and duty-free access to the markets of developed countries. The first challenge will be a reduced access to global markets for our exports and as such we must focus on economic diplomacy. Bangladesh should now put stress on bilateral relations and make deals with countries that buy our goods and services. The assistant secretary general of the United Nations (UN), Haoliang Xu said that Bangladesh is the first country to fulfill the three conditions at the same time and its steady progress showed that formal elevation to the list of developing countries in 2024 will be smooth.Bangladesh needs to focus on economic diplomacy to confront new challenges
Foreign investment will stream in once Bangladesh can reduce production costs
Prof. Sarwar Md. Saifullah Khaled
As Bangladesh has already graduated to the list of developing countries, the leading economics researchers opine that it should now focus on economic diplomacy to confront the challenges of losing grants, low-interest loans and duty-free access to the markets of developed countries. The first challenge will be a reduced access to global markets for our exports and as such we must focus on economic diplomacy. Bangladesh should now put stress on bilateral relations and make deals with countries that buy our goods and services. The assistant secretary general of the United Nations (UN), Haoliang Xu said that Bangladesh is the first country to fulfill the three conditions at the same time and its steady progress showed that formal elevation to the list of developing countries in 2024 will be smooth.
The conditions are (i) Income criterion, based on a three-year average estimate of Gross National Income (GNI) per capita for the period 2011-2013, based on the World Bank Atlas method (under $1,035 for inclusion, above $ 1,242 for graduation) as applied in the 2015 triennial review). (ii) Human Assets Index (HAI) based on indicators of: (a) nutrition: percentage of population undernourished; (b) health: mortality rate for children aged five years or under; (c) education: the gross secondary school enrolment ratio; and (d) adult literacy rate. And (iii) Economic Vulnerability Index (EVI) based on indicators of: (a) population size; (b) remoteness; (c) merchandise export concentration; (d) share of agriculture, forestry and fisheries; (e) share of population in low elevated coastal zones; (f) instability of exports of goods and services; (g) victims of natural disasters; and (h) instability of agricultural production. Now Bangladeshi economists are also of the opinion that Bangladesh would not fall behind on any of the three indices, if there is no big natural or man-made disaster in the future. Therefore, they spoke about the challenges Bangladesh is going to face once it is certified as a full developing country in 2024.
Bangladesh began to lose the advantage of accessing low-interest loans from different agencies once its per capita income expanded. As the World Bank (WB) and other global donors grant loans according to per capita income, Bangladesh has already lost partial advantage of low-interest loan. Now that our per capita income has increased, they will reduce the scope for low-cost loans. A former official of International Monetary Fund (IMF) has said that the donors will now reduce the soft loans and increase hard loans. However, the WB will still provide some of the low-interest loans along with high-interest loans for few more years. And then it will gradually reduce the low-interest loans. Economics experts also mentioned the possible challenges of Bangladesh losing duty free access to global markets for its exports. Bangladesh will gradually lose the trade benefits under the generalised system of preferences (GSP) from the European Union, Canada, Japan and Australia and have to pay 14-15 percent tax which is more than that it is now entitled to as an LDC. So, Bangladesh should now focus on bilateral relations with world countries that have demand for Bangladeshi products. Bangladesh should follow Vietnam in this regard. Once it graduated from LDC, Vietnam signed up free trade agreements with several countries. Bangladesh needs to do the same. They took different measures to enter the global market including becoming member of the Association of South East Asian Nations (ASEAN). Bangladesh may have to follow suit.
Because of its successful economic diplomacy, Vietnam has progressed tremendously. The Southeast Asian Nation Vietnams annual exports grew to US $230 billion while Bangladesh exports only US $35 billion worth of goods. Bangladesh should now increase the internal productivity to prepare to compete in the global market. Bangladesh can pay the 14-15 percent tax if it makes itself capable to do that. It needs to earn that capability by reducing production cost through skills development. It needs to be capable in every step. First, it has to develop its communication system which may enable it to save 2 percent of Gross Domestic Product (GDP). A truck takes 12 hours to reach Chattagram from Dhaka. The fare will certainly go down if it can reach the port city from Dhaka in four hours. This is capability. Most of the business organisations need generators due to lack of quality power supply. So it is necessary to stress the need for low-cost power supply to the industries. Once we can ensure power supply at competitive price, the production cost will consequently decrease. The cost of production of commodities will reduce further if ports are developed and activated to meet the demand. If goods are not stuck in the Chattagram port for three days, it will substantially reduce the cost of production.
Bangladeshs skills development and creating a proper environment for investment as a means of cost reduction is also suggested. If an investor made a profit of Tk 15 after investing Tk 100, he will be much interested to produce when that profit is increased to Tk 20. The need for removing all barriers: such as (i) extortion, (ii) harassment by law-enforcement agencies, (iii) crime and (iv) toll collection that prevent investors from investing in Bangladesh, is also emphasised. Just ponder on why does Vietnam receive annually US $18 billion as investment while we get only US $2 billion? We need to make a heart searching as to why investors are not interested in Bangladesh? Samsung came to Bangladesh but changed its course to Vietnam as Bangladesh could not provide them with needed land or gas. That factory in Vietnam now generates in export value a year worth US $7 billion.
Foreign investment will stream in once Bangladesh can reduce the production cost, adding roads, railways and waterways. In addition the economic zones should be developed to become appropriate for investment. Human resource needs also to be developed as per the current demand in the market. Bangladesh cannot afford to leave the learners with just general degrees. It must build their skills development to meet the demand of those sectors with high dexterity manpower. The researchers also stressed the need for institutional capability and good governance in the country.
It is a general consensus of opinion that the ministries, the judiciary or the police became institutionally weak. They do not serve the national interest but that of the vested groups. Bangladesh needs to stop this unholy culture. However, it is to be kept in mind that graduating to a developing country is not the end of the struggle. Many countries, as for example Malaysia, Indonesia, Thailand and the Philippines are trapped in the group of middle-income nations, as they fail to move to the next level due to lack of further development. We have to be sure and careful so that we do not get trapped in the group like the developing countries just mentioned.
The writer is a retired Professor of Economics, BCS General
Education Cadre
