Bangladesh's ambition to become a middle-income country by 2021 faces great challenges. One of these is to provide gainful employment to over 2 million people who will join the labour force each year over the next decade. Moreover, 51.5 million of its 90 million working age people are employed. Thus Bangladesh needs to use its labour endowment even more intensively to increase growth and, in turn, absorb the incoming workforce.
The country now needs to exploit global market more intensively, building on the pivotal role that exports have already played in providing gainful employment. Exports have grown strongly and doubled their world market share between 1995 and 2012, owing to success in garments, catering largely to the European Union and the US. Since 2009, the country has become the world's second largest garments exporter, making it unique among the least developed countries in its high share of manufactures in total exports, which reached 90.1 per cent in 2012 compared with about 21.1 per cent for LDCs.
Garments will continue to grow, in existing and newer markets. Newer products will emerge more slowly. Thus, more rapid export growth will initially rely on capturing higher market shares in Bangladesh's existing strengths, i.e., basic garments--both in current markets, and penetrating newer and dynamic markets such as Japan, China, ASEAN countries and India. In addition, many firms are starting to produce high-value garments, and this will expand the target market for Bangladesh. Other products are also emerging, such as jute goods, footwear, seafood, information technology enabled services (ITES), etc., and some of these may over time become part of a larger product cluster.
To sustain and accelerate export growth will require actions on four pillars. These are breaking into new markets through better exploitation of regional trading opportunities and better trade logistics to reduce delivery lags and become more competitive in nearby markets, especially Asia.
As world markets become more competitive and newer products demand shorter lead times, the country needs to generate new sources of competitiveness and thereby go for market diversification.
It has to break into new products through more neutral and rational trade policy and taxation and bonded warehouse schemes and concerted efforts to attract foreign direct investment to spur investment and export diversification. The country needs to improve skills and literacy of workers and implement labour and work safety guidelines.
In shipbuilding, enforcement of standards for domestic ships would help bring domestic and export market segments closer, and help exporting yards to achieve better scale economies. More credible enforcement of standards in pharmaceuticals would help people's health and also reduce the disincentives to firms including foreign firms that practise self-enforcement.
Training to upgrade skills is a critical need in many sectors, including shipbuilding, ITES, and bicycles. The FDI could play a much bigger role in many sectors, especially those with technology upgradation needs, such as pharmaceuticals, bicycles, and shipbuilding.
Improvements in access to finance and ease the Bangladesh Bank-monitored current account transactions would relieve constraints across all sectors. Additional submarine cables would help reliability of internet services for the ITES sector.
The writer is a student of
MSc in economics, Jahangirnagar University. [email protected]
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