The World Bank's latest contentions as advanced in its Bangladesh Development Update will leave economists much to ponder upon. How the stellar progress of the economy in terms of GDP growth was accomplished without a corresponding increase in urban jobs, and where informal jobs accounted for about 84.9 per cent of the total demand thorough analysis. The update that brings together a gamut of issues together is an important policy document as an indicator of past performance and possible outcomes where inflation, external pressures, financial vulnerabilities and political instability all play a part.
The latest Bangladesh Development Update unveiled last week by the WB points out certain basic weaknesses of the economy. The country's GDP growth rate has been revised down to 4.0 per cent in FY2025 and projected to rebound in the next fiscal. Sadly, what had often been touted as a revolution in industrial growth in the country over the past decade or so is not backed up by data. There is clear indication that the country's Gini index (that measures income inequality) grew by 0.03 points and unless a more robust sustainable growth path is adopted by policymakers, there will be serious problems with job creation. Over the past many years, huge numbers of educated (and uneducated youth) have not found any meaningful employment in the economy. Segregated data suggest that educated women found it even harder to find employment compared to their male counterparts.
The issue of youth unemployment, particularly in urban areas over the 2016 to 2022 period can no longer be ignored. With stagnation of investment in industry, job creation in large industries has fallen dangerously low resulting in such high urban unemployment for the educated youth in major divisions like Chattogram, Rajshahi and Sylhet with Dhaka being the only exception. So, what is to be done? The WB country director believes that improving the business environment and financial governance helped by bold reforms can reverse the tide and usher in millions of jobs for the youth because if these nagging issues were dealt with proactively, then it would spur investments --- both domestic and foreign. Without investments in the industrial sector and sound fiscal policies, the issue of youth unemployment simply cannot be addressed.
To be more precise, the country is facing serious roadblocks in the areas of education, training and skill development. The education system is producing young people with degrees that are either out of date or lacking in skills demanded by industry or other productive sectors of the economy. While there have been fast paced economic growth, which has primarily been propelled by the readymade apparels (RMG) sector requiring primarily low-skill jobs and helped financially by inward remittance, little has been done to improve the quality of curriculum or vocational training of the youth. "The structural transformation from agriculture to manufacturing and services that had been sustained since 2000 has slowed down in recent years as excess labor has been absorbed in the agriculture sector. As a result, from 2016 to 2022 most new jobs were in the low-wage, low-productivity agriculture sector and by contrast new urban employment growth declined." When the manufacturing sector saw annual growth by 9.1 per cent as against a 9.6 per cent decline in jobs, it indicates a serious mismatch. Real wages across all sectors also declined. Add to this the gender disparity in the labor market. With the domestic labour market shrinking, emigration has been a critical source of employment for the young people.
The problem is that the economy is dominated by small firms which face significant obstacles to growth. The informal sector that employs nearly 9 out of 10 people is hamstrung by low productivity. Large-scale employment (for educated youth) comes from large industry and as experience has shown in other countries, foreign direct investment (FDI) plays a big role here. Unfortunately, FDI has not been forthcoming primarily due to a challenging business environment. Corruption is a major discouraging factor. The WB update reveals that the "share of tertiary-educated youth among who are unemployed has increased to 27.80 per cent, as many struggle to find jobs that align with their skills and educational qualifications."
Hence what is needed now is a complete overhaul of the education system. The continuous experimentation with education has not worked and policymakers need to reorient the whole idea of tertiary education with a skill-based approach. The country needs skilled workers for both domestic employment and employment abroad. Courses and subjects offered for higher education need to be very selective. A curtailed curriculum offering fewer but contemporary subjects would release a lot of financial resources that could be devoted to improving technical education. Let there be no misconceptions here. Without a knowledge-based education system that prioritises quality over quantity, there is little possibility of addressing the youth unemployment issue.
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