Bangladesh needs to diversify economy ‘beyond textiles’

Bangladesh needs to diversify its economy beyond textiles and execute productivity-boosting reforms to weather likely challenges ahead and attain higher economic growth, said a renowned Greek economist here Tuesday.
Dr. Louka T. Katseli, from her experience fresh from the Eurozone crisis and recurrent recession in her own country, underscored the urgency of pursuing more active industrial policies and undertaking governance and institutional reforms for Bangladesh's economic development.
"Each country must have a vision for its future and a transformative strategy based on its own history, endowments and culture," said Dr. Katseli, a professor of Economics at the University of Athens, while addressing the Centre for Policy Dialogue (CPD) anniversary lecture session.
The CPD, a globally reputed think-tank in Bangladesh, invited Dr. Katseli, also a Greek politician and former minister, to its 2014 anniversary lecture to share her thoughts and lessons drawn from the Eurozone's recent experience of endemic financial troubles.
The CPD organized the lecture as part of its founding anniversary celebrations.
Drawing on experiences from her own country, Greece, Dr Katseli cited common policy challenges for the Eurozone which appeared similar to that of the developing countries.
Despite differences, she said, there are many things interesting and relevant to Bangladesh as the country tries to promote sustainable and inclusive development in a fiscally-constrained environment like her country.
According to Katseli, shaping and implementing a transformative strategy for the future is a must for both Greece and Bangladesh.
In her lecture on 'Recent Fiscal and Labour Market Adjustment Experiences in Europe and Lessons for the Low-Income Countries' she dwelt at length on her country's constraints in various economic fields.
The fields facing the strains include growth, investment and employment.
She listed their endeavours to overcome the crises.
The European economist focused more on how to promote structural change and productivity-enhancing reforms to upgrade the productive base, develop new sectors, products and services.
Investment in powerful enablers such as governance, infrastructure, human capital or local, regional and global networks was also underscored.
Besides reducing the country's economic dependence on textiles sector, she also stressed the need for building public-private partnerships for development, mobilising development assistance, trade and domestic taxes to finance infrastructure and other specific enablers.
"Developing countries, including Bangladesh, and even many emerging economies, are in a better position to reap low labour-cost competitive advantages," she added.
CPD chairman and renowned economist Professor Rehman Sobhan chaired the programme held at a local hotel. CPD Distinguished Fellow Dr Debapriya Bhattacharya introduced Dr Katseli, an expert on international economics and development policy. She has served as Director, OECD Development Centre, as member and vice-president of the UN Committee for Development Policy.
Dr Katseli currently leads the Social Pact Party and has held positions such as Greece's Minister of Labour and Social Security and Minister of Economy, Competitiveness and Shipping.
In his opening remarks, CPD Executive Director Professor Mustafizur Rahman said Dr Katseli was invited to share her reflections on the salient features of the financial crisis in the context of globalising economies, her assessment about the way the crisis was managed, and her insights on lessons that can be drawn for their own policy making.
Referring to the Greek economic crisis, Dr Katseli noted that concerted action by few financial speculators can produce an unprecedented crisis for a national government.
"In the times of crises, policymaking is shaped by the interests of a global financial system which, in the absence of regulation, appropriate incentives or effective oversights, caters to its narrow financial interests as opposed to the national interest," she noted.
Pointing at the unemployment scenario in the Eurozone, she noted that combination of credit crunch and austerity policies result in dramatic reduction of aggregate demand, firm closure and surge in unemployment.
She further mentioned that excessive labour-market flexibility increases unemployment due to adverse income and productivity effects.
It was also observed that sharp reduction in wages does not necessarily enhance final price competitiveness due to fall in productivity and increases in non-wage cost components.
Among the useful lessons that emerged from the analysis was the observation that primacy of fiscal goals as the backbone of a policy strategy that aims to improve financial stability, competitiveness and growth is self-defeating.
It was learnt from experience that government is likely to lose credibility if living standards deteriorate.

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