Enhancing the competitiveness
Friday, 22 June 2007
THE latest survey of the Japan External Trade Organisation (JETRO) has identified Bangladesh as the cheapest place for doing business in Asia. This rating was possible on the basis of comparative evaluation of wage rate, social security burden, utility charges, etc. However, this recognition makes no big room for self-satisfaction among the policy planners. For a short term advantage -- like cheap workers' wages -- is no guarantee of its continuing in the medium and the longer terms. Already, buyers of Bangladeshi products are stressing on issues such as better wages for the workers here as well as other benefits. Importing of products from Bangladesh is getting increasingly tagged to compliance with such demands of the buyers. The basic wage level in the country's principal industry -- the readymade garments (RMG) sector -- has already gone up and is likely to go up further. The other sectors are also under pressure to raise wages. Thus, it is doubtful that competitiveness based on low wages to workers will last long.
Therefore, it is imperative to search for other durable ways and means of enhancing the competitiveness on a sustainable basis. This will require making good progress in other very important areas such as infrastructures. It is good to see that there are now efforts to turn one infrastructure really efficient which is pivotal for the economy and it is the Chittagong port that handles the greater part of the country's external trade. The remarkable positive improvements noted in the functioning of this port only within months, go to show that with real resolve and dedicated work, a government can certainly change operations of important infrastructures for the better. Now, the good work done at this key port needs to be buttressed by building an expressway and establishing inland container depots (ICDs) along the way between Dhaka and Chittagong for the faster movement and handling of commercial cargoes in both directions. Similar attention should be paid to upgrade the functioning of the railways, the air terminals and waterways. There is a great need to boost investments in infrastructures related to diverse sectors. The government should increase its own investments in infrastructures and facilitate private sector participation in infrastructure building, operation and maintenance. Investors, both local and foreign ones, are likely to invest more in Bangladesh on seeing first class infrastructures depending on which they would be able to run their enterprises cost-efficiently. Thus, infrastructure building should be seen as very important for improving the competitiveness of the economy in the longer run.
The government should also consider its maintaining a policy framework over the long haul that would be seen as investment-friendly. Fiscal and monetary measures applied on long term basis can be either inducement for investment, or, the same may be interpreted as hostile towards investors. If the government policies change frequently and are seen as unfavourable by the investors, then the same do not create confidence among them and tend to be disincentives. Thus, the creation of a longer-term conducive environment for an increased flow of investments crucially calls for bringing it into being through appropriate policies on the part of the government. Investors consider the corporate tax they have to pay in Bangladesh as specially heavy. A reduction in the tax, therefore, may be considered in a comparative regional perspective in order to help enhance the competitiveness of businesses.
Therefore, it is imperative to search for other durable ways and means of enhancing the competitiveness on a sustainable basis. This will require making good progress in other very important areas such as infrastructures. It is good to see that there are now efforts to turn one infrastructure really efficient which is pivotal for the economy and it is the Chittagong port that handles the greater part of the country's external trade. The remarkable positive improvements noted in the functioning of this port only within months, go to show that with real resolve and dedicated work, a government can certainly change operations of important infrastructures for the better. Now, the good work done at this key port needs to be buttressed by building an expressway and establishing inland container depots (ICDs) along the way between Dhaka and Chittagong for the faster movement and handling of commercial cargoes in both directions. Similar attention should be paid to upgrade the functioning of the railways, the air terminals and waterways. There is a great need to boost investments in infrastructures related to diverse sectors. The government should increase its own investments in infrastructures and facilitate private sector participation in infrastructure building, operation and maintenance. Investors, both local and foreign ones, are likely to invest more in Bangladesh on seeing first class infrastructures depending on which they would be able to run their enterprises cost-efficiently. Thus, infrastructure building should be seen as very important for improving the competitiveness of the economy in the longer run.
The government should also consider its maintaining a policy framework over the long haul that would be seen as investment-friendly. Fiscal and monetary measures applied on long term basis can be either inducement for investment, or, the same may be interpreted as hostile towards investors. If the government policies change frequently and are seen as unfavourable by the investors, then the same do not create confidence among them and tend to be disincentives. Thus, the creation of a longer-term conducive environment for an increased flow of investments crucially calls for bringing it into being through appropriate policies on the part of the government. Investors consider the corporate tax they have to pay in Bangladesh as specially heavy. A reduction in the tax, therefore, may be considered in a comparative regional perspective in order to help enhance the competitiveness of businesses.