Possible, but more needs to be done

Those who are thinking that the Bangladesh economy will automatically graduate to a higher growth level they are wrong. For the last one-decade or so Bangladesh economy was growing at around 6% annually, though in the recent years the public pronouncement was always for a higher growth rate than what had been achieved.
A growth rate above 6.5% until now has remained a wishful thinking. Many would say the growth rate achieved is not bad, given the average growth rate of the emerging economies. But if the present growth rate is thought to be enough, then Bangladesh will take a longer period to become an emerging economy.
Even there will always remain fear that the present growth rate may take a back seat in the event of a major natural disaster or politics becoming too troublesome. Bangladesh economy has been doing well but it is yet to acquire the inherent strength to withstand any major shock coming from either external or internal sources.
Is the Bangladesh's increasing income from exports a guaranteed one? No, there are competitors to who can anytime push back Bangladesh behind. Bangladesh's, increasing exports depends on its relation with other countries. Now a days, relation depends on whether a country belongs to certain trade & investment blocks or to any security arrangement led by the militarily strong countries.
Unfortunately, Bangladesh does not belong to either of the two. Whatever export it could have increased in the past that had happened because of its cost competitiveness and GSP facilities offered by the EU countries. Cost competitiveness works better for export purpose if a country belongs to a free trade block. Bangladesh is the only country in the world with its size of the economy which could not sign a single free trade agreement. The rest of the world already joined multiple trade blocks. When the whole world is entering into a free trade regime system through negotiation bilaterally or multilaterally, Bangladesh is still waiting for the Doha Round Global Trade negotiation to have free trade globally. But the important economies of the world already started to shun the Doha route and they are opting for trade and investment negotiation on bilateral or regional basis.
The South Asian Association for Regional Cooperation which include countries like Bangladesh, India, Nepal, Pakistan, Sri Lanka, did not work in the way it was expected in the formative years. As the time passed, the people of the region got more frustrated with the activities of SAARC. Now one expects nothing more from the SAARC then providing a good platform for making speeches by the SAARC leaders at its bi-annual summit conferences. Bangladesh exports to SAARC member countries are already on the down trend. How far SAARC will be successful in promoting a true platform for freer trade among member countries all now depends on the wishes and quality of leadership of India. But we see a shortage of will on the part of India in making SAARC a true driving force for promoting trade and investment among SAARC economies. India is now the fifth largest economy in the world, and increasingly importing more goods from the other countries of the world. But India's imports from the SAARC countries are on the wane.
Bangladesh still belongs to the group of the countries known as the least developed countries (LDCs). The number of LDCs is 48 or so. Some of the LDCs already qualified to join group of the emerging economies, but Bangladesh will take another six to seven years to leave behind the stigma of an LDC. Even if Bangladesh can join the rank of emerging economies in the next six to seven years, its position will remain at the bottom for long among emerging economies if Bangladesh does not achieve a growth rate better than 6 or 6.5% p.a.
Bangladesh economy is performing at a much lower level than its potential. It has remained underinvested for many years. The worrying situation is that Bangladesh is saving more than what is coming as investment. This, in other words means, Bangladesh's extra savings is going out of the country. Investment situation has turned from bad to worse in the last few years. It is said and believed that there is a lack of confidence on the quality of economic management which again has been largely affected by an acrimonious politics. A deep discontent is there in the society beneath the surface. Rich Bangladeshi people are transferring a part of the riches abroad illegally. Bangladesh has turned to be country of net capital supplier to the world if illegally transferred wealth is taken into account.

Bangladesh taking longer time in fixing its infrastructure needed for a higher growth level. Its roads and ports are in an unpalatable condition. People cannot move easily and safely in its cities and towns. It is a country of over population, and every year a large number of people are being added to its workforce for whom Bangladesh economy cannot provide employment.
Bangladesh economy's strength lies in its increasing exports, though the export growth is also falling behind. The second strength of the Bangladesh economy lies in its manpower exports. About 6.0 million or so Bangladeshi workers are abroad now who are sending back remittance worth of $14 billion annually. Bangladesh cannot and should not remain as a labour supplying country to the world forever. The world one day will not need Bangladesh workers. Already, the remittance flow from the Bangladesh workers has recorded a down trend. Bangladesh can easily attain a growth rate beyond 7% p.a. provided it puts its own house in order politically. Once political problems are settled, few reaming needed reforms if carried out will bring back confidence on the economy.
Among other things Bangladesh needs to do more on the economic front such as undertaking the mega projects like constructing the Padma Bridge, deep sea port, expressways, flyovers under state sector or in collaboration with the private sector. The completion of mega projects will not give immediate returns to the nation, but will help grow the economy in other sectors. Bangladesh needs to sign bilateral free trade agreements with other countries for boosting of its exports. It will commit a mistake if it continues to look up to the Doha Round of multilateral free trade agreement to come to a conclusion. There is a thought around that the Doha Round will be left out in the middle. Bangladesh is paying more taxes on its exports than many advanced economies simply because Bangladesh does not belong to a free trade blocks that make export to member countries free of taxes and quotas.
Internally, Bangladesh should strive more to make available the low-cost capital to its entrepreneurs. Banks' interest rates are still high compared to the global average. As the Bangladesh economy is experiencing a some kind of depression, interest rates need to go down further to encourage more borrowing and investment. Capital market route can be a better option for channelling low cost capital to the entrepreneurs. But the capital market was scandalized time and again. The wrong doers went scot-free. Financial reporting is so poor that hardly any investor now believe the financial reports presented by the auditors. Bangladesh Govt. could not sell any share from the state-owned enterprises though repeated promises made by the Govt. in this respect. The capital market is being supplied with the poor quality IPOs. Fundamentally strong stocks especially from the multinational companies, did not find way to the capital market since long. A vibrant and functional capital market will go a long way to keep expectation afloat on the economy. With a confidence reigning in high, Bangladesh economy can easily attain a growth level beyond 7% p.a.
Mr Abu Ahmed is a Professor of Economics, University of Dhaka. He can be reached at:
abuahmedecon@yahoo.com