Reaping possibilities of technology

In less developed countries, policy discourse on benefit from technology centres around adoption of imported varieties. Based on the belief that there has been a natural correlation between technology usage and economic prosperity, the predominant policy prescription has been to reduce taxes and give subsidies for increasing import of technologies. But as labour and natural resource export has been reaching the limit putting a cap on foreign currency earning, imposition of taxes on technology has become incumbent. In the proposed 2023-24 budget, the finance minister has sought to increase import tax on software from 5.0 per cent to 25 per cent. Besides, the value-added tax (VAT) on locally assembled smartphones is also likely to increase. Consequently, the cost of software and smartphones will go up. But are there alternatives that can reduce cost of production? More importantly, is there a natural correlation between import-driven technology adoption and economic prosperity? How about looking for brilliant alternatives to technology imports?
It is better to look into the so-called natural correlation between import-driven technology adoption and economic prosperity. Conventional indicators like per capita power consumption indicate that Bangladesh lags behind most countries, let alone advanced ones. Hence, policy instruments have been aligned to increase electricity generation. Despite quantum leap in production capacity, Bangladesh has been suffering from scarcity of electricity, while power plants remain idle because Bangladesh does not have enough foreign currency to import fossil fuels like coal, liquefied natural gas, and oil. Such a reality raises a vital question: why can increased power consumption not earn or save a proportionate amount of foreign currency? Perhaps, it indicates that without creating the capacity to produce proportional wealth, increased adoption of imported technologies does not drive prosperity. Therefore, lowering taxes and offering subsidies for increasing technology import runs the risk of a negative impact on economic growth.
Furthermore, technology adoption also runs the risk of non-productive usage. For example, smartphone addiction has been a growing concern. Notably, in less developed countries like Bangladesh, smartphone usage is primarily for social media and video content. Often such consumption drains productive engagement and exposes users to unethical content. There has been a growing concern about the degradation of cognitive capability and moral values due to addiction to smartphones and mobile internet. Hence, adopting imported technologies is not always positively correlated with economic and social well-beings.
Then how to reduce the cost of production of software? That taxes, wages of programmers and price of utilities, office space, computers, and development tools determine the software cost is not the case. The cost of software affecting competitiveness mostly depends on the number of units of the same software application sold. Due to the zero cost of copying software, the cost per unit keeps falling with the growth of the customer base. Leveraging such an effect is far more potent than tax, and subsidies can offer. Due to it, American software companies have been far more competitive than the Bangladeshi ones. Ironically, although the government has been offering tax and even cash incentives, subsidised utilities and office space, the software industry has yet to leverage scale, scope, and network externality effect to reduce the cost of their outputs. It's time to draw lessons from the global success stories of the software business. For example, Microsoft became an iconic success story not due to tax waivers, low wages, or subsidies. Instead, it focused on creating increasing value and lowering costs due to the growing adoption of its products. In the same way, Apple has been building its successes. Hence, it's time to look into smarter ways to leverage scale, scope, and network externality effects to increase the software industry's competitiveness.
Then comes the effect of VAT on smartphone assembling. There is no denying that a VAT increase will lead to cost escalation. Let's draw lessons from history. In the 1980s, Motorola unveiled DinaTac, a revolutionary mobile handset. This machine, weighing three pounds, was priced at $3995. But what has reduced prices of cell phones far below $100? No tax reduction or subsidies did the trick. A steady flow of ideas was behind the miracle, contributing to increasing the quality and reducing the cost simultaneously. In exploiting technology possibilities, capability building is vital. Unfortunately, this reality is missing from the policy discourse in less developed countries for leveraging technology possibilities for driving growth.
So far, Bangladesh, like many other less developed countries, has been after using the proceeds of labour and natural resource export for importing technology. The underlying thesis has been that technology density has a natural correlation with economic growth. Such a correlation is mostly neither realistic nor scalable. Again, labour-based value addition in assembling imported technologies has been drying up. But there is a scalable path of creating economic value out of technology's potential. Creating a flow of ideas and adding them into products and processes for increasing the quality and reducing the per unit cost-due to material, labor, and energy saving effects, and zero cost of copying software---hold the key. Unfortunately, this window is overlooked in formulating strategies and policies for leveraging technology possibilities. It's time to get to the basics in order to fix the missing links and take advantage of technology for driving economic growth to the cherished high-income status.

zaman.rokon.bd@gmail.com