What 2015 holds out for Bangladesh economy

Towards the end of every year, The Economist devotes an entire issue to survey the forthcoming year. As far as broad brushstrokes go, though it cannot grapple with sudden developments, such as the 2014 oil-price collapse or economic sanctions (both ruining Russia's economy for the foreseeable future), it nevertheless provides any mileage for a reasonable analysis.
What the 'Year in 2015' predicts for Bangladesh is of relevance here. Five themes can be extracted for policy-making discourse and other discussions: Bangladesh's projected 6.3 per cent annual growth rate; ASEAN's 'transformational year' in which it becomes 'the ASEAN Community'; evoking the European Union's trajectory; local impacts of the tussle between stimulating the economy and the restraint that central banks face globally; increasing financial and macroeconomic instability; and tectonic shifts in the global geo-economic balance.
Bangladesh's 6.3 per cent predicted 2015 growth-rate lies ironically behind the four countries: China having 7.0 per cent growth rate and India 6.5 per cent, with which mega-deals have already been made or remain in the pipeline, and Sri Lanka posting 7.1 per cent growth rate and Vietnam 6.6 per cent, two of its low-wage export competitors. How Sheikh Hasina's government tosses and turns between a rock (China) and a hard place (India) with her developmental projects during 2015 is of obvious importance to futurologists. Similarly, plans to double our RMG (readymade garment) earnings from $ 26 billion to $ 50 billion by 2021 might obscure latent market threats. Since our past growth of at least 6.3 per cent has been RMG-driven (in 6 years of our democratic experiences after 1991: in 2005, 2006, 2007, 2010, 2011, and 2014; and never before 1991, with 4.61 per cent being the previous highest in 1983), if we do not start diversifying our exports, we will be stuck in a dead-ended game that will increasingly favour countries like Sri Lanka and Vietnam.
Infrastructure-building is one sign of diversification. Of late, it is demanding greater policy-making attention, from flyovers and highways to bridges and ports. How we allocate these projects (to China, India, Japan or else) carries enormous geo-political significance, not just in terms of the short-term policy-making interest, but also in terms of how they connect with the policy priorities of each of those countries. Hasina's May-June visits to Japan and China were fed into Shinzo Abe's implicit 'ring-around-China' policy framework and China's similar 'string of pearls' market-opening and resource-acquiring ocean-access strategy. India introduced the Look-East Policy framework (first by Prime Minister Narasimha Rao during his 1991-6 tenure). It could have damaging short-term effects for us since India owns one of the largest markets we have not yet tapped and remains a country too dependent on for other economic needs (electricity, trucks, consumer goods, and so forth).
Nourishing India's Look-East Policy nurtures our Southeast Asian interests. This is the second theme. The ASEAN faces, as The Economist duly noted, the same predicament as Bangladesh's, being surrounded by giants. Unlike Bangladesh, some of its members are already at odds with China (Vietnam, for example) over South China exploits. Our concern should be more than Indonesia, Malaysia and Vietnam challenging our low-cost RMG production and exports, or Myanmar building their RMG industry; these are important, but feeding on India's very warm ASEAN relations carries multiple benefits.
One manifestation of this cuts right across Bangladesh: the Ho Chi Minh City-Kolkata highway, as part of the Mekong-Ganga Project. As an offshoot of the Bay of Bengal Initiative for Multi-Sectoral Technological and Economic Cooperation (BIMSTEC), the Ho Chi Minh-Kolkata highway would extend the proposed India-Malaysia-Thailand Trilateral Highway and then a projected Delhi-Hanoi railway, building upon the British World War II railway networks.
If these run through Bangladesh, which is the most efficient course, we will benefit from (a) adding to our own highway infrastructure, (b) connecting with Narendra Modi's soft-spot, which, as high-growth Gujarat vividly shows, is infrastructure-building, thus diluting tensions, (c) opening up corollary businesses while not only guaranteeing a larger traffic flow through the Padma Bridge but also adding to India-China rapprochement, (d) diluting tensions with Myanmar through BIMSTEC cooperation and (e) connecting more directly with the ASEAN heartland. Apprehensions of being surrounded by 'giants' can be dampened by strengthening relations with actual and associate ASEAN members surrounding us. Being ignored by this pact does not make sense, but building it is an idea the value of which can only be reaped by not rocking the Indian boat.
Third, though the Bangladesh Bank is unlikely to make any global splashes in the foreseeable future, the country is already being fully exposed to how other central banks, by tinkering with policies, are shifting the global economy in one direction or another. At stake is central bank intervention: to stimulate, as Abenomics dramatically highlights, or restrain?that is, by manipulating interest rates. Abe's Dhaka visit was part and parcel of boosting Japanese spending, for example, through Japanese investments here or low-wage Bangladesh exports there but we are also benefiting from an increasingly strong US dollar, itself building pressure to raise interest-rates from the ground during 2015. With the European Union headed in the same direction as Japan, and with China fluctuating between the two choices, it is not surprising to note why we have done better than just sitting back and reaping the rewards. The opportunity to build our own foreign exchange reserves has never been more promising than now (if cultivated, we will then depend less on foreign borrowings in the future) but one of the most important reasons has been how our own central bank leader, Dr Atiur Rahman, has brought stability by stepping outside the interest-rate tinkering business. His formula of inclusive banking, green banking and corporate social responsibility earned him the privileged Asian Central Banker award for 2014, precisely for these, bringing with it global attention of the kind our country desperately needs.
Cautionary measures and stepping outside the traditional box, such as his, would also buffer us against global-level financial and macro-economic instability. In fact, given our hypothetically high infrastructure-building demand for both foreign investment and cash, the year 2015 could make Bangladesh a country of high interest for multinational corporations: instability creates pools of foreign investors searching for calmer waters and few other projects can be more stable for investors than infrastructure-building. Again, we have a lot to gain from a tumultuous financial market throughout 2015 if we can hold off domestic political conflicts during the year.
Much the same holds for the fifth theme: caution and reconsideration could pay off handsomely. One of the clear geo-economic tectonic shifts will be oil price-driven. Falling oil prices could be double-edged. High exploration costs, as in the Bay of Bengal, would not attract oil companies, thus postponing our own benefits from potentially high gas/oil reserves. With the petroleum centre-of-gravity shifting from Saudi Arabia to the United States, we have to be prepared for our Middle East expatriates losing their jobs as this will cause waves of shocks in the economies of both industrialised countries, where our exports go, and developing countries, where new economic opportunities will only generate more competitors for us. In the long-run, we will need all the fuel we can get from our own backyard: with extant gas reserves projected to be exhausted soon, we might not have a choice but to continue exploring the Bay, in turn demanding fewer restrictions upon oil companies (for example, giving them a greater share of possible exports than they have so far been permitted). Even when the oil price was high, we did not get many oil companies interested in exploration. Unless we chew a little, we might not find much to bite later.
In short, then, Bangladesh is ready, willing, and capable of delivering a 6.3 per cent growth rate during 2015 (or close to that figure), if it can avoid political disruptions domestically. It can emerge on the brighter side of all the global sources of instability that The Economist listed: domestic peace and fewer investment controls would help us exchange our infrastructural and energy deficiencies for rootless corporations seeking safe havens.
The writer is Professor Emeritus, Universidad Iberoamericana, Mexico City. inv198@hotmail.com