High economic growth in Bangladesh is now a recognised fact. But it is not adequately benefiting the larger section of the people. With sustained growth, inequality is also rising. While the annual average growth of Gross Domestic Product (GDP) is now 7.0 per cent, income Gini Co-efficient increased from 0.458 in 2010 to 0.483 in 2016.
Making society gradually inclusive is one of the ways to contain the rising trend of income inequality. The latest ranking of the Inclusive Development Index (IDI) of the World Economic Forum (WEF) apparently indicates that Bangladesh is mostly on track in this regard.
Released last month, the index shows that Bangladesh is ranked 34th among 74 emerging economies. The country is also the 6th most inclusive developing and emerging economies in Asia. This is an impressive performance, but not the whole story.
Reading between the lines would reveal a clearer picture. The IDI is based on three pillars: Growth and Development, Inclusion and Intergenerational Equity. The pillars are based on several sub-pillars or indicators. While performance of Bangladesh in the first and the third pillars is positive, the trend in inclusion is negative. There have been a reduction in poverty rate and a modest improvement in net income inequality. But wealth inequality has widened significantly in the last five years. As a result, the real trend of inclusion has turned negative.
Again, there is another set of related indicators known as Policy and Institutional Indicators (PII). It has identified 15 policy domains that have the potential to drive both stronger growth and wider social inclusion. These also allow countries to benchmark their institutional strength and policy incentives in these areas.
Bangladesh's position in the PII is disappointing when compared with its competitors. In the education and skills indicator, Bangladesh lags behind countries like Burundi, Uganda, Tanzania, Nepal, Kenya and Zimbabwe and ranked 9th among 16 developing countries considered by the WEF. In the basic services and infrastructure, though the country is 5th among 16 countries, its score is at the lower end of the scale. In employment and labour compensation, only two African countries (Burundi and Chad) lag behind Bangladesh while countries like Mozambique, Malawi and Cambodia are well ahead.
PII ranking provides a comparative idea about the real advancement of the country in the area of inclusiveness. Weak education and skill, inadequate basic services and infrastructure and lack of proactive actions in employment generation and labour compensation are detrimental to sustainable, inclusive development.
To put it in another way, continuous higher and sustainable growth are not adequately transferring the resources to the all sections of the society.
The discriminatory distribution of economic growth is more clearly reflected in the job market. International Labour Organisation (ILO) in its World Employment and Social Outlook - Trends, 2018 points out that informal sector dominates the job markets of many countries in East Asia and South Asia including Bangladesh. Around 90 per cent of all workers in Bangladesh, Cambodia, India and Nepal belong to this category. ILO has observed that high incidence of informality continues to undermine the prospects of further reducing working poverty, especially in South and South-Eastern Asia.
An informal job is generally considered as non-decent and mostly done by a disproportionate share of the working poor. Empirical pieces of evidence show that workers in the informal sector generally face higher risks of poverty than those in the formal sector. People engaged in the informal sector are also exposed to inadequate and unsafe working conditions and have low skills levels and inadequate training opportunities. Their payment is less and irregular; they are burdened with additional work. They are physically and financially more vulnerable.
All this does not, however, mean that informal job is always bad. In countries like Bangladesh, the prevalence of informal job, as well as informal economy, is not undesirable. What is important here is the graduation from informal to the formal sector for the betterment of the people and society.
According to the different labour force surveys conducted by the Bangladesh Bureau of Statistics (BBS), the number of informal employment increased from 50.8 million in 2013 to 52.3 million in 2015-16. The rate of informal employment, however, decreased from 87.4 per cent in 2013 to 86.2 per cent in 2015-16. It means the current economic growth is not helping the informal sector in contributing significantly to the national economy.
The seventh five-year plan (7FYP) has rightly pointed out that the 88 per cent informal labour force in the country requires a long-term massive enhancement effort in education and skills training to be converted into quality labour force for manufacturing and formal services. "This is a huge challenge and requires a long-term strategy for public investment in human development and improvement in service delivery," the planning document adds.
Here comes the question of distribution of income from higher rate of growth to different classes of the population. When the economy is growing at an annual average rate of 7.0 per cent and the country is on its way to graduate from the status of a Least Developed Country (LDC) to an upper one, it is crucially important to maintain focus on balanced growth with a view to making development sustainable. Keeping the overwhelming majority of the workforce in the informal sector and allowing concentration of most resources in the hands of a minority group can't help build an inclusive society.
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