The scientifically and technologically developed world is expanding very fast, being aided by the globalised nature of industries, trade and commerce. In the present hyper-competitive world, no country can thrive without sustainable investment growth. Investment in multi-dimensional areas is the crucial need for enhancing sustainable economic growth. The intermittent world-wide economic and financial crises spanning continents that range from Asia, Europe to northern America necessitate diversification of investments in different fields at national and international levels.
Short-term diversification of investment in production, marketing, export and other structures of the economy has been a common feature of many developing economies. The developed countries, realising the various economic benefits of diversification of investment, opted for diversification long time back and are much ahead of developing countries. The doctrine of diversification echoes the idea "don't put all your eggs in one basket; rather put them in different baskets".
Diversification is a much-used and talked-about strategy. It means identifying directions of development that take an organisation away from both its current products and markets at the same time. In reality, it is not a single strategy, but a set of many that involve all the dimensions of strategic alternatives. Diversification strategies comprise those of concentric and conglomerate. Concentric diversification comprises the market-related one, the technology-based one and that which is related to market and technology.
Bangladesh, a densely populated country, is ranked as a developing one in South Asia. It has made extraordinary progress in capital and labour-oriented manufacturing industries like ready-made garments (RMG) and textile industries. For the last two decades, these two sectors have flourished immensely and played a pivotal role in production, employment and in the area of keeping the sustainable economic growth steady. Presently, the economy of the country is strikingly dependent on the performance of these two sectors. With rapid globalisation, most of the countries, developed and developing, face stiff competitions with each other in the international markets. Bangladesh RMG and textile industries are confronting competitive international markets like the other countries. As a result, many Bangladesh RMG and textile industries have started to lose lucrative international markets. Their owners are struggling to survive with single-dimension investment, as many industries have been closed.
The broader RMG industry in Bangladesh has long been beset by shortage of energy coming from natural gas. "Production is low or cannot reach target due to the faltering gas supply," is the common observation made by the direct stakeholders. The present state of the RMG sector that requires business wisdom suggests that instead of incurring continuous losses in terms of production, marketing and profitability and facing increased loan liabilities, it's prudent to formulate strategies to divert the investments to economically and financially viable industries. When a country's business status becomes weak, its international markets also get slackened; diversification can provide a strong antidote here.
It's high time the policymakers and the private and public sector business people mulled seriously about diversification in keeping with the perception of concentric and conglomerate diversification. There's little time to waste as the countries in Africa and Latin America have already undertaken their respective diversification programmes. In order to reduce its reliance on oil and natural gas, the Gulf country Qatar now considers diversification as a key element in its economic strategy. According to Qatar National Development Strategy and IMF projections, the growth in its non-oil sector in 2012-2016 is expected to reach 9.1 per cent. The growth in hydrocarbon sector, which still drives the national economy, will meanwhile decrease to about 4.4 per cent. Besides conducting the overseas activities of Qatar's sovereign wealth fund, the Qatari government has plans for massive infrastructure development along with further diversifications such as manufacturing, construction, trade, communication, real estate and business services.
The middle-income country of Malaysia is, for example, an economy endowed with natural resources. It has diversified its economy over the past 40 years, expediting its post-independence growth and development. The economy has shifted from being one dominated by agriculture and the exports of agricultural commodities and tin to an economy that is now more industrialised. Manufactured products now form a sizable share of total exports. Diversification and economic growth has also contributed to the country's reduction in absolute poverty.
There are many cost-effective and well-paying sectors in Bangladesh which can prudently be capitalised on by the business communities. The entrepreneurs who are losing in their 'one-dimensional investment' may take long-term plans and strategies to diversify their investments.
Dairy industry can be developed in the country like New Zealand. Dairy products have a huge market at national and international levels. Bangladesh has been importing dairy products since long by spending hard-earned foreign exchange.
Information technology (IT) has become a top-listed export item in the economy of India. The modern economy with its advanced and sophisticated technology needs IT extensively. Bangladesh can invest more in the IT sector since it has fast-growing numbers of qualified IT engineers and programmers coming out from the public and private universities. These newly emerged experts remain unutilised or underutilised in the country. Investing in the IT sector by the business people may generate more employment opportunities and give more dividends to the investors.
Manufacturing and exporting electronic and sports items, car assembling etc are economically and financially viable sectors, where Bangladeshi industrialists may diversify their ventures.
The diversification story around the world highlights the fact that a policy in this regard requires a long-term planning and strategy both by the government and business communities. Bangladesh, a low-income country with a huge population, needs to take concerted efforts. It should channel its human and natural resources towards diversification and move forward with the developed and the emerging world.
The writer is the chief financial officer (CFO) at a private group of industries. [email protected]
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