Economic growth is always good for a country with the caveat that it doesn't become an addiction and results in unplanned growth. Bangladesh has enjoyed its rapid inclusion into the global economy since late 80s and early 90s. The country needed to grow and it did not have the freedom to cater its preferred financing options. The hard truth is that we were a poor country with a large population and both foreign and domestic investors took advantage of such factors. Bangladesh was not industrialized so the most convenient way to exploit the influx of available labour force was to employ them in low wage jobs in low value-added industries such as the ready-made garments (RMG) sector. Also, millions of workers were hired as low-cost workers in the Middle-East, Singapore, Malaysia etc. Our policymakers and private sector leaders were satisfied with the arrangement and became dependent on that system. This was because this opportunity created millions of jobs and contributed to country's economy.
It has been almost 30 years since and we have not scrutinized our financing options and explored labour diversification to be copacetic. We must review and adjust our aid management not only by its quantitative dimensions but also for its qualitative features. We need to prioritize building a system of resilience that can absorb economic shocks and utilize aid effectively to maintain higher growths as necessary.
In almost three decades we should have adequately planned ways to diversify the existing labour force. The workers in multiple labour-intensive industries are hard-working but hard work does not always translate to high productivity. We are systematically trapped in a cycle of low-wage and low productivity and only focused on labour-adding collective value. The current unemployment levels are alarming and government states that unemployment numbers are low. Credibility of most data provided by the relevant government agency is even questioned by Finance Minister A.M.A. Muhith as he pointed out during budget planning.
Labour organizations, think-tanks, and prominent economists rightly clarified the mist around the unemployment numbers. The unemployment rate officially is 4.0% but if we consider the informal employment rate and those who are reluctantly employed at very poor-quality jobs then the unemployment rate would be close to 35% to 40%. The government shows its complacence over the official unemployment numbers and its capacity to sustain economic growth with mega projects.
This phenomenon of complacency and overdependence is also reflected on our government's rhetoric regarding per capita gross domestic product (GDP) and growth rate. We should not celebrate the growth rate when it is a jobless growth and does not equate to making peoples' lives better. Simply put, given Bangladesh's current status quo the economic interaction generated by 160 million people and an active labour force of 72 million (World Bank 2016) is catalyst enough to generate a 5.0-6.0% growth rate.
Bangladesh's honeymoon period of initial economic growth has already ended. Business leaders and technocrats have raised concerns that unless we diversify our industry and labour force then traditional labour-intensive sectors like RMG alone cannot sustain current growth rate. Remittance is the second most important contributing factor in our economy, and in last few years due to the slump in petro-economies and other issues our remittance level is showing a notable decline.
The sage saying, "to live within your means" is not only for individuals but also is a guiding principle for countries. As a country develops, it generates multiple contributing and contradicting effects. When contradicting effects overwhelm the contributing ones then the country's system starts to generate problems. This is known as the "overshoot" and "collapse" of a system. Economic growth increases resource consumption, waste generation, pollution, traffic congestion etc. An "overshoot" system increases cost of doing business and decreases competitiveness of a country. Moreover, unplanned economic growth can exhaust the systemic capacity of a country. The country after enjoying a certain level of stable growth faces multiple systemic problems such as resource availability (gas shortage in Bangladesh), decreased industrial output (declining export growth rate), food shortage (rice shortage and price hike), large population and overall decline in public service and public goods.
For a natural disaster-prone country, people of Bangladesh were always economically cautious; hence resounding the above principle "to live within your means" seems redundant. However, a systemic analysis of Bangladesh's current trajectory raises concerns of fiduciary risks brought forth not by its people but as results of public policy decisions. Election-year promises of mega projects and roadshows highlighting such projects are nothing new. However, the economic fundamentals and government's financing plans for the large infrastructural projects seems asynchronous and that is a cause of concern.
The government undertook multiple mega projects worth billions of dollars with very slow aid utilization rate. The sluggish project implementation is the cumulative result of inefficient management, lack of trained professionals and pilfering from delayed timeline that increases the project cost.
The financing through expansive supplier's credit, public-private partnership agreements and foreign mixed loans are increasing our debt obligations at an unprecedented level. Bangladesh's recent aid pipeline from fiscal year (FY)2014 -FY2015 was $18.69 billion and disbursement of aid in FY 2014-2015 stood at $3.04 billion at utilization level of 16.74% of the opening balance. The government's current plan is to increase the aid utilization to 33% which is a 67% increase of utilization within a year!
Such, slow utilization, dependence on expansive energy sources and continuing budget deficit are similar to the premonitions of the Latin American debt crisis of 1980s. The crisis is known as the "lost decade", foreign debt obligations due to infrastructure development projects exceeded the economic output of respective countries and they defaulted. It is fiduciary duty of the government of Bangladesh to ensure that such circumstances do not arise specially in a country already facing multiple systemic pressures.
The growth-rate addiction and improperly planned mega projects are factors that might lead to economic crisis. We should be focused on building a system of resilience and not a system that cannot manage itself. A significant portion of Bangladesh's population might have come out of extreme poverty. But the majority of its population still do not have economic resilience. It would be better if we can control the trajectory of our growth within practical limits; otherwise, if it overwhelms the system, then we might face our own "lost decade".
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