Time for economic diplomacy to confront challenges: Ahsan Mansur

Bangladesh should now focus on ‘economic diplomacy’ to confront the challenges of losing grants, low-interest loans and duty-free access to the markets of developed countries as it graduated to the list of developing countries, said leading economic researcher Ahsan H Mansur.

 “The first challenge will be a reduced access to global markets for our exports and we must focus on economic diplomacy,” Mansur, executive director of the Policy Research Institute, said in an interview with bdnews24.com.

“We should put stress on bilateral relations and make deals with countries that buy our goods.”

Mansur also suggested developing infrastructure and productivity as the way forward.

Bangladesh, which has been an LDC since 1975, recently fulfilled the UN’s current criteria to graduate from a ‘least developed country’ to a ‘developing country’ after advancing from a low-income country to a low-middle income country on the World Bank’s scale two years ago.

According to the UN, a country is eligible to graduate from the LDC category if it has a gross national income (GNI) per capita of $1,230 or above for three years, a Human Assets Index (HAI) of 66 or above and an Economic Vulnerability Index (EVI) of 32 or below.

Bangladesh has fulfilled the three conditions on a very large margin. Bangladesh's current per capita income is $1,610. The HAI is 72.9, while the EVI is 25.

Haoliang Xu, assistant secretary general of the United Nations, said Bangladesh is the first country to fulfill the three conditions at the same time and its steady progress showed that formal elevation to the list of developing countries in 2024 will be smooth.

Mansur also said Bangladesh would not fall behind on any of the three indices, if there is no big natural or man-made disaster.

Therefore, he spoke about the challenges Bangladesh is going to face once it is certified as a full developing country in 2024.

Bangladesh began to lose the advantage of accessing low-interest loans from different agencies once its per capita income expanded.

“Already we lost partial advantage of low-interest loan, as the World Bank and other donors grant loans according to per capita income; now that our per capita income increased, they will reduce the scope for low-cost loans,” he said.

Mansur, a former official of International Monetary Fund, said the donors will now reduce the soft loans and increase hard loans.

“However, the World Bank will still provide some of the low-interest loans along with high-interest loans for few more years; and then gradually reduce the low-interest loans.”

Mansur also mentioned the challenge of Bangladesh losing duty free access to global markets for exports.

“We will gradually lose the trade benefits under the generalised system of preferences we are now entitled to as an LDC from the European Union, Canada, Japan and Australia and have to pay 14-15 percent tax,” he said.

Therefore, Bangladesh should focus on bilateral relations with countries that have demand for Bangladeshi products, he said.

Bangladesh should follow Vietnam in this regard, according to Mansur.

“Vietnam signed up free trade agreements with several countries once it graduated from LDC. We need to do the same. They took different measures to enter the global market including becoming   member of the Association of Southeast Asian Nations,” he said.

Vietnam has progressed tremendously due to its successful economic diplomacy; the Southeast Asian nation’s annual exports grew to $230 billion while Bangladesh exports $35 billion of goods. 

Mansur believes Bangladesh should now increase the internal productivity to prepare to compete in the global market.

“We can pay the 14-15 percent tax if we make ourselves capable. We need to earn that capability by reducing production cost through our skills,” he said.

“We need to be capable in every step. First, we have to develop our communication system which may enable us to save 2 percent. A truck takes 12 hours to reach Chittagong from Dhaka. The fare will go down if it can reach the port city in four hours. This is capability.”

He stressed the need for low-cost power supply to industries saying most of the business organisations need generators due to lack of quality power supply. “The production cost will decrease once we ensure power supply at competitive price.”

The production cost will reduce further if ports are developed and activated, he said.

“It will reduce the production cost if goods are not stuck in the Chittagong port for three days.”

Mansur, also a former teacher of economics at Dhaka University, suggested increasing worker skills and creating a proper environment for investment as a means of cost reduction.

“If an investor made a profit of Tk 10 after investing Tk 100, he will be interested when that profit is increased to Tk 15,” said Mansur.

Mansur stressed the need for removing all hindrances, such as extortion, harassment by law-enforcement agencies, crime and toll collection that prevent investors from investing in Bangladesh.

“Why does Vietnam receive $18 billion as investment while we get only $2 billion? We need to ask ourselves why investors are not interested in Bangladesh?” he said.

“Samsung came to our country but changed its course to Vietnam as we couldn’t provide them with land or gas. That factory in Vietnam now generates $7 billion in export value a year,” he added.

He said foreign investment will stream in once Bangladesh can reduce the production cost, adding roads, railways and waterways along with economic zones should be developed to become appropriate for investment.

He also said human resource to be developed according to the demand in the market.

“We cannot leave them with just general degrees. We must build their skills for those sectors with high demand for manpower,” said Mansur.

The researcher also stressed institutional capability and good governance in Bangladesh.

“Ministries, the judiciary or the police became institutionally weak. They don’t serve the national interest but the vested groups. We need to stop this culture,” he said.

However, Mansur warned that graduating to a developing country is not the end of the struggle. He said many countries are trapped in the group of middle-income nations, as they fail to move to the next level due to lack of development. He cited Malaysia, Indonesia, Thailand and the Philippines as examples.