Towards a brighter future

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Latest milestone: A light festival at Dhaka's Hatirjheel celebrates Bangladesh's generation of 15,000 MW electricity

© bdnews24.com/muhammad mostafigur rahman

A former central bank governor sees all the hope for the Bangladesh economy

The recent surge in economic expansion in Bangladesh and its social transformation have drawn the admiration of the global community. The country is characterised as being amongst the 'next eleven' by Goldman Sachs, the 'frontier five' by JP Morgan and the 'three growth generators, 3G' by the Citigroup. The Economist, commenting on May 3, 2012, noted that "Bangladesh has shown what can be done." The size of the country has expanded 174 times in 45 years. Due to this the per capita income has increased at a slower rate than could be expected, expanding less than 100 times in the same period ($170 in 1972 to $1466 in 2016). Life expectancy at birth has increased from 43 years to 71 years. Infant mortality has dropped from 157 to 31 per thousand. Total fertility rate has dropped from 5 to 2.2. Primary enrolment has reached 98 percent, the dropout rate falling to less than 30. The primary and secondary enrolment of girls and boys reflects the demographic composition. Compared to 31,000 students seeking tertiary education in 1973, enrolment reached 3.1 million in 2016. Quality of education, particularly at the secondary and tertiary levels, however, leaves scope for improvement.

Gender parity

Of particular significance is the manifestation of women's empowerment. In the Gender Parity Index of the World Economic Forum, Bangladesh ranked 68th in 2014 amongst 145 countries, and 64th in 2015. In contrast, India ranked 108th. In women's political participation, Bangladesh ranked 8th in 2015. Its positions in health and education were 95th and 109th respectively. The economic participation rate of women rose from 3 percent in 1973 to 39 percent in 2016. According to the Bangladesh Bureau of Statistics, the number of women amongst employed workers was 1.23 million in 2003 (10.91 percent), rising to 4.1 million (16.24 percent) in 2013.

Security

The US Gallup Survey 2016 ranks Bangladesh as the 6th safest country in the world, with a score of 78 after Singapore (89), Uzbekistan (88), Indonesia (87), Hong Kong (87) and Sri Lanka (79). In the Global Peace Index compiled by the Institute of Economics and Peace (IEP), in a survey of 162 countries on 23 counts, Bangladesh ranks 74th after Bhutan (18) and Nepal (62) but is ahead of Sri Lanka (114), India (143), Pakistan (154) and Afghanistan (160). The visiting 2016 England Cricket Team's security chief has remarked that Bangladesh's security arrangements have been the best in his twenty years of experience in several countries.

Open economy, confidence barometer and demographic dividend

In terms of openness of the economy and consumer confidence, Bangladesh has worked wonders. The $350 million exports of 1972-73 reached the level of $35 billion in 2015-16. The trade-GDP ratio which has been 0.1 in 2010 is now an impressive 0.45. But the economy suffers from a narrow base, both in industrial production and in exports. Eighty percent of the exports revenue comes from Readymade Garments (RMG) and Knitwear. Diversification in industrial production and in exports, both in product mix and destination, are warranted. The structural change of GDP of Bangladesh leaned more in favour of the services sector than job creating industrial/manufacturing secondary sector. The contributions of the primary, secondary and tertiary sectors were 53, 17 and 30 percent respectively in 1972-73; these are currently to 17, 30 and 53 percent. The lesson is to adopt a development model that prioritises in industrialisation for employment generation, poverty reduction and higher local value addition. For that to happen, the Investment-GDP ratio has to increase from 29.8 percent to 40 percent for an annual GDP growth of 10 percent by 2030 when electricity generation should rise to 20,000 KW. The country's development partners, notably China, ADB, World Bank, India and Japan, who committed $40 billion in new economic assistance, primarily in infrastructure development, have expressed confidence in a vibrant Bangladesh. Initially, however, very competent entrepreneurs of the country will need to be enthused under a newly crafted policy framework, to invest big in textiles, leather, pharmaceuticals, sports goods, plastic products, bicycles, motorcycles, shipbuilding and ecotourism perhaps in the Special Economic Zones. The Micro, Small and Medium Enterprise (MSME) products, and the spectacular success in light engineering in Jinjira and plastic industries, deserve more attention than before. Harvesting the demographic dividends of 50 million people between 15 to 30 years of age requires transformation of human capital through vocational education at the secondary and technological education, at the tertiary level. Joint collaboration in evolving the tertiary education syllabus, co-op type education like the Northeastern University of Boston, entrepreneurship incubators in the universities, compulsory nine credits per semester for all university students in rural areas and an inspiring PPP endeavour in education will make graduates more job-worthy and useful to the country. Manpower planning is thus in order.

On Jan 1, 2015, MasterCard assessed that Consumer Confidence Index (CCI) was very high in Bangladesh – at 83.3 points amongst the 16 market economies of the Asia Pacific region and its annual growth of 16.9 points was the highest among them. The Boston Consulting Group (BCG) recently published a survey that speaks of a strong middle class population of 12 million (growing at an annual rate of 0.02 million) with per capita income of $4000. Thus Bangladesh has emerged as a strong market for light consumer goods. This finding also lays the foundation for escalating efforts in lifting the Tax-GDP ratio from 10 percent or so to at least 17 percent.

Recent developments

The optimism about a significantly prospering Bangladesh apparently received a jolt in 2016 with a series of killings of progressive minded bloggers and some foreigners. The authorities' ruthlessness in successfully dealing with the armed attackers of the Holey Artisan Restaurant in Gulshan was both necessary and precedent-creating. The lesson learnt from the carnage is that IS was not necessarily targeting only the madrassa-goers but operated its net from abroad, brainwashing the children of the well-off studying at some of the top universities, both public and  private. The frustration might have resulted from parental negligence of the children at home, heavy and uninteresting curricula loads at schools, some teachers' preference for private coaching rather than classroom contact with the pupils, electronic media and an era of dangerous exposure, false propaganda linking vengeance to Islam and a singular lack of attention towards a cultural-ideological orientation for young minds.

In 2015 MasterCard assessed that Consumer Confidence Index (CCI) was very high in Bangladesh — at 83.3 points amongst the 16 market economies of the Asia Pacific region and its annual growth of 16.9 points was the highest among them

Parental affinity with children, drastic reduction of the course load, discontinuation of JDC  and JSC exams, banning notebooks and guide books, intensive teachers training, area-based school admission, mandatory bus services for school pupils and a regeneration of cultural as well as sports activities are immediately in order.

The maturity with which the Sholakia and other potential attacks have been handled shows that government investment in law and order force is bearing fruit. More intense training and motivation, ruthless supervision to reduce inter-agency rivalry (as recently done at the behest of the head of government), effective deployment and a work ethic sans publicity will, along with the attention to children at home as well as school, may work wonders in leaving the terror and radicalism behind our prospering nation.

The favourable judgment of the International Tribunal on the Law of the Sea, ITLOS enabled Bangladesh control over a total area of about 1,20,000 square kilometres of sea, 200 nautical miles  and a continental shelf hitherto contested by India and Myanmar opens up opportunities for a blue economy rich in marine resources, fisheries, energy, minerals, tourism and transportation prospects. The earth shaking move towards the possible discovery of five celestial bodies by a team of NASA scientists headed by 29 year old Bangladeshi researcher scientist Rubab Khan, the discovery of the jute genome, potential electricity generation without fuel, correct prediction on control of cholera, co-functioning of YouTube, the scaling of Mount Everest by two Bangladeshi women and rising prominence in world cricket are also some feathers in the crown of Bangladesh.

The prospects and challenges

If Bangladesh has to heed the unbalanced growth theory of Professor Hirschman, it will definitely select infrastructure, gas development and electricity generation and technological advancement, including management, as the two critical challenges to double up its journey on the optimal growth-cum-development super highway. The country has made excellent progress in enhancing the maximum electricity generating capacity from 4130 MW on Sept 17, 2007 to 9036 MW on Jul 30, 2016, but still has a long way to go to realise the double digit GDP growth aspiration in a decade. Review is called for in ensuring the use of quality bituminous coal reserves in a hundred square kilometre area of Rangpur-Dinajpur in open pit extraction to generate 20,000 MW electricity for 30 years. For the environmental and technological consent of the affected people, land price ten times the market value, shares in the proposed Coal Bangla Inc, jobs for the siblings and a massive relocation effort could be offered. A potential spoiler, the Rampal project may be the subject of a temporary "cooling off" by the organisers of the agitation declaring a one year moratorium with the government taking a deep breath and starting negotiations with the movement, trying to convince them or even agreeing to some modifications.

The usual practice is not to use scarce gas for electricity generation or for domestic cooking, but in Bangladesh electricity generation consumes 53 percent and domestic cooking another 16 percent of the gas. Gas should instead be used for industrialisation in the interest of job creation. Given the pace at which environmentalists are gathering strength globally, using the cheapest coal fired electricity generation may not remain an option. To increase access to electricity from 60 percent to 90 percent, and for it to be sufficient for the massive development spurt during the next decade, the present investment level in electricity generation and transmission  has to double by the year 2021. The current balance of public sector share of 54 percent may even have to increase and the net energy import of 15.18 percent may have to increase in the short run due to import of LNG and LPG from 2018. A 10 percent reliance on renewable energy is possible in a decade, particularly after the Bangladesh Agricultural University in Mymensingh's biogas plan. Adequately safeguarded atomic energy will also be available in a few years. Solar energy has been quite steady.

Non-investment in gas exploration and development until 2009 depleted the deposit to 13.5 trillion cubic feet (tcf) that may at best meet the requirements of the next 14 years. The Tk 100 billion mega projects on exploration and development of gas including drilling of 108 wells will hopefully lead to the discovery of a significant quantity of gas reserves. Under a possible agreement with Oil and Natural Gas Company, ONGC, a joint venture of Australia and India, offshore exploration of three blocks may result in a daily supply of 500 cft of LNG from 2018 and of another 1500 mcf by 2000. A hundred thousand or so illegal gas connections should be cut off and a smooth but firm transition from piped domestic gas supply to cylinder supply can be completed by that phase. Sabotage and corruption prevention in gas and electricity definitely deserves attention. Price hike of gas without an augmented supply will only help to increase revenue but may actually hurt industrialisation via a cost push.

Middle income country or developing country?

With the categorisation of Bangladesh as a low middle income country by the World Bank, based on its 2012 data, the aspiration to become a mid-income country has been strengthened. Messrs Kamrul, Farzana and Nandi of the Economics Department of East West University, Dhaka, have shown in a recent study the period needed by some countries graduating from Low Middle Income (LMI) to Middle Income (MI). China took 17 years, the Republic of Korea and Taiwan took 19 years each and Malaysia took 27 years for the transition under their respective GDP growth scenarios. It may be possible to project a 17-year transition for Bangladesh to move from a LMI country in 2012 to a MI country in 2029. But if the annual GDP growth can be enhanced to double digits by 2022, the transition may be completed by 2025.

It may be possible to project a 17-year transition for Bangladesh to move from a Lower Middle Income country in 2012 to a Middle Income country in 2029. But, if the annual GDP growth can be escalated to double digits by 2022, the transition may be completed by 2025

On the other hand, Bangladesh has lowered The Economic Vulnerably Index (EVI) to 0.32 in 2015 (requirement <0.36). Human Asset Index (HAI) in Bangladesh has risen to 0.63 just short of the required level of 0.66. The third criteria, the GNI threshold, has already been met. The country can thus apply to the UN Committee on Development Planning for the 2018 Review for graduation to a developing country status in 2021. The country would do well to get out of the "ignominy" of an LDC. Given a strong social safety net programme by the government committed to a welfare state in Bangladesh, its Human Development Index HDI 0.585 should continue to increase from the present medium HDI category to High HDI well before 2041 when Bangladesh aspires to become a developed country. It would gather further steam if and when the growth with equity strategy of 1996-2001 is readopted in the context of industrialisation. There is, however, no alternative to putting the social security beneficiaries to jobs as appropriate in the long run.

Critical hurdles in 2017

Bangladesh would do well to ward off a 2013-style mindless political agitation, which could cause temporary deceleration in  robust growth; the killings, arson and looting in the cover of petrol bombing are simply unacceptable. The government will have to take particular care in handling the tricky issue of the reconstitution of the Election Commission and the Rampal project. It should be given the cooperation of all in the interest of an uninterrupted political stability, an essential ingredient for sustaining growth and social progress. Continuation of digitalisation as well as augmenting the management capacity (doubling the compensation level of civil servants should help) would enable better planning, implementation, monitoring and evaluation of public sector projects. A strengthened planning commission or a council of economic advisors to the head of the government should help appraisal, approval, implementation, monitoring and evaluation of the mega projects without time or cost overrun.

Completion of the daunting dream project, "Bridge on the Ferocious Padma", through the country's own funding by the end of 2018, a master plan in Railways for its broad-gauging, double tracking and electrification and tightening of corruption and capital flight (Washington based Financial Integrity Institute finds a $56.6 billion illegal fund transfer abroad from Bangladesh during the decade 2004-2013, a staggering $9.6 billion in 2013 alone) should add at least an addition two percent points to the annual GDP growth. An upward trend in revenue collection, noteworthy increase in development imports, worsening of the trade imbalance and on upward trend in private sector bank borrowing augur well. Reforms in Banking and Insurance will help too.

The country is fortunate in having a homogeneous, non-communal, basically peaceful and democratic-minded population of 161 million, of whom 50 million are ready to be transformed into human capital for reaping the demographic dividends. Bangladesh has also regained its prestige and the goodwill of the international community. In 1971, the goodwill was one of sympathy as compared to the current one of admiration for its miraculous economic growth and outstanding social progress in the face of formidable hurdles. That speaks volumes.

Mohammed Farashuddin
is a former governor of Bangladesh's central bank and the founder of East West University, Dhaka