Financial openness to raise inequality: BICM

Although financial openness will help attract investments, increase the use of advanced technology and create demand for skilled workers, it will push back unskilled workers, increasing inequality, according to a research.

The more the country is connected with the global economy, the more financial openness will increase, bringing new types of investment in the country. The expectation of that investment will be to get more return.

Modern technology will be used to achieve this goal, where only skilled workers can survive and unskilled workers lag behind. This will increase the disparity between the skilled and unskilled labour force, the research found. 

Bangladesh Institute of Capital Market (BICM) carried out the research and unveiled the findings at a seminar on Tuesday in Dhaka. BICM’s Assistant Professor Safayeduzzaman Khan presented the research paper titled ‘Financial Openness and Income Inequality in Emerging Economies: A Panel Data Approach’.

It said the economy is growing and global connectivity is increasing. As a result of this connectivity, various financial rules and regulations have to be waived, which will increase investment.

However, the goal of the investment will be to get a high return. This will increase the use of advanced technology and create demand for skilled workers. But the incompetents will fall behind. This will increase inequality, it said.

Unskilled workers need to be trained to overcome this situation. In this case, training and educational opportunities should be increased and the emphasis should be on vocational education in particular.

Safayeduzzaman said, “We cannot ignore the demand for skilled workers. But we also have to think about the issue of incompetence.”

It is to be noted that the labour-intensive garment industry has started using advanced technology to increase production and reduce costs. As it has created opportunities for skilled workers to get jobs, unskilled workers are losing theirs.

Safayeduzzaman said that considering the welfare, we have to stand by workers who would lose jobs. They need to be brought into the social safety net and trained.

Central Bank Executive Director Habibur Rahman said that increasing financial openness means relaxing many rules and regulations in this regard. However, even if Bangladesh wants, it will not be able to bring as much relaxation as is being said.

“Any investment brings new knowledge and technology. And as the economy grows, so does investment,” he said. 

He hoped that it would have a positive impact on the downside and play a role in poverty reduction.

He said that in any emerging economy, we have to accept inequality and move forward. This inequality can be seen in the international arena as well as within the country. However, we have to take measures so that the difference is not widened.

SM Zulfiqar Ali, senior research fellow at the Bangladesh Institute of Development Studies, said that as regional inequality is high in Bangladesh, so is the income gap between different groups. He emphasised focusing on reducing disparities for a sustainable economy.