Home ›› 05 Oct 2021 ›› Editorial
A study done in Bangladesh has shown that 60 per cent of the 250 startups in Bangladesh have been affected by Covid-19. However, Pathao has been delivering groceries and medicines since May when lockdowns in Bangladesh restricted people’s movement. This Pathao initiative reminds one of the maxim that necessity is the mother of invention. Demographic Dividend as defined by the United Nations Population Fund (UNFPA), is "the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older)”. In other words, it is “a boost in economic productivity that occurs when there are growing numbers of people in the workforce relative to the number of dependents”. UNFPA stated that “A country with both increasing numbers of young people and declining fertility has the potential to reap a demographic dividend." Demographic dividend occurs when the proportion of working people in the total population is high because this indicates that more people have the potential to be productive and contribute to growth of the economy. In simple terms, the demographic dividend is the economic growth that may result from changes to a country’s age structure, due to the shift from people living short lives and having large families to living long lives and having small families. Because of this change in age distribution, fewer investments are needed to meet the needs of the youngest age groups and resources are freed up for what is called the “economic gift.” This means that the labor force is growing more rapidly than the population that is dependent on it, creating a window for faster economic growth and family welfare. In theory, at the micro level, this transition can result in better living standards for families and higher incomes per person while at the macro level, it can have significant gains in the economic development of a country.
vFor decades, experts have debated the impact of population growth on economic development. "Population pessimists" have insisted that high fertility and rapid population growth inhibit development. This view contributed to the rationale for widespread funding of family planning policies and programs in the 1960s. Conversely, "population optimists" have argued the opposite position: Rapid population growth and large population size can promote economic prosperity by furnishing abundant human and intellectual capital and increasing market size. Proponents of both views can find support in the research record, but overall, the evidence has been inconclusive. Proponents of yet a third view, "population neutralism," contend that population growth, in isolation from other factors, has little impact on economic performance, a position supported by a sizable body of economic research. This view has become the dominant position in the current policy environment. Exploiting the Transition. Policies in three areas—education, the economy, and governance—are critical to collecting the demographic dividend.
Transforming a youthful population into a productive workforce requires investment in education at all levels.
A larger, better-educated workforce will yield benefits only if the extra additional workers can find jobs. Government policies that lead to stable macroeconomic conditions are associated with the growth of productive and rewarding jobs. Labor-market flexibility and openness to trade are also important, but the relevant policy reforms must be undertaken gradually and in a manner that protects those who can lose out in such transitions.
In many countries, necessary steps to reaping the benefits of the demographic dividend include strengthening the rule of law, improving the efficiency of government operations, reducing corruption, and guaranteeing contract enforcement.
The effects of successful policies in all of these areas can be mutually reinforcing, helping to create a "virtuous cycle" of sustained growth. Conversely, without effective policies, countries may miss opportunities for economic growth, or worse. They may risk high unemployment, increased crime rates, and political instability.
In 2019, 36.2 per cent of the total 164.7 million population was aged below 20, 54.3 per cent below 30, and 70.4 per cent below 40. It also implies that 96.43 million people (58.5 per cent) belonged to the working-age groups of 20-64 years. Fostering economic activities through digitization requires the establishment of the digital infrastructure for businesses and operations, the e-money transactions, a digital payment system, and online-based platforms for providing and facilitating services for the businesses.
Throughout the last decade, Bangladesh has experienced rapid growth in internet connectivity and mobile phone penetration. Furthermore, the country has also fostered the development of a support system for digital entrepreneurs that would attract the huge young population towards attaining the advantages of digitization and technologies. E-commerce is one of the core embedded parts of a digital economy. It refers to the economic activities of goods and services using online platforms.
Over time, new avenues of e-commerce are opened to provide various products and innovative online services that connect mass consumers and suppliers in a virtual marketplace. Hence, in a way, it facilitates large-scale digital entrepreneurship, especially among the young population. Globally, e-commerce and cross-border online businesses have been rising at a good pace. According to UNCTAD (2018), over 1.45 billion people shopped online in 2018, which was 9 per cent higher than in 2017 and 30.3 per cent higher than in 2016, as shown in Figure 6. The global value of e-commerce transactions increased to US$25.6 trillion in 2018, an 8 per cent rise from 2017. The US, Japan, and the PRC have the highest e-commerce sales and share 55.4 per cent of global sales. Category-wise, B2B (business-to- business) comprises around 83 per cent of all e-commerce sales while B2C (business-to- consumer) makes up the rest.
In Bangladesh, e-commerce is in its early stage; however, the sales have been increasing and are yet to tap the fullest potential. Only 8 per cent of internet users are internet shoppers, according to 2017 data (UNCTAD 2019). However, as the digitization process is shaping up, more infrastructural and regulatory support is being provided by the government and concerned organizations. E-commerce has thus been facilitated on a wider scale and people are getting more accustomed to online purchasing rather than the conventional physical visits to shops.
As people are becoming financially educated to handle smart devices and digital payment systems, the prospect of e-commerce seems to be immense. Besides the banks, mobile financial services (MFSs) play a major role in transforming the digital payment system. There is still a kind of oligopolistic market of MFSs but the market is under constant regulation and overseen by the central bank. As a result, the MFS activities have been growing faster than the digitization process has accelerated to the next level. According to the Bangladesh Bank’s statistics, MFSs support an array of financial activities: cash in, cash out, merchant payments, person-to-person (P2P), government-to-person (G2P), salary disbursement, talktime purchase, and utility bills payment.
Total transactions through MFSs increased from BDT321 billion in December 2018 to BDT448 billion in June 2020, an increase of around 40 per cent. In person to person transactions salary disbursements, utility payments, merchant payments, and talktime purchases increased while the shares of cash in, cash out, and G2P decreased. In June 2020, cash out, P2P, and cash in hand the highest shares with 30.0 per cent, 29.3 per cent, and 27.2 per cent, respectively. In contrast, G2P, talktime purchase, and merchant payments had the lowest shares with 0.8 per cent, 1.4 per cent, and 1.8 per cent, respectively.
The afterword of 2050, as population projection depicts, with higher life expectancy, Bangladesh will face huge dependent aged people who will require feed them without sales return under Social Safety-net programmes and hence it is the high time to step up its economic growth. We recommend equitable quality education for all linking with job market needs and demands as well as full and productive employment for all through the creation of new job opportunities. Over the last few decades, the decline in fertility and mortality rates in Bangladesh and subsequent increase in number of working-age population (15-59) relative to the dependents (0-14 and 60+) offer the country an opportunity of accelerated economic growth. Economists optimistically call this potential for accelerated economic growth the “demographic dividend”. Until the early 2040s, Bangladesh is expected to gain an average 1 percent additional yearly GDP just because of this growing working age share—yet realising that potential has been one of its major challenges. However, demographic dividend is not a given. Shifts in age structure of a country’s population do not automatically guarantee growth. Rather, it requires investment in a number of areas and a set of policy commitments to systematically manage its working-age population for productive economic output.
The writer is MD and CEO of Community Bank
