Home ›› 20 May 2022 ›› Editorial

Bangladesh in the globalisation and development era

Towfique Hassan
20 May 2022 00:00:00 | Update: 20 May 2022 07:02:59
Bangladesh in the globalisation and development era

Perhaps no other period since the 1930s has witnessed stresses and tensions in international trade relations comparable to those of the 1980s,1990s, and financial crisis of 2008-09. The decline in commodity prices and the attendant fall in trade in many developing countries, the increase in protectionism, in managed trade and in trade related disputes have collectively given rise to a great deal of uncertainty in trade relations. These developments have directly affected and, in turn, have been exacerbated by developments in the international financial and monetary situation clearly. One of the most far-reaching impacts of the deteriorating trading environment has led to the global deregulation of the trade regime. This globalization of trade has been undertaken as an instrument of development and structural transformation through fuller and more equitable participation of developing countries in trade. The globalization process goes back to the Kennedy Rounds (1964) and Tokyo Round (1973). From those two rounds, deregulation in the international trade regime has actually been initiated.

In a world of economic interdependence, where the well-being and prosperity of nearly every country depends on so many external factors, the importance of a sound and predictable economic environment can hardly be overestimated. The enduring growth of international trade has been viewed as an effective means for bringing about faster development, more jobs a better allocation of resources, larger availability of consumer goods and, above all, rising standards of living particularly for the countries that still sustain low levels of development and face a heavy debt burden.

Through a series of rounds of trade negotiations, WTO/GATT contracting parties have succeeded in reducing the general levels of tariff protection significantly and in introducing more discipline into the use of several NTBs, which have become important trade policy instruments. The major areas where deregulation took place in phases are tariff barriers, non-tariff barriers (NTB), structural adjustments, greater market access, deregulation and divestment of SOEs, simplifications of customs procedures, greater participation of private sector, simplification of exchange rate fixation, eco labeling, labour standard and removal of child labour, etc.

Despite these achievements in trade liberalisation, the international trading environment has not improved in many developing countries. The early 1980s have been a period in which a succession of developments in international trade has tended to negate the very idea of multilateralism. An overgrowing number of trade related issues have been taken up on a bilateral basis, outside the framework of WTO, at the expense of weaker trading nations.

Developing countries have been the main victims of disarray in the trading system. Their efforts to increase exports in the context of development and the servicing of their external debt have been undermined by the proliferation of protectionism. The launching of the Uruguay round of multilateral trade negotiation reflected general concern about the state of the trading environment. It constituted a collective attempt to address many of the international trading system’s acute problems. The new round was the most challenging undertaking in GATT/WTO history not only because it has been launched against the background of an unprecedented worsening of world trading conditions with a view, inter alia to developing a more open, viable and durable multilateral trading system, but also because of the scope and complexity of its agenda.

As the millennium winds down, the nations of South Asia look back over a century that passed almost entirely in what has conceptually come to be known as the Third World. With more than 20 per cent of the global human resource in South Asia accounting for only 5.6 per cent of global trade and just 1.3 per cent of global income, there is an increased challenge for consolidating the gains made over the past decade of regional partnership. While strengthening regional partnership there is every reason to believe that we can successfully pursue a model of regional union which Europe has adapted and ASEAN has been able to foster for sustaining economic gain. In this respect, we would like to throw some light on the globalization scenario of Bangladesh.

The present government has a well-defined economic policy, the basic arm of which is to bring about social and economic emancipation of the masses and alleviate poverty. With this aim in view, Bangladesh has undertaken deregulation steps in the field of tariff and non-tariff barriers, structural adjustments, greater market access, trade diversion, and trade creation, simplification of rules and regulations regarding import and export trade, greater participation by the private sector, deregulation and divestment of SOEs, removal of child labour, eco-labeling and simplification of exchange rate mechanism.

Over the years, Bangladesh reoriented her economy from one with an inward-looking import-substituting bias to an outward-looking export-oriented one. This has been done through import liberalisation, export promotion, tariff reduction, an adjustment in exchange rate (taka convertibility in current account) and virtual elimination of all statutory bans. As a result, we now have one of the most open economies in the region, well integrated into the world economy in an era of globalization and liberalization.

The government recognised trade liberalisation reform as a critical requirement to achieve rapid economic growth. The liberalisation reform undertaken resulted in considerable economy opening up and created a more favourable competitive policy environment. The government has undertaken trade liberalising tariff reforms to enhance external competitiveness. The non-tariff barriers, mainly of quantitative restriction (QR) on imports were considerably reduced. So considerable stimulation has taken place in both domestic and foreign investment in the private sector. The progressive tariff reduction reforms carried out during the last several years showed a positive impact on import growth and shifts in import composition. Tariff reductions so far have played a major role in liberalizing and boosting imports.

Consequently, exports from Bangladesh have undergone a structural change. We have a limited export range. So we need to have zero-duty access for our goods on a non-reciprocal basis, a facility acknowledged under the WTO. We have already embarked on an open door policy. We have reduced our un-weighted average tariff considerably from fifty-seven per cent.

We moved swiftly to introduce significant relaxation of existing foreign exchange control on current account transactions and interbank dealings in recent years. In the past, the central bank was the sole authority to fix the exchange rate for all types of foreign exchange transactions. Now the central bank relaxed this centralized control. In so far as the policy relating to exchange rate management, we pursue a policy of flexible exchange rate management to maintain external competitiveness.

The industrial sector of Bangladesh as a whole continued around 35.66 per cent to the GDP and employs around labour force in agriculture 40.6 per cent, industry 20.4 per cent and service sector 39.6 per cent. The contribution to GDP has been increasing over the years. Industrial exports both in intermediate and finished forms constitute around three-quarters of the total export. The sector has the immense potentiality of growth and expansion. The government has been pursing a policy of privatization of the public sector. Investment, both foreign and local, in the industrial sector has been increasing over the years. Foreign investment has been taking place by establishing fully foreign-owned enterprises or participating in joint venture and through portfolio investments through the stock markets.

The power sector is now open to private investment. The government has undertaken some reforms intending to achieve operational efficiency and effect commercial character in the sector, and attract private investment, domestic and foreign, to supplement public sector investment.

In addition to all these reforms programme government has successfully eliminated child labour from garments sector.

We would remember that when the European leaders despite their differences come together after almost half a century under the Maastricht Treaty to push through the European Union, why can’t we in South Asia? South Asia will have to seize the available advantages. Regional integration for SAARC is not about political aspiration-- it has become an economic necessity. With economic integration in the EU, NAFTA, and ASEAN proceeding apace, the power of individual nation as key players in the global economic sphere is in decline. Trade investment, information, and technology are increasingly flowing within and between regional blocks threatening economic marginalization for nations being left out of these processes.

The fruits of globalization have been enjoyed by the developing and developed world and are expected to have greater benefits. However, the Covid-19 pandemic has shown how fast what we had once seemed so permanent can change. Globalization will always be vulnerable to global shocks, as we have very recently experienced with Covid-19. But the pre-pandemic world has not joined the world of yesterday. A robust economic logic drove the most recent era of globalization, and that logic remains valid. But the logic has been challenged. Protectionism is rising, climate change is accelerating and industrial policy is shifting. In the past the benefits of globalization have been enjoyed by Europe and now Europe has suffered enormously from its fall back. The globalized world is in transition. It is difficult to predict what benefits will accrue in future out of globalization for Bangladesh. Let us hope for the best and be prepared for the worst.

 

The writer is former Director General of Export Promotion Bureau. He can be contacted at [email protected]

×