How to make the growth sustainable?

Bangladesh under Bangabandhu’s aesthetic leadership started its development journey from a narrow ‘metho path’ (rural road) with a total size of its economy of a mere $ 8 billion. The per capita income was only $ 93. The share of savings to GDP was just 3 per cent. The same for investment was 9 per cent. The rate of poverty was more than 80 per cent with expectancy of life at birth of about 47 years. There was persistent food insecurity and hunger in the wake of natural calamities and nasty food diplomacy by a superpower.

That Bangladesh has now emerged as a ‘poster child’ of inclusive development linking itself with the broad highway of development.

Currently, the size of the economy is of $ 411 billion with per capita income of more than $ 2,500.

Defying the global pandemic Bangladesh’s growth rate was more than 4 per cent during Fiscal Year 2020-21 while the global growth contracted by 3.5 per cent in 2020.

The economy is expected to grow by more than 7 per cent in the current fiscal year as forecasted by the Standard Chartered Bank research team as well as by the Bangladesh budget documents.

The growth rate of Bangladesh’s economy remained 6 per cent plus over the last decade or so reminding the past trend of the East Asian growth story. The sustainability of this growth rate owes a lot to the fast moving modern and diversified agriculture, consistent inward flow of foreign remittance and stunning performance of the export-sector led by the apparel industry.

Certainly, the phenomenal growth of apparel industry along with its forward and backward linkages must be credited for this extra-ordinary performance of Bangladesh economy.

The stability of the macroeconomy with a very strong external economy along with a growing foreign exchange reserves has also been contributing significantly to maintaining this unprecedented growth momentum.

The farsighted policies for adoption of digital technology, continued support to rural economy and inclusive finance have also added to this dynamic growth process. Indeed, the process has been boosted by well-performing consumption stability by the many with their stronger capabilities for purchasing food and other daily necessities.

That Bangladesh has been performing well in the growth trajectory and has also been complemented by other international finance and development institutions.

The IMF’s World Economic Outlook postulates the growth to be 6.5 per cent this fiscal year. The World Bank’s estimate is 6.4 per cent and ADB’s 6.8 per cent.

All these estimates support Bangladesh’s expectation of becoming a high-income country by 2031 when its growth rate will be 10 per cent along with per capita income $ 12,000 plus, inflation 5 per cent, savings to GDP ratio 37.7 per cent and that of investment 40.8 per cent.

The IMF’s World Economic Outlook points out that the size of Bangladesh economy will be $ 517 billion in 2026. The Standard Chartered Bank’s research team also thinks it to be $ 500 plus billion by this time.

Center for Economics and Bureau Research (CEBR), a British think tank postulates that Bangladesh’s economy will be 34th in the world by 2034.

It was 40th in 2021. My own hunch is that this will be even larger if we can maintain the present growth momentum. I am showing this optimism based on the strong fundamentals of the macroeconomy supported by even stronger economic gains at the base of the social pyramid. The nominal GDP per capita was 7.8 per cent in Fiscal Year 2019-20 defying the pandemic-induced challenges as against China’s 6.9 per cent and India’s 3.1 per cent.

During the period from 2011 to 2018, this was 9.4 per cent compared to China’s 7 per cent and India’s 3.9 per cent. What is more encouraging is that this growth has been inclusive as reflected by the ‘SDGs Progress Award’ received by the Bangladesh Premier during this year’s UN General Assembly meeting from the UN and Earth Institute of the University of Columbia for outperforming all countries in implementing almost all sustainable development goals.

No doubt that the UN General Assembly recently approved formally the graduation of Bangladesh from the status of LDC to a developing country which will take effect from 2026.

Both the UK and the EU have committed to keep up trade facilities for Bangladesh as it has been enjoying now and will be so up to 2029.

Bangladesh will have to invest more in people to make them more efficient to live up to the challenges of a developing country and finally a developed country.

In addition, it must further bolster its smart economic diplomacy to enhance trade cooperation with most of the regional economic groups.

To continue this robust growth process to align Bangladesh’s dream of becoming a developed country by 2041 we must remain focused on the following:

Continue the heritage of indigenous growth, originating from mostly stronger consumption (now 63 per cent) and domestic demand. Support modern mechanization and diversification of agriculture to enhance its pace of commercialization.

Continue investing in those people promoting modern and humane education, inclusive health system and more robust social protection to address the short-term challenges of the pandemic as well as long-term challenges in the wake of climate change.

Emphasize more on enhancing skills and hence the productivity to prepare the workforce with artificial intelligence, robotics, big data management to embrace 4th Industrial Revolution.

Continue support for diversification of exports without undermining the already best performing export sector, particularly the apparel industry.

Support tourism and aviation sector with huge potentials in post-Covid transformation as these sectors may experience V-shaped recovery.

Emphasize and incentivize food processing industry by supporting SMEs and encouraging FDIs.

Further expand software industry which has the potential of becoming the second RMG sector. In addition, continue to support high-tech infrastructures along with more fiscal support to R&D for all strategic sectors.

Focus more on sustainable urbanization which must be green, climate friendly and well-linked to special economic zones. The big cities like Dhaka and Chattogram must not be overburdened with working migrants who can find work opportunities in smaller adjoining townships and economic zones. Rather replicate green Rajshahi with digital employment opportunities as much as possible.

Emphasize the need to explore the potential of Bangladesh in joining the regional and global value chains by further improving connectivity to make Bangladesh a regional hub. It may be noted that Bangladesh is the most potential hub of growth dynamism flanked by economic giants like India, China, and the ASEAN.

Mobilize more domestic resources to move up the Tax/GDP ratio to 20 per cent in addition to mobilizing low-cost long-term external resources from international finance and development institutions. Finally continue to emphasize ‘Make in Bangladesh’ campaign with more rigor. Bangladesh must continue to promote transformative policy regime to make its inclusive development journey more sustainable.

It must continue experimentations to move forward drawing lessons on what works and what does not within the country’s changing dynamics of political, economic, and social configurations. As already indicated, Bangladesh has a rich history of policy innovations, particularly low-cost solutions like digital entrepreneurship, financial inclusion, low-cost public health solutions, microfinance, and rural infrastructural connectivity to serve many and not a few.

The country can certainly cash in on these gains and further innovate policies, with more emphasis on strengthening the base of pyramid. Quality implementation is a must to live up to its deeply rooted aspirations of shared prosperity for achieving ‘Sonar Bangla’.

* The author is the Bangabandhu Chair Professor of Dhaka University and former Governor of Bangladesh Bank.