Home ›› 30 Sep 2022 ›› Front
Bangladesh needs a reform agenda to sustain its growth trajectory and accelerate the growth rate further in the long term, says a World Bank report.
The World Bank released the report, “Country Economic Memorandum: Change of Fabric”, at a programme at Hotel InterContinental in the capital on Thursday.
The report urges policy reforms in three areas which are critical to sustaining growth, stemming the erosion of trade competitiveness, addressing vulnerabilities in the financial sector, and ensuring an orderly urbanisation process.
The report also explores the implications of digital development and climate change as cross-cutting themes in these reform areas.
The report recommends export diversification to reduce the risk of export volatility, create new sources of growth, and increase foreign exchange earnings in the long term.
The heavy reliance on ready-made garments and Bangladesh’s protective tariff regime hinders diversified export growth, the report said, adding that Bangladesh can increase the resilience of economic growth by diversifying its export basket.
Average tariffs in Bangladesh are higher than its comparator countries. The average tariff rate on intermediate goods in Bangladesh is 18.8 per cent which is about two times more than in China, Thailand, and Vietnam.
Overall trade costs and inefficient border processes are major impediments to trade. Deep and comprehensive trade agreements with the European Union and India, covering tariff modernisation, increased trade facilitation, and services and investment reforms can respectively boost Bangladesh’s GDP by 0.4 and 0.5 per cent and exports by 1.4 and 3.9 per cent.
Speakers at the programme underscored the need for diversified export-oriented products and boosting trade competitiveness to ensure sustainable economic growth in Bangladesh.
They underscored the need for policy reforms for the economic development of the country.
“Over the past decade, Bangladesh has been among the top 10 fastest growing economies,” said Dandan Chen, World Bank acting country director for Bangladesh and Bhutan.
“But there is no room for complacency. New and emerging challenges, including, advances in technology and climate change, demand new policy and institutional innovations to cater to the changing needs of a growing economy. To achieve its vision of becoming an upper middle-income country by 2031, Bangladesh will need strong and transformative policy actions,” he added.
Professor of Economics Department of Dhaka University Selim Raihan said export, RMG and remittance are the main components of the country’s economy.
“We have adopted all kinds of policies but those are yet to be implemented. Now the time has come to implement the reform policies immediately,” he added.
Speaking as chief guest at the event, Planning Minister MA Mannan said the government is working on formulating various reform policies for developing the country’s economy. “We will implement all the recommendations of World Bank provided in this report,” he added.
The report said scaling up private sector financing is essential for sustaining economic growth. Actions to improve asset quality, increase the capitalisation of banks, and address the increasing non-performing loans are urgently needed to maintain financial stability and accelerate credit growth.
Unlike Thailand, China and Vietnam, Bangladesh has an untapped domestic capital market, which is required for raising long-term finance, particularly for infrastructure and climate adaptation projects.
“Greater Dhaka generates one-fifth of the country’s GDP and almost half of its formal employment. The already congested capital needs to be prepared to accommodate climate migrants,” said Nora Dihel, senior economist in the Macroeconomics and Fiscal Management Global Practice of the World Bank.
“Better urbanisation and connectivity will help absorb the climate migrants and sustain fast productivity growth. Successful urbanisation will mean attracting tradable activities to small and medium-sized cities,” she added.
