Product diversification needed for economic growth: Trimmer

Bangladesh needs to diversify export-oriented products and markets to attain the sustainable economic growth in future, said Hans Trimmer, chief economist of the World Bank for South Asia, on Monday.

“It is high time to focus on new and potential export items in order to come out of overdependence on readymade garments as Bangladesh will face more challenges after graduating to a developing country,” he said.

“The readymade garment sector in Bangladesh holds a major share of export earnings for a long period. There is no product diversification in export-oriented markets,” he said while speaking at a seminar titled “Bangladesh Development Story: Role of Service and Manufacturing Sectors in Driving Diversification and Inclusive Growth” organised by Bangladesh Institute of Development Studies (BIDS) at its conference room in the capital.

Trimmer also underscored the need for foreign direct investment (FDI) in Bangladesh for sustainable economic development like Vietnam and China. The chief economist has presented a keynote paper titled “Expanding Opportunities: A Case for Equitable, Inclusive Growth in Bangladesh.”

In his paper, he said Bangladesh has been spectacularly successful during its first 50 years of independence. But economic problems are emerging and strong sustained future growth is not guaranteed.

“Lack of inclusion in the productive economy is a key structural impediment that makes current problems difficult to solve and makes the future growth through diversification uncertain,” he added.

“Crises create opportunities. They trigger the development of new technologies, they allow creative destruction, they lead to new divisions of labour and new economic paradigms,” he also said.

In short, crises can break through economic structures that were no longer evolving. Bold action in new directions is needed to unlock underutilised potential, he added.

A rethinking of formal firms may be helpful because the informal sector is heterogeneous and technologies such as digital platforms potentially offer new opportunities, he said.

However, informality in South Asia is dominated by firms that happen to be outside the purview of regulations because they are small, as opposed to those that remain small to escape regulations, he mentioned.

“Reducing inequality of opportunity and increasing economic mobility in South Asia is important because it is an essential part of broadening the tax base,” said the World Bank chief economist.

“Therefore, eliminating obstacles to mobility is not merely a long-term agenda, but should be a central part of current reform programmes that aim to make the fiscal outlook more sustainable, and help South Asia achieve its full potential.”

To this end, Trimmer recommends continuing to improve the quality of primary education and expanding access to secondary and higher education, evaluate and strengthen affirmative action policies targeted to “low opportunity” groups, and policies to improve the business climate for small and medium enterprises, who account for the bulk of job opportunities for the less well-off.

“In addition, reducing barriers to labour mobility can have a powerful equalising impact as urban areas tend to offer more opportunities for social mobility.”

About inequality of opportunities, Trimmer said almost three decades of sustained economic growth across most of South Asia has brought significant poverty reduction, yet inclusive social progress has remained elusive.

Inequality of opportunity and intergenerational mobility in South Asia is one of the highest in the world.