The webinar focused on how, just within a generation, the East Asian countries like South Korea, Taiwan, Singapore, and Hongkong have emerged from extreme poverty and achieved rapid economic progress.
Panelists for the policy dialogue included Dr Ahmad Ahsan, director of Policy Research Institute (PRI), Bangladesh; Dr Monzur Hossain, senior research fellow at Bangladesh Institute of Development Studies BIDS) and Shafiqur Rahman, a doctoral candidate at the University of Oregon, with the session being moderated by Mastura Tasnim, Policy Lead, YPF Content & Editorial, Victoria University of Wellington (New Zealand).
The East Asian Miracle is a term first used by the World Bank in its 1993 Report on the historically unprecedented fast developing East Asian economies. This dramatic growth is mainly attributed to High Performing Asian economies (HPAEs) such as South Korea, Singapore, Taiwan, Hong Kong, Malaysia, Indonesia, Thailand, later joined by Vietnam, and, most famously, China who made this possible by adopting highly effective economic policies. These countries also have the experiences of successfully overcoming significant crises. Bangladesh, especially during this ongoing pandemic, needs similar strategies to overcome the adverse economic impact.
The panel discussion was initiated by a brief background presentation by the YPF research team, followed by a series of questions and answers by the distinguished panelists. The research team’s findings showed that since the 1960s, HPAEs grew about three times as fast as Latin America and South Asia, and five times faster than Sub-Saharan Africa.
They further added that it was possible due to certain measures implemented by the nations, such as private domestic investment by increasing integrity of the banking system, macro management and stability which limits fiscal deficits and develops a supportive framework for private sector and public enterprise, rapid growth of human capital which emphasizes proper education of the labor force, policies encouraging foreign direct investment (FDI), implementation of export oriented strategies, and quick adoption of technology.
During the panel discussion, Dr Ahmad Ahsan stated some important reasons for the East Asian miracle to happen. According to him: “Strong macroeconomic fundamentals, including competitive exchange rates and high public investment in infrastructure and human development, and an embrace of globalization and regional integration were key factors.” Cooperation and shared growth were important among East Asian countries for their development, as leaders were aware that without unity and shared growth, survival would be difficult. “They were highly motivated by their survival instinct.”
Dr Monzur Hossain added that Japan was the main architect of East Asian miraculous development by providing FDIs, technological know-how and various other supports. He believes, like many other experts, the developing experience of East Asia is not largely replicable for other nations. Japan, for example, started to recover quickly after World War II with support from efficient and development-minded bureaucracy. Japan mostly supported East Asian countries because of narrow cultural differences. Moreover, “Like Japan, East Asian interventionist states, focused more on selective investments in science and technology, and research and development,” he added. Their tax rates were low -- hence, there was a rise in personal savings and private investments.
“State capacity is one variable that is given utmost importance to East Asian countries for development,” opined Shafiqur Rahman. He also mentioned Japan following the German model for development was a “state interventionist model”.
In his article “The spectacular rise of East Asia” published in The Daily Star, Dr Ahsan argued that political competition among leaders, different ideologies, and decentralized governments were critical drivers behind the rise of East Asia. When asked about how these elements can be implemented in Bangladesh, Dr Ahsan mentioned the importance of using decentralized governments to “identify capable leaders and spur competition among them for growth and development”. He explained how China’s provincial and county governments promoted urbanization, migrant workers, increased employment, and encouraged experimentation (such as allowing different decentralized fiscal systems in the provinces). He emphasized that a key lesson was that without strong local governments, urban development may not be possible in Bangladesh.
Referring to Dr Monzur Hossain's article “Exchange rate management in the COVID era” published in The Business Standard, the question about how Bangladesh can aim for better exchange rate management in pursuit of macroeconomic stability and attract more FDI both during the pandemic and normal time, was raised. “We have to correct our overvaluation before as part of preparing ourselves for any future currency crisis in the post-Covid recovery phase,” he replied. He suggested making small and frequent adjustments in nominal rates could act as a cushion against any future crisis. He added that international reserves should be maintained for the current and future crises, and “reserves for import payments of six months may not be enough for the recovery phase”.
Narrowing down to Bangladesh, the panelists were asked how the principle of shared growth can be implemented, to which Dr Ahsan replied: “Human capital investment is the key to implement shared growth. Investment on trained and skilled labour force is necessary for development.” He also stressed on the importance of accountability on local levels -- how lack of power accountability and monitoring in the local level can hinder development.
Bangladesh remains far behind in terms of rapid industrial growth, whereas the East Asian countries like Japan have promoted SMEs as an important part of production networks, and made effective industrial policies. Discussing how this can be attained in Bangladesh, Dr Hossain first addressed the problem: “There is a problem in our policy sustainability.” The SMEs contribution in our country is almost 25% of the GDP, and 86% of industrial employment. Since we do not have the capacity to invest in large industries, we must focus on the development of SMEs. We also do not have any specialized bank for providing loans to SMEs like East Asian countries. Moreover, the foundation built for SME development does not have adequate resources for monitoring, assessing, and analyzing their performance and growth. Therefore, he suggested: “Institutional building and reforms are important for development to take place, and more priority must be given to SMEs as they are the lifeline of the economy.”
Dr Ahsan and Rahman agreed on the relevance of Taiwan’s model, where the government focused more on the citizens’ savings, monetary policy, and small and medium enterprises to promote development. They suggested Bangladesh, too, follows the pragmatic attitude of the East Asians.
Finally, all the panelists heavily emphasized on developing the citizens’ skills, investment in human capital development by ensuring good public health, and quality education systems at all levels starting from primary level, ensuring efficient bureaucracy and good governance, recognizing different strategies, and taking lessons from each other in order to replicate and implement in our own context. These, if maintained, can be the indicators of future growth.
The recorded version of the webinar is available on YPF’s Facebook page.