For Bangladesh, international and regional trade, especially with South and East Asian neighbors, is critical to create more and better jobs for the 2m youths entering the labour force every year, says a new World Bank study.
The study titled “Diagnostic Trade Integration Study” was launched by Commerce Minister Tofail Ahmed at a hotel in Dhaka yesterday.
The study provides a roadmap for strengthening Bangladesh’s trade competitiveness and developing a policy regime that takes full advantage of international markets.
“If Bangladesh can capture 20% of China’s current garment exports, Bangladesh’s total exports would more than double, increasing by $29bn, and will create 5.4m new jobs and 13.5m new indirect jobs,” the study said.
According to the report, to sustain and accelerate growth Bangladesh will require actions centered on four pillars.
Firstly, breaking into new markets through better trade logistic to reduce delivery lags as world markets become more competitive and new products demands shorter lead times to generate new source of competitiveness.
Secondly, breaking into new products through more neutral and rational trade policy and taxation and bonded ware house scheme; concerted efforts to spur domestic investment and attract FDI and to contribute to export promotion and diversification, including by energy and land constraints; and strategic development and promotion of service trade.
Thirdly, improving worker and consumer welfare by improving skills and literacy, implementing labour and worker safety guidelines, and making safety net more effective in dealing with trade shocks.
Fourthly, building a supportive environment including sustaining sound macroeconomic fundamentals and strengthening the institutional capacity for strategic policy making aimed at the objective of international competitiveness to help bring focus and coherence to the government’s reforms efforts.
The report also calls for establishing an inter-ministerial committee to help Bangladeshi exporters to succeed in a globally competitive environment.
“To accelerate GDP growth, Bangladesh needs higher volumes of exports to larger and richer markets, beyond its relatively smaller domestic market,” said Johannes Zutt, country director of World Bank for Bangladesh.
Bangladeshi firms have succeeded in garments, and they can also succeed in other industries with demonstrative competitiveness such as jute-based industries, footwear, information and communications technology, shipbuilding, pharmaceuticals, light industry such as bicycles and others, he said.
The study identifies a number of reform initiatives in high priority areas for enhancing the country’s trade capacity and competitiveness.
Foreign direct investment can play a much larger role in many sectors, especially those with technology upgrading needs, such as pharmaceuticals, bicycles, and shipbuilding, the study findings showed.
Bangladesh will need to expand its linkages with neighboring countries such as China and India as well as other Asian countries like Japan and South Korea, to access underexploited markets and attract greater Foreign Direct Investment, it said.
For this, the country needs to address critical bottlenecks such as the availability of serviced land, uninterrupted power supply, congestion Chittagong port, the Dhaka-Chittagong road and rail corridor, customs clearances at land and sea borders, and ease of access to finance.
“A trade policy regime that is more neutral between exports and production for the domestic market, would support the development of new export sectors and small and medium firms,” said Sanjay Kathuria, Lead Economist, Trade and Competitiveness Global Practice, World Bank, and co-author of the report.
The country also needs to prepare its youth with solid foundational education and vocational skills needed to be productive in export-oriented industry, said Sanjay.
Bangladesh needs to act urgently to tap into regional and global trade as well as FDI to boost its economy and reduce poverty, he added.
It also needs to deepen links with South Asia and East Asia to capitalise on the fastest growing regions in the world and build supportive institutions to meet the demands of an increasingly complex trading environment, said Sanjay.
He urged to create an inter-ministerial trade, transport and investment facilitation committee, to guide and coordinate the multi-sector competitiveness agenda, said Sanjay.
To achieve its development objectives, Bangladesh will need a fundamental policy shift that is geared towards international competitiveness and is neutral between the interests of the domestic producer, exporter, and consumer, he added.
“If the 7th Five year Plan is implemented, Bangladesh not only will be a middle income country but also a progressive country by 2021,” said Tofail Ahmed. “Bangladesh is moving towards positive economic directions in all the sectors.”
