Stagnant private investment, weaker export growth and declining remittances have hindered quality job creation in Bangladesh despite the country enjoying a sustained rate of Gross Domestic Product (GDP) growth.
The observation by the World Bank came in its ‘Bangladesh Development Update September 2017’ unveiled in Dhaka yesterday.
“We have witnessed strong GDP growth but it is not reflected in the job market,” said Zahid Hussain, the lead economist at the World Bank's Dhaka office.
“Readymade garments factories - the largest job provider in the private sector - have seen a fall in job creation. Even the participation of women has declined.”
He said in the last few years Bangladesh witnessed over 6% GDP growth rate driven by industry and services, and despite a decrease in productivity in the agriculture sector.
“Proper contribution of the private investment sector was also not seen in GDP growth,” Zahid Hussain said.
According to the global lender, between 2003 and 2016 an average of 1.15 million net jobs were created in Bangladesh each year.
Between 2003 and 2010, total employment grew by 3.1% per year before falling back to 1.8% between 2011 and 2016, impacting women and youths in particular.
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“Infrastructure gaps, predominance of informality in labour markets and slow structural reforms have reduced the rate of job creation,” the report said.
The World Bank suggested Bangladesh focuses on micro-financial stability, structural reforms, urban planning and technological advances especially in SMEs, in order to create more jobs, better jobs and inclusive jobs and boost its growth potential.
“The Bangladesh economy is moving forward at a strong pace despite internal and external headwinds,” said Qimiao Fan, World Bank Country Director for Bangladesh, Bhutan and Nepal.
“Poverty reduction underpinned by job creation has continued, albeit at a slower pace due to lower remittances, flat exports, higher food prices and adverse natural shocks.”
Qimiao Fan said downside risks include the resurgence of political instability in the run up to elections planned for early 2019, and a hardening of credit constraints with increased insolvency of banks due to rising NPLs.
The World Bank also stressed the importance of private and public investment for increasing productivity and employment.
“Bangladesh has to take advantage of the global recovery by undertaking institutional and market reforms, which would help it to sustain growth in the long term,” the report said.
The World Bank also projected a 6.4% GDP growth for Bangladesh driven by industry and services in FY 2017-18.
At yesterday’s briefing, Zahid Hussain said GDP growth is projected to be robust and above many developing countries in East Asia and South Asia in the Fiscal Year 2018.
“Export growth is likely to pick up modestly with expected recovery in global trade. Remittance may turnaround, and private sector investment may pick up,” he said.
For the current fiscal year, the government has set a growth target of 7.4% for the economy.
According to Bangladesh Bureau of Statistics, last year’s GDP growth was recorded at 7.24%.
Assistance for Rohingya
The World Bank is also ready to provide financial support to help the government manage the ongoing Rohingya refugee crisis, Qimiao Fan told yesterday’s briefing.
“Bangladesh remains one of the largest recipients of International Development Association (IDA) resources globally and we want to make it sure that Bangladesh can make good use of these resources,” he said.
Fan said Bangladesh could apply for the maximum $400 million from the IDA’s total refugee fund of $2 billion.
“The World Bank is very concerned about the plight of the Rohingya who have fled their homes in Myanmar’s Rakhine State because of conflict and violence,” the regional country director said.
“We are monitoring the situation very closely and working with our UN colleagues and other development agencies.”
As of yesterday, a total of 480,000 Rohingya have entered Bangladesh fleeing brutal persecution by Myanmar’s military forces.