Setting up of more special economic zones (SEZs) and export-oriented trade policy would be the driving force to accelerate the country’s economic growth, economists said in Dhaka yesterday.
Many short-term factors and lacklustre investment are holding back the GDP growth, which was mainly driven by investment and exports, they said.
They were speaking at a seminar on “Trade and Investment for Higher Growth” jointly arranged by the Policy Research Institute of Bangladesh (PRI) and UK-based development organisation DFID (Department for International Development)
PRI Executive Director Ahsan H Mansur said Bangladesh will require multifaceted approaches to increase domestic investment and growth. “In order to make the export driven growth, all policies leading to anti-export biases need to be corrected.”
Investment in infrastructure will help create immediate domestic demand and at the same time would lay the foundation for catalysing higher private sector investment, he said.
He said removing land constraint is important for industrialisation by establishing a series of special economic zones in various parts of Bangladesh through public private partnership arrangement.
PRI Chairman Zaidi Sattar said after three decades of trade policy reforms, most analysts and international institutions often describe Bangladesh’s situation as a glass half full. “Much has been done, but more is left to be done in order to complete the trade reform agenda.”
Focusing on trade-stimulated growth, he said, Bangladesh has come a long-way since the early years of inward-looking import substituting industrialisation policies that neither led to industrialisation nor resulted in an acceleration of economic growth.
“By changing its policy stance to outward-looking export-oriented development, it subscribed to a regime of trade openness, on a gradual rather than radical track.”
He said the spectacular success of RMG industry has not been replicated. “A major reason for this is the existence of anti-export bias in non-RMG export production.”
He said around 98% of the country’s exports are end consumer products with little or no intermediate goods. “Trade and domestic policies have an anti-intermediate good bias. This needs to be changed as trade in intermediate goods is the fastest component of global trade.”
PRI Operations Director Khurshid Alam said the country’s inability to cross over to the 7% rate of GDP growth is to large extent a reflection of investment constraint.
“Shortfall of private investment growth is worrisome as because Sixth Plan identified private investment as a major engine of growth and exports, especially in manufacturing sector.”
He said implementing SEZs could be one way catalysing new desired private sector investment.
For example, he said, in Asia, owning to availability of certain specialised skills and trained human resources, IT firms in India, and electronics firms in China, Taiwan Province of China, Malaysia and Singapore have successfully integrated into global supply chains.
Given Bangladesh’s success in exploiting the global supply chain in the RMG sector, it could very well look for opportunities to integrate into it and exploit benefits from global supply chain in other sectors, he said.
“This integration can be triggered through FDIs as well as domestic investments, and the SEZs could be the catalyst for attracting such FDI while at the same time source from domestic supply chain,” he said.
Referring to Mongla EPZ that has the weakest performance in terms of employment, investments and exports, he said location is an important ingredient to achieving success, and decision on location should follow economic and business principles.
Professor of economics at the Dhaka University Selim Raihan said Bangladesh trade policies need to be rationalised and open in the context of global and regional, as incoherent and ad hock-based policies affect the economy.
He said RMG industry enjoys many facilities on exports compared to any other sector. He estimated that the sector enjoys incentives 7% of total revenue income.
“Reduction in tariff structure is imperative for diversifying exports.”
Founder and Managing Partner of Asian Tiger Capital Partners Iftekharul Islam said global investors, specially from China, Japan and Korea look to relocate their industry due to higher cost of production. “To woo them, it is inevitable to set up SEZs.”
He said Bangladesh can be Switzerland of Asia as it has advantage of geographical position better than any other countries.
Councilor for Development Cooperation and Economic Affairs at Japan Embassy in Dhaka Masayuki Taga said Japanese investors look for joint venture here but Bangladesh needs to ensure supply chain and efficient industrial policy.
In response to analysts view, Commerce Minister Tofail Ahmed said the government is working to set up more special economic zones and to diversify its export baskets.
The government has already given cash incentives to 40 new products to encourage exports to new destinations.
He admitted the fact that land constraint and necessary infrastructure development is a problem to attract FDI. He said Bangladesh makes policy but unfortunately it is not implemented. The minister, however, assured to look into the suggestions put forward at the seminar.
