Bangladesh has to come out of low wage focused industries and embrace structural transformation methods in its development policy, as a major tool to elevate the nation to a middle income status, Centre for Policy Dialogue said on Thursday.
The think tank called for a clear indication of their economic structural transformation approaches in the election manifestos of political parties, ahead of the ensuing national elections.
The local think tank made the comments at their briefing on the “Least Developed Countries (LDCs) Report 2018: Entrepreneurship for Structural Transformation,” released by the United Nations Conference on Trade and Development (UNCTAD).
“Entrepreneurship development is very important. As an LDC, Bangladesh needs to create transformative entrepreneurship, that will gradually move for diversification of products as well as new initiatives instead of being captive in low wage and low end products,” CPD Research Director Khondaker Golam Moazzem said, who presented the key note on the report. .
Development of transformative entrepreneurship should be the focus of development policy in order to ensure sustainable development. It also needs to focus on a number of policies related to operational and management issues to ensure the comprehensive development of enterprises and entrepreneurs in the country, Moazzem added.
He also suggested adopting sectoral policies targeting key and potential sectors highlighting the value chain of respective industries and ensuring fair competition in the market with proper implementation of rules and regulations, including competition policy.
For the effectiveness of government policy support, the think tank stressed assessment of fiscal and financial incentives provided to different industries. Based on the findings, the CPD suggested providing targeted, vertical and time- bound, and result-oriented incentive structures to companies.
The CPD also sought a clear direction from political parties to graduate to a developing country.
“There should be a clear indication from political parties in their election manifestos on structural economic transformation to graduate to a developing country from an LDC,” CPD distinguished fellow Mustafizur Rahman said.
“Bangladesh will be a developed country in course of time. But now it needs to become an entrepreneur state from its current status of a developing nation.”
Rahman said, in creating entrepreneurship, government policies play an important role. To this end, the government should consider the life cycle of an entrepreneur and provide required support to expand businesses and keep them engaged in the business, added Rahman.
He also suggested creating entrepreneurship for the Asian market as it would be a big market for Bangladeshi products as well as to meet local market demands the, as both markets are growing simultaneously.
Constraints to LDC entrepreneurship
Starting a business is very challenging and costly in LDCs, where there are other constraints such as the adoption of digital means and latest technology. There are also problems with gender discrimination.
According to the report, from 2015 to 2017, median start-up costs in LDCs were 40% of per capita income, compared with a world average of 26%.
An important external barrier is the business climate, the report said. Elaborating, it said the barriers can give rise to direct, indirect, and hidden production costs, inhibit the adoption of new technologies, deter investment, weaken competitiveness, and reduce market size.
Furthermore, the report said, most significant internal barriers include commitment of entrepreneurs to growth, management capability, networking ability, funding, sales and marketing strategies, capacity, and the level of production orders, said the report.
In LDCs, women are required to undertake additional procedures with regard to starting a business compared with men, the report added.
The report said 14.1% women in LDCs use internet compared to 21.0% men, representing a gender gap of 32.9%. This gap has widened since 2013 to 2017.
According to the report, another constraint for LDC entrepreneurship is access to energy. As per the report, in 2016, LDCs accounted for only 13% of the world population, but 56% of their people live without access to electricity.
LDCs remain behind other developing countries in the provision of ICT infrastructure such as access to internet. 17.5% of the population in LDCs had access to the internet in 2017, compared to 41.3% in developing countries, and 81% in developed countries, the report highlighted.
Most of the policies are of a generic nature targeting broad industrial development with limited focus. Policies and measures do not target the vertical development of sectors, enterprises, and entrepreneurs, said the report on Bangladesh.
Policies for transformational entrepreneurship are needed to harness entrepreneurship for structural transformation, to support and sustain dynamic and innovative enterprises.
“The policy aimed at entrepreneurship development should be a whole-of government approach and it needs to be an integral part of a wider set of strategies and policies for structural transformation and sustainable development,” said the report.
UNCTAD advised LDCs to focus their entrepreneurship policies on the objective of structural transformation of their respective economies.
Policies aimed at establishing, nurturing, or strengthening entrepreneurship for structural transformation in LDCs need to be a combination of vertical and horizontal policies, said the report.
The UN organization also stressed promoting formalization of entrepreneurship, saying that an element of entrepreneurship policy is promoting the formalization of informal enterprises.
In many LDCs, there are linkages between the formal and informal sectors, for example in urban West Africa. Such linkages can benefit the formal sector by reducing the cost of certain inputs, said the report.
The informal sector can also be a seedbed for creativity, promoting innovation and new ventures, it added.
