Failure to deliver on trade facilitation will be a shame for industrialised nations following the Bali agreement of the World Trade Organisation, the chief economist of USAID said yesterday.
Stephen O'Connell, the chief economist of the US government's development agency, said the recent WTO agreement committed the industrialised countries to wrap up their trade facilitation efforts.
“It seems to me that if the industrialised countries can't get it together to deliver on those commitments it will be a shame. It seems to me those are long-awaited.”
He also touched upon the issue of levy being imposed on Bangladeshi products entering the US market despite the country being a least-developed one.
“I think the USAID, the US government and the Bangladesh government will be able to engage productively in wrapping that up.”
He admitted that the US politics is complicated and difficult in spite of the improvement in overall openness when it comes to textiles and apparel sector.
Bangladesh's garment exports were out of the purview of the Generalised System of Preferences until the trade preference was revoked by the Obama administration for the country last year.
O'Connell spoke at a dialogue organised by Policy Research Institute of Bangladesh (PRI) on the challenges and prospects of the economy at its office in Dhaka.
He made the remark after Hassan Zaman, chief economist of Bangladesh Bank, called for removal of tariffs on Bangladeshi products entering the US markets.
In case the tariffs are not removed, Zaman said, the US government can set up a fund, using a part of the $800 million the US gets from Bangladesh in tariffs annually.
He said the fund could be used to improve conditions of factories where there are problems of labour conditions—a key issue that led the US to cancel the GSP.
Zaman also called for realistic economic growth targets.
It is important that the five-year plan and the budget are based on realistic economic growth targets, as that in turn affects revenue, expenditure and deficit targets, he said.
“For fiscal 2014-15, we believe a realistic number could be around 6.5 percent.”
Once key infrastructure like the four-lane Dhaka Chittagong highway, Padma bridge and key power sector investments are completed in a few years, the country can realistically project above 7 percent growth.
O'Connell also expressed satisfaction about Bangladesh's stellar economic growth. “It is not on average 6 percent. It has been growing at 6 percent every year. It is very unusually stable and resilient. This economy is full of self-insurance.”
He said energy and electricity top the list of bottlenecks facing investors, followed by infrastructure, governance, contract enforcement and access to land.
Stefan Dercon, chief economist of DFID, the development agency of the UK, said Bangladesh should be really proud of its record of what it has achieved in human development and poverty reduction.
He said keeping up the current level of economic growth for the long-term would not be easy though.
“You can probably have 5 to 6 percent GDP growth for the next couple of years, but not for the next ten years from now. It is going to get more difficult.”
He urged the country to move up the value chain, as the simple low-skilled-based manufacturing process is not an easy route to keep the growth going.
Dercon said Bangladesh would have to emphasise upon the '5 As' to help its economy sustain its growth: additionality, anonymity, accountability, access to mobility and ability to aspire.
“First, you need an economy that keeps on creating additionality: when a sector achieves growth it will try to keep growing further through innovation and new products and diversification.”
Second, it has to be a society where anonymity is possible and anyone with good idea will have access to the economy and new entrants are welcome. Third, accountability, clarity and transparency are crucial.
Fourth, it has to be a society where there is access to mobility of the poor and low middle-class to the middle-class. “There has to be a condition of ability to aspire to think long-term.”
The DFID official urged the country not to think short-term to attract investment, adding that political uncertainty in the long-run would not make people invest.
He also expressed concerned over the declining private investment.
Good policymaking, which is good for investment, is actually trying to give out the right signals that this is indeed a good place for long-term investment, said the DFID chief economist.
He urged the country not to be too complacent about special economic zones, as there are a lot of examples of failure from around the world.
“It is not a guaranteed success. Simply setting up one will not work. You will have to make sure the rules are right and that institutional and practical environments are there.”
AB Mirza Azizul Islam, a former caretaker government adviser, backed him, saying the selection of sites for special economic zones must be done on the basis of consultation with potential investors.
Various industrial states have been set up by the Bangladesh Small and Cottage Industries Corporation, where there are sites but no investors, he said. A number of export processing zones are also failing to attract foreign investors.
The economist also emphasised political stability not in terms of avoiding street violence, but in terms of generating a sense of certainty that there would be no uncertainty.
Mashiur Rahman, economic adviser to the prime minister, also called for a need to raise the private investment.
Amir Khosru Mahmud Chowdhury, an adviser to the BNP chairperson, said private sector investment would not pick up until there is real stability in the country.
Rubana Huq, managing director of Mohammadi Group, said entrepreneurs are really scared, not because of the relative political instability, but because of the serious lack of personal and factory security.
Salehuddin Ahmed, a former governor of Bangladesh Bank, called for continuity in policies so they do not change even if the government changes.
PRI Chairman Zaidi Sattar moderated the dialogue and its Executive Director Ahsan H Mansur presented a keynote paper.