Bangladesh should equip its largely young population with skills to reap the benefits of demographic dividend as it strives to become a higher middle-income country, economists said yesterday.
The country has not benefited from the demographic dividend adequately, said Wahiduddin Mahmud, an economist, while giving a keynote speech at the SANEM annual economists' conference themed “Bangladesh: Way towards a middle-income country”.
The daylong event was organised by the South Asian Network on Economic Modelling or SANEM, a non-profit research network of economists and policymakers in South Asia with a special emphasis on economic modelling.
He said Bangladesh had a demographic dividend prematurely in the 1980s despite lower levels of per capita income, which is now helping maintain the current growth rate.
“But the bad news is, we may exhaust the demographic dividend earlier as the proportion of dependants and elderly people is increasing.”
Mahmud said the major setback to the demographic dividend is that most of the workforce is untrained, semi-skilled or uneducated.
Creating appropriate employability for the workforce will be a real challenge for Bangladesh, he said.
There is a need for a link between educational institutions and industries so that the former caters to the skill needs of the latter, according to Mahmud.
He also said attention has to be paid to small and medium enterprises as they are a key growth driver and give cushion to the economy during shocks.
Environmental sustainability, expansion of Dhaka city and climate change are the other key issues that Bangladesh has to deal with in the coming years, Mahmud added.
KAS Murshid, director general of the Bangladesh Institute of Development Studies, however, said: “If we end up exporting demographic dividend then what benefit will be left?”
Martin Rama, chief economist of the World Bank for South Asia, said Bangladesh has to create jobs that cater to demand in order to reap the benefit of demographic dividend.
Speaking from Nepal through video-conferencing, the WB official also said Bangladesh has to do better in terms of the quality of policies and institutions.
Citing the Global Competitiveness Reports of the World Economic Forum, he said the country has not done well either when it comes to public trust in politicians, judiciary independence and governance agenda.
He said Bangladesh also needs to accelerate growth, better quality of electricity supply and improve port infrastructure.
Speaking at a panel discussion on economic growth, Hossain Zillur Rahman, executive director of the Power and Participation Research Centre, said there is a political stability in Bangladesh at one level, whether through neutralising or managing protests.
“But, there is a political uncertainty about the future.”
One economic indicator, private sector investment, reflects the level of uncertainty about the future, and that has remained stagnant since 2012. As a result, investors are keeping their money under their pillows.
Rahman, also a former caretaker government adviser, said Bangladesh has a kind of resilience that ensures about 6 percent GDP growth every year.
But the real challenge will be how the country can accelerate the growth rate in the current political reality, he added.
Saman Kelegama, executive director of the Institute of Policy Studies of Sri Lanka, emphasises that a deeper integrated Saarc, which is the least integrated region in the world, could be an important building bloc for regional integration.
As impediments for trade in goods among the region, he listed low preferential margins, large negative list, non-tariff barriers, procedural delays and poor connectivity.
With the global value chains increasingly determining trade, reducing tariffs in the region has become vital for South Asian integration process both to the world and in the region.
He also said binding commitments are required in trade facilitation and NTB removal.
Given its economic power, India will have to take on a disproportionately larger responsibility for promoting regional cooperation in South Asia.
Kelegama said if existing barriers are sorted out, intra-regional trade can easily be boosted to about 20 percent from existing 6 percent.
The benefits of more economic integration in the region will dilute the political differences and lead to deeper integration in the region, he added.
In a paper, Prabir De, professor of the Research and Information System for Developing Countries in India, said non-tariff measures constitute a substantial portion of trade restrictiveness for Bangladesh, India and Nepal.
He said exporters and importers in Bangladesh have to comply with higher number of NTMs, compared to India and Nepal. Among these measures, testing requirement and certification requirement are common in both India and Nepal.
The Bangladesh China India Myanmar economic corridor can bring enormous economic opportunities to the region, according to Kishore Kumer Basak, senior research associate of the Centre for Policy Dialogue.
“But the individual economic gains are dependent on how well the member countries are connected in the region with sufficient infrastructure support.”
He said the BCIM economic corridor needs to be developed beyond simply transport connectivity and towards a secure place for traders and investors.
Sadiq Ahmed, vice-chairman of the Policy Research Institute of Bangladesh, said there is no guarantee that the current growth rate would continue in the next one decade.
The issue is to find out the policies and institutions that will allow the country to continue the growth trajectory and accelerate growth, he said.
“Growth is not independent of policies and institutions.”
Ahmed also said setting a 6.5 percent inflation target is very high in the current global context. “It brings a lot of problems. It affects the exchange rate management.”
Mushtaq Khan, a professor at the School of Oriental and African Studies in London, called for a political stability. The capital flight will take place if the influential people do not feel secure about the future, he added.
Christian Tardif, a representative of the High Commission of Canada, said Bangladesh can boost its remittance income if the skill of the migrant workers is developed.
SANEM Chairman Bazlul Haque Khondker and Executive Director Selim Raihan also spoke.