Bangladesh needs to sustain higher economic growth and diversify the economy in order to create jobs for a young population, said Kristalina Georgieva, chief executive officer of the World Bank since January 2017.
During an exclusive interview with The Daily Star in Dhaka on Thursday, she said she was very happy to come and see how much progress Bangladesh has achieved.
“First and foremost, what I saw is an economy that is really vibrant. Growth rates average 7 percent over the last couple of years. It provides job opportunities for millions of people.”
“Of course, that growth has to be sustained. And that means the economy needs to continue to diversify and create more opportunities for especially small and medium-sized enterprises to create jobs for a youthful population.”
The WB CEO, who is the co-chair of the third executive meeting of the Global Commission on Adaptation that took place in Dhaka on July 10, was in Dhaka for a two-day visit last week.
Georgieva, a Bulgarian by nationality, puts emphasis on diversifying the economy.
“The textile sector has served the country very well. I don’t want to make it sound like it is not important for the future. It continues to be very important. But there are risks when you are dependent on a single industry. Therefore, these risks have to be addressed.”
The WB can help Bangladesh by bringing experience from other countries that have diversified and where integration in global value chains is effective.
Georgieva said Bangladesh has already had a very impressive track record in education and bringing boys and girls to schools. The WB is funding large educational programmes supporting the government in that regard.
On Thursday, she visited a school for urban slum children who were dropouts or had never gone to school.
“We give them a second chance and it’s almost 700,000 children that could have seen their dreams crushed because of a lack of education. Now they can dream bigger and they were telling me they want to be teachers, doctors and engineers and that is the strength of the country and the biggest richness Bangladesh has.”
Georgieva has built a reputation as a gender equality champion, humanitarian and leader in the global fight against climate change.
She talked about gender equality in Bangladesh that also fascinates her.
“Girls are in school. They work. They have economic independence. Many of them choose to be entrepreneurs. And that empowerment of women has helped Bangladesh achieve what many countries are struggling to achieve: reduction of population growth rate. It is one of the best performing countries in that regard.”
As co-chair of the Global Commission on Adaptation, she is working alongside Ban Ki-Moon, former secretary general of the United Nations, and Bill Gates, founder of Microsoft, to bring the issue of climate change adaptation on equal footing with mitigation on the policy agenda.
She applauds Bangladesh’s determination to adapt to a changing climate.
“That has been an example for many countries to follow. Bangladesh is at very high risk of climate change but the country is also very effective in building resilience to this changing climate.”
Getting climate-resilient agriculture is going to be absolutely paramount for food security in Bangladesh, she said, adding that she is very impressed by the investment Bangladeshis are making in climate-resilient seeds, heat-resilient wheat and salinity-resilient rice.
“Living with the changing climate and not dying because of it -- is what Bangladesh is achieving.”
The WB was among the first development partners to support Bangladesh following its independence. Since then, it has committed over $30 billion, mostly in grants and interest-free credits to Bangladesh, supported by the International Development Association (IDA), the WB’s arm for the poorest countries.
Bangladesh currently has the IDA programme totalling $12.6 billion.
“This is our largest programme in low-income countries and it is a highly performing programme. It is a joy to visit the projects we support because they deliver good outcomes for people here.” During her visit, she met with the government higher ups, including Prime Minister Sheikh Hasina.
“It was a meeting of minds. She has high ambition for improving the well-being of people here and for the economy to continue to grow. She is extremely determined to see poverty numbers brought down. And that is exactly what we embrace from the World Bank side.”
“We discussed where we can be most useful. For example, there are congested roads in Bangladesh and they can be eased if waterways are used more for transportation. We would like to help to be supportive in this regard.”
Speaking about the priorities for Bangladesh, the CEO said the first and foremost objective ought to be in imagining the economy of the future and the climate of the future and then taking policy decisions today that help to step into this future.
For example, skills are absolutely paramount to creating more cognitive skills to build a population that is agile and that learns to learn. “No longer can you go to school and learn something and then rely on this learning for the rest of your life.”
And that agility of the educational system requires advanced thinking and an investment in quality and not so much in the quantity of education.
“It is very simple. Countries that invest in their people today are going to be wealthy tomorrow.”
The second priority is public finances and Bangladesh is taking it very seriously to raise revenue collection and rightly so because the government needs revenues to make investments in skills, health and resilient infrastructure.
What would make the biggest difference from Bangladesh is relentless focus on the wellbeing of people that may be left behind.
“From a very early age and from the day a child is conceived, it has to be taught that this is a cherished asset for the country. And I think judging by the ambition of the government and the ambition of the prime minister that focus on people is going to make the future of Bangladesh a bright future.”
According to Georgieva, the WB can help Bangladesh improve its business climate.
Bangladesh has targeted to improve its ranking in the WB’s Ease Doing Business Index to below 100, after ending up at 176th out of 190 countries in the latest ranking. This puts Bangladesh in the lowest position among all the South Asian countries despite moving up one spot in the index from the previous year.
“Yes, Bangladesh can go up. We have seen once countries set their eyes on eliminating red tape to businesses and improving conditions, they go up in the ranking. Your neighbour India last year celebrated becoming number 100. So, why not Bangladesh?” “We can offer our expertise on how you can zero in on obstacles.”
Her advice is: “You can look at your ranking as a problem. Or, you can look at the current ranking as an opportunity and step up.”
Georgieva said the International Finance Corporation, the private sector arm of the WB, and the Multilateral Investment Guarantee Agency (MIGA), its guarantee agency, have a strong presence in Bangladesh. The IFC has $1.2 billion investment and the MIGA about $500 million.
“Using these institutions, which specialise in creating markets and building more business opportunities, is a way we can be supportive.”
It would then create a better enabling environment for domestic private investment and also for foreign investment to flow.
The government is taking structural reforms quite seriously because the country has to be competitive in the region and globally.
As a lower middle-income country Bangladesh is facing higher interest rates, at 2 percent, for loans from the WB, up from 0.75 percent it had paid until the country gained the new status in 2015.
“Well, the good news is that Bangladesh is doing well and income per capita has gone above $1,500. That places the country in a different category. We have a very transparent and fair treatment of all countries.”
When a country is very poor, it can have access to primarily grants and when the country gets wealthier, then it pays very low interest rate.
“We are still offering 30 years repayment and five years grace period. These are very good conditions for financing.”
But she stresses when it comes down to helping Bangladesh, the Washington-based lender is doing its part. For the Rohingya refugees, it has provided $400 million in grants.
“It is strictly on a grant basis because it is an extra burden on a country that still has many problems of its own. And I want to very calmly say that Bangladesh is an example for others to follow in example of generosity.”
“You give hope to people persecuted that humanity prevails. And for that the country deserves all the help we can get.”
Georgieva, who holds a PhD in economic science and an MA in political economy and sociology from the University of National and World Economy in Sofia, said the ongoing trade war between the US and China worries her.
“It is not a good sign when two large economies are faced with disagreements that could impact business sentiments around the world. The trade tensions have been a negative factor for global growth and trade is slowing down.
“We have revised our growth forecasts downward partially because of this trade tension. But the world economy is still quite strong and the downward correction we have made on growth forecast is for now expected to be corrected upward in 2020.”
Georgieva said amid the trade tension, a vast majority of the countries are doing the right thing. The majority of the countries are looking for ways to continue to function in multilateral agreement environment.
In fact, there are many new bilateral agreements that are being signed by big trading blocs like the EU or Japan, seeking to expand opportunities.
“Our advice to developing countries is: do not fall for introduction of tariffs. Open up. It has served you well in the past and open economies are the economies that grow faster.”