Reforms can make Bangladesh an export powerhouse: WB

Bangladesh can become an export powerhouse like its East Asian neighbours by improving its business competitiveness and trade regime, which will help firms compete globally, the World Bank said in a new report yesterday.

Bangladesh is a wonderful case of how the rise in competitiveness can help cut poverty, said Vincent Palmade, lead economist for trade and competitiveness global practice at the WB, presenting the report at a programme at Le Méridien in Dhaka yesterday.

“Now the challenge for Bangladesh is to continue the success and diversify into other areas.”

The report -- South Asia's Turn: Policies to Boost Competitiveness and Create the Next Export Powerhouse -- identified four policy levers that can help Bangladesh enable its firms to boost productivity and become more globally competitive. These include improving the business environment, connecting firms to global value chain, maximising agglomeration benefits, and strengthening the firms' capabilities.

“With rising labour costs in East Asian countries, investors and buyers are now turning to South Asia, including Bangladesh,” said Palmade.

With over two million youths entering the labour market every year, Bangladesh needs to act now to seize the opportunity and create more jobs, he added.

The WB launched the report jointly with the Policy Research Institute of Bangladesh.

Speaking at the launch, Finance Minister AMA Muhith said Bangladesh has been very good in exploiting areas where it has comparative advantages.

In the 1980s, his major concern was how to manage food for the population, and he had to sit with development partners three to four times a year, he said.

“Now I have no worries about food although arable land has narrowed by 10 percent, while the population has doubled over the last three decades.” 

Bangladesh's exports increased 13 percent a year in the last decade, according to the report. However, 80 percent of its exports remained concentrated in garment, mostly low-value items. Bangladesh needs to continue to grow its exports by improving the mix and quality of its apparel products, as well as diversify into new labour and skills intensive industries, such as footwear, light engineering and electronics.

While about 80 percent of the firms in Bangladesh practise technological innovation, well above the average in Eastern Europe and Africa, most are limited to imitating existing products and processes, according to the report. 

To better connect and expose South Asian firms to international good practices, Bangladesh and other South Asian countries should deepen reforms to improve the capabilities of firms to participate in global value chains, which will require making it much easier for exporters to import what they need, gradually reducing tariff, while improving trade logistics, said the report.

With support from governments, firms can improve their productivity and competitiveness by investing more in training their workers and managers, innovating to introduce new products and processes, as well as making greater use of the internet to buy, sell, market, or manage their inventory, the report said.

“To realise Bangladesh's competitiveness potential, the country needs to start by focusing on improving its trade policy regime and the business environment, and address the acute shortage of industrial land,” Qimiao Fan, the WB's country director for Bangladesh, said in a statement.

“With the right set of policies and an enabling environment, there is no reason why Bangladesh cannot become the next Asian export powerhouse.”

Wendy Jo Werner, country manager of the International Finance Corporation, said increasing private investment is the key to creation of more and better jobs, an important development objective for Bangladesh.

“Critical for private sector growth will be enhanced competiveness that requires policy support to improve the investment climate and increase integration with global and regional markets.”

She said South Asia needs $2.2 trillion in infrastructure investment; Bangladesh's infrastructure investment requirement would also be high.

Ahsan H Mansur, executive director of PRI, said South Asia's performance has been led mainly by India and Bangladesh in recent years. In fact, Bangladesh has fared well compared to India in some social and economic indicators.  As the workforce ages and labour costs rise in China, it would create opportunities for South Asia and Bangladesh, he added.

SR Osmani, a professor of development economics at UK's Ulster University, said countries should look to expand footprints where they have comparative advantages, instead of venturing into many sectors.

Rubana Huq, managing director of Mohammadi Group, said following the collapse of Rana Plaza, remediation has been going on with or without help. “I think Bangladesh will end up becoming one of the most compliant countries in the world in the coming years.”

Arif Dowla, managing director of ACI Ltd, called for increasing agricultural productivity. “If we can double the productivity and feed the population by cultivating crops on half of the land currently in use, we will be able to free up land for others including industrial purposes.”

Kazi M Aminul Islam, executive chairman of Bangladesh Investment Development Authority, said the government is revisiting factors, including incentives that affect businesses.

The report called for expanding the bonded warehouse scheme, gradual harmonisation of tariffs to a lower base and continuous improvement of customs, ports and logistics in a bid to connect to the global value chain.

Palmade said they have come to know that Bangladesh is working on reducing para-tariff by 1 percent every year. “This is good news.”