Infrastructure, political stability key to high growth: analysts

Adequate infrastructure, energy, skilled manpower, political stability and investment-friendly climate are the key factors for higher economic growth, economists said at a discussion yesterday.
Bangladesh has achieved considerable success in gross domestic product but fell short of the growth numbers achieved by the other developing countries, they said.
They were speaking at the discussion on “growth strategies and macroeconomic stability”, which was organised as part of a two-day long economic conference hosted by Bangladesh Economists' Forum (BEF), a non-political voluntary body of professional economists, for the first time.
Presenting a paper on “searching for sources of growth in Bangladesh”, Sadiq Ahmed, vice-chairman of Policy Research Institute, said per capita income has grown from $100 in 1974 to $850 in 2013 (according to 1995-96 base year). With fiscal 2005-06 as the base year, per capita income rose to $1,190 in 2014, according to government-run Bangladesh Bureau of Statistics.
Nevertheless, Ahmed said, this performance is below the potential and much lower than the growth rates achieved by China, Malaysia and Korea, who were also low-income countries like Bangladesh in 1974.
Malaysia and China are now at the higher end of the middle-income group, while Korea has crossed over to the high-income category. “Bangladesh is still at the low-income group, and is aspiring to enter the low-end of middle-income group by 2021.”
“There is no reason why Bangladesh cannot achieve a higher growth rate than its current one,” Ahmed said, while stressing capital accumulation, investment-friendly climate, policies for labour growth, strengthening human capital, developing infrastructure, acquiring better technology and strengthening structure of production for higher growth.
Policies that promote efficiency and improve governance and institutions are particularly important to increase the contribution of total factor productivity growth, he added.
Presenting another paper, “Avoiding the middle-income trap and jobless growth: overcoming binding constraints to growth and getting policies and institutions right”, Mohiuddin Alamgir, former president of the Bangladesh Economic Association, said transport, energy, and skill and human capital are the major constraints for economic development.
Quantitative and qualitative policies and investments are needed to improve the situation in the sectors, he said.
Good governance, shift to and adoption of information technology, planning process and integration between planning and budget are also important factors to the growth trajectory, Alamgir added.
Commenting on the two papers, Zahid Hussain, lead economist of the World Bank's Dhaka office, said steps need to be taken to increase political stability by strengthening incentives for groups to achieve their aims peacefully.
“Securing peaceful access to rents should play a crucial role in any negotiation.”
He stressed the need to enhance the state's ability to enforce the rule of law impersonally and equitably, especially in its dealings with the non-elite-run political, economic and social organisations.
Hussain also recommended encouraging the business community to seek profits by improving productivity by way of investing in learning, efficiency and technology rather than seeking rents from the state and parking their savings offshore.
The World Bank's Commission on Growth and Development indentified five reasons that brought about sustained high growth post-World War II. They are: macroeconomic stability, advantage of the world economy, markets to allocate resources, sustained high investment and saving rates and capable governments.
“Bangladesh does very well on the first, reasonably well on the second and third, not so well on the fourth, with a lot wanting on the last,” Hussain said.
“By increasing savings and investment rate and the capability of the government while maintaining macroeconomic stability and allowing markets to do what it does best, Bangladesh will make it to the high-income group sooner than many pundits think. However, it may not be in our lifetime.”
Mashiur Rahman, economic affairs adviser to the prime minister, moderated the discussion.