As scientists are relentlessly working to create an antidote to fight Covid-19, governments, policy planners, business communities, and economists have started foretelling the economic consequences of a prolonged crisis period. Some have compared the ensuing catastrophe to the Great Depression of the 1930s and the economic stalemate after the Second World War. The Covid-19 pandemic has already cost more than 380,000 lives and shut the sources of incomes for millions of families, affecting the livelihood of a few billion people in the process. Even the wealthiest nations of the world are finding it difficult to contain job losses due to the crisis. For example, the US has lost about 30 million jobs, followed by China's 26 million, and the UK's 6.5 million. The fear that the US might hit an unemployment rate of 32 percent or more, from the present 14.7 percent, sketches a gloomy picture for the world economy. For many reasons, shifts in economic policies would be inevitable in the post-coronavirus era. Bangladesh will be no exception. In that case, among other issues, the following are worth considering in the Bangladeshi context.
Product and market diversifications in external trade
The relatively long spell of economic growth that Bangladesh has enjoyed to date owes greatly to its remarkable export performance, courtesy to globalisation. Exports accounted for 14.32 percent of GDP in 2019. The virtue of globalisation notwithstanding, one has to admit that globalisation inevitably creates external dependence. Bangladesh's economic success has become largely dependent on the economic performances of the rest of the world, with the latter creating demand for Bangladeshi products. But its export regime is inherently weak as it is concentrated on a limited number of products and in a limited number of countries. The top 10 exports—dominated by RMG products, which comprise 84 percent of the total exports—account for 96 percent of the total export earnings. The top 10 destinations receive more than 71 percent of Bangladesh's total exports. A general lack of product diversification is, therefore, associated with a lack of market diversification.
These top export partners include the EU countries, the US, and Japan. Given that most of these countries have been hit hard by the Covid-19 outbreak, Bangladesh has huge challenges ahead if it is to sustain its export market. Imports, on the other hand, pose a different type of external dependence. The country mainly imports machines and equipment, electronic products, vehicles, and raw materials and industrial inputs. The bulk of Bangladesh's imports (about 68 percent) comes from a handful of countries with China dominating the group, with 26.1 percent, followed by India's 14.7 percent. To the extent that these countries are affected by the coronavirus outbreak, Bangladesh is destined to feel the heat, if not by the supply chain, by higher import prices. As such, product and market diversifications are a must.
If there is one thing to learn from the mood swings of some of the countries during these trying times, it is the importance of self-reliance for basic goods and services. It's clear that in a crisis like the present one, some goods and services become non-tradable. The services of the medical scientists and health workers, medicines, and basic ingredients of medicines, protective gear, etc. are notable examples. In the past, we have encountered similar problems with the shrinking of international supply of some basic necessities. The coronavirus has just brought to the fore, once again, the virtue of self-reliance.
Expanding domestic demand
Led by consumer expenditure, domestic demand remains the most authentic determinant of economic progress. Domestic demand in turn depends on income generation through the creation of employment opportunities. Bangladesh is still far away from becoming a mass-consumption society. It has underutilised and unutilised human resources. These less-than-optimum states of the economy and similar ones put Bangladesh in a good stead to accelerate its economic growth. A more equitable income distribution scheme can realise further economic growth. A transfer of income from the rich to the poor will simply propel demand for domestically produced goods and services as the lower-income people have a great deal of unfulfilled demands even for basic necessities. This view is supported by empirical evidence. Reduction in income inequality has even become more important in the wake of the Covid-19 crisis. For once, the well-being of the richer has become dependent on the well-being of the poorer—my health depends on your being healthy. Economists would like to call it an interpersonal comparison of utility. An individual may be inclined to think that an extra amount of a particular good might be more useful to another individual. This applies to money or income as well.
Research and development
It's time we put more importance on investment in research and development, particularly in science and technology. The spillovers from foreign innovations and inventions carry a gestation gap. Countries like Taiwan and South Korea pass the test of time by their preparedness enabled by the state of their scientific knowledge and technical know-how. Innovative ideas and inventions, no matter how insignificant they may look and sound at the outset, must be encouraged and nurtured. Let's begin with schools. Research organisations, including research universities, encompassing all disciplines of learning, need to be instituted. Apart from science and technology, these organisations will conduct research on policymaking and leadership at all levels.
Taking advantage of what's on offer
Bangladesh has to think beyond the RMG exports. In the post-Covid-19 era, there shall be a boost in demand for certain types of products and services. These include health equipment such as masks, gloves, ventilators, etc. and the services of medical scientists including doctors, microbiologists, chemists, pharmacists, and auxiliary health staff such as technicians and nurses. A long-term plan in this regard is warranted. This is even more important as the world demand for Bangladesh's conventional labour and human capital services is likely to wane substantially following the dramatic job losses in the host countries.
A task force
The government may institute a task force comprising experts from various disciplines to prepare an independent report on matters of interest as deemed necessary.
Finally, there is scope in a democratic political set-up to accommodate potentially more equitable social and economic policies for the greater good of the society. These are complementary rather than contradictory, as some nations have demonstratively proven it over the last two months or so.
Dr MA Hossain is Professor, Department of Economics, University of Chittagong, and Vice President, Bangladesh Economic Association.