Empowering' economic growth should be the prime agenda for the nation right now when growth is slowing down. This is a challenging task that can be done by ensuring the marriage of optimal investment policies with the right institutions. Growth empowerment is different from a marginal increase in growth numbers: the first one is a qualitative improvement while the second is quantitative change.
Although the task of empowerment may initially slow down economic output it will ultimately accelerate growth. For example, any new land reform or labour law is likely to disrupt production activity at the formative stage. Simply growing fast does not guarantee quality growth – just like achieving high literacy rate does not guarantee quality education. Therefore, the question is how to 'empower' economic growth.
We need to focus more on quality drivers of growth that include good governance, better institutions, a speedier judiciary, city-life mobility, more vocational and scientific education, a vibrant private sector, responsible and brave media, and fearless practice of cultural diversity. Empowering growth means streamlining fiscal and monetary policy in a way that produces optimal output. When growth is empowered it is steady and sustainable and does not display high volatility.
Say, two countries, A and B, have the same average growth of five percent, but the degree of fluctuations, which we measure by standard deviation, of growth in A is 2.5 and 1 in B. Country B's institutions and human development index must be higher than that of A – and thus B's growth empowerment is higher than A's. B is more confident about its growth trajectory than A.
Economic growth may increase due to many non-economic reasons such as a favourable monsoon season or a political emergency. Indira Gandhi's state of emergency suddenly gave India a nine percent growth in 1976 whereas the growth figure dropped back to its pre-emergency state of 1.2 percent in 1977. That achievement of nine percent growth was not empowered because institutions were not ready. The growth India got after 32 years in 2006, which touched nine percent again, was rather empowered – it was maintained up to 2008 until the economy took a hit during the global financial crisis.
In 1974, Bangladesh harvested 9.6 percent growth – the highest in history. This growth was not empowered enough to remain steady and robust because other institutions were not in place and economic fundamentals were non-robust. As a result, growth plummeted to as low as a negative figure of 4.1 percent in the following year. It recovered to 5.7 percent in 1976 and fell again to 2.7 percent in 1977. Unpredictable fluctuations in growth describe its crumbliness. That is how South Korea progressed during 1960-1980 and China during 1980-2010. India's pace was not as resolute as China's since institutions were half-baked. The way China implements rules is still not possible in India or Bangladesh although our institutions are gradually getting there.
Recently, the Chinese government posted the faces of big defaulters on billboards essentially soliciting a response of 'shame on them' from the public. We are not sure whether big defaulters have any sense of shame, but we are sure that a similar action against bank looters in countries like India or Bangladesh is beyond imagination. Only brave institutions can empower growth. When high-up government officials are more concerned about holding onto their positions, their institutions cave in to political cronyism, making growth disempowered. Growth is empowered when a nation has the right people in the right positions. A person must be innovative and sometimes aggressive in advocating ideas particularly in economies like ours that need rapid and steady growth to fulfil their national aspirations. Sadly, there is a widespread disregard for knowledge in our financial institutions, which is why we are ranked 26th in the Knowledge Economy Index out of 28 countries in the Asia and the Pacific region.
Empowered will be the economy that takes into account the Doing Business Index and addresses each impediment categorically – an arduous task Bangladesh Investment Development Authority (BIDA) has already started working on. At least BIDA is not hiding under the moldy circulars of its predecessor entity Board of Investment (BOI) that proved to be a dead horse. During the course of my professional experience I heard numerous complaints from foreign investors on how they were 'welcomed' or treated in Bangladesh. Let's change this culture. Let's create new rules if the economy in a globalised world demands so. We have been floundering in the battle of attracting FDI, which is still one percent of our GDP while Vietnam has already made it five percent of theirs.
Empowering growth means creating a solid and sustainable foundation for economic activity by undertaking fiscal and monetary policies with a long-term vision. A quick fix will not work. There is no separate index for growth empowerment. But if the government works relentlessly to improve our position in just a couple of indexes such as Knowledge Economy, Doing Business, Liveability, and Openness, our growth will be much more empowered. Therefore, building institutions as well as enforcing good governance are important for quality growth.
The writer is visiting fellow of Bangladesh Institute of Development Studies and guest faculty at the Institute of Business Administration at Dhaka University. E-mail: firstname.lastname@example.org