Bangladesh will make a mistake if it thinks that the present good days for its economy will last forever. The economy's good days started with a huge number of Bangladeshis migrating abroad with jobs. These people now number above seven million and in all likelihood, may go up in the next few years. Secondly, globalisation has opened up the doors of the advanced economies for Bangladesh's exports.
One single export item, readymade garments (RMGs), put the Bangladesh economy on the world stage. In a short period, the country's exports crossed $32 billion per annum with RMGs contributing 80 per cent of the same. No global player took Bangladesh seriously before the surge of its RMG exports. Now globally, Bangladesh ranks within the top five of the apparel-exporting countries. There was a time when 90 per cent of the components of the RMGs were to be imported from outside the country, but now local components' contribution has risen up to 60 per cent or even more. Back-up textile and spinning industries have come up in the wake of the surge of the RMG exports to the global market in the last three decades.
There are global competitors of Bangladesh in the RMG sector, but the country is still in a position of offering the global buyers its apparel products at the cheapest prices. The main reason for low cost of apparels in Bangladesh is its cheap labour. But depending on cheap labour at home and quota-free and tax-free facility by some importing countries, Bangladesh may not go much far.
There is a limit to the global RMG demand; the demand may not go up unless there is a continuous upswing in the economies of the advanced countries. So, if Bangladesh wants to go ahead with its export growth at the rates of the past, its economy must undergo structural changes. The economy will have to adopt and absorb capital-intensive technology, producing varieties of goods at competitive prices for exports. The demand for pricey goods from within also can act as a supporting factor for restructuring of the economy in favour of technology-based production.
Bangladesh reaped the benefits of globalisation under the World Trade Organisation (WTO), but the pace of further globalisation seems to have come to an end, specially with the about-turn position of the major economies like that of the USA. The USA seems to have taken a decision of not going further with globalisation, but some economies, both advanced and the emerging ones, are going ahead with the agenda of globalisation, albeit, among themselves. They are signing agreements sans the USA in favour of free trade. There will be more semi-global and regional free-trade agreements in the coming years.
There will be a huge export-import surge among the countries that have already signed multiple free-trade agreements or are going to sign trade and investment agreements soon. Already, there are agreements which have paved the way for free movement of goods and also of capital. The economies, belonging to the big trade blocs and economic unions, will enjoy many more benefits which countries remaining outside such agreements will not enjoy. Bangladesh is one of the countries which did not or could not sign any free-trade agreement with any country until now. We heard many initiatives, such as the Bangladesh-China-India-Myanmar Forum for Regional Cooperation (BCIM) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), but none of these has taken off in the real sense. The country was not serious from the beginning about the need for free-trade agreements. The one between Turkey and Bangladesh and the other between Sri Lanka and Bangladesh have progressed at a snail's pace.
But what Bangladesh needs more is to join a big global free-trade bloc. Otherwise, its future export drive will face big problems in the future. If it remains isolated it will never be able to assure its people of social security they need. Capital flight or illicit capital outflow takes place more from isolated and socially unstable economies.
The illicit capital outflows from Asia are still at a low level. War-torn small economies are the other good targets for the international money racketeers for resource smuggling. Another problem Bangladesh may face in the coming years is food deficit. The country might not be able to feed its growing number of people from within. This country will have to keep the food import option open and the necessary foreign exchange for food imports will have to come from its growing export. Compared to its size of the land, Bangladesh's population is huge. If the country does not go for population management in a scientific way, it may face food shortage on a perpetual basis. For it, management of both land and population is the key issue to be addressed seriously. A sleeping Bangladesh may be caught off guard.
In many respects, Bangladesh is standing on a razor's edge. If the country can attain a growth rate of beyond 8.0 per cent per annum, many of its problems will possibly be solved. Otherwise, the problems it may face from growing population and ever-decreasing cultivable lands may simply tear society apart.
The writer is Professor of Economics University of Dhaka.
