The Bangladesh economy has been achieving a laudable growth rate. Some quarters put it at or better than 7.0 per cent per annum, which is well above the world average in this respect. The recent statistical data of the Bangladesh Bureau of Statistics (BBS) show that in the current fiscal year, the economy may achieve a 7.28 per cent gross domestic product (GDP) growth rate.
So there is hardly anything to worry about the present growth rate. If there is any worry it is about the future development. Many experts question whether Bangladesh has the ability to maintain the present growth rate in the foreseeable future, not to speak of achieving an accelerated one. The main reason behind such fear is that the Bangladesh economy has already outlived its capacity to grow at the current rate or at a higher rate with the present infrastructural bottlenecks.
The first and the second generation reforms in the economy have already delivered results. The economy had its hey-day based mainly on an export surge from globalisation. With globalisation in trade and investment, Bangladesh made its economy ready to take advantage of free global trade and investment flows. In fact, Bangladesh could have reaped better benefits from globalisation. Increased global trade was a result mainly of a multilateral trade liberalisation effort undertaken under the Doha Round in the middle of '90s of the last century, which, to an extent, has now gone out of its steam without a conclusive end.
The rich countries of the world have instead opted for their chosen regional and multilateral trade deals bypassing negotiation for an all-out free global trade agreement under the WTO. The losers of the about-turn by countries like the USA from the Doha Round were, by and large, developing countries like Bangladesh. The hope for a free trade globally, and also free flow of investment all across the globe has been dashed with the failure of negotiations one after another towards that by the World Trade Organisation (WTO) members. They have now almost abandoned the Doha Round of multilateral trade and investment negotiation and opted for sub-regional trade and investment negotiations with and among the countries of their liking. In such a situation, countries like Bangladesh, which could not sort out their agenda for joining any regional or sub-regional free trade blocs, have been left behind. Bangladesh was depending on what the Doha Round hitherto offered to it in areas of trade and investment. Bangladesh could not take any initiative on its own to strike a deal bilaterally or sub-regionally with other countries for having freer market accessibility for its exports. Whatever the advantage the country was enjoying in this respect was offered by the mature economies of the world on their own. When those advantages were offered, the country did not have many competitors for such benefits or in areas where it exports.
But now there are now competitors. Bangladesh is facing competition from rival exporting countries in an increasingly squeezed global market. In the field of foreign investment, the country's achievement is even worse, as it did not receive any big capital inflow from abroad in the recent past, especially in its competitive sectors.
In the absence of required capital inflow from both within and without, the Bangladesh economy has remained under-performed. Of course, the shortage of gas and electricity supplies and the dilapidated infrastructure have also stood in the way of receiving increased investment. Already, the Metropolitan Chamber of Commerce & Industry (MCCI) pointed out that the economy has remained under-performing in the absence of improved infrastructures and because of delay in supply of gas and electricity. The limitations of the Bangladesh economy should have been known to its policymakers much earlier.
Maybe, the problems like shortage of power and gas sectors will be lessened soon with increase in generational capacity and import of liquefied natural gas (LNG), but the economy will not receive the required investment unless it is positioned with strong global linkages. For that, Bangladesh will have to partner with regional and sub-regional countries in free trade blocs, or better, forging economic union with them. Once Bangladesh becomes a member of such free trade and investment blocs, investors' confidence will go up. Then, we will see a significant change everywhere. The economy will only go from one height of growth to a higher one. The achievement of a growth rate of 8.0 per cent or more or better will become possible.
For Bangladesh, the better option is to explore the Bangladesh-China-India-Myanmar (BCIM) initiative for tying its economy to the bigger global economies and also to conclude bilateral free trade agreements. There are some such offers now on the table, the one being from China also. Bangladesh's policymakers should consider these offers seriously.
The writer is a Professor of Economics at the University of Dhaka.
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