The Financial Express

Growth and industrialisation: Balancing act?

| Updated: October 23, 2017 04:34:29

Growth and industrialisation: Balancing act?

A previous series in this newspaper highlighted the key industries that have made the country what it is today (began with the March 01, 2016 issue), and to which the country continues to look for further fuel and fruits. Industry-specific attention and resource-allocation beget imbalances. Led by Albert O. Hirschman, developmental economists believe unbalanced growth is normal; and what makes it so is its tendency to move towards homeostasis (without necessarily getting or remaining there). There is a lot to be learned from this for developmental countries, like Bangladesh, climbing the economic ladder.
One appraisal of the lessons is to examine a second-tier of industries, that is, those not currently laying the golden-eggs of development, and eventually what their contributions must mean for the overall growth of the country and where/how balances may be struck in the journey. Accordingly, this article begins a follow-up series simply dubbed "Second-string Sector Survey," examining, not just fall-back or emergent industries, but also some of the inputs, outputs, and developmental framework, as well as the relationship between them. Ship-building, fertilisers, ICT (information and communication technologies), fashion, cement, ceramics, as well as energy/infrastructure will be examined, in that order, before a final piece (the ninth in the series) draws some conclusions on the backward and forward linkages generated, as well as the evolving nature of our social overhead capital.
Explaining those concepts here might be an appropriate start to the series. Linkages come across as innocuous or simple, as well illustrated by our well-established front-burner ready-made garment (RMG) industry. It is more discussed for its outputs (clothing the world and fetching us an income) than for its inputs, with imported cotton exemplifying the dominant one. That is a linkage, as too, for example, the dry-cleaning industry that emerges subsequently to keep the product serviceable to consumers. Shifting from the clothing sector to another sector for its input (cotton, in this case) falls into a "backward" type of linkage; but since dry-cleaning opens up another sector after the production of clothing, it constitutes a "forward" linkage. Refining inter-industry/sector dynamics like this becomes an increasingly important "a posteriori" task in any developing country: by streamlining growth, it helps reduce unpredictable outcomes (one type of a "market-failure") and helps prepare a "Plan B" in case something happens to "Plan A" (in this case, the RMG output). The immense RMG profit-making (the "golden eggs") might have obscured any Plan B considerations in the past. It is time we start paying more attention to them, even more, gearing up for a "Plan C" mindset. It is all part of the development game, rather broadening-the-perspective game.
None of our front-burner industries (RMG, leather, pharmaceuticals, fisheries, tourism, and the like), and equally so the back-burner counterparts (ship-building, fertilisers, ICT outputs, fashion, cement, ceramics, and others), can function without, for example, energy of some sort (from natural gas, hydro-electricity, coal, nuclear, solar, or some other source); or even infrastructures of many kinds (highways/railways for conveying the finished products to the market from the assembly-line, thus necessitating ports to handle the overseas shipments, banks to finance the investment, insurance companies to offset losses or hazards, rules and regulations for automobiles, trains, steamers,  ports, bankers, insurers, and so forth). Many of these have been seen as part of the social overhead capital (SOC): social, because they are also for the public, not just for the specific industry; overhead, for a similar reason, that they cannot be claimed exclusively by that specific industry or that specific production (since factory managers, for example, also need electricity to keep accounts even though they were not producing clothes); and capital, since they are themselves the product of an investment, but also because they become the foundation of other investments and investors in the future.
Bangladesh seems to be in this "Plan B" phase. The present government, like no previous governments, is not only fast-tracking infrastructure-building, energy-availabilities, and establishing special economic zones, but also fast-tracking an awful lot of them together. It is one way to say we are throwing in all we have to move beyond the RMG magic without diminishing the golden RMG eggs. It is another way to simply acknowledge that those RMG eggs have pushed us to a higher threshold where non-material considerations demand attention, for example, building a house with the new RMG income; sending children to schools for the first time because the RMG income made it possible, but if not for the first time, to a better one, also because of that new income; taking care of those health problems that inadequate funding once prevented; our enhanced environmental consciousness propelling us into thinking about our children having a "green" garden to play in as part of their growth; and simply finding the next pot of gold now that the RMG pot has been harnessed. In short, a broader than industry-specific or product-specific mindset permits us to take full advantages of the social overhead capital notion.
Cultivating the length, breadth, and depth of any Plan B should gear us well for an eventual Plan C. That should be to deal with all the consequences of a diversified economy, in turn depicting how much closer we are to balancing that unbalanced beginning, an exercise that takes us into the domain of a developed country. That, however, is looking too far ahead for now (and this series). What matters most is to begin cooking what is on the back-burner. With that in mind, the next article in the series will take a first stab with our brewing ship-building sector.
Dr Imtiaz A Hussain is Professor, International Relations, formerly Universidad Iberoamericana, Mexico City.
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