Bangladesh could be next to China if it takes the advantage of its low cost edge on its competitors, says a recent report by the World Bank.

“If Bangladesh improves its business environment to half of India’s level it could increase its trade by about 38 per cent. But if Bangladesh hesitates for long, other competitors will take the markets China is vacating,” the report observed.

“Capturing just one per cent of China’s manufacturing export markets would nearly double Bangladesh’s manufactured exports,” the report pointed out.

The global lending agency underscored the need for an export-led strategy that would focus on diversifying products, skills and markets. Export diversification leads to generally strong economic performance.

“Diversification of the main migrant-labour destinations countries could enable more Bangladeshis to work abroad resulting in higher remittance and higher economic growth.

It would also reduce the vulnerability of Bangladesh’s remittance inflows.”

The report titled “Bangladesh, towards accelerated, inclusive and sustainable growth opportunities and challenges,” was launched recently through a function attended by Finance minister AMA Muhith and leading economists of the country.

The report observed that labour was the Bangladesh’s strongest source of comparative advantage.
Its abandoned and growing labour force is currently underutilised.
On the other hand, Bangladesh’s competitors are becoming expensive places to do business.

In the next tree to four years, China’s exports of labour intensive manufacturers are projected to decline. Chinese wages are rising above $150-250 per month. Labour shortages are becoming serious constraints in Chinese coastal areas.

Costly labour regulations are increasing and the government has made it difficult for some foreign investors which have frightened others.

On the other hand, “Bangladesh’s wage is half of India and less than one third that of China or Indonesia.”

The report also observed that despite its vulnerability to global and natural shocks intermittent political turmoil, weak governance and rising cost of unplanned urbanization it has made significant progress on the economic front. “Its Gross National Products (GNP) grew well above the average for developing countries, reducing poverty an impressive 26.4 percentage points in the past two decades.”

The report suggested that to sustain the growth and become a middle income country by the year 2021, Bangladesh would have to take a number of reform agenda. “Real GDP growth has to accelerate from its current level of 6 per cent to around 7-8 per cent.”

It also suggested the government invest in infrastructure especially energy. According to the report Bangladesh’s severe energy crisis is a constant threat to growth momentum. In addition Bangladesh’s transport infrastructure is weak.

To overcome the low private investment situation, the report suggested forging partnership with domestic and private sector to increase power generation, increase public spending on road maintenance, improve the management of Chittagong port.

The study found that poor logistic capacity constraints the ability of traders to move goods efficiently and connect manufacturing and consumers with international markets.

It suggest improve logistics to ensure that exports as well as imported inputs are shipped cost effectively, reliability and on time by introducing tools to facilitate trade such as single window processing, risk based inspections and electronic data interchange system strengthen multi-modal connections between Chittagong port and the hinterland and enhance air shipment capacity and improve rail services by adding new physical capacity.

“Promote strategically located EPZs to foster industry competitiveness and spearhead urban reforms by developing EPZs in proximity to markets,” the report said.

It also suggested transforming Dhaka into a globally competitive metro city by developing appropriate institutional mechanism. “Be more proactive in adjusting wages and relocate factories from residential to industrial buildings that are better equipped to provide safe working conditions.”

News: The Daily Independent/Bangladesh/21-Nov-12