This op-ed that I wrote was published in the newspaper Dhaka Tribune on December 23, 2015.
As Bangladesh embarks on a new era of being a lower-middle income nation, some questions remain about what steps should be taken next to further develop the country. Complicating matters are the large differences in living conditions and economic opportunities between the urban and rural areas of Bangladesh.
Just travelling a few miles outside of the main cities of Dhaka or Chittagong shows stark differences between rural and urban areas of Bangladesh. The government needs to do a balancing act between Dhaka, the other urban areas of Bangladesh, and the rest of the country to ensure that there is a balanced economic growth across the country.
The labour force of Bangladesh is 77 million and growing, according to the World Bank. This can be both a blessing, and a curse. It is a blessing as it provides a cheap supply of labour who can work with low pay and this factor can attract industries that require a large pool of unskilled workers.
However, unskilled workers will earn a low pay, and the only way to develop the nation is to ensure that the labour force becomes productive and demands a higher pay. Bangladesh needs to create 21 million jobs in 10 years, according to Kaushik Basu, the chief economist of the World Bank.
Herein comes the dilemma. How can Bangladesh continue its growth trajectory if it has to rely on attracting industries that only require low-skilled workers? If the country tries to attract industries that require high-skill workers, it will only employ a small fraction of the workforce, and the unskilled workers will be left behind, creating uneven growth.
Moreover, a recent article in The Wall Street Journal indicates the assumption that manufacturing-led growth is a feasible strategy for poor countries to achieve high-income status may not be so true anymore. Many developing countries are experiencing a fall in the contribution of manufacturing sector to GDP according to the article. A number of reasons were given, but one big reason is the rise of China as the world’s manufacturing hub.
As Bangladesh is currently over-specialising in low-end manufacturing of clothes, it is possible that the country may not move to higher-end manufacturing, and may even see the manufacturing sector shrink in the future.
So what hope does a country like Bangladesh have to achieve upper-middle income status in a reasonable amount of time? Improving infrastructure, such as building seaports or a new airport, can help to improve bottlenecks to trade and employ thousands, but will take years to build and decades to realise the full economic impact.
As mentioned above, there is a large pool of unskilled workers that need to be employed, along with the growing number of skilled workers.
While looking at projects that can improve the long run growth prospects of the country, Bangladesh needs to look into steps that can create new employment opportunities. Besides implementing large-scale infrastructure projects, the government can focus on increasing employment in the service sector. It can encourage local transport companies to trans-ship goods from one part of India to another through Bangladesh.
Online payment sites, such as PayPal, can be allowed to operate in Bangladesh so that small manufacturers can sell their products through online vendors. Non-resident Bangladeshis should be courted to invest in Bangladesh.
Students should be encouraged to be entrepreneurial, and all kinds of facilities, like subsidised office-space for start-ups, can be given to recent college graduates to start their business. But whatever the steps the country takes, there needs to be a balance in employment opportunities so that in the short-run, both skilled and unskilled workers can gain employment to ensure an even development in the country.
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