Daunting challenges ahead

Bangladesh needs to improve infrastructure and standard of education, equip the youth population with market-oriented skills and uproot corruption to become a high-income country, experts say.

Once a byword for disasters, Bangladesh is now a development role model. And experts believe it needs to step up the efforts to transform the economy as Bangladesh today celebrates its 50 years of independence. 

"We will have to help the private sector expand further, give it more space and attract more foreign investment," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

"We have to have a congenial investment climate. We have not been successful much in this area."

The problem facing investors in securing land could be sorted as the government has moved to set up 100 economic zones.

"We hope they will be implemented quickly," Mansur said.

Bangladesh has made major strides in electricity generation in the last decade. The government is set to bring 100 per cent of the population under power coverage. But a credible supply of electricity is still a far cry.

"Power is very unreliable. There has been wasteful investment in this area. As a result, the cost of power has increased, but consumers are not getting quality power. This is a major barrier to development."

"If we don't get quality power all the time, we can't build successful business enterprises," Mansur said.

The financial industry is facing major challenges. The same is true for revenue generation, according to the analyst.

"We will not be able to attain Sustainable Development Goals with this low level of tax to GDP ratio."

At less than 10 per cent, Bangladesh has one of the lowest tax-to-GDP ratios in the world.

There is a lot of questions about the quality of education. The education system should be more skill-based.

The employment sector has been facing twin challenges.

The first challenge stems from technologies. As a result, fewer people are needed per unit output. Second, more investment is required per capita in the industrial sector for the same amount of output, Mansur said.

In Bangladesh, more than 20 lakh people join the workforce of the country every year.

He blamed the lack of governance for the weakening of institutions. "Nobody can prevent our collapse if we can't strengthen our institutions."

Bangladesh has made the least improvement when it comes to reforms. In order to grow further, the types of reforms that Bangladesh needs are not low-hanging fruit.

"Reforms require a political will. But we have not been able to link the reforms with the political will. If we don't do that, our aspiration to implement the SDGs and become a higher middle-income country will not become a reality."

AB Mirza Azizul Islam, a former finance adviser of a caretaker government, said Bangladesh needed to diversify exports in terms of products and markets.

Today, 85 per cent of export earnings come from garment shipment. And the income is concentrated in a few markets such as the United States and the European Union.

Diversification is also needed in the case of remittance, which is a key pillar of the economy. The country mainly sends unskilled and semi-skilled workers abroad, so their salaries are low.

"If we can develop their skills and send them abroad, our remittance earnings will go up," Islam said.

In the governance indicators of the World Bank, two-thirds of the countries are doing better than Bangladesh.

"We have to improve in this area as corruption increases the cost of business, which erodes competitiveness in the international market."

Bangladesh introduced a guideline on loan classification in the early 1990s, but it has not brought major changes in bringing down non-performing loans. Instead, loan defaulters are being given more facilities such as rescheduling.

"This, along with scams, is weakening the health of the banking industry. We need to undertake fresh initiatives to tackle NPLs," said the former chairman of the Bangladesh Securities and Exchange Commission.

Muhammad Abdul Mazid, a former chairman of the National Board of Revenue, said Bangladesh had clocked higher GDP growth years after years, but the gains were not equally distributed. The gap between the rich and the poor has continued to widen.

Money has been swindled from the banking industry, and this has spooked the confidence of people, he said.

There have been talks about restoring financial stability, but there is little progress because regulatory bodies have not been able to carry out their responsibilities. As a result, it is becoming difficult to ensure accountability and governance.

Prof Shamsul Alam, a member of the General Economics Division, said creating a skilled workforce is paramount to making Bangladesh first an upper-middle-income economy and then a developed economy.

"We need skilled human resources. We need qualitative change to the education system. We are trying, but we are yet to get desired results."

According to Prof Alam, project implementation has accelerated and the pace of acceleration should be taken to the next step.

Zaid Bakht, a former research director of the Bangladesh Institute of Development Studies, said all the investments in the private sector came from the financial industry.

"There is corruption in the financial sector, but the credit flow worked as a blood flow for the economy."