Can Bangladesh seize the south breeze?

The breeze has turned to the south. Various industries, apparel being the biggest, are switching to South Asia from other regions, particularly China, which is hitherto known as the factory of the world. There are competitors like India, Pakistan, Nepal and Sri Lanka, who are out there to claim their share of the pie. Bangladesh has huge prospects of invigorating its industrialization process and make fortune in the context of recent changes. The question is: Can Bangladesh seize the opportunity of industrial relocation and growth, harnessing its competitive edge in the world arena?

The western buyers are losing interest in China mainly because of salary hike of labor and resultant rising cost of production there. The labor wage and production cost are still relatively low in Bangladesh, for which buyers are attracted to it. Wage is a crucial factor in labor-intensive industry like apparel. Therefore it is a golden opportunity for Bangladesh since it has a huge labor force, and cheap as well, ready for service. The total volume of labor force in the country is about 80 million and every year over two million youths are entering the job market. If Bangladesh can tap the potential, its movement towards becoming a middle income state, as envisaged in the millennium development goals, will be expedited.

In a recent report, World Bank has expressed its optimism regarding better performance of Bangladesh in global business and economy. The report "South Asia's Turn: Policies to Boost Competitiveness and Create the Next Export Powerhouse" analyzes the global business trends, pointing to the flexing muscles of the South Asian nations. According to its prediction, 10% increase in the production cost in China will decrease 8% of its export to the USA. As an effect, Bangladesh's export to the USA will increase 13.6%, amounting to about 52 crore dollars. Other South Asian countries will also be benefitted. India's export to the USA will increase 14.6% (42 crore dollars) and Pakistan's 25% (34 crore dollars). Much more benefits may, however, go to Vietnam and Cambodia.

In the world export index, the share of Bangladesh is just next to India among the South Asian nations. Bangladesh has several export processing zones and they contribute significantly to the country's trade earnings. Bangladesh has large industrial setups, ahead of other South Asian countries, and it guarantees voluminous productivity. About 27% industries in Bangladesh are of large type, which is an obvious advantage. In comparison, it is 13% in India, 16% in Pakistan and 6% in Sri Lanka. It becomes easier for large firms/companies to collect funds, employ skilled workers and tackle business risks.

Bangladesh also holds strength in research and development. Just behind India, 19% firms in Bangladesh are engaged in R&D while it is six and four percent in Pakistan and Nepal respectively. R&D includes marketing new products, quality enhancement and innovation in production. For Bangladesh and India, R&D is however of imitative nature rather than novelty. Novelty in R&D will come gradually as more and more cash will flow in businesses, to the benefits of the stakeholders. Better health in businesses will encourage bigger allocation in R&D, which in turn will provide nutrition to the businesses. It is a virtuous cycle, which hardly stops once in motion.

Bangladesh is a hub of apparel industry because of its cheap labor principally. It is a comparative advantage. But Bangladesh is lagging behind in terms of product quality, lead time, compliance and sustainability. In these respects, China, Vietnam, Indonesia and Cambodia are still ahead, but, as a consolation, Bangladesh is well ahead of India.  In terms of using information technology, Bangladeshi companies are behind India and Pakistan. About half of the business organizations use IT in Bangladesh, so in Nepal, and it is even lower than the average in Africa. India is far ahead of its neighbors in this respect. Therefore Bangladesh has to improve in the areas where it has lacks. Otherwise it will lose to its competitors. Relying solely on cheap labor, a country cannot go further, sustaining its development for a longer time. Labor cost is bound to increase with the passage of time in consistency with labor protection laws, ensuring better living standards. So the country must attain competitive prowess in all respects, offering good prospects for the investors.

Bangladesh has a big apparel market in the USA. The good news is that its RMG export to the USA has increased recently. During January-September 2016, Bangladesh's export has increased 0.61%. And see, during that period, export has decreased 8.64%, 3.40% and 0.08% for China, Indonesia and India respectively. The main reason of this fall is the curtailed order of the US companies with a lower unit price. Bangladesh could somehow overcome the situation which others could not and it is a testimony of the country's immense shock absorbing capacity. China accounts for about 80% of US apparel import. If China continues to lose its market, other countries like Bangladesh will bring grist to the mill.

There are many obstacles in front of Bangladesh to become an industrial champion, on regional as well as global scale. It has to devise policies to increase its ability to attract investments from outside. It has to improve in its compliance provisions and product quality. Its business environment must be better, with loosening bureaucratic tangles. It has to boost up its managerial efficiency as well as the skills of the workers. It has to provide firms access to serviced land and required infrastructure, ensuring uninterrupted power supply. It should deepen reforms to improve the capabilities of firms to participate in global supply chains, which will gradually reduce tariffs, while improving trade logistics. Positively active roles are also expected from the banks and chambers. Last but not the least, security and safety of foreigners must be ensured, curbing all terrorist threats in the land. Otherwise all efforts will fall flat on the highway of development.

It is a fact that Bangladesh's export increased by about 13% per year in the last decade. During 2015-2016 fiscal, the volume of export amounted to about 35 billion dollars. However, 80% of its exports remained concentrated in low value products like apparels. In any case, Bangladesh has to expand its market spectrum. Instead of solely depending on RMG, it has to diversify its products. To make the export bag bigger, it may include fish and sea foods, pharmaceuticals, leather and steel products in enhanced quantity. Bangladesh has huge potentials in ICT. The trained youth force can earn foreign exchange from software and animation, particularly mobile app and gaming, if the government pays attention to this sector.

In the changing world industrial scenario, China may gradually lose its status while South Asia may fill up the gap in the years to come. Bangladesh has to take the opportunity. It has to ride on the south breeze and gallop towards being an economic powerhouse. The 32nd largest economy and the ninth fastest growing economy of the world can justifiably expect to improve its profile by facing the challenges judiciously. The rapid industrialization will push its GDP growth rate from 6.5% average to a dashing double digit. Is this upward mobility a distant dream? Not at all!

The writer is the Director of Daffodil Institute of Languages (DIL) and Associate Professor, Department of English, Daffodil University

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