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Demographic dividend- resisting outbound remittance

The conventional education system and insufficient technical professional orientation make our university graduates uncompetitive and worthless in the technical job market

Nowadays increasing population is considered as the blessing for any economy. China having 1.06 billion people has created huge economic and demographic dividend and transferred the benefits of demographic dividend in the rest of the world and almost all populous economies have undergone this economic transformation.

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In the changing complex global economy, countries need to be equipped with industry-driven technical, managerial and professional skills for better utilization and human capital leverage to retain a competitive edge in the industry. Managerial, professional and technical skills are always important for any developing countries for fostering innovation, creating business opportunities, increasing productivity, integrating global value chain, tapping future prosperity, and creating jobs.

The demographic advantage and skill gaps in Bangladesh

With the changing global trend, the demand for managerial and professional soft skills is on the rise in Bangladesh. Bangladesh today is the 8th largest country in the world as per latest population estimate. Bangladesh is going through this prime era of potential demographic benefit but to realize them, we are required to improve multidimensional young working force development. The huge population has unfolded an avenue of demographic dividend with 62.1 million working age population. Of the total population, about 59.5 million are employed in various public-private sector skilled, unskilled and semi-skilled jobs in industry, service and agriculture sector. The labor force survey of Bangladesh 2016-17 showed that as per occupation distribution- we have 1.8% Managers, 3.8% Professionals and 1.9% Technical experts in the total workforce.

This small percentage of manager and professionals in Bangladesh indicates a huge gap between hard and soft skills that the industry needs in Bangladesh. This incremental gap challenge innovation led industrialization and another spillover incidence across our economy. This skill gap in the managerial and technical positions especially in RMG, Textile, Power, Pharmaceuticals, ICT, construction, shipbuilding, automotive infrastructure work and consultancy sector have created a window of opportunities for foreign professionals in our local job market with better pay for competitive and international standard quality skills.

Demand and supply gap of managerial staffs

Our economy is progressing with 7% plus GDP growth based on consistent economic operation trend. The export earning and remittance account for a large pie of our growing GDP. Bangladesh is set to become a Middle-Income country by 2021 and developed country by the Year 2041 based on skills, research, technology, and innovation led knowledge economy. The on-going economic growth of Bangladesh created a huge need for managerial and professional skills to meet the growing industrial and service sector needs. Unfortunately, our education system does not comply the industry-demand with requisite skills as University backed Higher education and scattered vocational education of Bangladesh are not aligned industrial orientation.

This weak state of the skill supply has opened up the opportunities for foreign employees to be migrated into Bangladesh for meeting our needs. The current employment growth is 1.8% whereas it was 3.1% between the years 2003 to 2010. This severe fall of employment growth has become a matter of deep concern for all.

Labor force state in Bangladesh

  • The rate of youth unemployment is 10.9% and underemployment is 18.7%.
  • The workforce of Bangladesh will surpass 76 million by 2025.
  • 9 million new employment under the 7th five-year plan and 10 million employment through EZ development targeted.
  • According to “Labor Market and Skill Gap in Bangladesh” labor demand will be 7 million in 2025.
  • The study projected that demand for skilled workers in agro-food sector will increase to 261%, in construction sector 54%, in healthcare sector 54.95%, in hospitality and tourism sector 35%, in IT sector 100%, leather goods sector 107%, light engineering sector 76.95%, in RMG sector 122.6%, and in shipbuilding sector 677% in FY2025-26 and skill gap for “skilled workers” is also high (40%) in the IT and leather sectors.
  • The productivity of our workforces is 77% considering Chinese workers 100%, which is lower than our major competitors India 92%, Vietnam 90% and Pakistan (88%) indicating the lower productivity and efficiency.
  • Around 5.5 million new entered into labor force whereas only 4.57 million have got employment as per employment labor survey. The graduate unemployment is around 11% in the country and post-secondary unemployment is around 6.4%.

demographics

The demand for foreign workers & experts

Against the aforesaid state, government initiatives National Skills Development Council relating to skills development shows the commitment of the government to address the current weakness and much-needed improvements.

Nowadays, local skilled people are few in number and mostly being migrated to many countries and local owners hardly rely on local skilled workforce and that create the opportunities for a foreign employee in many technical jobs especially in Textile, Steel re-rolling, merchandising, pharmaceutical, infrastructure and other heavy technical and high-tech sectors.  Technical experts mainly are from India, Sri Lanka, China, Japan and South Korea and the Indians are highly preferred as there are some commonalities in culture, lifestyle, and convenience of communication.

The recruitment of foreign employees cost a huge budget to the local employers and increase the cost of doing business as well create external dependence. Our conventional education system and insufficient technical professional orientation make our university graduates uncompetitive and worthless in the technical job market ending up with low-paid job and joblessness in many instances. It is common in our tertiary education system that students are keener to business and social science education and to some extent the ICT education that creates grossly specialized skill shortage in core technical sectors in Bangladesh.

The aforesaid projection of labor force in Bangladesh demands new skill development in various major sectors and industries accordingly we are required to undertake programmes to address the large scaled demand of sector-specific skilled workforce from agriculture to the service sector. The education system has to be aligned with the industry needs through consultation with relevant industry otherwise, we will gradually lose our local job market.

Bangladesh is one of the highest outbound expatriate workforce nations having almost 9 million workforces abroad. Bangladesh marks the double growth of labor migration in 2017 more than from 2015 and this year it reached to 3.92 lakh so far as per BMET.

India is the largest remittance recipient country followed by China and Philippines in world remittance market and Bangladesh ranks 8th position in the league table. Due to soaring demand of skilled foreign workforce, Bangladesh is losing the attention of global market as skill labor destination.

Remittance state of Bangladesh

Today, a lack of diverse skilled workforce is slowing the inward foreign remittance trend and increasing outward remittance. Bangladesh received usually $14.5 billion per year and much of that is received from the GCC region and mostly from KSA. Qatar and Oman have recently come up as a large remittance partner of Bangladesh in recent years. The lion share of our remittance is gained from the unskilled and semi-skilled workforce working abroad. The remittance earned is likely to be challenged due to recent ban of labor export into the Malaysian market and volatile GCC diplomatic relation and replacement of foreign workforce by local people in the job market in KSA.

For attaining sustainable growth of an economy and improving the living standard of its people, the role of skill development cannot be overlooked. Skill development not only enhances individual’s capacity of earning but also transforms the nation’s workforce into a more productive contributing towards the growth momentum of an economy.

The remittance inflow of Bangladesh is always volatile as recorded over the last couple of years since our remittance market is mostly middles east dependent and low and unskilled labor recruitment ban in KSA for a certain time thinned our remittance health. The remittance scenario of Bangladesh during each quarter in FY2016-17 hovered around $3 billion, which was flexible and unhealthy and turns to recover in FY 2017-18, the frequent change is not inspiring for our country.

Outbound remittance

qoute1There was a saying that the formal trade of India and Bangladesh is around $6.5 billion with positive trade balance however if we consider the informal trade, the size of trade could be $7 billion plus. In the same line, if we consider the informal outbound remittance source, Indian bound remittance will exceed the given amount.

The report of Newspaper also showed that Indian workforce has relatively low earnings from KSA and other Middle East Countries whereas higher earnings from the USA as more Indians work in the USA to support their high skill gap but the remittance of Bangladesh from the USA is very insignificant as our labor market is tailored to low skilled Middle East region, not for high skill jobs in the western market.

The double-edged challenge

We have a double-edged challenge in remittance shift-the slimming inbound remittance and likely decline due to various geopolitical challenges on Bangladesh and on the other hand, retention of the inbound remittance tends to decline as more foreign currency is going out of the country. Off late, the negative trade balance and current account balance affect the foreign exchange reserve where the remittance is an element of primary earning.

Figure: Double-edge Challenge for Bangladesh
Figure: Double-edge Challenge for Bangladesh

Our conventional attitude to low skill labor market target has become suicidal and deprived us from high-value skill migration market orientation since long.

The recent trend of soaring import and extreme dependence on foreign consultants in our infrastructure projects, soaring dollar value have declined foreign exchange reserve and this growing outbound remittance will be another blow to our foreign exchange reserve. Meanwhile, due to negative trade and primary and secondary income, the current account balance is badly affected and the government is working hardest to manage it through MPS tools. Since our import is larger than export, the growing outbound remittance may shorten our currency reserve and decline our net earnings from hard-earned remittance in Bangladesh.

Steps to be taken

Despite all the above, we are optimistic that our gradual development in the education sector will positively change our skill and management employment perspective in Bangladesh. And, we are required to get rid of the external dependence of technology transfer on almost all countries but this will take time. But, we can rely on some skill transferred from overseas for our learning on a short-term basis.

Taking into account our economic, incremental industrial and international labor market needs, we are required to take the focused programs and some course of actions to improve our skilled employment scenario in Bangladesh and resist the rising outbound remittance flow:

  • Local University graduates are to be prioritized in skilled mid and upper-level position in the major industrial sector.
  • Employees in operation level should be limited to only local employees and Indian work migration can be selective subject to special need and permission.
  • Gradual phase out of foreign employees through a higher tax on their income and income transfer.
  • For local skill development and retention, ToT can be introduced for specialized skill jobs.
  • Industry/GDP ratio is estimated at 40% by 2030, 35% by 2021 and export revenue $54 billion by 2021. In order to realize these huge targets, we are required to have a coordinated and shared program having Industry, labor, Finance, and Education ministries to create, nurture in-country wide-ranging skills and engage them into industries.
  • Building Industry and academia partnership to meticulously deal this skill gap and development challenge.
  • For increasing our migration in developed and other potential countries, our training institutes are required to be equipped with curriculum and capacity aiming at foreign market needs.
  • Vocational training schools are to be widespread in each upazilla across the country.
  • Broad-based skill development catering to futuristic local and international labor market needs is to be planned and enforced accordingly.
  • Literacy and numeracy skills are essential for our outbound labor force so that they remain safe in earning and existence in overseas.

Skill development is the core priority of the government as the enabler of multiplier socioeconomic operations and excellence accordingly government is to come forward to bring necessary changes, programs and relevant budget and infrastructure in the national budget to address the core issues and challenges in this connection. Bangladesh envisioned $117 billion from remittance by 2041 and this target will remain far-cry and if this outflow trend gets richer due to negligence at the highest policy-making level, therefore, a nexus of demographic dividend and skill building is essential for all upcoming industrial and economic well-being. With the given concern of soaring outbound remittance, we are required to implement a futuristic national roadmap entailing local skill mapping and remittance enhancement program to implement in line with national economic development agenda by the year 2030 and 2041.

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