The post-economic graduation journey will unearth myriad opportunities as well as bottlenecks. And, notably, supply-side diversification and a shift-away from factor-driven to the productivity-driven economy will remain a challenge for the impending time. And, speaking of the underlying strengths of our economy and a degree of demonstrated resilience, there is no going back once we graduate.
Therefore, managing the transition will require investing in the service sector, infrastructure, and trade facilitation programs and it would require helping Bangladesh’s businesses to integrate themselves better in the global value chain.
In this connection, a well-thought-out strategy involving the private sector should be adopted to cement the below-mentioned pillars of progress during the post-economic graduation regime namely the Diversification of the economy; Technological up-gradation; Training and skills development of human resources, and Institutional strengthening and innovative financing.
The twin-goal of “beyond graduation regime”: private sector and the government
After graduation, our private sector enterprises will need to become globally competitive in delivering value-added goods and services to meet demands and capture a rising share in the global market. In this connection, the private sector will need support to nurture a strong spirit of entrepreneurship which should be backed by risk-tolerant financial institutions and legal systems.
Furthermore, careful policy crafting should be aimed towards this end so that it brings private sector investment through FDI and PPP initiatives.
Also, it is essential to rebalance the role of public and private sectors in sectoral development for the upcoming years. In this case, the government’s role should mostly be limited to creating an enabling environment such as setting and regulating standards, ensuring transparency, and registering and enforcing contracts. Besides, the public sector’s role must change to support the new paradigm of growth.
Conversely, the mainstay of the private sector after the graduation regime should entail developing productive capacities, orienting innovative technologies, and diversifying industry.
Seizing the opportunities for private sector to diversify
The loss of special facilities will be a blessing in disguise because Bangladesh will then reach out to new markets. In order to make up for the loss to be incurred by the preference erosion and end of various international support measures (ISM), the Government must engage measures to strengthen the private sector to enable them to improve export competitiveness and diversify both markets and products.
In this respect, Govt. should remain active in dialogue and lobbying at the World Trade Organization to realize any potential benefit (e.g. non-LDC-specific trading arrangements, avoid MFN tariff rates) to calibrate the potential of the private sector. For instance, some graduated LDCs have tried to ensure soft ending by renegotiating access to soft term loans and preferential market access which can be followed in our context.
Inviting pro-poor SDG scheme
Building on the record of past performance will be increasingly difficult when it comes to hard-to-reach areas and communities to address impending vulnerabilities. Evidently, many of the SDG targets and indicators go beyond LDC criteria of income growth and reduction of human and economic vulnerabilities.
For example, to achieve further progress in terms of social development indicators, the solutions during the post-graduation regime are likely to be more capital-intensive than the many low-cost solutions of the past and present.
In this respect, the government and private sector will have a dual role in ensuring the preparedness to offer a low-cost solution to the lower end of the economic spectrum in a commercially viable manner. Moreover, the government can mainstream transition strategy into national development plans and incorporate the private sector’s obligation to fulfill the targets of the 17 Sustainable Development Goals.
Defining role of private sector during “grace period”
Now, the term ‘LDC Graduation’ is being intertwined with COVID-19 rhetoric since everything is at the critical juncture of uncertainty. However, being brave in hoping we will graduate by 2024 or at any other time and there may be this much-discussed grace period of another few years when Bangladesh can enjoy LDC-specific benefits in major markets. So, I suppose Bangladesh needs to prepare for smooth graduation by taking into account a few issues.
Considering the substantial role of this country’s private sector, there must be clear milestones set for it to ensure time-bound progress during the grace period. This can be facilitated through renegotiation on issues related to TRIPS, export subsidies for non-agricultural products, technical assistance (e.g. WTO’s Enhanced Integrated Framework, Aid for Trade program), and others deemed necessary.
Say, for instance, the Government may prepare a roadmap depicting the expected number and industry-orientation of PEZs required before and after the grace period to attract new sunset industries.
Reinventing the wheel of national policies and readiness of private sector
There are major national policies surfaced in this decade, most of which voiced pro-private sector economic growth. However, the first thing rings a bell that whether those policies will commensurate with the post-economic graduation regime and, If do, how those policies will sustain and keep pace with the changing dynamics of trade and industry.
So, it will be a pivotal stance for the government to ensure predictability, coordination, and navigability of Industrial Policy with Monetary Policy, Fiscal Policy, Import Policy, Export Policy, and other applicable policies to better equip the private sector to explore futuristic avenues.
Moreover, targeted interventions and adequate incentive packages need to be developed to facilitate High Priority and Priority industries as anticipated during the post-economic graduation regime.
Generate capital from the global financial market
It is quite assuring that the new status will help in branding Bangladesh. Investors from abroad will be keen on allocating their investment basket in Bangladesh given its strength in certain areas such as the size of its Gross Domestic Product (GDP), exports, and population compared to other LDCs.
So, such branding will help us mobilize resources from the global market through sovereign bonds. In this connection, the Government should carefully craft policies to bring private sector investment through FDI and PPP (private-public partnership) initiatives and to expedite new window for borrowing from financial and non-financial institutions at home and abroad in a sustainable manner.
Equipping the future players
Experts think tanks and government agencies made a forecast that labor demand will be in excess of supply in Bangladesh from 2021 and onwards. A BIDS commissioned a study titled “Labour Market and Skill Gap in Bangladesh” projected labor demand to be increased from 63.5 million in 2016 to 88.7 million in 2025. So, it is quite clear that the demand for overall manpower in Bangladesh would be higher than its population growth after 2021.
Considering the private sector’s spearheading role in the area of human resource management, it is imperative for the government to supplement the private sector with necessary supports to establish technical institutes, design competitive course curriculum, and facilitating industrial attachments policies to minimize the skilled manpower-gap shock after graduation.
So the bottom line is, Bangladesh’s burgeoning economy needs increasing private sector-driven investments. Provided the existing nexus among our Government, private sector, and civil society, we can anticipate an inclusive journey to reap the utmost benefit out of smooth graduation.