Removing deterrents down the road of a roaring tiger

Dhaka,  Fri,  28 April 2017
Published : 21 Apr 2017, 21:13:02
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Removing deterrents down the road of a roaring tiger

Abdul Bayes
The April 11, 2017 issue of the World Economic Forum carries an article on Bangladesh titled "Bangladesh could be a new Asian Tiger. Here's why".   It is interesting that the author of the article, Jonathon Garber who is Markets Editor, Business Insider, picked up Bangladesh as the next emerging tiger - a country that was largely touted as tail-ender in the journey of development in the Seventies.

We know about Royal Bengal Tigers hiding in the bushes of the Sundarbans but the 'Asian Tigers' are symbolic of South East Asian countries who performed exhilaratingly well in socio-economic and political fronts. Over the last four to five decades, these countries witnessed robust economic growth and, pari-passu, substantial social progress to lift people's welfare in respective societies. 

One does not need to wait for a moment to know who they are. When people talk about the "Asian Tigers," they're typically referring to Hong Kong, Singapore, South Korea and Taiwan. The four countries experienced rapid growth between the 1960s and 1990s". Jonathan Garber could have dealt with their developments in details but, possibly for want of space, he quickly jumped on to an almost conclusive statement: "But now there's another country that should come to mind: Bangladesh." For Bangladesh, the observation would be worth ovation, especially after many years of campaign as a 'development puzzle'.

Jonathan Garber then explains the justification for considering Bangladesh as the next new tiger in Asia. First comes the sustained economic growth at more than 6.0 per cent over the past decade thus assuming the status of one of the top performers in Asia.  Second, much like the Asian Tigers during the industrialisation of their economies, most of the growth that Bangladesh has made comes from garment exports, accounting for more than four-fifths of its exports. Available data show that Bangladesh meantime picked up about two-thirds of China's low-end manufacturing market share in Europe. But the tiger, argues the author, must meet certain preconditions to be out of the woods: "If Bangladesh is to reach the government's ambitious growth target of 8.0 per cent a year by 2020, it is essential that it starts to diversify out of the garment trade into other sectors, such as electronics and other consumer durables, where there is more scope to add value."

Concentration of exports both at commodity and country levels has long been a bane to the expansion of export base in Bangladesh, and diversification of exports has long been a perennial objective but met with little success so far. Economists suggest that in the wake of rising labour costs in China, Bangladesh could steal a part of garments, toys, electronic, shoes markets of China to help it diversify. In fact, successive governments strove hard to attain diversification but two constraints foiled all attempts: infrastructure and investment climate. "Poor infrastructure makes it difficult to transport goods across the country. Additionally, more than 20 per cent of the population of more than 156 million (about 31 million) aren't connected to the power grid, and companies often have to use their own back-up power generators because of the high susceptibility to blackouts".

There are further deterrents down the road of a roaring tiger. Lack of appropriate infrastructure and investment climate, combined with high levels of corruption, make business tough in Bangladesh thus asking for containing  corruption, simplifying customs procedures, making land acquisition easier, improving private sector companies' access to credit and making the security situation more stable." There is no doubt that the government is already taking steps to improve the investment climate. Here's Leather and Tan:

"Among the measures the government is planning to introduce include removing red-tape to expedite the process of starting a business (to seven days instead of 19.5 days), issuing construction permits within 60 days (instead of the current 278 days) and reducing the time it takes for a company to be connected to the national grid to 28 days (compared with 404 days at present). There are also plans to simplify property registration, enhance contract enforcement, streamline cross- border trade procedures under a World Bank-sponsored agenda, and digitize tax payments to improve collection. Progress on these fronts would increase Bangladesh's appeal as an investment destination."

Despite all appreciable progresses, easing of doing business, as per World Bank, is even worse than Pakistan and Myanmar. Compared to this grim situation, the easing of doing business in Asian Tigers appear to be promising.

Drawing upon South Asian researches by Hasnain Malik, Jonathan reckons that there is a lot to like about the market's fundamentals:

n Domestic political stability

n Geopolitical support from regional powers China and India

n Macroeconomic growth and currency stability

n Fast-paced urban growth and extreme population density

n Almost all of the 20 biggest publicly traded companies offer direct exposure to Bangladesh's domestic economy

"In our view, it is too early to let go of the tiger's tail," Malik writes. "Bangladesh public equity valuations are just beginning to catch up with its high growth and high returns on capital..."

We are told that our politicians and policy makers do not generally read writings on the wall; but they must read this article and embark on doing the doable to see that the tail-ender of yesterday becomes a tiger tomorrow. 

The writer, a former Professor of Economics at Jahangirnagr University, is currently, Chair, Department of Economics and Social Science, BRAC University. 

abdul.bayes@brac.net

 
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