816Published on March 19, 2023
Dr. Rashid Askari:
The ongoing conflict between Russia and Ukraine has made a tremendous impact on global markets, and Bangladesh, quite naturally, is feeling the full impact of the recession. As a developing economy heavily reliant on exports, Bangladesh is facing serious challenges such as inflation, reduced forex reserve and declining exports. However, it is reassuring that the country has already developed resilience to the dips its national economy may take, and it has also developed an ability to recover from crises. With the help of the government’s prudent crisis management strategies and preparedness to face the situation, Bangladesh offers excellent potential for making a strong economic recovery in 2023. There are several sectors that could have a high impact on the country's economic recovery in the aftermath of the COVID-19 pandemic and the Russia-Ukraine war.
Bangladesh is primarily an agrarian economy, with a large number of populations engaged in agriculture. Agriculture is the backbone of the country's economy and the agriculture sector is one of the key strengths which contribute significantly to the GDP. The government is taking steps to promote modern agricultural practices, improve access to microcredit, and invest in rural infrastructure to boost the sector's growth. Sheikh Hasina’s “One House One Farm” initiative and her appeal to make use of every piece of land available to this end could help to stimulate the economy by increasing agricultural production and exports.
Bangladesh is one of the largest exporters of ready-made garments in the world and the textile and apparel sector is a significant contributor to its economy. It is also a major source of our employment. The COVID-19 pandemic has taken a heavy toll on the sector too, but there are telltale signs of recovery as global demand picks up. The government is working with industry stakeholders to ensure that the sector is able to adapt to the changing market conditions and remain competitive and sustainable.
The remittance sector is also an essential factor in Bangladesh's economic development which hugely contributes to its foreign exchange earnings. Its growth has made a positive impact on the country's balance of payments, forex reserves and household incomes. In recent years, despite the impact of the pandemic on the global economy, Bangladesh sees a steady increase in remittance inflows. The government has been taking steps to promote the growth of the remittance sector by reducing the fees charged by banks and money transfer operators and creating a more transparent and user-friendly system for remittance transfers. In addition, the government has created several incentives, such as tax exemptions and special deposit schemes with a view to encouraging expatriate Bangladeshis to send money through official channels. The remittance sector also contributes to poverty reduction and access to healthcare, education, and other essential services in rural areas. Therefore, this sector is likely to continue to play a significant role in Bangladesh's economic recovery in this crisis situation.
The pharmaceutical industry, driven by increasing demands for generic drugs and boosted by favourable business environments, has been growing rapidly in recent years. Bangladesh has a large pool of skilled workers in this sector which has significant potential for growth in both the domestic and international markets. The government is taking steps to support its growth by improving the regulatory environment and investing in research and development.
The IT and Business Process Outsourcing (BPO) sectors in Bangladesh are still in the early stages of development, but they have shown significant potential for growth. The government is taking various measures to create a congenial working environment to help the sector thrive. The efforts include providing tax incentives for IT and BPO companies, improving internet connectivity and investing in worker training programs.
Infrastructure development is another key factor leading to economic recovery. The country is investing heavily in improving its road and railway communication networks, ports and power generation capacity. These investments will make a significant impact on the country's economic growth by improving connectivity, reducing transportation costs, and boosting trade and investment.
Bangladesh is also investing in renewable energy sources such as solar and wind power to reduce its reliance on expensive and highly volatile imported liquefied natural gas (LNG), coal and oil. This could help reduce the country's vulnerability to global energy price shocks and tighten energy security.
Bangladesh has thus shown the strengths that could help it recover from the economic fallout caused by the post-COVID-19 crisis and Russia-Ukraine conflicts. The strong agriculture sector, significant strides in the textile and apparel industry, growing pharmaceutical industry, promising IT and BPO sectors, special focus on infrastructure development and prioritising renewable energy bear the hallmarks of the country’s ongoing economic recovery. And with the pragmatic policies and their implementation, Bangladesh could emerge from this challenging period with a stronger and more diversified economy. And to further strengthen the economic recovery and foster sustainable growth of the economy, the government should implement the following policies.
Fiscal and monetary policies: The government should adopt expansionary fiscal and monetary policies like cutting tax, increasing public expenditure on infrastructure and lowering interest rates to stimulate economic activity. These policies could include measures like investment in infrastructure development and modernisation of transportation to improve connectivity, reduce transportation costs and boost trade and investment.
Promoting business-friendly environment: The government should implement policies that create an environment conducive to business, such as reducing bureaucracy, streamlining regulations and improving access to credit for businesses. They should also focus on facilitating business environment and improving the country's ranking in global indices.
Promoting exports: Since Bangladesh heavily depends on exports for its economic growth, the government should focus on promoting exports of non-traditional products, such as IT services and pharmaceuticals alongside the textile and garment sector. This could be done by offering incentives to exporters, exploring new markets and improving the quality of products.
Improving social safety nets: The government should improve social safety nets, such as cash transfers and food assistance programs, to support vulnerable populations during the war-induced global economic catastrophe. This could also stimulate demand and consumption in the economy.
Supporting remittance sector: The government should continue to promote the growth of the remittance sector by creating a congenial environment for expatriate Bangladeshis to send money through official channels. This could be done by reducing fees and charges, creating a more transparent and efficient system for remittance transfers and providing incentives to encourage remittance flows. A winning combination of these policies could help Bangladesh achieve steady growth in its economy and overcome the challenges posed by the ongoing Russia-Ukraine war.
Writer: Former Vice Chancellor, Islamic University Bangladesh
Courtesy: Daily Sun