The foregoing discussions highlight the importance of many global economic issues in Bangladesh’s development challenges. While most low-income countries depend largely on the export of primary commodities, Bangladesh has made the transition from being primarily a jute-exporting country to a garment-exporting one. The transition has been dictated by the country’s resource endowment, characterized by extreme land scarcity and a very high population density, which makes economic growth dependent on the export of labor-intensive manufactures. The issue of access of labor-intensive manufacturing exports from developing countries to the major global markets is, therefore, of utmost importance for Bangladesh. Given the important role of workers’ remittances in its economy, Bangladesh is also greatly concerned with the issue of freer movement of temporary workers across borders.
It is not easy for a least developed country like Bangladesh to specialize in manufactured exports, which currently account for more than 90 percent of the country’s export earnings. Having low wage costs can hardly compensate for its relative disadvantage in marketing skills and infrastructure (including transport, ports, product standards, and certification facilities). Moreover, its existing and potential exports are likely to have low domestic value-added contents because of their heavy dependence on imported raw materials and intermediate goods; this makes it difficult for Bangladesh to satisfy the so-called “rules of origin” in getting preferential access for its exports in the markets of the developed countries. Thus, while Bangladesh stands to benefit from the European Union’s decision to allow duty-free import of “everything but arms” from the least developed countries, it would like to see a relaxation of the “rules of origin” in order to benefit even more, and it would also like to see other industrialized countries, particularly the US, replicate such trade concessions.27
Bangladesh also needs to worry about non-tariff barriers such as those relating to environmental or labor standards. Possible anti-dumping actions against its exports are also an important latent threat. Besides, tough sanitary and phytosanitary trade regulations are an impediment for diversifying into prospective agro-processed export items. Clearly, the so-called trade-related assistance sought by the least developed countries like Bangladesh under the WTO arrangements needs to address these issues in a comprehensive manner.
Bangladesh’s export base remains low as the impressive success in garment export has yet to be replicated in other industries. Indeed, its experience with the garment industry has demonstrated the limitation of relying on enclavetype arrangements to facilitate export growth in a specific activity, while postponing institutional reforms for improving the investment climate generally. Lack of a favorable investment climate is also reflected by the fact that, in spite of very liberal policies, Bangladesh has yet to become a favorite destination for foreign direct investment.
Bangladesh’s development experience also brings into focus the issues surrounding the role of foreign aid, such as in meeting the funding needs for achieving the Millennium Development Goals and providing support to absorb economic shocks. Foreign aid currently received by Bangladesh is much lower compared to the average of low-income countries both as a proportion of GDP and in per capita terms; and this disparity has been increasing over the years.28 One explanation for this lies in the perceived low “aid absorptive capacity” of the country due to weak governance. Donors are concerned about the possible misuse of aid funds, given the governancechallenged environment in Bangladesh. But there is ample evidence that part of the problem also lies with the donors insisting on unrealistic project design and aid conditionalities (Mahmud 2006). In a recent review of its aid operations in Bangladesh, the World Bank, for example, has admitted the need for finding a “good local fit” for its projects and for engaging in a wide range of critical sectors rather than waiting for reforms to occur (World Bank 2006b). Given Bangladesh’s record in reducing poverty and improving social development indicators, the international donor community faces the challenge to find ways of helping the country to achieve its development goals.
No comments:
Post a Comment