Bangladesh can become an export powerhouse at the level of its East Asian neighbors by improving its business competitiveness and trade regime, which will help firms compete globally, says a new World Bank Group report launched jointly with the Policy Research Institute in Dhaka.
South Asia will be home to more than a quarter of the world’s working adults by 2030 and should take advantage of the favorable demographics, increasing education levels, and growing cities.
The report South Asia’s Turn: Policies to Boost Competitiveness and Create the Next Export Powerhouse identified four policy levers that can help Bangladesh enable its firms to boost productivity and become more globally competitive: improving the business environment, connecting firms to Global Value Chain, maximizing agglomeration benefits, and strengthening firm capabilities.
“With rising labor costs in East Asian countries, investors and buyers are now turning to South Asia, including Bangladesh,” said Vincent Palmade, Lead Economist, Trade & Competitiveness Global Practice, World Bank Group, and one of the authors of the report.
“With over two million youths entering the labor market every year, Bangladesh needs to act now to seize the opportunity and create more jobs.”
Bangladesh’s export increased by 13 percent per year in the last decade. However, 80% of its exports remained concentrated in apparels, mostly low value products. Bangladesh needs to continue to grow its export by improving the mix and quality of its apparel products as well as to diversify into new labor and skill intensive industries such as footwear, light engineering, and electronics.
Overall, South Asian countries have underperformed in terms of both the quantity and quality of their exports – fundamentally because most firms in South Asia have low productivity. While nearly 80% of the firms in Bangladesh practice technological innovation, well above the average in Eastern Europe and Africa, most are limited to imitating existing products and processes.
Deeper reforms needed
To better connect and expose South Asian firms to international good practices, Bangladesh, and other South Asian countries should deepen reforms to improve the capabilities of firms to participate in global value chains, which will require making it much easier for exporters to import what they need, gradually reducing tariffs, while improving trade logistics.
“To realize Bangladesh’s competitiveness potential, the country needs to start by focusing on improving its trade policy regime and the business environment, and address the acute shortage of industrial land,” said Qimiao Fan, World Bank Country Director for Bangladesh, Bhutan and Nepal.
“With the right set of policies and enabling environment, there is no reason why Bangladesh cannot become the next Asian export powerhouse.”
Bangladesh needs to provide firms access to serviced land and required infrastructure -- – the current well located zones are full resulting in large foreign investors not being able to invest in Bangladesh.
“Increasing private investment is key to creation of more and better jobs, an important development objective for Bangladesh. Critical for private sector growth will be enhanced competitiveness that require policy support to improve the investment climate and to increase integration with global and regional markets,” said Wendy Jo Werner, Country Manager of International Finance Corporation (IFC) for Bangladesh, Nepal, and Bhutan.
With support from governments, firms can improve their productivity and competitiveness by investing more in training their workers and managers, innovating to introduce new products and processes, as well as making greater use of the Internet to buy, sell, market, or manage their inventory.
Together, these proposed reforms and investments will help South Asian countries take a turn toward realizing their great competitiveness potential.