Improve infrastructure, organization climate to stay competitive
Development of physical infrastructure, improvement of the business enterprise climate and labour efficiency and technological adoption will be the key to making Bangladesh competitive found in global trade by offsetting the fallouts of the LDC graduation.
"Improved infrastructure and labour efficiency will reduce the costs and smoothen the business enterprise in the post-LDC period," the overall Economics Division (GED) explained in a report.
The wing of the look ministry carried away the analysis styled "Impact assessment and coping up strategies of graduation from LDC status for Bangladesh" as the country is defined to graduate from the band of minimal developed countries in 2024.
It said although the federal government should be lauded for increasing the number of power plants to 108 in 2020 from 27 in '09 2009, almost all of them are small level.
Remember the surge of projected demand for energy to 34,000 MW by 2030, the federal government is likely to invest around $70 billion in the energy sector over the next 15 years.
"It is significant that this investment is founded on using least-cost alternatives and renewable strength to the level technically possible to lower the cost of electricity, make sure the sustainability of principal energy supply and reduce carbon pollution.
"Proper pricing of most important energy will get of critical importance."
Emphasis will also must be given to power transmitting and distribution, upgrading of grid capacities, and strength trade in your community.
Cooperation with neighbouring countries such as for example India in the field of strength trade is ongoing, which should get broadened to include Bhutan and Nepal, the article said.
The GED report said the current road network was inadequate to provide infrastructural support to a country with a population of more than 160 million and that's aspiring to become a high-income country in 2041.
In global connectivity, Bangladesh is presented a score of 34.3 out of 100 and a ranking of 121th out of 140 countries. The quality of roads is as well considered to be substandard, with a score of 3.1 out of 7 and a rank of 111th out of 140.
"Export competitiveness could be adversely influenced by the high price of trading, both for imports of recycleables and capital items and exports of goods."
The importance of efficient, low-cost trade logistics is now well-recognised as an essential determinant of export competitiveness.
Bangladesh is ranked 100th out of 160 countries in the Index of Trade Logistics Efficiency (LPI) of the WB, much at the rear of China, Thailand, India and Vietnam.
China, India and Vietnam happen to be major rivals of Bangladesh for garment in europe, and the higher expense of trade logistics may have serious adverse implications for maintaining market show post-LDC graduation, the survey said.
Once Bangladesh graduates from the LDC group, the competitiveness task will intensify.
"In order to keep up with the market share found in the more competitive environment, it'll be vital for organizations to have timely and less expensive access to raw materials, maintain development schedules and ship items to their buyers promptly."
Ship turnaround period and cargo clearance from container back yards at the Chattogram port, which handles 75 per cent of Bangladesh's $90-billion international trade, are a bit longer compared to the most ports in the region. Reforms ought to be done to increase the proficiency of the Mongla interface.
Additionally, immediately after holding dialogue with almost all stakeholders, decisions should be taken as to whether a number of the handling businesses in the ports of Chittagong and Mongla should be contracted away to private entities, the report said.
Despite progress with the policy environment for the individual sector which has spurred the expansion of individual investment from a low of 6 % of GDP on the fiscal year of 1988-89 to 23 per cent of GDP in FY2018, the entire investment weather for Bangladesh remains substantially weaker than those within competing countries.
That is reflected in the global rankings of investment climate made by the WB and also by the World Economic Forum. The WB 2020 Simple CONDUCTING BUSINESS ranks Bangladesh 168th out of 190 countries.
Bangladesh features taken some positive techniques to address the serviced territory constraint through commercial parks and special monetary zones.
"This is a welcome approach. Speedy completion of most ongoing conveniences and making them on a timely and business-friendly way will be an essential point to spur domestic and foreign investment," the GED record said.
"Bangladesh should focus on reducing the period it requires to get electricity, register real estate, obtain credit rating, trade across borders, enforce contracts and resolve insolvencies."
Export expansion and diversification tend to be constrained by limited household capital, technology and marketplace knowledge.
The foreign direct investment (FDI) with their better technological and managerial skills and understanding of international marketing conditions is likely to improve the productivity and export performance of host country firms.
It has been argued that Bangladesh needs to can get on the bandwagon of the global worth chain (GVC) as a means to export-oriented industrialisation.
Cross-border FDI flows have already been the lifeline for the development of GVC trade that assists sustain the growing development networks across borders.
Bangladesh's record in mobilising FDI is disappointing, the GED said.
FDI found in Bangladesh reached $2.2 billion in 2017, as compared with $134 billion in China, $40 billion in India and $14 billion in Vietnam.
Presently, Bangladesh faces the dual challenge of mobilising more FDI and integrating into the GVC operation.
Its best potential for getting on the GVC bandwagon is based on aggressively courting FDI from multinationals that would like low-cost locations for making parts and parts or for final assembly within the framework of cross-border production integration.
FDI thus becomes crucial for Bangladesh not just to develop a wider basic of intermediate goods sector but also to diversify exports into intermediate goods by vertically integrating with cross-border production entities.
Bangladesh must translate it has the RMG experience with GVC to different sectors such as for example footwear and natural leather goods, electronics, light engineering, playthings, and plastics with an aggressive strategy of FDI-driven GVC during the period of another decade, the article said.
"That would constitute a new sort of export-oriented industrialisation for Bangladesh on approach to graduating out of LDC status and becoming an higher middle-income-country."
Bangladesh is abundantly endowed with low-expense labour that provides the foundation for comparative advantage found in making and exporting labour-intensive goods.
In fact, the RMG revolution is definitely a prime example of how Bangladesh gained global market share predicated on low labour cost. Yet, additionally it is recognised that labour efficiency in Bangladesh is very low.
"A major concern in the post-graduation globe for Bangladesh would be to increase labour efficiency through large investments in human being capital and other coverage changes. This maybe holds the main element to successful graduation from LDC position."
Using area, employing labour and trading capital away from agriculture to industry isn't enough in the event the labour force isn't trained and productive.
Bangladesh features made important inroads found in improving human capital due to suggested by favourable people development indicators relative to comparators in the same level of development.
Major gains have been made in both health insurance and education front. But, the 2016-17 labour force survey demonstrates 32 per cent of the labour force didn't have any education, 26 % had only primary education, 31 % got secondary education, and 12 % had larger secondary and tertiary education.
The quality of labour force when it comes to skills can be low on average although the federal government undertook the National Skills Creation Policy as a way to increase the functions through spreading the extent of technical and vocational education and training.
Building on the improvement achieved in primary education and strengthening of other levels of education, including vocational and advanced schooling are important to get a well-educated and skilled populace with the capacity to contribute effectively to the country's development.
"Furthermore to reducing crimson tape, decreasing tariff barriers and enough time spent while complying with diverse procedures to set up businesses, it is also crucial to have a reliable and well-organised customs provider to create Bangladesh competitive on the planet market."
