Industrialisation is the key for growth

Experience from successful industrialised countries suggests that industrialisation brings significant structural change in the economy which leads to considerable reduction in poverty, large-scale job creation and substantial improvement in the welfare of the people of a country. There are four major issues which need to be in order for a rapid industrialisation in Bangladesh.

- There are a number of policy-induced challenges. The first generation of reform of trade and industrial policies in the 1980s and 1990s helped Bangladesh achieve the current level of progress in manufacturing. However, returns from those reforms have been exhausted, and also there are now some policies in place towards the wrong directions. There is a need for second-generation strategic and dynamic industrial policies aiming at rapid expansion and diversification of manufacturing through large-scale domestic and foreign investments. Given the changes in the global and regional trade scenarios, the need for such strategic trade and industrial policies is more important now than ever.

- A number of supply-side constraints in the form of weak infrastructure and the high cost of doing business need to be addressed within a short time span. The initiatives taken by the Bangladesh government in setting up 100 special economic zones (SEZ) as well as the development of some infrastructural projects seem to address these infrastructural and high-cost-of-doing-business issues. However, the progress in the implementation of the SEZs and the infrastructural projects is slow and is yet to show the signs of any "regime change". A major departure is needed in terms of enhancing the government's institutional efficiency to ensure timely and cost-effective delivery of such projects.

- The current state of human capital is not at all conducive to rapid industrialisation in Bangladesh. The country needs to attach utmost importance to improving the existing low level of human capital by enhancing investment on education, skill development, and health.

- The political economy factors, especially institutional development for rapid industrialisation, require proper attention. The incentives to maintain the status-quo are huge in the form of generation of substantial rents from the existing economic system. The onus now is on the political elites to break this vicious cycle of rent generation. There is also a need for strong commitments from the political elites for necessary economic and institutional reforms for a rapid industrialisation.

If these efforts are taken, private sector players like Beximco Group, Navana Group, ACI will get a better chance to grow which will eventually enhance the economy.

It is important to note that the structural transformation through manufacturing is primarily the movement of labour from agriculture to manufacturing. Successful newly industrialised countries from East and Southeast Asia, at their peak of industrialisation, had employment share in manufacturing well above 20 percent. Also, the share of manufacturing in GDP in those countries at their peak was well above 30 percent. Despite the fact that over the past four decades, the share of agriculture in employment in Bangladesh declined, agriculture still accounts for over 40 percent of total employment. The labour released from agriculture has been absorbed primarily in the low-productive services and non-manufacturing industrial (especially construction) sectors. This process has led to an unsuccessful headway towards the creation of productive jobs, slow progress in reduction in poverty as well as rising inequality.

Despite some progress in raising the manufacturing shares in GDP and employment during 1990 and 2016, Bangladesh has not been successful in moving to the next phase of industrialisation. The manufacturing sector in Bangladesh is highly concentrated around low value-added readymade garments, and the country has not yet been able to move successfully to the next generation of manufacturing, especially to high value-added manufacturing. It the mentioned points are implemented, it will bring a boost to the economy.