Racing to move from middle-income to developed economy in Bangladesh

Robust economic reforms, remittances received from expatriate community, boost in exports, coupled with the vision of country's leadership, are major factors behind the turnaround of Bangladesh's economy, believes country’s top official.

Even in the face of global recession, the country has recorded an estimated 8.1% GDP growth in 2019.

Bangladesh has also climbed up a spot to 135 among 189 countries in the 2019 human development index, according to a report by the United Nations Development Program. It can be termed impressive, as it is almost matching the performance of neighboring countries India (130), Bhutan (134), and leaves behind others like Myanmar (145), Nepal (147), Pakistan (152) and Afghanistan (170) in the region.

In an exclusive interview with Anadolu Agency during his visit to Ankara, Prime Minister Sheikh Hasina's Economic Affairs Adviser Mashiur Rahman explained factors behind successful transformation of Bangladesh's economy. He also spoke about Bangladesh's current relations with two regional heavyweights -- India and China -- as well as explained several issues related to India and Bangladesh, such as trade deficit, water sharing agreements, and citizenship row in India’s northeastern state of Assam.

Anadolu Agency: What are the major factors behind the recent outstanding economic performance of Bangladesh?

Mashiur Rahman (MR): I think the biggest achievement is our former finance minister [Abul Mal Abdul] Muhith. He has his flaws, everyone has, but he had the ability to lead and guide.

And the main reason for our success is Prime Minister Sheikh Hasina's vision. Her emphasis on women empowerment, in the overall development of society is a factor. Women form a large part of our society. The prime minister believes that without the advancement of women, the development of the country is not possible.

Moreover, another factor is the expansion of technology-based learning. If education is not spread in the country and if there is no technology-based education, then the progress of the country is not possible.

So, it can be said that this is a success story. Together with the prime minister's policy, vision, commitment, and the help of his colleagues, we have achieved this level.

- From middle-income to developed country

Q: What type of steps the Bangladesh government is taking for the future of country’s economy?

MR: We have achieved and have already become a middle-income country. The next step is to reach to the level of a developed economy. A better economic policy, as well as structural reform, are the paths to transform ourselves from a middle-income group country, to the level of advanced income country.

Q: What is your roadmap and preparations to cross this line?

MR: That preparation [to cross this level] is through social development. For example, to educate our people, reduce discrimination, create job opportunities for all people.

We give priority to boost exports and at the same time, we also focus on our internal demand. As a result, a cushion is created for internal economy so that we can handle any outside push.

And secondly, by focusing on exports, we produce an inventory about demand of our goods and products in the external market and the internal consumption. Through this way, we are gaining the ability to create demand in a comparatively larger market.

And another is remittance, the money sent by Bangladeshis living abroad. Those who go abroad, work hard after experiencing many difficulties, I will not say that they are living a pleasant life. But the remittance they are sending is a big force for our economy.

About $15-$16 billion remittances come to the country per year. This is a major strength. Thanks to our remittance, we always have foreign currency reserves of six to eight months. If there is a reserve of six to eight months, then any sudden shock can be dealt with. For example, if the price of something suddenly goes up, we still have the money to import the item. We do not have to run to anyone else, like the World Bank or the IMF [International Monetary Fund].

Along with the foreign exchange reserves, the increased demand in the domestic market, exports, and structural reforms, these altogether create a virtual circle of growth and development.

Q: Bangladesh borrows a large amount of money from various countries, including China and India for infrastructure and other development projects, especially for power projects. Is there any possibility that Bangladesh can fall into a debt trap like neighboring Sri Lanka?

MR: Not just Sri Lanka, Pakistan has also fallen into the debt trap. The strategy that Bangladesh needs to protect itself from India and China's debt crisis is that the debt -- often long-term, needs to be repaid within 10 years or 15 years. So that we can increase the overall growth and export in this time. If exports and foreign currency receivables do not increase, then we will have to fall into the date-trap.

And if you talk about [the debt trap of] Sri Lanka and Pakistan, when these two countries took loans [from China] then they had internal problems. There was a civil war in Sri Lanka for a long time. Pakistan had been in turmoil internally for many years. But in our country, we do not have this type of issue. And I believe that no such kind of situation has been and will be created in our country.

- India’s NRC and Bangladesh

Q: India is your biggest neighbor. Historically Bangladesh has very good political, economic, commercial and cultural relations with this country. But India's northeastern state of Assam has put forward a National Register of Citizenship that will likely make nearly two million people stateless. And the most important issue is they are being called "illegal Bangladeshi migrants". There is fear that all these people will flood to Bangladesh once the NRC process is finalized. How will this move in India affect the relations between the two countries?

MR: Our prime minister spoke to her counterpart in India. And the Indian prime minister's assurance [on this issue] is that no matter what the state government does, the federal government has the powers to make the ultimate decision on citizenship. The federal government is not seeing any situation that will bring undue pressure on Bangladesh or neighboring countries in the future.

On the other hand, we have to look at the constraints or limitations of all countries. One of India's major constraints, I think, is that it has to maintain a good and healthy relationship with its neighbors. India has historically bad relationship with Pakistan, for which a large part of India's budget has to be spent on defense.

We have to accept that India is a regional power. If India wants to establish itself as a regional power, then increasing unfriendliness with these neighbors will not be a reasonable thing for India. On the other hand, we think that the relationship we have with India will not deteriorate. If our dependence and relationships increase, the friendship will also get deeper.

For example, we give them transit facilities to reach to the northeastern states of India. The convenience of this transit is increasing India's dependence on us. We are getting some electricity from India. This connection of our business and the facilities of going to the northeast, the benefits of shipping, deepens the relationship and increase India's dependence on us a little bit. In that sense, I do not think India will move away from friendly behavior with us. Because if they move away from the friendly behavior with us, then the maintenance of the mainland's relations, with the northeastern states will be a very difficult problem for India.

For this reason, it is important for India to maintain good relations with Bangladesh, in order to maintain its regional position and internal law and order.

- Water and trade issues with India

Q: What steps Bangladesh is taking to address both the trade deficit and water-sharing problem with India?

MR: There are two issues when it comes to water problems. One is the Teesta Water Treaty. The Teesta agreement was signed but for whatever reason, it was not finalized. Failure to sign the Teesta Water Treaty, has created an emotional distance. But the actual situation of the Teesta is that we did not talk to India before the creation of the Teesta Barrage. As a result, there was no prior commitment from India.

Second, the water we get in the Teesta Barrage is for irrigation augment during the monsoon season. There was no deal to give us water during the dry season. The deal was that by 15 years, we would measure how much of that water we would get in Dwanei after they release the water from the Gajoldoba barrage. The main agreement of this deal was not signed.

So, what I see for myself is that it is not feasible to do any kind of bore water detours within this area like our border 4-5 km from Gazaldaoba. Therefore, no water diversion of the borough can or will not be possible. I have heard from those of us who work on the issue that the water we measure in Dawani has not decreased over the period. There are seasonal variations, but on the whole has not decreased. And even in the dry season, it has not decreased at all.

The topography of Sikkim is geographically such that no big barrage is technically feasible in Ujiga. Therefore, it is less likely to draw water from there. However, one thing has to be acknowledged that the failure to sign the Teesta agreement has led to an emotional conflict.

Secondly, and what is important is the Ganga Water Treaty. The Ganga water deal, which is now in place, will end in 2020 or 2021. The latest situation is that the two prime ministers have directed technical expert to examine the technical aspects of the project and give their opinion. This project will be done jointly.

Q: And what about the trade deficit?

MR: There is no reason to take this [trade] deficit with India seriously. For example, in our business with America, we have a trade surplus and America has trade deficit.

Q: But India is your closest neighbor and it is a huge market. Should Bangladesh not do more exports to this market?

MR: Yes. The reason for the deficit with India is that we do not have such type of products to export to India. The amount of goods we sell to India is increasing over the past few years. And practically, we are looking for new alternatives to the U.S. and European markets due to drop of prices and demand there.

- Importance of remittances inflow

Q: Bangladesh stands among top 10 remittance receiving nations. While remittance inflow is crucial for Bangladesh's economy as you mentioned. There are reports that large number of foreigners are working in Bangladesh, resulting billions of dollars of remittance outflow while thousands of Bangladeshi youths are unemployed. How do you see this?

MR: My explanation is that there is no inconsistency in the economy here because these people are hired by private entrepreneurs.

Q: But thousands are unemployed?

MR: Jobs are given by private entrepreneur. If there is one skilled person among these thousands of unemployed, that person will not be taken [hired by entrepreneurs].

Q: So, would you say that your unemployed youths are not skilled?

MR: No, not that. We have lack of managerial skills and technical skills at mid-level. We have to accept it. We have to hire people from outside because for what we lack. We have this deficiency, so we go outside for treatment. If not, we would not go.

Q: What is the solution then?

MR: The solution is how fast we can increase technical and managerial skills. If we do not increase then this deficiency will continue.

In my opinion, the main reason for hiring these people from India or any other country is, we do not have that amount of technically qualified and managerially competent people that our companies are needed at the mid-level at least.

Q: So, what are the steps government is taking to make people qualified and skilled?

MR: The government is setting up vocational, technical training schools and colleges. And from there skilled people will come out slowly, thus the shortage should be fulfilled within three to five years.

- India’s slow down economy

Q: India's economic index has been down for a long time. According to recent reports from various international organizations, this slowdown will be prolonged. How much of this economic downturn in India can have a negative impact on the Bangladeshi economy, and what is the preparation of your government to deal with it?

MR: Our exports to India were on an increasing trend. If we predict that Indian economic growth will decrease, then maybe this export rate might face a little bit slow trend. The main markets for our exports are Europe and America.

Maybe we will look for new markets to diversify it. We need to find other markets. Some African countries and some Muslim nations or countries in the Middle East will be considered for new markets. That means diversification of products and diversification of markets. We will need both of these.

Another question associated with this is how bad will India's economy be? Not only recently, but many of those who were involved with India's policy were also saying that the economic condition of India is bad.

It seems to me that their economy is as bad as was predicted. Since the physical structure and the technical knowledge structure of India are stronger than ever, they have ability to turn around.

I do not think that the Indian government will be so irresponsible, to not secure its economy. Because the Indian government has shown courage in all the steps it has taken recently related to the economy. So, I do not think India's economy is going to be as bad as it is said. The growth that we had in the trade may have been a little slower.

- Cybersecurity issues

Q: Bangladesh is getting digitized very fast. It is also being realized in its economy and banking system. In addition to digitalization, cybersecurity is also important. So, if we want to know how much the government of Bangladesh is giving importance to cybersecurity in its economy, particularly after the cyber theft of $81 billion from the Bangladesh Bank in February 2016?

MR: In cybersecurity, we need to be sufficient. Practically I cannot say whether or not we are all secure. At the time of the Bangladesh Bank accident, I was at Harvard at a program on cybersecurity, where cybersecurity experts from various countries were present. I remember someone saying that one of the major problems with digitization or computerization is this - you can never guarantee 100% protection because those who hack [you] may be as clever as you and sometimes cleverer than you are. So, here is the only way -- change your system frequently.

Q: Is there any strong step that your government has taken in this regard? Or do you have any advice from the economic circle?

MR: I am not completely aware of it. However, during discussions [economy experts], I have seen that they are aware of cybersecurity.

Q: What is the status of current trade and economic relations between Bangladesh and Turkey?

MR: The cost of transportation is a big thing. As a result, exports and trade will be more with those countries, where transportation costs are low. In this context, Turkey is very far from us. Turkey has been somewhat flexible in its European-oriented policy, which has been helpful to our relations. However, there will be neither very close nor distance relationship with Turkey. Cooperation via various international Islamic forums like OIC [Organization of Islamic Cooperation] will continue.