Says Manmohan Parkash, the country director of ADB, in his exclusive interview with Dhaka Tribune
For Manmohan Parkash, the country director of the Asian Development Bank, now is the time to brandish the emphatic success story that Bangladesh, a country carved out of a bloody war some 50 years ago, has been.
“The last 50 years have been a period of phenomenal success, but Bangladesh has been modest in projecting its success story,” he told Dhaka Tribune in an interview recently.
Parkash, whose father was in the Indian Air Force in 1971, is all too familiar with the nine-month-long liberation war against the Pakistan Army and its after-effect.
“There were over 10 million refugees and 3 million got killed and millions had lost their homes. In 1971, when the country gained its independence, it was staring at abject poverty and hunger -- it was quite the war-ravaged country.”
And to rebuild the nation from there to what it is now, a beacon of human development and economic advancement that surpassed India in per capita GDP last year, is a significant achievement, one for which Bangladesh deserves to be the toast of the development world.
“It is extremely satisfying to see the country come a long way from where it all started. And I am very happy to see how Bangladesh has been reported in The Wall Street Journal and The New York Times.”
Last month, The Wall Street Journal dubbed Bangladesh “South Asia’s Economic Bull Case” and The New York Times called it an example of how to engineer progress by investing in the most marginalised.
And a large part of the credit goes to Sheikh Mujibur Rahman -- the current prime minister’s father -- who took the right decisions soon after independence and laid a strong foundation to build on.
His policies focused on the poorest of the poor, rural areas and women. He invested in agriculture, education, new industries and job creation for the youth.
“In some sense, that model has been central to the economic growth seen in the last 10-12 years.”
The country averaged 7 per cent GDP in the past decade, putting it in the ranking of the best-performing economies in the world.
Parkash, who has been heading the Manila-based multilateral lender’s Bangladesh mission since November 2017, feels the time is ripe for the country to get an image makeover from that of poverty, starvation, filth and natural calamity.
“Bangladesh now needs to brand itself -- it needs to project itself as a place for work, for living and leisure. You have all the ingredients to promote Bangladesh as a destination.”
Then, global talents would be drawn to Bangladesh, investments would be flowing in and tourists would be flocking to the land with the largest mangrove forests and the longest white sand beach.
Promoting Bangladesh as a destination is of paramount importance, he says.
“In development circles, we are all talking about Bangladesh as the new tiger economy. The fact is, even at the people-to-people level, it could easily become a good destination. Bangladesh needs to fully unleash its potential.”
And for that, there is plenty of work for the government to do, particularly over the next decade.
“The last 50 years have given you a process of development that has left the country at a point of inflection.”
From here onwards, if the right pragmatic policies can be taken, if an enabling environment can be created and if all the stakeholders can be brought together, becoming an advanced nation, as per the vision 2041, is very much within reach.
The policies should be geared towards ensuring export diversification and human capital development, building quality infrastructure, mobilising greater revenue for the government, creating a robust financial sector, improving the investment climate, greater participation of the private sector, building institutions to establish transparent and open governance, and safeguarding the climate.
Parkash, who attended executive education courses at Harvard University (Kennedy School), Cambridge University and the University of Michigan (Ross School of Business), feels Bangladesh can follow the lead of South Korea, Japan and Vietnam.
Bangladesh’s growth story, he says, is parallel to South Korea’s: it was born out of a three-year-long war with North Korea in 1953 but its people have gone on to rebuild the economy, one which became one of the 20th century’s most remarkable success stories.
In the 1960s, South Korea’s GDP per capita was comparable with levels in the poorest countries in the world. In 2020, it was $31,497, surpassing that of Italy’s, G7 economy.
The Group of Seven (G7) is an informal forum of the world’s leading industrialised countries: Canada, France, Germany, Italy, Japan, the UK and the US.
Last year, South Korea became the 10th largest economy in the world, beating Brazil and Russia, according to the latest edition of the International Monetary Fund’s World Economic Outlook.
Beginning in the 1960s under President Park Chung-hee, the government promoted the import of raw materials and technology, encouraged saving and investment over consumption, kept wages low and directed resources to export-oriented industries that remain important to the economy to this day.
Growth surged under the policies and frequently reached double-digits in the 1960s and 1970s. In the 1990s, it moderated as the economy matured but remained strong enough to propel South Korea into the ranks of the advanced economies of the Organisation for Economic Co-operation and Development by 1997.
“It went from cheap goods to quality goods and now the top-end of quality -- they have become part of the global value chain with its expertise in heavy engineering and industrial goods. It has liberal trade and investment policies, which it learnt from the Japanese example,” Parkash said.
And crucially, South Korea invested heavily in education and skills development and in marketing and branding itself as a country.
“When I look at Japan, Korea, and more recently, Vietnam, one of the reasons they were able to diversify their exports and become part of this global value chain is because they have got an industrial policy that helps in skilling, reskilling and is geared towards the Industrial Revolution (IR) 4.0 and 5.0.”
But Bangladesh’s exports are still profoundly dependent on one product: garment, which, advertently, came out of Korea’s example.
While the country is the second-largest apparel supplier in the world, the value addition, at 30-40 per cent, is modest at best.
“The sooner you go for export diversification, the better it is for you, be it leather, ICT, jute, pharmaceuticals, shipbuilding. There are areas where it is possible to diversify the export base.”
And there is no reason Bangladesh cannot be a part of the global value chain, supplying semiconductor chips or components and the likes, if the apropos decisions are taken now.
“If you can get an industrial policy that is centred on manufacturing, engineering and the technical sides, you have the 100 economic zones that are coming up and you get a few of these big investments, suddenly you will find that not only export diversification and product diversification are taking place but also industrial diversification. That is a policy shift I would recommend and Japan, Korea and Vietnam are good examples.”
Side by side, the government needs to focus on human capital development by nudging the youth towards science, technology, engineering and mathematics (STEM) education, research and development, and vocational training.
“When I look at the labour market, you have good skills at the low end, and now one would want it more to go at the medium- and the higher-end,” said Parkash, who has an undergraduate degree in engineering and a postgraduate degree in management.
Given Bangladesh’s sizeable young population and its growth aspirations, a technically skilled workforce is imperative.
Another area where Bangladesh needs to focus and do more is to improve the investment climate, according to Parkash.
After the pandemic, many companies want to diversify out of China and Bangladesh could step forward as an alternative.
“If you have the 100 economic zones coming, if you are able to offer good incentives, have good tax laws and an open, agile, modern financial system, why not? You have cheap and abundant young labour.”
But for that to happen, Bangladesh needs to climb up the rankings in the World Bank’s Ease of Doing Business Index.
“From 168 if Bangladesh comes down to 50 or 60 over the next five years, suddenly the investment climate will improve, you will find a whole lot of industries wanting to relocate their production centres into the country.”
Bangladesh also needs to continue its investment in infrastructure, in the same vein as in the previous 50 years.
“But now, I will use a qualifier: quality. Whether it is road, rail, seaport, airport, waterways, ICT, urban-rural infrastructure, the focus should move towards quality, filling up the gaps and missing links.”
And that needs to be supplemented with a robust financial sector.
“In the entire game of economic development, access to finance is extremely important.”
The existing system of banks borrowing short-term and giving long-term credit is not a viable model.
“And also, if you want to attract foreign direct investment or if you want certain companies to come in, they are looking for an open, transparent financial system, one which is modern and agile.”
Such a system cannot be put in place overnight but a 10-year roadmap is needed, he said, while calling for the development of a bond model.
“Ultimately, if you can get a good financial sector together with a good industrial policy and a good human capital development, I can tell Bangladesh can generate new wealth -- you won’t need to re-orient or capture.”
Subsequently, investors will be lining up, and more so, because of Bangladesh’s 165 million-strong population and its geographical location.
Exports within the region could generate a huge amount of demand and revenue in itself, he said, adding that Bangladesh’s trade within the region is undesirably low.
“Bangladesh needs to enter into long-term trade partnerships and choose strategic partnerships, all with the focus on economic growth and national interest,” he said, adding that the country can become part of ASEAN+1.
The Bangladesh economy is getting bigger and it is getting noticed, so this is the right time to negotiate these trade agreements.
To sustain the whole process, the environment and climate must be kept at the heart of all plans.
“In terms of the development process, that needs to be kept as a cross-cutting theme, whether you are building infrastructure, whether you go for rural development, or you are doing urbanisation.”
Provided all the development jigsaw puzzles slot in, Bangladesh can leapfrog and join a select band of countries that are progressive, prosperous and inclusive.
“The next ten years would be very important and implementing a blueprint where everyone is included, climate and environment are kept at the centre, and enough opportunities are created for the youth and the women -- will help.”
And the ADB will continue with its support for Bangladesh, where it has been since 1973.
The multilateral lender is drafting its new country partnership in line with Bangladesh’s 8th Five-Year Plan.
“There, the focus will be more on things we can add value, we can bring new ideas and technology, also make sure this development is inclusive, climate-friendly, gender-responsive and helps people at the bottom of the pyramid. The bottom 20-30 per cent is the one we need to move up -- they are starting from a low base so growth would be faster.”
At present, Bangladesh is now at number three in terms of the total portfolio for the ADB.
The Manila-based lender is willing to scale up its funding to Bangladesh, but it is resting on the country’s absorptive capacity.
“We are now focusing on getting Bangladesh to use the money prudently. Project approval is one part of the story. The most important part of the story is that disbursement should happen and commitment should happen. As long as these happen, more and more money will flow in.”
The ADB is drafting its annual portfolio performance report for 2020, where Bangladesh has done much better than average in terms of disbursement, according to Parkash.
“It is a well-performing portfolio, which gives confidence that more money can be given to the country. Everything depends on demand -- we do not want to give money that cannot be spent.”
The ADB is particularly looking to ramp up its support to Bangladesh’s private sector.
On the public sector side, Bangladesh is among the top three or four borrowers of the ADB.
“Now we want to bring in public-private partnership and we also want to bring in private sector resources. We also want to do leveraging and co-financing. When you put it all together, Bangladesh can be one of the top.”