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OP-ED: How do we revive the economy?

  • Published at 01:32 pm July 6th, 2020
Everyone could do with a little help REUTERS

Prioritizing policy in the backdrop of Covid-19

It is the public administration which has been at the front line in dealing with any national crisis, be it natural, man-made, internal, or transboundary. Public administration is nothing but the government in action and the bureaucracy is one of the key elements of government. Therefore, even with huge criticism, the role of bureaucracy in public policy making is important and needs to be focused on. 

The nations across the globe are experiencing an unprecedented situation due to the advent of the virus known as Covid-19. Bangladesh is not an exception in this regard. Like others, we are also busy with managing the crisis. However, among many actions, saving people’s lives and keeping the economy alive are the two common focuses for all. 

In the meantime, the pandemic has caused a global financial slowdown. The total estimated global cost of the pandemic could range from $2 trillion to $4.1tn; equivalent loss of between 2.3% to 4.8% of global GDP (ADB, 2020). In this context, this write-up is focusing only on policy issues linked with reviving the economy.

Responding to crises

Historically, the nations have responded to various crises in their own innovative and customized ways. Likewise, it is time to focus on setting our own policy priority and agenda, keeping the country context in mind. Academically speaking, we are passing through the containment and damage control phase of the crisis management process and we need to be prepared for business recovery and redesign keeping the learning curve activated. 

While approaching various phases, we should keep in mind that a crisis can lead to both positive and negative outcomes. Therefore, we may need to utilize the positive aspects while dealing with the negative consequences. Keeping the proposition in mind, the agenda and priority of the public policy need to be formulated. Here comes the role of the bureaucrats who need to be more thoughtful and analytical than any time before. In this backdrop, some overarching initiatives along with some sectoral ones may be considered. 

At the macro level, we may think of ministry/division-wise short-term strategic planning to deal with the Covid-19 situation. It should be based on research (internal) and situation analysis. This document should be an additional policy document but in line with our long-term goals and targets of the respective ministry/division. 

And we may need to prepare a national strategy document combining all the strategy papers so that we can monitor and evaluate the progress at the national level. It is globally recognized that research-based policy is more effective in dealing with a crisis. In line with that, the research and analysis capacity of ministry or division can be further developed by engaging institutions like universities and research institutes. 

This can be done by introducing ministry/division-wise formal platforms for such engagement. This mechanism may help to develop research-based public policy and may reduce the gap between theory and practice. 

Ensuring food security

Apart from the overarching initiatives, we may take some initiatives at the sectoral or micro level where ensuring food security is one of the most important areas. 

According to the Food and Agriculture Organization (FAO) food security is at stake due to mobility restrictions, reduced purchasing power with a greater impact on the most vulnerable population groups. Although Bangladesh has been making significant progress in food production for the last few years, we shouldn’t be complacent, rather we should be more careful and watchful as the global supply chain is breaking down. 

At this point of time, the policy focus should be to ensure cultivation in every inch of cultivable land including the household yard and backyard. In addition to the agriculture department, field administration can be formally given responsibility in this regard. 

Uncultivated land may be acquired by the local administration for a short period of time and can be contracted out for cultivation. Besides, the government may engage local administration and, if necessary, armed forces in addition to the marketing department of the agriculture sector to facilitate the selling of locally produced agriculture goods. 

Moreover, the government may think of purchasing more agricultural products in addition to only paddy/rice. Additionally, an online marketplace can be introduced in each upazila engaging the upazila administration and agriculture department. It is important to identify possible foreign markets for agricultural products (including fish) utilizing diplomatic channels. Due to the Covid-19 situation, food supply has been hampered, especially in Europe. Therefore, we may initially focus on European Union and the UK. 

Diversifying our exports

Alongside food security, we need to focus on export diversification and facilitation. The export earnings are totally dependent on garment products (around 85%) and even the share of the second largest export earning sector is insignificant. According to experts, this kind of single item dependency cannot be sustainable. 

Therefore, product diversity needs to be given importance. It is time to emphasize on other export-oriented industries like ship-building, pharmaceuticals, software, and agricultural products. However, we may engage our diplomatic missions to identify potential items which have demand and export potential in the countries they are operating. 

They may also be asked to identify possible market entry strategies. Moreover, in order to have comprehensive planning on export diversification, a national level task force may be formed involving the ministry of commerce, industries, agriculture, fisheries and livestock, and foreign affairs, along with research institutes like BIDS and trade bodies. 

Additionally, RMG manufacturers have lost more than $3bn due to order cancellations by foreign buyers so far, and knitwear manufacturers are facing a similar loss. In this backdrop, the foreign mission can also work for facilitating the current export and order-related issues of the garment sector. 

Earning from manpower export is playing a significant role in the economy but it is evident that the potential export destination for manpower is shrinking amid the Covid-19 situation. However, this crisis also opens opportunities for some professions like health workers and IT trained personnel. 

Every potential foreign mission may be assigned to prepare a strategy paper on manpower export, based on which a comprehensive planning can be prepared. The missions need to open continuous communication channels with appropriate organizations so that we can avail possible opportunities in the first instance. 

Given the situation, we need to focus on the countries that have been affected less by Covid-19 and need to explore new destinations (ie, exploring African continent/East Asia), not confining to popular destinations only.

The role of FDI

Without significant foreign direct investment, it is difficult to stimulate the economy and create significant employment. According to UNCTAD (2020), the Covid-19 pandemic may bring a 30-40% drop in global foreign direct investment (FDI) flows during 2020 and 2021. 

This is an ominous sign for countries such as ours. This situation can be further aggravated, given the fact that China is the leading investor in Bangladesh. However, like other sectors, new opportunities have been created for us. But we need to grab it properly. 

Since the coronavirus originated from China, there has been a global reaction against the country for the spread of the virus and subsequent economic disruptions. Some countries have already decided to move production plants from China. For example, Japan is moving out gradually from China, which will be accompanied by some European countries. 

In this context, we must make immediate and thoughtful moves so that we can avail the redirected investments. Bangladesh Investment Development Authority (BIDA) can take a new customized scheme for this purpose. In addition to that, we must focus on the countries which are less affected by Covid-19 and we need to strengthen our relationship with them. 

At the same time, we should also try to establish close communication with entities which are planning to invest in potential areas. In this regard, global wealth funds such as Public Investments Fund (PIF) of Saudi Arabia, Qatar Investment Authority, Kuwait Investment Authority, Abu Dhabi Authority, Investment Corp of Dubai, Turkey Wealth Fund, State Oil Fund of Azerbaijan, etc can be potential destinations because they have planned to diversify their investments by investing beyond oil and gas. 

It is always important to focus on internal resource mobilization. It is projected that the export earnings, the flow of remittance, and the flow of foreign direct investment will decrease in the next 2 years. Hence, we need to focus on internal resource mobilizations. Internal resource mobilization should not be confined to just increasing the periphery of tax income, rather we should explore all other possible resources we have like new potentials at the Bay of Bengal and renewable energies. 

This suggestive list is not an exhaustive one, but should be considered while preparing a comprehensive action plan. We need to keep in mind that there is no “one size fits all” type of model for crisis management. And it is recommended that the public policy amid the corona crisis needs to be “tailor made.”

Mohammad Kamrul Hasan is a Deputy Secretary (on study leave) and PhD Researcher in Development Policy and Management  at The University of Manchester. Email: [email protected]

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