Money Matters

Lessons from Bangladesh

Money Matters
By Majyd Aziz
Mon, 07, 22

Three remarkable news recently emanating out of Bangladesh have been highlighted in the media and on Whatsapp Groups. The first announcement came from the Bangladesh High Commissioner Ruhul Alam Siddique, who in meetings at Karachi Chamber of Commerce and Industry and at English Speaking Union of Pakistan, informed that Bangladesh is establishing 100 more Special Economic Zones (SEZ). The second important announcement was that on 25 June 2022, Prime Minister Sheikh Hasina Wajed inaugurated the 6.15 km long two-tier Padma Multipurpose Bridge. The third announcement was that Bangladesh exported more than $52 billion goods during July 2021-June 2022.

Lessons from Bangladesh

Three remarkable news recently emanating out of Bangladesh have been highlighted in the media and on Whatsapp Groups. The first announcement came from the Bangladesh High Commissioner Ruhul Alam Siddique, who in meetings at Karachi Chamber of Commerce and Industry and at English Speaking Union of Pakistan, informed that Bangladesh is establishing 100 more Special Economic Zones (SEZ). The second important announcement was that on 25 June 2022, Prime Minister Sheikh Hasina Wajed inaugurated the 6.15 km long two-tier Padma Multipurpose Bridge. The third announcement was that Bangladesh exported more than $52 billion goods during July 2021-June 2022.

These three news items need further discussion and elaboration and the reason for mentioning these items is to motivate and sensitize the tripartite stakeholders (government, workers and employers) as well economists and social activists of Pakistan into learning from a country that half a century ago was termed in Washington as a “basket case”.

At this moment, there are eight public Export Processing Zones, seven public SEZ and three private SEZ. When the plans to set up 100 more SEZ (about 75,000 acres in total), 70 public and 30 private, of which administrative approval has already been accorded to 97, come to fruition, Bangladesh would become an industrial juggernaut. In Pakistan, under CPEC, nine SEZ are to be set up in designated areas but none of them are really functional. The Pakistan Japan Business Forum proposed nearly twenty years ago that Pakistan should establish SEZ and Japan was ready to invest in it. However, it took another four years for the SEZ Act to become law. In short, the Pakistani SEZ Act 2008 on the one hand and the Bangladesh SEZ Act 2010 on the other hand. This is the difference. As an aside, Bangladesh is also setting up 40 IT Parks and all set to incentivize free lancers and software companies, and to digitalize the country.

What about the EPZ in Bangladesh? A vivid example is the Adamjee EPZ just 15 km from Dhaka. The erstwhile largest jute mill in the world, spread over 250 acres, was set up by the Adamjee family of Pakistan in early 1950s and was nationalized after Bangladesh came into being. It was in operation until the day when mega losses, overstaffing, labor issues, and of course bureaucratic hurdles, resulted in its closure. Despite this situation, there were no encroachments, no land grabbers, and no housing projects. Instead, the government decided to transform this valuable property into the 6th largest EPZ. Now it is brimming with activity with investments, both foreign and domestic, with industries of all kinds. By the way, the Karachi EPZ is probably the world’s largest Landa Bazaar (old clothes market). Nearly 400 enterprises are importing old, used, and discarded clothes and sweaters from the West and then sorting, packing, and re-exporting with minimal value addition. This is the difference. Ergo, no land available for genuine industries in KEPZ.

The Padma Multipurpose Bridge was constructed at a cost of nearly $4 billion financed out of the country’s reserves and connects 21 districts in Southwest Bangladesh with the capital, Dhaka, by road and rail and substantially reduces travel time. It is not just a means of conveyance or convenience. It symbolizes the very essence of economic progress, which is, in the words of Metropolitan Chamber of Commerce and Industry, Dhaka, “propelled by increased human assets, lower vulnerability, and a highly vibrant economy”. Of course, Bangladesh is graduating from being a least developed c country and all set to emerge as a developing economy by 2026. The nation that once was one of the ten poorest countries in the world is now the 41st largest economy and according to JP Morgan, it “is one of the Frontier Five economies” while the World Bank says that it “is among the five fastest growing economies of the world”. US President Joe Biden in a statement said that “Bangladesh is an example of economic progress and a country of great hope and opportunity”. The economy grew 271 times in 50 years which is a manifestation of prudent economic governance, efficient fiscal management and macroeconomic stability.

Research done to find out what other mega projects are in the pipeline or work in progress revealed some of the following mega projects with support from the Japanese, Chinese and Russians that would be a game changer in the development and growth of Bangladesh. The Dhaka Metro Rail Project costing $3 billion, having capacity to handle 60,000 passengers per hour, and to be completed by 2024. The Padma Rail link having a projected cost of $3 billion, executed by the Chinese would be in operation by 2024. It will connect Dhaka to Jessore by train via the Padma Multipurpose Bridge. Then there is the Matabari Deep Sea Port that will enable large Master Vessels to enter, anchor and unload 2.8 M TEUs. At present, a huge constraint for Bangladesh is that only small feeder vessels bring cargo which is transferred from large Master Vessels in Singapore or Colombo Ports. The expected completion date is 2026. The Japanese are building a new Terminal at the Dhaka Shahjalal International Airport. This will increase the Passenger Handling Capacity from 8 million to 20 million annually and would be ready in 2023. Another ambitious project is the Dhaka Elevated Expressway that is 20 km long from airport to Dhaka Chattogram Highway and would have a huge impact on traffic congestion. Moreover, the Rooppur 2.4 GW Nuclear Power Plant is being built by the Russians and the completion target dates are 2024 and 2025 for Phase 1 and Phase 2.

By the way, the Karachi EPZ is probably the world's largest Landa Bazaar (old clothes market). Nearly 400 enterprises are importing old, used, and discarded clothes and sweaters from the West and then sorting, packing, and re-exporting with minimal value addition.

Keeping in perspective the march towards being a developed country, Bangladesh is increasingly focusing on bilateral Preferential Trade Agreements and Free Trade Agreements to enhance export revenues and obtain improved market access in the next few years. Talks are in progress regarding possible PTA with 45 countries while 11 countries have been approached to sign FTA. This fast-track policy is meant to lay the foundation for a larger global market penetration and share. Today, the share of industry in GDP is over 37 percent and the readymade garments sector is the mainstay.

Export regime is the stronghold of the Bangladesh economy. It is the national priority and the lifeline. The Prime Minister Vision 2021 stipulated exports of $50 billion and Bangladesh exceeded the target. In fact, if exports of service sector are added, the figure is more than $61 billion. Add to this figure the remittances of overseas migrant workers who remitted in excess of $22 billion. The Bangladesh Garment Manufacturers and Exporters Association, displaying an upbeat and buoyant posture, is formulating a strategy to achieve a $100 billion apparel shipment target by 2030. The assessment is based on the fact that buyers are shifting their orders from China and some other countries to Bangladesh. The garment manufacturers are relying on an upsurge in demand of mid-range garments, items made from manmade fiber, and technical garments such as uniforms and PPE garments and clothing. The biggest export is ready-made garments, accounting for 86 percent of its global goods exports. Over 4.50 million, mostly women, are employed in this sector.

The recent happenings around the world bode well for the apparel sector. Brands are not comfortable with the political instability in Myanmar while Sri Lanka is embroiled in the worst economic crisis. Some countries in Africa, especially Ethiopia, have their own problems of riots, strikes, and racial issues. Major league player Vietnam has a different export product mix and it will take a few more years for Bangladesh manufacturers to make these items. China has to a large extent moved away from apparel and is focusing on high tech industries and this is providing an opportunity for Bangladesh to even cater to the huge Chinese market.

The Pakistani home textile producers created a niche for themselves in the global marketplace. But, now a strong player, Bangladesh, is emerging and there is likelihood of guzzling a substantial global share presently enjoyed by Pakistan. Home textile exports are the second main earner after apparel and the uptick in exports has bolstered the enthusiasm of producers. Home textiles exports are escalating due to various initiatives such as investments in research, quality products, innovation and latest technology, sustainable growth, and government support.

It is significant to note that green garment factories are changing the industrial milieu and this trend is crucial for long term sustainability. The apparel industry in Bangladesh reached the milestone of having 163 US Green Building Council’s Leadership in Energy and Environmental Design (LEED) Certified factories, the highest in the world. LEED is intended to help building owners and operators be environmentally responsible and use resources efficiently. It is a green building certification program that recognizes best-in-class building strategies and practices. It is now at the threshold of leading the global garment factories by tackling the challenges in the area of sustainability, climate change, groundwater depletion, efficiency, etc. According to BGMEA, “more than 550 factories are in the pipeline to get LEED certification”. This is another example of progressive approach of the Bangladesh entrepreneurs who are geared towards compliance as well as saving water and electricity besides providing a healthy working environment.

It goes without saying that there are issues that directly or indirectly impact on the upward trajectory of Bangladesh exports. There are genuine, and even biased, complaints from the human resource point of view and that these regularly get negative concerns from global workers institutions, more so at the Annual ILO International Labor Conferences in Geneva. At the same time, there are physical infrastructure shortages such as high prices of spot purchases of LNG, electricity loadshedding, etc. Then there are climate problems such as cyclones and floods. However, the silver lining is that the government is proactive in addressing the myriad issues through the development of strategies and setting up essential mega physical infrastructure.

Bangladesh government and private sector are geared up and prepared to resolve all issues, through well-defined strategies and policies of crisis management, reallocation of resources, skills and assets, and massive innovation. This is the recipe for resilience, determination and success. Prime Minister Shaikh Hasina Wajed, in a speech at the UN General Assembly, stated that “my priority is to establish (Bangladesh) as a poverty-free country; we have a long way to go – we have to do more. When I have been able to establish this country as a poverty-free country, a hunger-free country, a developed country, perhaps at that time, perhaps then I may say I am proud.”


The writer is president UN Global Compact Network Pakistan