Md. Shahidul Haque Foreign Secretary, Bangladesh Metropolitan - - PowerPoint PPT Presentation

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Md. Shahidul Haque Foreign Secretary, Bangladesh Metropolitan - - PowerPoint PPT Presentation

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Bangladesh Economy by 2030/35: Challenges, Prospects, Partnership Md. Shahidul Haque Foreign Secretary, Bangladesh Metropolitan Chamber of Commerce and Industry (MCCI) Dhaka, 18 February 2016 N arrative .! Bagladesh is a

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Bangladesh Economy by 2030/35: Challenges, Prospects, Partnership

  • Md. Shahidul Haque

Foreign Secretary, Bangladesh

Metropolitan Chamber of Commerce and Industry (MCCI) Dhaka, 18 February 2016

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Narrative …….!

  • Bagladesh is a stale “tate:
  • sound political, economic and social fundamentals - governed by

a strong and visionary leader i.e. Hon. Prime Minister, Sheikh Hasina

  • prudent macro-economic management
  • A pluralistic democracy
  • unity amongst diversity is her strength: people are inspired to

move forward despite many internal and external odds. [ref. PEW

Centre Report, 2015]

  • People- politically conscious, socio-culturally vibrant, resilient
  • creative - industrious, with appreciation for wider values

and identity.

  • Civil society - dynamic and responsible, with global

appreciation.

  • Economy-on a stable path, with a positive outlook for future
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Narrative otd. ……..

Prudent macroeconomic policies and structural

reforms, with support from the Extended Credit Facility (ECF) arrangement, have helped steer Bangladesh economy through domestic and global challenges in the last three and a half years. Growth has been robust, inflation eased, foreign exchange reserves have risen to a comfortable position and public debt has remained stable as a share of GDP ….

[5th- 6th Review under Extended Credit Facility (ECF) Arrangement, Oct. 2015]

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Bangladesh : strong socio-economic fundamentals

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trends of Bangladesh Economy: Sustained Growth

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Bangladesh : strong socio-economic fundamentals(Contd.)

6.77 5.49 4.29 5.73 2.13 2.61 1.95 0.57 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 India Sri Lanka Pakistan Bangladesh

Average Rate of GDP Growth Growth Volatility

high and least volatile among regional peers

Time period: 1995-2014

  • Over the last two decades, average GDP growth is just below 6%. However, in the last decade,

average GDP growth crossed the 6% threshold.Economic performance was complemented by inclusive socio-political policies. As a result, volatility in the growth path would be seen as less than other regional countries [Source: Finance Division]

  • Bangladesh is one of the top 20 countries in terms of attractiveness based on growth and market size

(Agility Index 2014)

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Bangladesh : strong socio-economic fundamentals (Contd.)

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Bangladesh : strong socio-economic fundamentals (Contd.)

[Source: Finance Division]

1991 2013 / Latest Bangladesh Bangladesh India Fertility rate, total (births per woman) 4.37

2.17

2.47 Immunization, DPT (% of children 12-23 mths) 74%

97%

72% Life expectancy at birth, total (years) 60.5

70.7

66.46 Literacy rate, adult total (% of people ages 15 and above) 35.3%

57.7%

48.2% Malnutrition prevalence, height for age (% of children under 5) 76.7%

42%

  • Mortality rate, infant

(per 1,000 live births) 95.8

33.2

41.4

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Bangladesh : strong socio-economic fundamentals (Contd.)

[Source: Finance Division]

33 100 50 49.75 33 10 20 30 40 50 60 70 80 90 100 10 20 30 40 50 60 70 80 90 100 China India Cambodia Bangladesh

Unit Labor Costs Across Selected Countries (Percent of unit labor costs in China)

Cambodia Myanmar Vietnam Bangladesh

Population

a large doesti arket … competitive and innovative workforce

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Bangladesh : strong socio-economic fundamentals (Contd.)

0.0 10.0 20.0 30.0 40.0 50.0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Export Growth (%) RMG Growth(%) Remittance Growth(%)

“With RMG buyers moving out of China, the sourcing caravan is moving on to the next hotspot: Bangladesh” (McKinsey Inc.) Over the years, exports show robust growth. Remittance growth complements exports in boosting growth [Source: Finance Division]

Financial Remittance ; Exports

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Bangladesh : strong socio-economic fundamentals (Contd.)

10.9 10.4 15.3 21.6 25 26.2 1 2 3 4 5 6 7 8 5 10 15 20 25 30 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016*

Foreign Reserves (in USD bn), LHS Import cover (months), RHS

steadily rising Forex reserves safeguard against external/global shocks/vulnerabilities

* As of August 2015

Billion USD

  • No. of import months

[Source: Finance Division]

Foreign Exchange Reserve

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Bangladesh : strong socio-economic fundamentals (Contd.)

10 15 20 25 30 35 40 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Investment /GDP (%)

India Pakistan Bangladesh

Investment is rising steadily

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Bangladesh : strong socio-economic fundamentals (Contd.)

[Source: Finance Division]

20 40 60 80 100 120 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Debt/GDP (%) Bangladesh India Pakistan Sri Lanka

low and sustainable External Debt

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Bangladesh: Strong Socio-economic Fundamentals (Contd.)

[Source: Finance Division]

10 20 30 40 50 60 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Trade/GDP (%) India Pakistan Bangladesh

steadily rising integration with global economy, trade Openness of the Economy

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Bangladesh Economy by 2030/35 ?

  • Bangladesh GDP (nominal) expected to rise: from US$ 175 billion (2015) =>

US$ 1,044 billion (by 2034) [Ref. : IMF Country Report]

  • Average GDP (real) growth of Bangladesh will be 6.5% over the next 20
  • years. Yet, potential is to achieve 7% real GDP growth until 2020.
  • In the long-run, price level will be stable : good for investment and business!
  • Interest rate on foreign currency debt will be around 3.5%, by 2034: fairly

low!

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%

Real GDP Growth Rates

(IMF Projections shown by the red line)

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Bangladesh Economy by 2030/35 ?

  • Remittance inflow projected to be around US$ 21 billion (by 2021)

and US$ 44 billion (by 2034) [ref. : IMF Country Report]

  • By 2034: global export likely to be US$ 290 billion … global import to

be around US$ 329 billion.

  • External debt-GDP ratio will be around 13% by 2034: little worry over

debt distress!

  • In 2034, FDI inflow to be around US$ 26 billion: FDI growing @ 25.31%) annually

5000 10000 15000 20000 25000 30000 35000 40000 45000 50000

Remittance inflow (million US$).

(Red line shows IMF projections)

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Bangladesh Economy by 2030/35 ?

  • Over the next decade (2015 - ’25),
  • Female workforce participation will reach 82% - from

current 34%. => adding 18% to Bangladesh GDP [ref. : World Bank President, 2015]

  • Middle and Affluent Class (MAC) population to increase:

from 7% to 17% By 2030, Bangladesh will be one of the top 30 countries in terms of size of real GDP. By 2050, Bangladesh will overtake countries like Malaysia, Australia and the Netherlands, being the 23rd largest economy in the world (now 31st)

[Source: Price Waterhouse Coopers, February 2015]

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Bangladesh Economy: Strength(s) ?!

[Source: Finance Division]

  • Geo-strategic location: unique location, contiguous, flat border and proximity to

South-East Asia. % of Bangladeshi population will continue to be young over the next 3 decades. Additionally, millions will be lifted out of extreme poverty and join mainstream

  • economy. This educated young population will transform the economy through hard

work and expanding domestic market: every year, 2 million people will be added to the Middle Class (Per Capita GNI US$ 5000+). By 2035, the middle class population could reach 30 to 40 million.

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Demography continue to enjoy demographic dividend (2012 – 2035)

  • Bangladesh has an increasingly younger population:
  • 100 million economically-active by 2017.
  • 2/3rd population will remain active till 2031.
  • Increasingly urbane people: by 2028/30: 48%+

population will live in urban or, peri-urban space.

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Bangladesh Economy: Strength(s) ?!

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Strength of Bangladesh Economy

Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC)

19

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Asia-Pacific wide Rail connectivity: re-define economics!?

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Trans-Asian Railway: zooming into South Asia and around …

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Trans-Asian Highway: Bangladesh in the middle!

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Kathmandu Samdrupjhanker Thimphu

Chengrabandha Tamabil Dawki

Burimari Hatikumrul

Agartala Chittagong Teknaf Dhaka Khulna Mongla Kolkata Mongla Teknaf

Tamabil

Samdrupjhanker Agartala Kathmandu Kolkata Thimphu

Dawki Chengrabandha

BBIN Passenger Vehicles related to Bangladesh

Chittagong

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Trans Asian Highway + Railway + Dry Ports: an emerging connected world!

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Chias Initiatives

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Strength of Bangladesh Economy

Connectivity: re-shaping Bangladesh

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Connectivity: Japas Iitiative

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Connectivity: Japas Iitiative otd.

  • Japan proposed to assist Bangladesh in establishing the “Bay of Bengal

Industrial Growth Belt (Big-B)” along Dhaka-Chittagong-Cox’s Bazar an Engine

  • f Growth. (Matarbari Island)
  • Matarbari island, 60 km south of Chittagong city, has the potential to become

transformed into an integrated industrial and trading hub as well as a central energy base.

  • Japan’s projects:

Matarbari Ultra Super Critical Coal-fired Power Project with 2 components:

  • Deep sea port with 18 m draft for importing coal.
  • Coal-fired plant with an electricity generation capacity of 1200 MW.

Big-B has 3 pillars:

Energy and power

development Matarbari to be developed into a massive supply base of primary energy (such as coal, LNG and oil). Electricity produced can support industry all over Bangladesh. Industry and trade Construct a deep sea port at Matarbari island and turned to be a trade gateway to Asia and beyond. Transportation connectivity Dhaka-Chittagong- Cox’s Bazar transport network to be strengthened and could be extended to neighbouring countries to enable greater industry, trade and energy production.

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Connectivity: Japas Iitiative otd.

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Japan’s Initiative

(contd.)

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Japan’s Initiative

(contd.)

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Japan’s Initiative

(contd.)

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Accelerate industrial agglomeration in Dhaka- Matarbari belt and beyond to shape a value chain hub for South Asia and Southeast Asia

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Kathmandu-Dhaka-1152 km ; Thimphu-Dhaka- 630 km ; Kolkata-Agartala- 530 km

Connectivity: Bangladesh-Bhutan-India-Nepal (BBIN)

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South-Asia Sub-regional Connectivity

33 Source: The Daily Star, 9 June 2015

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Connectivity: East-West Economic Corridor (South-East Asia)

34

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Connectivity: India-Myanmar-Thailand Trilateral Highway

35

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Politics of Connectivity

  • Connectivity initiatives are strategic opportunity

(rather than strategic concern)

  • Not to be a party to any “zero-sum” geographical

game (containment of any country). Carefully navigate relations with other countries/entities maintaining a delicate balance of interests and alliances (greatest diplomatic challenge)

36

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Risks and Challenges

  • Impact of climate change
  • Terrorism and violent extremism
  • Limitations in adopting to rapid economic changes as

well as evolving international norms, ethics and practices

37

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Conclusion

  • Rapid and radical changes are “new normal” making

economy and society ever changing

  • In future economy, consumers/clients will be more

urbane, empowered, and rights-conscious

  • ‘Dignity’ and ‘well-being’ of people will get focus - way

beyond CSR!

  • Cost matrix and pricing equations likely to be altered

unlike anytime before e.g.

  • science – technology – innovation will pay, not merely R&D!
  • ideas-design-creativity will count! Concepts as ‘water

footprint’ will hold sway.

  • social – environmental accountability will matter e.g. green

accounting, green design will be essential, not just sufficient!

  • Global value chain will dominate business.
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Conclusion (contd.)

  • Future of Work and workplace will be different:
  • A more urbane, youthful population and women-

dominated workplace/force

  • Work attitude will be radically changed – ethical

standard will define economics of production- distribution-logistics e.g. decent work, fair wage.

  • Traditional labour-intensive production, sourcing of

inputs, marketing likely to come under challenge

  • ‘Informal economy’ will come under organized

structure…

  • Business to be more ‘responsible’ e.g. EU GSP+

[Bangladesh Sustainability Compact !!] Responsible Business Conduct!

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Conclusion (contd.)

  • Bangladesh businesses:
  • Global /Regional Supply Chains + Global Value

Chains: Bangladeshi merchandise exports to conform

  • Productive resources /production inputs i.e. raw

materials to be sourced worldwide: intense competition!

  • Bangladesh as MIC: new role, new responsibility …
  • End of preferential access + protective regimes +

support measures

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Way forward

  • Get more connected and integrated into regional and

global space/platforms.

  • Appreciate the existing and emerging norms, practices

impacting business and industry (nationally + globally)

  • Manage industrial relations in a prudent manner!
  • Follow development of emerging discourse concerning

business and industry, e.g. OECD, G-20, G-8

  • Effective and transparent interface of Business and

Politics in a global context.

Business not devoid of International Politics

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Thank You