GLOBALISATION of world economy plays an important role in the development of Asia. To capitalise the opportunity, Bangladesh has to understand the main features of the newly transformed world economy. The new economy is global. Capital, production, management, markets, labour, information, and technology are organised across national boundaries.
Now a national economy works as a unit at the world level. Manufacturing and service processes are increasingly being organised as global value chains. In this process, several countries participate in different stages of the manufacturing of a specific good. The process is of considerable economic importance since it allows stages of production to be located where they can be undertaken most efficiently and at the lowest cost. A personal computer is now assembled in the USA; monitor produced in Malaysia, CPU case in China, processor in Taiwan, software in India, and the cable in Thailand.
Since production sharing is increasing in relative importance, this implies that countries are becoming more interdependent on each other. It means, Bangladesh can greatly benefit from the expansion of international trade and can share the growth of Asia. As Bangladesh is strategically positioned between the energy-rich Middle East and the world's factories in China and East Asia, Asia's progress will contribute significantly to the growth of our economy. As our economy grows and trade expands, our business and political leaders should take into account how the world is changing in order to set an effective domestic agenda.
This century is for Asia, and the continent will set the agenda for the world. Europe's dominance in 19th century and the USA's in 20th will come to an end at the middle of this century. Asia will repossess its position. In 1820, Asia accounted for 68 per cent of the world's population and 59 per cent of the world's income valued in terms of 1990's purchasing power parity. In 1950, these shares went down significantly to 55 per cent and 18 per cent, respectively. By 1995, however, its share in world income rose markedly to 34 per cent while its share in world population had remained almost the same as the 1950 level. Conservative estimates suggest that Asia will reclaim its place in the world economy by 2030 and, with import shares of more than 50 per cent, will become a dominant market in the world economy. It is likely to become a dominant producer as well as consumer of certain agricultural commodities like cereals, pulses, oil crops, cotton lint, tobacco, and sherry and raw materials like coal, steel, cement, and fertiliser, and even higher income commodities such as passenger cars, air travel, consumer durables, personal computer, and mobile phones.
The respectable growth realised by most Asian countries in the past two decades was fuelled to a large extent by rapid expansion in trade and foreign direct investment (FDI), which in turn were stimulated by both domestic factors -- trade and investment liberalisation, favourable macroeconomic environment, and abundant supply of well educated, low-wage labour -- and external factors -- realignment of exchange rates and remarkable progress in information and communication technology.
With significant improvements in economic efficiency realised from trade and investment liberalisation, Asia has become a dominant exporter to developed economies, especially the US. Japan played a significant role in the development of East Asia. Japan appears to be the largest investor in middle-income ASEAN countries, particularly Thailand and Indonesia. The economic landscape of Asia has changed markedly with the emergence of China as a major economic power. Between 1990 and 2005, the Chinese economy grew on an average by 8-10 per cent annually and exports expanded on average by 15 per cent annually. Since 1991, bilateral merchandise trade between ASEAN and the China grew at an annual average of 20 per cent, reaching $39.5 billion in 2002. This could be an indication that there is increasing intra-industry trade in manufactured products between ASEAN-5 and China.
Growth in East Asia has propelled the growth of South Asia, which includes Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. In South Asia, India has now found a path for sustainable economic growth. During the period of 1990-2004, its GDP rose by an average of 5 per cent a year in real terms. Between 1980 and 2000, 210 million Indians were lifted above the poverty line the threshold being US$ 1.50 in earnings per day. Among business strategists, India has emerged as a new source of competitive advantage. Companies have been lured by opportunities to cut costs through outsourcing back-office and service business processes to Indian IT firms. From call centre operations, through software engineering to accounting, India's service sector has profited from the global IT revolution and the new cost-cutting imperative. Strong performances by India's IT industry, business process outsourcing sector and pharmaceuticals have won the attention of corporate strategists. Multinationals, in particular, have cut costs by setting up back-office operations in India.
In South Asia, intra-regional trade has been increasing. The value of regional trade increased fourfold during the period from 1990-2000. Similar to Japan's role in East Asia, such pattern is also emerging in South Asia, though not on the same scale as that in East Asia.
Indeed, some Indian companies are already in a position to play the same role played by Japan's for East Asia because India's intra-industry trade with neighbouring countries is already high in several sectors. Examples of high intra-industry trade between India and its neighbouring countries may be like: with Bangladesh in manufacturing units relating to shirts -- not hand printed; sacks and bags and plastics; with Bhutan in sweetened fruit juice, tubes, and pipes; with Maldives in air conditioning machines, water pumps; Nepal in manufacture of toothpaste, household and laundry soaps; Pakistan in cane sugar, some chemical products; and with Sri Lanka in manufacture of printing and writing papers not elsewhere classified, soap cutting and moulding machinery. Indian companies could move to neighbouring countries to set such industries either as joint ventures or as wholly owned subsidiaries to exploit cost advantages, thereby enhancing their competitiveness. Such complementarities can be exploited if South Asian countries deepen further their regional cooperation in trade and investment.
Rapid economic growth in Bangladesh has underpinned poverty reduction efforts. Real annual GDP growth averaged 5.3 per cent during 2000-2004 up from 4.8 per cent in the 1990s, and 3.5 per cent in the 1980s. The GDP growth rate reached a record level of 6.3 per cent in FY2004. A decade of double-digit growth in exports of goods and services and increased remittances have generated the resources required to boost imports of capital goods and raw materials, and to maintain a comfortable level of external reserves.
Bangladesh, however, is less successful in promoting full employment: 40 per cent of the population is estimated to be unemployed or underemployed. Still, national income remains extremely low, with national gross domestic product (GDP) at about $56.5 billion and per capita GDP at $418 in fiscal year (FY) 2004. As a result, nearly half of the population remains poor, education quality also poor, gender discrimination continues, and efforts to overcome poverty face numerous constraints.
New sources of growth will need to be nurtured to sustain the country's current achievements and to move to a higher annual growth path of 7-8 per cent needed to achieve poverty reduction objectives. New sources of growth can be achieved by expanding the non-farm rural economy, promoting small- and medium-sized enterprises (SMEs), fostering export diversification, tapping information and communication technology (ICT), and enhancing investment opportunities by boosting factor productivity
The growth of the manufacturing sector has been confined to just a few industries: ready-made garments, jute, yarn and twine, pharmaceuticals, tobacco manufacturing, printing and publishing, beverages, and cement. The RMG sector makes up more than 75% of the total export earnings, while jute goods, hide and skin, and shrimp together contribute an additional 12.6 per cent. Whilst RMC helped to employ over 2 million uneducated female workers, still a substantial number of youth remained unemployed or underemployed. There is rising unemployment of college-graduate youths, raising the questions of management level job creation. In order to create more employment, we should concentrate on diversifying the export basket. We should focus on production of electronic goods and high-technology hardware, information software, and other business services. We should partially integrate our industrial and services sectors with the new global economy.
The rising number of educated unemployed youth raises the question about the quality of education being delivered. Education should be a moving target that evolves as old needs are met and new needs emerge. Education influences and is influenced by the context in which it is developed. This synergistic relationship implies that education must be in a constant state of change so as to respond to changing social and economic needs. However, in our country it is rather a different attitude to education. We should strive to increase competitiveness of education in our country by making provisions, for expansion and quality-oriented reform of primary, secondary and tertiary education.
We should strive to achieve the followings;
* Focus on the development of employability skills;
* Improving interpersonal skills, communication skills, and analytical and logical skills;
* Having a well-trained cadre of scientists and engineers;
* Develop problem-solving capacity and flexibility needed for a range of production and service jobs;
* Increasing the general knowledge base and achievement levels in language skills and mathematics of the labour force as a whole.
The writer is a Financial
Consultant in London