Becoming a lower middle income country is certainly something to
cheer about. It makes us firmly believe that we will soon elevate to the
status of middle income country. It makes us feel good. It gives us
confidence. And it makes others turn around and glance at us with
respect. We become a target for investment.
But it also cautions us about some pitfalls. It also cautions us to
know the challenges and prepare ourselves to brace the crosswinds. It
also alerts us about the so-called middle-income trap that may embrace a
country when it elevates to middle income category.
As a middle income country gains in wages, as we have and will
further in future, we face the challenge of remaining competitive with
the cheap products of the low income countries. We must not forget
Bangladesh had once snatched the jobs of countries like Korea, Thailand
and Singapore when they geared up to the higher ground.
While we will face the possibility of not competing with low income
countries, we will also not be able to compete with the high-tech
products of developed countries.
So we have to consider upscaling our productivity by infusing it with
better technology and also by training our workers. Slow transformation
of our agricultural workforce into an industrial one will lead to
unemployment and low wage as has happened in countries like India and
Thailand, leading to increase in poverty. So we must focus on this job
at hand before we soon reach the middle income category.
We are already suffering in productivity because of the sudden spurt
in small and medium enterprises which because of their economy of scale
cannot integrate modern technology. This factor needs to be resolved
quickly.
Egypt and Nigeria are such cases which saw wage increases that
adversely affected productivity. But then there is the bright case of
South Korea which was one of the poorest countries in the 1960s with
about $100 per capita income and soon became a middle income country
with attention to productivity through its policies and institutions.
The other challenge we will face is how to keep rising inequality in
check and how to make basic services accessible to the poor. It will
need proper policy, institutions and financing.
As countries open themselves up to trade in goods and capital, they
also face risks of vulnerabilities to different global crises. We have
seen how the South-east Asian countries were floored by the financial
crisis of the 1990s. So we need to reform our financial sector as we
integrate more and more with the global financial markets.
We need to have the proper institutions for industrial policy and
trade. We need to think of relating export policies to growth. Here the
biggest issue at stake is the zero duty access of our garments to the
European Union not least because the EU is our largest export market for
apparels.
We can still get GSP Plus facility but that would depend on
fulfilling a number of stringent conditions on human rights, labour
rights and environmental issues. Bangladesh already has poor records on
all these counts and fulfilling them would need sincere effort on the
government's part.
In the end, we can say that while we celebrate our achievement we
also need to get ready for tackling the next level of tough challenges
looming ahead.
