Bangladesh has liberalized its trade regime since the mid-1980s, and its economic performance improved substantially during the 1990s, driven by rapid growth of exports. With the creation of two million jobs in the garment industry and millions more in linkage activities, there is ample proof that more trade has indeed been good for growth and poverty reduction in Bangladesh. And now, in 2005, managing trade is again a central part of the nation’s development agenda.  At the global level, the World Bank has advocated a trade agenda that enables developing countries to gain as much access to markets as possible and pressed for the removal of trade barriers, so that poor countries and poor people can trade their way out of poverty.  The linkages between trade and poverty reduction are interesting to study: I found myself just recently talking to one of Vietnam's senior leaders in Paris about trade liberalization. His question to me -- in the form of a metaphor -- was this: if I were coaching Vietnam's football team, would I really want to send them out, now, to compete against 'Manchester United’?; wouldn't I prefer to keep them in the little leagues for some time, protected, so to speak from the competition?  I said something about honing one's skills by competing with the best team, but the fact is that the impact of trade liberalization is not an easy one. Not everyone, everywhere, will always be made better off. There are losers also. Benefits to the economy depend on ongoing ‘behind the border’ reforms -- hardware and software improvements to the economy -- that enhance competitiveness –the topic of this workshop today.  That said, the Bank’s research suggests that there was a noticeable dent in human and income poverty following Bangladesh’s period of trade liberalization.  But, looking ahead, what can we expect? The MFA ended in 2004, and contrary to the predictions of many analysts, exports of ready-made garments from Bangladesh has continued to grow at a steady pace and could well achieve 15%+ growth in FY05. However, this should not lull anyone in industry or in policymaking circles into complacency.  Our study on export competitiveness reveals that exporters as well as potential exporters face many constraints -- ranging from ports to power to high cost of finance. Let me add that competitiveness is a dynamic not a static game in the global market. As Alice-in Wonderland said, ‘you need to run as fast as you can just to stay in the same place,’ and many of Bangladesh’s competitors are running very fast indeed. So for Bangladesh to keep up demands continuing efforts at improving the policy environment, and in mobilizing the best of technology, management and resources to produce exports of high quality at competitive costs.  Let me turn now to today’s program: Francois Bourguignon will kick off the seminar by exploring the chanels through which trade liberalization affects the economy and particularly the poor in Bangladesh. .I think we will all be enriched by his insights. He is internationally recognized as an leader in the economics of public policy, poverty and inequality, and on the income distribution aspects of development policies. Presently, he leads the World Bank’s research on poverty and income distribution and, in that capacity, has studied the links between trade liberalization and poverty  After the break, Shanta.Devarajan, our Regional Chief Economist for South Asia, and Zaidi Sattar, Senior Economist in the Dhaka office of the World Bank, will discuss the Growth and Export Competitiveness study. This study was undertaken in light of the looming global competition with the end of the MFA, and draws on detailed analysis of the factors that help or hinder export performance to gauge Bangladesh’s competitive strengths and weaknesses.  The Growth and Export Competitiveness study has shown that policies to protect domestic industries result in significant anti-export bias -- and to take the example of textiles protections, such policies would worsen competitiveness of the RMG sector in the post-MFA period, unless better policies are adopted (central bonded warehouse; allowing FDI outside of EPZs’; opening land borders to yarn imports; reducing tariffs overall, etc). It also reveals that high and complex tariffs make any duty drawback scheme ineffectual, discouraging new exports are discouraged, and halting export diversification in its tracks, as seems to be the case in Bangladesh.  In order to make the most of its export opportunities in a changing international environment, the study reiterates that Bangladesh needs to follow a more strategic approach ‘behind the borders’, to invest in and reform infrastructure; technology and skills, streamline trade, tax, and regulatory policies; and improve quality and safety standards. The report makes concrete recommendations in all those areas.  |
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