What is China’s role in promoting inclusive growth in Bangladesh?
Alexandre Ayertey Odonkor |
Jan. 08, 2022, 7:09 p.m.
Over the past decade, Bangladesh’s economy has made impressive strides towards achieving sustainable development. During this 10-year period, the country has significantly reduced poverty and at the same time secured a position among the fastest growing economies in the world.
As data from the World Bank in Bangladesh show, for a country that had the tenth lowest GDP per capita in the world in 1971, reducing poverty from 43.5% in 1991 to 14.3% in 2016, is certainly an accomplishment that cannot be hidden under a bushel. While Bangladesh’s recent achievements are laudable, the country’s next hurdle is to graduate from the United Nations Least Developed Countries in 2026, a goal that is threatened by the COVID-19 pandemic that has wiped out years of hard-earned social and economic gains in Bangladesh.
According to the World Bank, the country’s poverty rate fell from 14.4% to 18.1% in 2020 and at the same time, inequalities have also increased in several dimensions. To effectively address this setback and fully recover, policymakers in Bangladesh should focus on strengthening infrastructure development to accelerate economic growth which is inclusive growth.
By developing efficient infrastructure, the country could achieve the requisite inclusive economic growth and tends to effectively tackle current social and economic problems. In fact, this approach will be the surest way to solve COVID-19 issues, support economic growth, reduce inequalities and reduce poverty in Bangladesh.
Currently, Bangladesh’s economy relies heavily on sectors such as ready-to-wear, agriculture, and small and medium-sized enterprises (SMEs). However, a large infrastructure deficit in key sectors such as energy, transport, and information and communications technology (ICT) limits productivity, hinders business innovation, and creates a difficult business environment that hinders industry growth. Collectively, these deficiencies hamper the country’s economic growth and at the same time limit inclusive growth.
According to the Global Innovation Index 2021, a comprehensive report that examined the performance of the innovation ecosystem of 132 economies that was published by the World Intellectual Property Organization (WIPO), a specialized agency of the United Nations, the Bangladesh was ranked 95th in the area of infrastructure. . In terms of business environment and overall performance, the country was ranked 117 and 116, respectively. In addition, for ICT access and use, Bangladesh was ranked 103 and 108, respectively.
Addressing these bottlenecks, or infrastructure gaps, is essential to promote equal access to opportunities, improve the competitiveness of domestic industries and also increase the overall efficiency of the economy, which are all essential to achieve inclusive growth.
In practice, developing infrastructure to accelerate economic growth which tends to create decent jobs and improve access to opportunities for all segments of society (especially the less privileged) has not been a priority. walk in the park for policymakers in Bangladesh. However, China, the country’s largest investor, plays an important role in achieving this goal in the country.
Through the Belt and Road Initiative (BRI) and other infrastructure development projects supported by China, Bangladesh is expected to significantly close its infrastructure gap in the coming years. For example, a BRI project such as the construction of the 6.15-kilometer Padma Bridge Rail Link valued at $ 3.3 billion will boost connectivity across the country and throughout South Asia when completed.
Once again, the upgrading of the 48-kilometer-long Dhaka Bypass to a two-lane highway, an agreement between the China-Bangladesh consortium, will also truncate the travel time between the northern part of the country and the Port of Chittagong, Bangladesh’s main seaport – for transportation projects alone, China invested around $ 9.75 billion in Bangladesh from 2009 to 2019.
Along with other BRI infrastructure projects, China’s unwavering support to Bangladesh is significantly helping to close the South Asian country’s infrastructure gap. All of these infrastructure development projects are invaluable additions that will strengthen the much needed solution to the country’s growing energy demand, improve mobility in urban and rural areas, enhance business innovation, add value and increase productivity, especially in the small and medium-sized enterprises (SMEs) sector.
In my recent article for The Diplomat, where I explained how SMEs could drive inclusive growth in Bangladesh. I reported that in 2019, the country’s SME sector reached a total of 7.8 million enterprises and accounted for 25% of Bangladesh’s GDP. This massive contribution is a clear indication that the growth of the SME sector cannot be overlooked in the pursuit of inclusive growth.
Therefore, with China investing adequately to fill infrastructure gaps in Bangladesh, this provision will solve two main problems; while the SME sector and the economic landscape as a whole will benefit from infrastructure development to enhance innovation, foster added value and boost productivity, and ultimately promote growth that will expand economic opportunities, advancement of infrastructure At the same time, enhance access to those opportunities which ensure that low income households and impoverished communities can benefit enormously from the growth of the SME sector and other social and economic opportunities.
In fact, poor and low-income households will benefit from better connectivity to markets and other basic productive assets, which will reduce inequalities, eradicate extreme poverty and improve their standard of living.
In addition, from July 2020 to date, China has provided duty-free access to 97% of Bangladesh’s products, representing 8,256 products, a decision that presented another window of opportunity for SMEs and other entities. The country’s trade to grow as they tap into China’s colossal market.
Overall, China’s infrastructure investments and trade agreements have not only proven to be a catalyst that significantly contributes to accelerating inclusive growth that reduces poverty, alleviating the extreme inequalities experienced by poor households and low income, but also better access to education, health care and employment opportunities in Bangladesh.
Alexander Ayertey Odonkor is an economic consultant, chartered financial analyst and chartered economist with a deep understanding of the economic landscape of countries in Asia and Africa. The article, which first appeared on cgtn.com, reflects the author’s point of view.