Focus on human resource, exports diversification to avoid middle-income trap: Experts

To avoid the middle-income trap, experts have advised that Bangladesh focus on skill development, export diversification, adaptation to climate change, investment in digital infrastructure and increased use of renewable energy.

Despite significant progress, Bangladesh faces challenges in transitioning to a middle-income country, and to tackle these challenges and transform into a high-income country, further investment is required in these areas, speakers said at a seminar organised jointly by the Asian Development Bank (ADB) and the Economic Relations Division (ERD) on Tuesday.

The seminar was held at the InterContinental Dhaka to mark 50 years of partnership between Bangladesh and the ADB. Prime Minister Sheikh Hasina inaugurated the celebration. ADB President Masatsugu Asakawa, who is in Dhaka on the occasion, said that Bangladesh has made significant progress, particularly in the past decade. Bangladesh is on the path to transitioning from a low-income to a middle-income country. However, there are still many challenges ahead. In particular, he stressed the need for investment in human capital, green investment, digital infrastructure and development of transport systems.

Bangladesh Bank Governor Abdur Rouf Talukder said Bangladesh has made achievements in poverty alleviation, women's education, population control, women's employment and economic growth. Besides, it has also shown success in coronavirus management.

Owing to increased demand post-Covid and the Russia-Ukraine war, Bangladesh has recently faced some challenges, he said, adding that high inflation, a volatile exchange rate and a high interest rate are now the country's major challenges.

Abdur Rouf Talukder said the government has taken various initiatives to control inflation. Exchange rates will be market-based by July. And the work of creating an interest rate corridor has started. As a result, it is expected that these problems will be solved soon.

He said that despite all this, it is difficult to avoid the middle-income trap. For this reason, the government has begun work on a priority basis. First priority is given to the cottage, micro, small, and medium enterprises (CMSME) sector.

Apart from this, the governor said, the government has placed special importance on financial inclusion, the digital economy, investment diversification, enhancing productivity and addressing climate impact. As a result of these initiatives, the country is expected to become a middle-income country in 2031 and a high-income country in 2041.

There is a lot of demand for investment in these areas. Global institutions must come forward to meet this investment demand, he added.

In a keynote presentation, Professor Yasuyuki Sawada of the University of Tokyo said Bangladesh has shown miracles in development through massive microcredit, the expansion of the ready-made garment sector and massive investment in the infrastructure sector.

He said now Bangladesh's challenge is to deal with the impact of climate change and retain the export market. If this is not done properly, it may fall into the trap of a middle-income country like Indonesia, the Philippines or Thailand.

Brazil, Colombia and Mexico are in a similar situation. That is why Bangladesh has to fix the importance of financing. In particular, funding should be increased for digital infrastructure, export diversification and human resource development, added Professor Yasuyuki Sawada.

In a separate keynote presentation, Professor David Hulme of the University of Manchester said Bangladesh needs to ensure green growth and initiatives to avoid falling into the middle income country trap.

For this, he said, the trade policy should be revised, new types of export products have to be created and skills should be developed.

Kenichi Yokoyama, Director General of the ADB's South Asia Department, said that to avoid falling into the middle income country trap, Bangladesh needs to increase its tax-to-GDP ratio.

Among others, Prime Minister's Principal Secretary Tofazzel Hossain Miah, former President of MCCI Nihad Kabir and Professor Saleemul Huq of Independent University spoke at the seminar.