From brick-and-mortar economy to startups
Cambridge University economist Edward Austin Gossage Robinson, who attended the International Economic Association’s first country-specific conference in Dhaka in 1973, did not hide his pessimism about Bangladesh’s declared economic policies within a “socialist framework”
A huge establishment of jute industry abandoned by West Pakistan's first generation industrialist family was what newborn Bangladesh was left with in December 1971. Before independence, Pakistan's military rulers pursued a two-economy policy to exploit East Pakistan. So the private sector did not have the skill, knowledge and maturity to manage and run those factories.
It was the period of the bipolar world in 1971. The world's economy was broadly divided in two camps – capitalist and socialist, and hostility of the US towards Bangladesh's Liberation War forced the government of Bangabandhu Sheikh Mujibur Rahman to look at the socialist bloc led by the USSR for assistance in many sectors.
Population growth was feared to outpace food output and managing the two was the top priority in the country's first five year plan (1973-78). While the plan was almost finalised, leading economists of the time sat for a brainstorming session with reputed economists of the world from diverse schools of thought – capitalist, socialist and mixed – to devise a future roadmap for Bangladesh.
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Establishing large-industries was a distant dream for Bangladesh at that time with a war devastated economy. The country's immediate focus should be on agricultural growth to feed the millions and agro-based small industries to employ unskilled workforce, they concluded.
Cambridge University economist Edward Austin Gossage Robinson, who attended the International Economic Association's first country-specific conference in Dhaka in 1973, did not hide his pessimism about Bangladesh's declared economic policies within a "socialist framework".
"I cannot see probable Bangladesh economic policies being very attractive to the United States…I cannot see the capital inflow that would be necessary for a brave plan becoming available without American aid."
Prof Rehman Sobhan, then a member of the Planning Commission, was not very optimistic about the success of industries under state management.
Large-scale industry only accounted for 6% of GNP in those days. Till then, 620 enterprises with assets valued at Tk377 crore were brought under state ownership or control. The enterprises included jute, textile, sugar, fertiliser, pharmaceutical, chemical and steel.
"Any serious deficiencies in the organisation and management of the state sector in Bangladesh would have inevitable repercussions on the modern industrial output," Prof Rehman Sobhan warned in a paper presented in the conference.
The concerns of the economists – from both home and abroad – were to be proven true later given the present state of the state-owned mills. A state-owned sugar mill produces sugar that costs Tk306 a kilogram, five times the market price.
Private sector now runs the show
The private sector-led economy has been the order of the day since the 1990s and over the last three decades the private sector has emerged as the main driver of growth and employment.
From a humble start in early '80s, the clothing sector now accounts for 84% of Bangladesh exports mostly to Europe and the USA. It is the largest employer in the manufacturing sector, giving women an opportunity to live with honour. After meeting 97% of domestic demand, Bangladesh's pharmaceutical industries now export medicines to many countries. Though the government almost washed its hand off the jute sector, private entrepreneurs have developed a niche market for products made of the natural fibre.
Bangladesh is now capable of meeting the demands for cement and steel locally for construction works. The private sector is also making its mark in electronic, electrical and engineering products, and local motorbikes are now keeping pace with imported ones.
A booming middle-class offers a hungry market for consumer products luring multinationals into Bangladesh. The government now offers land and tax incentives for high-end electric car makers.
Electricity coverage was 6% just after the country's independence. Now 97% people have access to electricity with upazilas after upazilas being declared under 100% coverage. Solar lights are replacing kerosene lamps in remote chars now.
Apart from offering comfort in living, electricity has revolutionised the rural economy as well powering small business enterprises and expanding self-employment.
Access to electricity and the Internet now connects the remotest of the villages to the whole world, creating a ground for a new mode of business known as start-up.
Gig economy in the making
It sounds like a micro venture, but holds immense potential to be a global player from anywhere.
A startup can be set up by one or more individuals to produce unique products or services and bring it to market. It requires more innovation than money to start with and grow from there. If one has the creativity, he or she can set up a startup on a shoestring, with initial funding from personal small savings and support from family and friends.
Here the quality of education becomes of great importance. Two new terms – re-skilling and upskilling – are frequently thrown about nowadays, particularly during the Covid-19 pandemic time. Our education systems and curriculum need a complete overhauling to create new skills for this new type of business.
We have one of the world's largest youth populations, but with investment slowing, the private sector is unlikely to absorb millions of jobseekers every year. We need to cash in on our demographic dividend before it phases out in the next 30 to 40 years.
Sajid Amit, associate professor of the University of Liberal Arts Bangladesh, sees great promise for startups, which, he believes, will promote the gig economy. Youths will not need to spend half their lives searching for permanent jobs. They will get to work on short-term contracts and in freelancing. "I see more and more university students doing part-time gigs as photographers, content creators, bloggers, or even third-party Facebook page administrators."
Ridesharing, on-demand delivery of food and almost all household needs, health-tech, fintech, ed-tech are becoming part of services. All these are startups that are growing into nationwide networks with global links. bKash, Uber, Pathao, Food Panda, Shohoz are some names in the startups that have created a large gig economy. Elaborating, he says, Pathao has three lakh riders, captains, foodmen and delivery agents – a platform that links 30,000 e-commerce merchants and 5,000 restaurants, apart from employing 300 people directly.
Startups directly employ 1.5 lakh people linking seven lakh service providers, says Venture Capital and Private Equity Association of Bangladesh.
Traditional collateral-based high-interest bearing bank loans are not suitable for this type of business. So, crowdfunding has been seen as an alternative funding source for startups. It is a concept of financing a new business with small amounts of capital from a large number of individuals. "Due to lack of policy benefits, the issue has not yet found an institutional basis in Bangladesh. It is important to create a crowdfunding framework in the country now," says Shawkat Hossain, general secretary of the association.
Soft skills and communication competencies are also required to do well in startups, says Rahat Ahmed, chief executive of Anchorless Bangladesh.
Of late, the government has incorporated startups in its policy at a time when 80% of startups were estimated to take the blow of pandemic-induced shutdown. State minister for ICT Zunaid Ahmed Palak said the government provided Tk50 crore for startups under Startups Bd Ltd venture. Startups will create one million jobs by 2021, he hopes.
Mobile phone operators like Grameenphone and Banglalink, and private universities including North South University are coming up with products and initiatives to promote startups.
Will hi-tech take away our jobs?
It will and won't. Both are true. Robots will replace humans, like auto rickshaws are replacing muscle powered rickshaws, pick-up vans replacing carts pulled by humans or bulls, mechanized boats throwing many boatmen out of jobs. Some jobs will perish, some new jobs will be created. Those who once made a living repairing kerosene lamps are now repairing solar panels, fixing electric wire or gadgets.
Some jobs will be lost. But the Luddites will not have their day anymore like in the early 19th century England when artisans protested against machines that replaced threshers and looms leaving many without jobs.
Now several million workers, mostly women, are running machines in Bangladesh's apparel factories to produce garment for the world. Weavers are also surviving in Sirajganj and Rupganj with their looms.
We cannot afford to oppose machines. We need to build new skills and learn to use those for more productivity.
Will technology make the world more unequal?
If so, inequality needs to be redefined. Battery-run rickshaws are not allowed in cities and towns. They operate on rural roads, relieving pullers of inhuman labour. Battery here gives the poor rickshaw-puller some comfort, bringing some equality with an automobile driver. Machines make odd jobs like digging mud, felling trees, lifting weights easier, reducing risks of injuries and deaths of workers.
Education Minister Dipu Moni told a webinar organised by The Business Standard that the education curriculum will go through a massive change and a modular system will be introduced to impart short courses and create new skills required both at home and abroad.
We may hope this will come true and stop youths from spending half their working life for an expensive university degree which turns unproductive in most cases. A need-based training on emerging skills will enable many youths to start earning much earlier and protect their parents from putting money into higher education with uncertain return.
Every crisis creates some opportunities. Covid-19, while confining people indoors and shutting businesses and slashing jobs, the 'work from home' experience gives a further boost to startups. The first coronavirus infection in Bangladesh was detected in March weeks before our Independence Day, and now we are nine months into the crisis.
We had fought a nine-month war to victory in 1971. On the 50th Victory Day on 16 December 2020, may we have another victory over the global pandemic ahead of others.
