Our economic
growth model seems an import-driven internal consumption-based pattern
characterized by high credit growth and internal and external imbalances, and presumably heading towards resource based economy with assumption that manufacturing, as well as services, will no longer provide engine of growth. It is
an easy-go model that requires no major effort to ensue. Basically beseech,
borrow and spend (not even invest) brand that takes practically no account of accountabilities for the financial
recklessness, be it millions spent on domestic airports, education city, IT
park, massive buildings and/or feeder roads of negligible benefits to the
nation.
The economic
growth model has to be supported by comprehensive plans. It should evolve fully
responding to various challenges emerged as a result of detailed analysis of
country’s situation, strengths and
weaknesses including people-sourced details. In formulating the model, it may
even involve transforming the economic development pattern completely. Late Lee
Kuan Yew said, "Well, we are
pragmatists. If in order to survive, we
have to open up a sector, we open it up. Because the best test - the yardstick
is, is this necessary for survival and progress? If it is, let's do it. We are
ideology-free. What would make the place work, let's do it."
Let us take
the case of Bangladesh. With about $21 billion in exports in 2013 (80% of total
exports) Bangladesh has become hot spot of ready-made garments (RMGs) producing
mainly 5 items: T-shirts, sweaters, trousers, men’s and women’s shirts. There
are more than 5,000 factories employing almost 4 million workers. Some experts
forecast export-value growth of 7-9% annually and Bangladesh RMG market to
touch $45 billion (about Nu 2.9 trillion, yes trillion) by 2020. Mind-blowing
figure!
The main
factors, among others, for Bangladesh RMG boom are: (i) strong and expanding
backward linkage particularly for cotton items; (ii) domestic supply meeting
90% of fabric and 75% of yarn requirements; (iii) low labour and production
costs (in time when increasing labour costs in China started to become an
issue); (iv) easy and abundant access to skilled labour force; (v) flexible
labour market laws and regulations; (vi) price competitiveness; (vii) product diversification and upgrading;
(viii) world standard and social compliances; (ix) courageous and bright
entrepreneurs; (x) export friendly government policies; (xi) flexible financial
market; and (xii) major push for image building and market promotion.
The
Bangladeshis are working on improving transport infrastructure and energy
supply, and reducing political unrest and strikes. The three main stakeholders
— the government, suppliers, and buyers — work together. The government's top
three priorities for investment are infrastructure, education, and trade
support. It is clear, Bangladesh is on export-led development model and directs
investment and entrepreneurs towards manufacturing exports. This is how they
have been able to carve a $45 billion niche in the world market that involves even shifting RMG manufacturing base from China to Bangladesh. I envy them in
an affirmative way!
A model is a
conceptual framework devised to be used as a guide in making a diagnosis,
understanding a developmental process, and forming a prognosis for continued
future development direction of the country. It has normally five components:
(i) the identifiable state describes the stage, level, phase, or period of the
condition or process; (ii) the shift in state identifies qualities of change as
progressive, sudden, abrupt, or recurrent; (iii) the form of progression
describes patterns of development as linear, spiral, or oscillating, (iii)
the force that triggers the change or
the step in development may be self-actualization or any form of stress, and
(v) development is ultimately constrained by the fifth component, potentiality,
the genetic and environmental possibility of growth.
It is not
possible to have a dynamic economic growth model if the economy is mostly government-centric and does not enjoy the confidence of private and non-profit sectors. That is what it is,
and therefore step-by-step transformation of economy to the new growth model is
prerogative. Plans drawn off the cuff and casual commitments with foot in the
mouth by politicians do not work. The haphazard action plans/activities
formulated on the back of an envelope not only distort development resources and efforts
streamlining, but also stifles
innovation, enterprise, and enquiry into cause and effect relationships.
Without due attention to these it is impossible to interact with fiercely
competitive world. Many with vacuum of ideology, principles, purpose and
integrity may say why do we need to interact with the world? Many experts
consider North Korea, Laos, Cambodia, Myanmar, and New Guinea as east Asia's
failed states. Their one common characteristic: failure to trade and interact
with the world.
As per Economic Development Policy (EDP), Bhutan’s
economic development policy, guided by the overarching philosophy of Gross
National Happiness (GNH), is based on the four pillars: (i) sustainable
economic development; (ii) preservation and promotion of culture and tradition;
(iii) conservation of environment; and (iv) good governance.
On
sustainable economic growth alone, major challenges identified in EDP are:
(i) Economy largely financed by external aid
(ii) High fiscal deficit
(iii) Weak balance of payment
(iv) Mounting public debt
(v) Difficult to sustain foreign exchange
reserves as it is not built through exports
(vi) Small domestic market
(vii) Inadequate infrastructure
(viii) High transportation cost
(ix) Difficult access to finance
(x) Inconsistent policies
(xi) Lack of management skills
(xii) Shortage of professionals
(xiii) Low productivity of labour
(xiv) Absence of R&D capability
(xv) Access to land
The EDP
recognizes that unless these constraints are systematically removed, the
capacity of the private sector as the engine of growth cannot be enhanced.
Heavy sentence!
Our
competitive advantages identified in EDP are:
(i) Political stability
(ii) Peace and security
(iii) A vibrant and living culture
(iv) Natural and pristine environment
(v) Geo-economic location and open access
to the emerging Indian market
(vi) Reliable and competitively priced
energy
(vii) Nation of GNH
(viii) Wide use of English language
I suggest
you to put the above pros and cons on an economic growth balance and see for
yourself if these so called advantages can be classified as the country’s
Unique Selling Proposition (USP), one that is expected to build on and to
become Brand Bhutan. I will not go into geographical location that lacks credible
reasoning to term as competitive advantage. The questions are, “Are we really
up for export-led development model? Do we really want to lure credible FDIs to
achieve our goal the way Bangladesh is doing?” The optimism displayed by our
pseudo-idealists lack understanding how tough the mainstream FDI customers are!
Credible FDIs do not do emotional investment. They look for opportunities and
markets favourable to their businesses in the terms they dictate, if possible.
I am not
disparaging EDP. We are in mid-2015 and the government statement of achieving
minimum growth rate of 9% annually and striving to be a middle income nation by
2020 in EDP sounds hollow. It is not difficult to assess how much of efforts
have gone so far into the Areas of Economic Opportunities identified in EDP to
help generating wealth, employment and sustainable growth within the framework
of GNH easing above 15 challenges. Surely, we cannot be taking things so casually once we
put credibility of the nation in the forefront. Can we?
We are in high-voltage cloud
computing age enabling to put-up apps in cloud storage, and do business or launch start-up. Those
who do not realize value of internet, they can watch the world go by outside
their window because you cannot eat pixels. The internet enables the use of the
knowledge and power of community. Those who are not aware of this will
eventually reach the point where they become a cubicle Jonestown devoid of
anything resembling real-world logic.
Internet is
the double-edged killer technology. The digitization not only benefit business
in terms of product development and supply-chain management to sales and/or
marketing, but also in providing straightforward information enabling people to
interact among themselves facilitating benefits. It is possible to harness
digitization benefits and the digitization process.
On the other
hand it can ruin the foundational underpinning with superficial use of information available
in the net through application of shallow ideas and concept that are no longer
relevant to the ground realities. We tend to be heading towards this syndrome.
If you disagree with me, try talking to senior teachers how many shallow
concepts and borrowed ideas have messed up the education system. Education is
not alone. All most all sectors have applied policies and regulations that
float because those are mostly square-pegs-in-round-holes. There are numerous
ideas in the net that look good and can be downloaded free. These only help in framing superficial solutions sweeping under the carpet the real
development dilemma and parroting frivolous nationalism. The problem is we suffer from doing things easy-way
without analytical details to help structure development direction. Our
inability or refusal to grasp in-depth knowledge of the structural problems,
because we find conflicts of interest, will drive us to intellectual backlog
deficit that will be of much bigger agony than any current account deficits. While the world's money is moving into the pockets of 25-year-olds with sexy ideas, our dated start-up engine does not fire because neither it has been retrofitted/modernized nor there is fuel.
In 1960, the
American Economic Historian, W.W. Rostow, suggested that countries passed
through five stages of economic development. According to Rostow development
requires substantial investment in capital. For the economies of least
developed countries to grow the right conditions for such investment have to be
created. If aid is given or foreign direct investment occurs at Stage 3 the
economy needs to have reached Stage 2. If Stage 2 has been reached then
injections of investment may lead to rapid growth.
Rostow's Model - Stages of Economic Development
Stage 5: High Mass Consumption consumer oriented, durable
goods flourish, service sector becomes dominant
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Stage 4: Drive to
Maturity
diversification, innovation, less reliance on imports, investment
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Stage 3:Take Off
industrialization, growing investment, regional growth, political
change
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Stage 2:Transitional Stage
specialization, surpluses, infrastructure
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Stage 1: Traditional
Society subsistence,
barter, agriculture
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It is good
to know the five stages of Rostow’s Economic Development model. I do not
believe development ladder-steps are so structured and neat in reality. So we
do not need to place ourselves on one of the Rostow treads. But there is no
denying of the fact that one way or the other we need to climb the staircase
for which a conducive environment for substantial investment in capital, both
internal and external, is a prerequisite.
