Per capita GNI will have to rise above $4,046 by 2031 from the current $2,000 in nominal dollar terms to attain the status of upper middle-income country (UMIC). This will require about 8.5% growth every year in nominal dollar GNI from now onwards. Shortfall each year will increase the growth required in subsequent years. Yes, the thresholds change, but the point is to get the economy on track to UMIC status.
A lot needs to happen on both the external and domestic fronts for this to be possible. The global economy must turn around from the ongoing crises. Exporters would be unable to diversify and expand without a sustained global recovery. Covid-19 related constraints on global connectivity are likely to ease by the end of this year and a new-normal will emerge. Whatever the new normal may be, be rest assured it will present both opportunities and challenges.
Taking advantage of the opportunities and coping with the challenges will require increase in the level of investment and improvement of productivity through technological advancement. The binding constraints on investment are well known – lack of land, availability of utilities, inefficient trade logistics, regulatory complexities, skills shortage, erosion of preferences in international market access and so on. The technical solutions are known as well. The government has taken several initiatives in line with the known solutions, but implementation progress is short of what is needed to get sustained 8 plus percent growth.
Investors are interested in the economic zones in Chattagram, Narayanganj and areas around Dhaka city. They will be interested to locate in the south west region of the country after the Padma Bridge goes into operation. Delays in completing the economic zones in these areas will delay the flow of investment and may even make some investors seek alternatives to Bangladesh.
The economic zones are not a panacea. Regulations on entry, operation and exit of businesses are onerous and not always predictable. Problems related to these issues have been identified. Several reform initiatives are also underway. The challenge is to take them to the finish line.
Skill availability is another problem. We will not be able to compete in the global marketplaces without changing the orientation of our education and training system towards science, technology, engineering, and mathematics from the extremely basic level.
Managing urbanisation to reduce congestion and messiness, digital development, mobilising savings locally and from abroad and channelling them towards productive investment will be key. We also need to step up economic diplomacy at the bilateral, regional, and global levels to address a variety of threats to the sustainability of Bangladesh's development.
Achieving the upper middle-income aspiration is not impossible. Realising it in ways that leave no one behind requires major overhaul of the institutions of economic governance to leverage the state and markets.
Zahid Hossain is the Former Lead Economist at World Bank's Dhaka office