Economic growth needs to be more closely linked to the rural economy: KAS Murshid
We should be a little humble - we must understand that although we have done well, so have most countries of the region: KAS Murshid
Dr Khan Ahmed Sayeed Murshid is a prominent economist, researcher and academic who is well known for his analytical clarity and intellectual integrity. Currently he is serving as the Director General of Bangladesh Institute of Development Studies (BIDS). Dr KAS Murshid talked with Atiqur Rahman Khan of The Business Standard on various issues facing the Bangladesh economy.
TBS: How do you narrate the poverty situation of Bangladesh?
KAS Murshid: First, the progress in poverty reduction has mainly been the result of growth – the growth that was widely distributed. The main sources of growth – agriculture, garments and remittances – were closely linked to the rural economy where the majority of the poor lived. This growth was broad-based enough to have a strong impact on poverty reduction, mainly operating through higher real wages. The low-income groups including farmers, labourers and women have contributed to this growth.
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But the link between growth and poverty reduction is slackening – and this is a worry. Agriculture is slowing down, women's employment in RMG is slowing down – mercifully, remittances are continuing to post respectable numbers.
There are various reasons for slowdown of growth in the agriculture sector: agriculture requires more investment in technology, diversification and modern value chains – while the trends are positive, the pace remains inadequate to deliver the kind of growth that we witnessed in earlier periods.
Another reason for slowdown of growth is the introduction of new technologies to industries, especially in the garments sector, which are actually displacing the labourers, female ones in particular. This could be temporary, because with the arrival of new technology, displacement of labourers can take place initially. Ultimately, it will leave positive impacts on the whole sector. We are now at the early stage of that phase. But we must expect to see more and more disruption due to technology, and prepare ourselves to face those.
The third factor is macro economy stability. There are many cracks here and concerns are rising. Everyone seems worried about the banking sector it seems except the Bangladesh Bank and the Finance Ministry. Perhaps there is some over-reaction from think tanks but it is clear that increasingly economic policies appear to be held hostage to political expediency and interest-group machinations. In the interest of development of an independent, strong, dynamic capitalist sector, such type of crony-driven policies need to be shelved. Unless this happens, I fear that we will not make it to our stated goals for 2040 or even 2030. Many a country in this region floundered - Philippines for one, because cronyism took over and drove out entrepreneurship.
We must not behave as if we have unlimited resources to play around with. We do not have that luxury. Public expenditures must be accountable and spent intelligently, with due care and efficiency. Only then people will have the incentive to gladly contribute to the coffer by paying their taxes. Only then public investment will be sustainable.
Another weakness is the poor private sector response - it appears that the 'robber baron' approach of a few is destroying the market confidence of those genuine investors, especially SMEs who are failing to respond to potential opportunities. There are lots of paper initiatives for SMEs as well as institutions meant to promote their growth – but alas the results on the ground are dismal.
TBS: The contribution of agriculture to GDP is decreasing whereas 41 percent of the total workforce are engaged in the sector. So, a large number of workers are engaged in low productive jobs. With this architecture of the economy, is it possible to become an upper middle-income country?
KAS Murshid: The difference between the wages of labourers in rural and urban areas has decreased, but productivity is still low. This problem will remain until our agriculture enters into more higher-value sectors. This is now the challenge. We must embrace new technologies for production, distribution, storage and resource management. However, the problem of employment will remain – and not just in agriculture. I feel that in terms of growth and per capita incomes, we are on track to becoming a higher middle-income country but this will be of little comfort if this is accompanied by huge disparities and large unemployment levels.
TBS: We are talking about our development narratives in glowing terms, but even a cursory look at Dhaka city reveals congested roads, ill-clad rickshaw pullers, chaotic traffic and overall indiscipline. How do you explain this development?
KAS Murshid: First, on urban poverty – there is no question that it has come down very significantly, at least in income terms. Other urban issues remain – water-sanitation, housing, health, morbidity and so on. Secondly, on our traffic – we reap what we sow. We need massive investment in cheap, efficient, fast public transport – Kolkata is doing it so why can't we? There is massive governance failure in this sector that needs to be resolved first. We must also move towards smart solutions and phase out fossil-fuel driven vehicles, introduce cycle-paths, clear footpaths, and tax vehicles entering busy roads. There are solutions. The question is, do we have the will to go for those?
TBS: Could you please shed some light on the issue of shared prosperity? The bottom 40 percent has grown significantly in Asia.
KAS Murshid: Inequality has increased to a worrying level. I already said that more attention to agriculture and rural development will have a positive effect. Similarly, we must facilitate the growth of SMEs. Ultimately, people at the individual level worry about access to opportunities and resources. As long as access is based on fair criteria (and not on nepotism and corruption), there is no issue. Unfortunately, when inequality is compounded by a perception of systemic institutional bias, lack of transparency and considered unfair – we have a serious recipe for disaster.
TBS: Who are poor actually? In the current system of poverty assessment, the garments workers are not poor despite their miserable life style, low-living standards, and hard-working conditions. Do you think it is a fair assessment?
KAS Murshid: This is a relative measure. Are garments workers better off than before? Yes. Still they are poor if we consider multi-dimensional of poverty – poor nutrition, housing, health, education, and water sanitation. These dimensions must be addressed gradually. In my view, housing should be high on our list of priorities for the urban poor.
TBS: Our life expectancy is more than 72 years now? Do you think the figure is believable?
KAS Murshid: We must accept the figure unless we have evidence that this figure is not correct.
TBS: Any final words?
KAS Murshid: I have always been optimistic about Bangladesh – I believe as a people, we will do the right thing ultimately. Today, my main worry is not about the economy so much – our indicators still remain respectable and on track. I am much more worried about the emerging geo-politics in our region. Although Bangladesh is a 'progressive, secular' nation, these values have eroded away from our neighbourhood. We are in fact surrounded by potentially hostile forces that are primarily medieval, religio-fanatic in their makeup. This makes it difficult to contain extremist elements within our own country. On another note, India is consistently failing to deliver on its promises while we have opened up to them in good faith. In addition, we are straddled with Myanmar nationals on our borders – an unsustainable situation, while the NRC issue in India – despite 'assurances' has the potential to cause further destabilization in this region. At the end of the day, we will have to safeguard our own interests ourselves – no one will come to our aid when the chips are down. Our leaders must plan accordingly.
TBS: Thank you very much.
KAS Murshid: Thank you.
