Bangladesh in the Post-industrial World

Bangladesh’s economic performance, over the last decade, has garnered accolades from the international community, particularly from multilateral development agencies like the World Bank, which has portrayed Bangladesh as an exemplary case for economic development. From being termed a ‘basket case’, espoused by then US Secretary of State, Henry Kissinger in early 1970s; we have come quite far. Forging ahead of Pakistan and growing neck-to-neck with India in economic terms have given the country renewed hope and confidence. However, at the onset of the third decade of the 21st century, the country faces a number of structural challenges potentially impeding the medium to long term growth. These fault lines, if left unaddressed, can prove detrimental to the growth potential of the country.

Bangladesh’s growth has been spearheaded by the apparel sector, which accounts for 83% of total export and 12% of GDP, placing the country as the second largest player in the global apparel market, after China. Remittances have also played a pivotal role in stabilizing BOP conditions, generating USD 14.9 billion in terms of foreign currency inflow as of FY 2017-18.  Although tertiary sector has the maximum GDP contribution (52%), the primary sector—garnering only 18% of GDP–employs 47% of labor. Since majority of workers operating in the agriculture sector are essentially underemployed, government is keen on shifting bulk of these unproductive workers from primary to secondary sector. To this end, policymakers have adopted an industrialization strategy, aimed at maximizing benefits of the country’s demographic dividend. This has been a proven model for economic development and some of our Asian neighbors have directly benefitted from the manufacturing led growth strategy.

Disruption of the Classical Growth Model

Over the last 60 years, economic growth for emerging countries have been driven by the secondary sector. This has been the experience of the original Asian Tiger economies- Taiwan, South Korea, Hong Kong and Singapore. Asian tiger cubs comprising of Indonesia, Malaysia, Philippines, Thailand and Vietnam have had similar experiences as well. Majority of the tiger economies had started off manufacturing low margin products utilizing inexpensive labor, while gradually moving to production of high margin products. Some of the more successful economies like Japan and South Korea have eventually evolved into innovation and knowledge driven economies, contributing to major innovations and launching global brands.

Lower tier economies like Bangladesh, Vietnam and Cambodia had been the main beneficiaries of this gradual shift in manufacturing. Since 1980s, as South Korea and Taiwan have moved up the value chain, specializing in electronic components and consumer electronics manufacturing; low margin apparel industry, requiring less skilled work force, gradually shifted to countries like Bangladesh, India, Vietnam, Pakistan and China. As China has become more prosperous over the last decade or so with rising labor costs, there has been another wave of shift in manufacturing industry to cheaper destinations.

While many would have expected Bangladesh to follow a similar trajectory of manufacturing led growth like its South East Asian neighbors over the next decades, a number of technological shifts may prove inimical to future growth. In fact, the country’s growth might cascade downwards towards the negative if we fail to undertake precautionary actions.

A Tectonic Shift in the Technological Landscape

The 21st century has paved the way for automation due to growing prowess of processors. Due to technology becoming more ubiquitous in all spheres of our lives and internet connecting us all together in a common web; we have increasingly becoming more interdependent. Internet of Things, also known as IoT, is a network of interconnected smart devices that allow each separate device to interact (i.e. send or receive data) from other devices on the network. Business owned systems that can collect real time data from IoT networks can make independent decisions.

As IoT becomes more mainstream, more data would be accessible for making increasingly better decisions, eventually replicating and then surpassing human decision making capability. While super computers like Watson have already surpassed human capabilities in certain areas, with adequate supply of real-time data, many computers would have the ability to engage in machine learning to make better decisions.

The medium term impact of the 4th industrial revolution would be in terms of loss of jobs. According to The Economist magazine, 50% of jobs are vulnerable to automation. However, some industries would be more prone to automation, particularly for the sectors with repetitive jobs, where AI powered robots would easily replace humans. The OECD released a list showing the likelihood of roles, within specific industries, becoming obsolete or automated.

The apparel sector jobs have high risk of getting automated, which will significantly curtail the cost competitiveness of Bangladeshi apparel. As long as the initial investment can be justified for automating operations, many investors will opt for robots in place of more troublesome human workers. Many international apparel buyers would also prefer purchasing apparel either from their own country or from a country closer to their markets as labor costs become irrelevant. A number of apparel manufacturers have already setup fully automated factories armed with Sewbots, which can independently sew clothes based on specific instructions. Automated factories require 70-80% less number of workers compared to comparable semi-automated factories. A human sewing line can produce up to 669 t-shirts in 8 hours, while a sewbot based production line can produce 1,142 t-shirts during the same period. As more apparel factories take up sewbots, the average cost for manufacturing these robots will keep decreasing, making them more commercially viable. This will eventually lead of job losses for apparel workers due to automation and exodus of international investments to more developed markets.

Bangladesh’s remittance earnings may nose-dive, as basic jobs like food preparation, construction, and cleaning, driving and agricultural labor have higher risk of getting automated. A significant portion of expatriate workers staying in Middle-East are engaged in the aforementioned jobs.

How to move ahead?

The upcoming challenges in the next decade can have a permanent damage on the country’s economic fabric, particularly due to overdependence on apparel manufacturing. While there’s no easy answer to these impending challenges wrought about by the 4th industrial revolution, policymakers must eke out long term strategic shifts for diversifying the economy. Education would play a critical role in equipping the work force to adapt to the technological upheaval. As aptly stated by a renowned futurist- ‘The purpose of education in the 21st century would be to distinguish oneself from a machine’.

The work force must develop skills which can’t be replicated easily by robots. These include fostering creativity, problem solving ability, Leadership and people management skills, critical thinking ability, adaptive learning etc. The nature of jobs will keep on changing and workers need to unreal and relearn new skills. Universities of the future would be keen on equipping students to excel at the art of acquiring new knowledge and learning novel skills.

Bangladesh must find ways to ride the service growth bandwagon, driven by the ICT sector. While traditional outsourcing services will eventually get automated, the local ICT sector must find a profitable niche in the KPO based market segment that should require creativity, originality and heavy human involvement. However, large group of semi-skilled and un-skilled workers may become unemployable and would likely require large-scale retraining initiative from the government for staying in tune with the market. The country’s future might not be cataclysmic, but the eventual technology led economic turmoil might prove to be a major dampener to the country’s future growth, unless concerted attempts are undertaken by the government and relevant stakeholders for stemming the tide of the 4th industrial revolution.  

This has been published as part of LightCastle’s anniversary publication. You can download the whole document from here:

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