Strategy for Growth and Employment Main Motivation

1. Strategy for Growth and Employment Main Motivation • Significance of growth as the most important enabler of development and poverty reduction • Bangladesh’s solid growth record, especially over the last 15 years. • The recognition that its future is anchored in this positive record rather than the bleakness of 1970s. • The distinct possibility of Bangladesh attaining the middle-income economy status in less than two decades

2. Strategy for Growth and EmploymentGrowth is crucial for poverty reduction • By definition, growth is a necessary condition and sometimes even the sufficient condition for poverty reduction • Many examples across the globe of countries that drastically reduced poverty levels through rapid economic growth (China and East Asian Tigers, for example). Conversely, many countries stuck in abyss of poverty because growth never took off . • Cross-country studies (Dollar and Kraay (2001), convincingly show that, on average, higher growth is equally shared by the poor. • Even in Bangladesh, higher growth and sustained poverty reduction coincided in the 1990s

3. Strategy for Growth and EmploymentA Solid Record on Growth • Growth has averaged 5% since 1990 – 3.2 percent per-capita growth. • A 60% increase in the average citizen’s income • A performance that puts it in the top quintile in the world – developed and developing • According to the Summers-Heston Database, Bangladesh ranked 91 out of 102 countries in terms of per-capita income in 1972. By 2000, its rank had improved to 78.

4. Strategy for Growth and EmploymentFuture Anchored in a Positive Record • Vastly improved initial conditions • Challenge is to ensure sustainability of past rates and then growth acceleration

5. A Strategy for Growth and EmploymentVision of a Middle-Income Bangladesh • At 4% per capita growth, Bangladesh will reach the thresholds of MIC status by 2020, or 2015 if it grows at 6.5%. • It is useful to envision what a middle-income Bangladesh would look like and work backward from that.

6. A Strategy for Growth and EmploymentVision of a Middle-Income Bangladesh • A middle-income Bangladesh would • Have shifted to the private manufacturing sector at the forefront of economic activity. An upshot is dynamic domestic manufacturing firms that are productive and competitive at the world stage • Session on “Firm-Level Productivity in Manufacturing Industries.” by Ana Fernandes • Be much more integrated into the global trading system • Session on “Enhancing Export Competitiveness for Supporting Higher Growth” by Sandeep Mahajan • Have greater regional specialization according to regional comparative advantage (this is not about geographically equally distributed growth – but more about allowing each region to converge to its own potential) • Session on “Subnational Growth Dynamics” by Binayak Sen

7. Strategy for Growth and Employment Vision of a Middle-Income Bangladesh • A middle-income Bangladesh would • Be much more urbanized and have well managed and dynamic urban centers of growth • Session on “Urban Development and Economic Growth in Bangladesh” by Somik Lall • Have more productive rural activities with substantially lower surplus labor. Commercialization of agriculture and non-farm sector growth will accelerate • Have a financial sector that enables more savings and efficiently intermediates between savers and investors • Session on “Financial Sector Development and Growth” by Thorsten Beck and Habibur Rahman

8. Strategy for Growth and Employment Vision of a Middle-Income Bangladesh • A middle-income Bangladesh would also • Have a sound macroeconomic framework that promotes price stability, is resilient to shocks, and removes price distortions. (remittances, FDI, capital account integration, • Would have much improved infrastructure – especially, a modern port/s, improved access to power, and modern telecommunications. • Have good quality institutions of higher education and technical training (importance of ideas, national leadership, technology absorption) • A middle-income Bangladesh would be a cause for celebration only if the majority participates in this progress. This means creation of productive jobs in the private sector for the rapidly growing labor force. • Session on “Performance of Labor Markets in Bangladesh” by Rushidan Islam Rahman