Economic lessons Sri Lanka should learn from Bangladesh

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By P. K. Balachandran

COLOMBO – The forthcoming visit of Sri Lankan Prime Minister Mahinda Rajapaksa to Bangladesh to participate in the grand celebrations connected with the 50th anniversary of Bangladesh’s independence, offers a golden opportunity to develop economic ties, an area crying for attention. The Sri Lankan Prime Minister will be the Chief Guest and deliver the key note address on one of the seven days of festivities.

Bangladesh, since 2008, and Sri Lanka, since 2009, have been enjoying terror-free existence. If Sri Lanka has put down ethnic and territorial terrorism, Bangladesh has crushed religious extremism and terrorism. Since 2008, after Sheikh Hasina came to power, Bangladesh has been enjoying political stability with agitation-politics becoming a rarity. Both Bangladesh and Sri Lanka have been using peace and stability to build up their economies, clearing the decks for enhancing economic cooperation.

The foundation for good Bangla-Lanka relations exists. Sri Lanka and Bangladesh may differ in religion, but much of their culture is shared. Both Sinhala and Bengali are deeply rooted in Sanskrit. They even share a common ancestry because Prince Vijaya, the putative founder of the ‘Sinhala race’, is said to have come from Bengal. Sri Lanka and Bangladesh both want to see South Asian unity forged through SAARC, which Bangladesh proposed and Sri Lanka has ardently supported from 1985.

However, despite the commonalities, the shared interests, the absence of acrimony, and the signing of many MOUs, the level of economic relations, has been low. Bilateral trade is between US$ 150 million and US$ 180 million. One of the reasons for this is that connectivity is poor. People to people contact and awareness of opportunities are minimal. The Dhaka-Colombo-Dhaka air fare is US$ 973, way above affordability.

Bangladesh’s phenomenal growth, especially since the advent of Sheikh Hasina as Prime Minister in 2008, should be a catalyst for Sri Lanka’s economic engagement with it. Growing at 8.1%, Bangladesh is no longer a ‘basket case’. It is now a South Asian ‘Tiger’, the fourth-largest rice producer, the second-largest jute producer, the fourth-largest in mango production, the fifth-largest in vegetable production and the fourth-largest in inland fisheries in the world.

With a good industrial climate, a friendly and development-oriented government and bureaucracy, and cheap labour (the cheapest in South Asia and 75% cheaper than in China), FDI is flowing into Bangladesh. China has pledged US$ 33 billion under its Belt and Road Initiative (BRI).

Sheikh Hasina told the World Economic Forum (WEF) in October 2019: “Today, Bangladesh offers the most liberal investment regime in South Asia – in terms of legal protection of foreign investment, generous fiscal incentives, concessions on machinery imports, an unrestricted exit policy, full repatriation of dividends and capital on exit. We are establishing 100 Special Economic Zones with one-stop service across Bangladesh. Twelve of the zones are already functioning. Two zones are reserved for Indian investors. A number of high-tech parks are also ready for technology and innovative enterprises.”

The Bangladesh pharmaceutical industry was valued at US$ 1.5 billion in 2013, but it jumped to US$ 10 billion in 2020.  The Bangladesh government gives the highest priority to developing the energy sector by committing itself to providing uninterrupted power to local industry by 2021 Bangladesh is way ahead in the use of solar energy, with 5 million households already using solar power.

Bangladesh is quickly moving to a high-value, knowledge-intensive society. The Digital Bangladesh concept has ensured 100% ICT access for people at the grassroots. As a result, Bangladesh has the fifth-largest internet user population in Asia-Pacific. There are 23,000 Multi-Media class rooms, and 150, 000 teachers are part of the Teachers’ Portal, which has put across 80,000 contents to help teachers improve their teaching. The aim is to post 900,000 contents on line. E-payments through mobile phones is the order of the day even at the grassroots level.

Existence of social services, which provide basic necessities to the masses and the liberation of women to release energies latent in the broad masses, have helped greatly in furthering development.  Writing about the reasons for Bangladesh’s transformation, Cornel University economist Kaushik,Basu said: “Bangladesh’s economic transformation was driven in large part by social changes, starting with the empowerment of women. These efforts have translated into improvements in children’s health and education, such that Bangladeshis’ average life expectancy is now 72 years, compared to 68 years for Indians and 66 years for Pakistanis.”

“The Bangladesh government also deserves credit for supporting grassroots initiatives in economic inclusion, the positive effects of which are visible in recently released data from the World Bank. Among Bangladeshi adults with bank accounts, 34.1% made digital transactions in 2017, compared to an average rate of 27.8% for South Asia. Moreover, only 10.4% of Bangladeshi bank accounts are “dormant” (meaning there were no deposits or withdrawals in the previous year), compared to 48% of Indian bank accounts.”

Bangladesh’s labour regime is conducive to development. “Although Bangladesh still needs much stronger regulation to protect workers from occupational hazards, the absence of a law that explicitly curtails labour-market flexibility has been a boon for job creation and manufacturing,” says Basu.

Sheikh Hasina tackled religious extremism and terrorism not by banning Madrasas or just shooting the killers, but by getting religious leaders and parents to instil the spirit of tolerance and the true values of Islam, tolerance, brotherhood and peace, among the youth. This ensured peace and not confrontation.

Areas of Cooperation

Bangladesh is ever ready to lend Sri Lanka its expertise in various fields. Likewise Sri Lanka has things to offer. With Bangladesh’s expertise, Sri Lanka can stop importing food items. Food imports accounted for 7.2% of Sri Lanka’s total imports in 2018. Unlike Sri Lanka, Bangladesh has reached self-sufficiency in food, including rice, having increased food production from 10 million tonnes in 1972-73 to 39 million tonnes in 2015/16.

Like Sri Lanka, Bangladesh experiences droughts and floods frequently. But Bangladesh has found ways to overcome the challenges through ‘climate adaptation techniques’.  Bangladeshi farmers in flood prone areas are using a variety of rice, which can remain submerged for seven days without getting damaged. They also use rice varieties that can withstand drought and salinity. In tackling drought, Bangladesh has been able to reduce the use of water in rice cultivation by half – from 3500 litres per kg of rice to 1800 litres. This technique can be used in the arid zones of Sri Lanka.

Sri Lanka can economize on its fish imports by encouraging inland fisheries with Bangladesh’s help. According to the Fisheries Department, the quantity imported between 2018 and 2019 was 84,463 metric tons spending Rs 32,726 million. There is vast scope for developing inland sweet water fisheries in Sri Lanka as there are many tanks in the island.

On its part, Sri Lanka can help the hotel and hospitality sector in Bangladesh grow as it has a longer and better tradition in these fields. It could help organize the Bangladesh tourism sector which is still in its infancy.

Bangladesh has opened its doors to Sri Lankan investors. A total investment of US$ 300 million has come from Sri Lanka. The LTL Group itself has invested over US$ 200 million in Bangladesh in the power, logistics and energy sectors. Around 30,000 Sri Lankan professionals are working in Bangladesh. Sri Lanka should also open its doors to Bangladeshi investment. As of 2014, only six Bangladeshi firms had been able to invest in Sri Lanka and that too amounting only to US$ 20 million, as of 2014. Bangladeshis would like Sri Lanka to be more hospitable to foreign investment.

-ENCL

 

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