Making globalisation work for Bangladesh
Why does globalisation matter to any of us?
Every day 2 million workers turn up at their garment factories in Dhaka to do jobs that link them to the UK, Europe, and America. That's where the goods they make are sold. Their jobs have come about because of globalisation; their jobs depend on it. 7 million people in Bangladesh now use mobile phones -- a doubling since last year -- with international connections growing at more than 60 percent. Two million Bangladeshis live and work outside the country and send back $3.8 billion each year.
For all latest news, follow The Daily Star's Google News channel. These are just three examples of how Bangladesh and the rest of the world are increasingly linked together.
The speed of this change can be frightening -- some want to stop it, I remember seeing a demonstration with the banner: "Worldwide movement against globalisation" --which shows some of the contradictions.
But it is not about being for or against globalisation. It is after all a human-made process -- the result of thousands of years of human activity, but greatly increasing in pace and scale in the last 100 years as a result of trade, technology, travel, and television. It is about making it work for social justice -- to increase prosperity for everyone.
The most important thing is that globalisation can bring huge benefits if managed well. It can provide the foundation needed for ending poverty. And no country in the past 50 years has lifted itself out of poverty without joining the global economy.
But if we manage it badly, we will see rising inequality and increased insecurity. I want to focus on two aspects of globalisation that are important to Bangladesh -- trade and investment. These are the most powerful forces driving globalisation.
That's why the trade talks in Hong Kong this week are so important, and why I am going to the meetings. They are an opportunity to seek agreement to greatly expand world trade -- to everyone's benefit -- and in particular for developing countries.
It is rising trade that has supported the steady growth of your economy, created more jobs and helped reduce poverty. Women, in particular, have benefited from getting jobs in the garment industry. It has helped equality in Bangladesh by getting women into the workforce, improved their position in society, reduced maternal mortality.
But more could be done to ensure that the international trading system works better for the poorest countries. At Doha in 2001, developed countries agreed to reduce trade protection and end unfair subsidies, which for the first time put the concerns of developing countries at the heart of the WTO. The UK is now working with other developed and developing countries to ensure that the interests of the Least Developed Countries (LDCs), such as Bangladesh, are taken forward in the WTO talks.
I think there are three key areas:
First, in agriculture, developed countries should cut tariffs, avoid new protection by ensuring that less than 2 percent of all products are categorised as "sensitive," cut trade-distorting domestic support by three quarters, and end all forms of export subsidy by 2010.
Second, we can do more to ensure that trade rules work better for developing countries. The right kind of Special and Differential Treatment would give countries such as Bangladesh flexibility to help them deal with change in areas crucial for good security and rural development.
There should be a simple Special Safeguard Mechanism for protecting countries from fluctuations in the volume and price of imports. And all developed countries, and the larger developing nations, should be providing the Least Developed Countries with duty and quota free access for all products.
Third, the poorest countries will gain very little from the Doha Round of trade talks unless they can build their capacity to trade. And like many other LDCs, Bangladesh will need time and help to adjust to an increasingly liberalised global economy.
So we are working to ensure that assistance is available to countries in need. G7 Finance Ministers recently agreed to increase aid for trade-related capacity building to $4 billion.
For our part DFID will be trebling our "aid-for-trade" to £100 million by 2010, and we play our part in making a success of the enhanced Integrated Framework.
The government of Bangladesh also considers these to be key priorities, and we both hope that progress can be made on these in Hong Kong.
However, there is much that Bangladesh can do to improve its trade prospects through action here at home.
As a start, a comprehensive trade strategy needs to be developed in consultation with all the major stakeholders -- government, business, civil society. And, in part, to focus on expanding exports beyond the traditional garment sector.
Despite the impressive recent growth, Bangladesh's exports as a percentage of GDP are around the lowest in Asia. You have a vibrant private sector that, with appropriate support, could quickly grasp new export opportunities. But this requires a number of things to happen.
Why is it that in Bangladesh it takes 6 to 7 days to turn around a ship, compared to 6 to 7 hours in Singapore? Why does it take 38 signatures to import items into Bangladesh but only 2 in Singapore?
Resolving problems like these requires the right policies and government action. But it is not just a matter of what the government can do. It also requires the private sector to get involved in streamlining regulation and red tape, and pushing for improvements in legislation.
A good example is the development of on-line investment applications at the Board of Investment, reducing processing times and increasing transparency many times over. It's encouraging that many of you are beginning to play this role, for instance through the recently formed Private Sector Development Task Force and Consultative Group. The Task Force has identified six key barriers that require early reform, including the duty drawback system.
One area of particular concern is in providing good and responsible working conditions. Labour standards in Bangladesh are improving but recent industrial accidents, such as at Spectrum in April this year, and the fire affecting six factories in Mirpur, in May last year, illustrate just how dangerous conditions can still be.
Bangladesh -- and its business leaders -- could do more in this area. This requires a concerted effort by all -- the private sector, NGOs, unions, and government. The UK will help in this process.
And progress in this area is not only good for workers, but improved labour standards will also help Bangladesh become more internationally competitive.
Arguably, the key economic challenge for Bangladesh is to become, and remain, internationally, competitive. This requires a host of things: building up educational and skill levels, becoming technologically innovative, improving productivity, and managing a more open market economy. A tall order for any country!
However not everything can be done at once; nor does it need to be. It's essential to prioritise. The key to increasing Bangladesh's ability to benefit from the opportunities arising from international trade is to get the investment climate right -- to give business the confidence to invest.
Foreign Direct Investment to Bangladesh is low by Asian standards, but is growing -- from $79 million in 2001 to $460 million in 2004. The Board of Investment has been very effective in attracting potential investors: there are announced plans of $7-$8 billion over the next 6 years, including some major international investors such as Cairn Energy and Asia Energy. The UK has always been a major source of investment into Bangladesh, and we will continue to encourage this.
But the global picture of FDI is highly skewed. In developing countries, FDI is concentrated in just a few of the largest economies, notably China and India. And on average, FDI represents only around 12 percent of total investment in developing countries. So, while attracting more foreign investment remains vital, it is clear that the key to progress is domestic investment.
This means getting the conditions right for Bangladeshi firms to invest more in Bangladesh. This means engaging you, the business leaders of Bangladesh.
The stakes are high -- if the investment climate in Bangladesh were to match China's then, on average, wages in Bangladesh could be 20 percent higher, return on investment 80 percent higher, productivity would double, and employment could grow by almost 5 percent. These are the sorts of results that are needed if Bangladesh is to achieve its national plans to increase growth, reduce poverty and achieve the Millennium Development Goals.
Business, whether foreign or domestic, want a business environment that is stable and predictable, supported by transparent laws, fair competition, reliable legal systems, predictable and honest public institutions, and reliable transport and communications infrastructure.
But business managers in Bangladesh consistently rank corruption, and the lack of confidence in the courts to uphold property rights, as a greater constraint than do their competitors in countries such as India, China, Pakistan, and Indonesia.
The court system makes contract and property enforcement expensive and unreliable. One prominent minister admitted that even he has been waiting to receive papers confirming his ownership of a tea garden purchased five years ago!
For the average citizen or small business person, false cases and manipulation of the legal process can make ordinary life -- let alone business -- difficult. Surveys indicate that the average Bangladeshi believes that justice -- particularly in the lower courts -- favours those who have money. Whether dealing with the police, courts, or with the land administration, reports of bribery are common.
Why does it take 363 days to register a property in Bangladesh, but only 2 days in Thailand? The chief reason -- outdated laws and overburdened courts. Property disputes account for the most case backlogs in Bangladesh's courts, often taking years to resolve.
But infrastructure is also vital.
Without power, the sewing machines stop sewing and computers and irrigation pumps shut down. There is a desperate need for investment in electricity generation and transmission in Bangladesh. The civil unrest in places like Karimganj, Shaghata, and Kalapara, in response to increased 'load-shedding', is both a worrying development and an indication of the extent of the problem. I am pleased to be able to say that have just signed an agreement to provide £50 million to support increased access to electricity in rural areas.
And without a functioning transport network and efficient sea port -- one that is free of the delays that I mentioned earlier -- exports will be unable to compete in international markets -- particularly as trade preferences are steadily eroded. DFID is supporting the development of transport infrastructure in Bangladesh, focussing on roads.
Increased investment in infrastructure will require strong donor support, and the aid commitments made earlier this year by the EU, and by the G8 at Gleneagles will help -- an additional $50 billion a year in aid by 2010.
Many of you will be aware that the UK Government has agreed up to £40 million to help Bangladesh achieve a better investment climate. We are working closely with out development partners, the World Bank, Asian Development Bank, Japan, EU and Canada on this. We will assist in the development of special economic zones, in which domestic and foreign firms will be able to secure a better investment climate.
It is encouraging to see the public and private sectors improving their cooperation, with frank discussions of Government capacity in key areas. It will be important to build on this and create better partnerships between employers and unions, and -- critically -- between the private sector and the public sector.
Another important source of money is migrants' remittances. In Bangladesh, remittances have been historically larger than FDI. In 2004 formal flows were almost $4 billion, some 6 percent of GDP, and more than 3 times greater than foreign aid. Remittances sent by migrants living in the UK and working in the Middle East are a major source of income for poor families in Bangladesh. The plane I arrived on this morning from Abu Dhabi was full of returning migrant workers, who, as they looked out of the window felt that there is nothing like coming home.
At an individual or household level, remittances directly increase income and reduce poverty. The recipient can use the money to build a house, for children's health or education, or to set up a small business. Evidence shows that in Bangladesh remittances play a really important role in poverty reduction.
For example, there is clear evidence in Bangladesh that "without access to remittances, children's access to education would have been severely limited." A rough calculation puts the amount of formal remittances that is spent on education at twice the value of Primary Education Stipends.
Remittances also play a major role in times of need. Remittances are an "emergency reserve" that provide help to households when needed. They are a form of "social security" for the elderly, and they increase in times of crisis. For instance, in the two weeks following the earthquake in Pakistan transfers to Pakistan jumped by 40 percent.
More can be done to support and expand this powerful source of "development finance." This will involve measures to reduce the cost of sending remittances, and expanding access to remittance facilities, particularly for the poorest and most disadvantaged migrants and recipients.
I had the pleasure today of signing the UK Government's Remittance Partnership with Bangladesh, which should benefit more than 4 million migrants and families over a period of 3 years, by helping to reduce costs of remitting to Bangladesh. DFID will be working closely with the Bangladesh Bank to implement this initiative.
Bangladesh is making huge progress. Fifteen years of economic growth at around 5 percent, and the reduction in poverty that has accompanied this, is an amazing accomplishment. But the progress that has been achieved faces a number of threats.
Security, in particular, is an issue that concerns all of us, and insecurity undermines confidence -- whether in the UK or here in Bangladesh. Concerns about recent violence and extremism cannot help Bangladesh.
The UK government has condemned the recent bomb attacks in Bangladesh and offers the families of the victims and the people of Bangladesh its deepest sympathy.
Terrorist attacks, wherever they occur, are not religious acts. We all know that Islam is a faith of tolerance and peace. Yet the extremists are harming Islam's image. These attacks are an attack on all of us. An attack in Bangladesh is especially felt in the UK, given our historical links and the Bangladeshi community there.
You will know that the UK has also suffered recent terrorist attacks. On July 7, bombs in London killed and injured people from 19 countries and of many different faiths -- Muslims, Christians, Hindus, Sikhs, and Jews.
The leaders of Britain's diverse faith groups have all stated forcefully that people of every faith should stand together to fight terrorism. It is time the mainstream stood up to the extremists and reasserted the true values of Islam.
Tackling these problems will take political will and courage, but we cannot allow the terrorists to succeed. We must work together to defend democracy and the rule of law in Bangladesh if the country is to develop and prosper. It is essential for the people of Bangladesh that the growing threats of terrorism and extremism are properly addressed. And a secure Bangladesh will increase the confidence of traders and investors.
In order to defeat terrorism, we also need to defeat poverty. An important way to do this is to make the most of the economic opportunities that a globalised world provides.
Asia is changing rapidly and has demonstrated remarkable performance both on economic growth and poverty reduction in the last few decades. Asia is also key to global achievement of the Millennium Development Goals by 2015.
The time is now right for all of us with a stake in Asia's future to consider how best we can increase our efforts over the coming decade to have a real impact on reducing poverty.
The UK is committed to this process and we'll be getting together with Asian governments in 2006 to look at how together we can learn lessons from Asian successes and address the risks and remaining challenges to ensure progress continues.
And here in Bangladesh we stand ready to assist government, civil society and the private sector -- working together -- to achieve this important agenda. You have a huge source of talent and experience to call upon. And you have achieved so much already.
Globalisation is an opportunity for Bangladesh -- let's work together to grasp it!