Deep in the winding alleys of a Dhaka slum, business was booming. Rafiq, an entrepreneurial 12-year-old, was selling snacks out of a makeshift food cart – and his customers couldn’t get enough.
On a foggy winter morning in Dhaka, 41-year-old Jahid was sipping tea by a roadside stall.
“Life was very peaceful back in my village,” he reminisced, “but there was no work, so I moved to Dhaka. Even if I live in a slum, my children are better off here.”
Jahid is one of the 500,000 people that move to Dhaka city each year. Driven by the promise of economic opportunity as well as poverty in rural and coastal areas, it is estimated that half the population of Bangladesh will migrate to urban areas by 2030.
Urbanization can be catalyst for growth. Density – the clustering of firms and workers – can drive productivity, innovation and job creation. It is the benefits of agglomeration that once drew the country’s most important industry – the ready-made garments sector to Dhaka city.
However, it is the costs from congestion that are now pushing factories away, mainly to peri-urban areas. Why are factory owners leaving?
For starters, the tide of new migrants has overwhelmed urban infrastructure, basic services, as well as the stock of affordable housing – eroding the both the livability and competitiveness of Dhaka city. A recent World Bank report described South Asia’s urbanization trajectory as “messy and hidden” – reflected in the large-scale proliferation of slums and urban sprawl.
While extreme poverty has diminished, however, the gap between the richest and poorest countries has increased dramatically. In 1776, when Adam Smith wrote The Wealth of Nations, the richest country in the world was approximately four times wealthier than the poorest. Today, the world’s richest country is more than 400 times richer than the poorest.
What separates them?
One answer is knowledge, diversification and the composition of exports, all areas in which foreign direct investment (FDI) has an important role to play.
FDI matters, but not all FDI is created equal
While FDI is important for economic growth, not all FDI is the same. One way to differentiate is by an investor’s motivations using a framework established by British economist John Dunning:
- Natural resource-seeking investment: Motivated by investor interest in accessing and exploiting natural resources.
- Market-seeking investment: Motivated by investor interest in serving domestic or regional markets.
- Strategic asset-seeking investment: Motivated by investor interest in acquiring strategic assets (brands, human capital, distribution networks, etc.) that will enable a firm to compete in a given market. Takes place through mergers and acquisitions.
- Efficiency-seeking investment: FDI that comes into a country seeking to benefit from factors that enable it to compete in international markets.
This last category – efficiency-seeking FDI – is particularly important for countries looking to integrate into the global economy and move up the value chain.
Recently, an undergraduate engineering student from Khulna University of Engineering and Technology (KUET) in Bangladesh showed me his mobile app that helps a blind person navigate while enabling family and friends to track their whereabouts. I was impressed with his capacity to apply electronics, geographic information system, and programming knowledge to develop a real-life solution.
Like this student, the ability to innovate harnessing existing talent and infrastructure already exist in Bangladesh. Leading universities, like Bangladesh University of Engineering and Technology (BUET), KUET, Bangladesh Agricultural University, and University of Dhaka already have analog fabrication labs for molding, casting, wood and metal workshops and robotics. The BUET even has a 3D printer, although it is an early version. What is missing is a transformation from analog to digital to improve precision, design, and speed of fabrication and prototyping, a market-oriented product development, and multi-disciplinary teaching, learning, research, and entrepreneurship to advance innovation.
A local innovation ecosystem has also been emerging. Last year, the first hardware startup competition called “Make-a-thon” (website and video) connected young entrepreneurs, industries, and professors to jointly make solutions. BRAC has also organized a 36-hour hackathon event called “Bracathon” to provide a platform for the youth to make mobile applications for social innovation.
To foster innovation and university-industry partnership, the Higher Education Quality Enhancement Program (HEQEP), have been supporting Universities with an Academic Innovation Fund (AIF). To accelerate this effort, the project team organized a workshop on the digital fabrication laboratory (Fab Lab) potential to introduce Fab Lab concept.
Bangladesh has a major opportunity to address one of its most pressing development challenges: creating 20 million new jobs over the next decade. And the trade agenda will be a centerpiece of any strategy that seeks to address this challenge.
Join me for a Facebook Q/A chat on January 28 to discuss this and other findings from the recently released report Toward New Sources of Competitiveness in Bangladesh co-authored with Mariem Mezghenni Malouche.
Below are some 4 highlights from the report, which we will be discussing. I look forward to your questions and a vibrant discussion!
- Bangladesh will need to expand its linkages with neighboring countries such as China and India as well as other Asian countries like Japan and South Korea. Not only are these very large markets, they are also potential sources of greater foreign direct investment. What are the critical steps that will allow this to happen? How can the recently signed Motor Vehicles Agreement between Bangladesh, Bhutan, India and Nepal help? What are the barriers to Bangladesh’s venturing into new markets?
- Bangladesh will need to gradually diversify its export base into new product areas while also strengthening its position as the second-largest garment producer in the world (after China). Our report explores the critical challenges that could allow this to happen. In your view, what challenges lie ahead if Bangladesh tries to diversify its exports? Can you name some prospective industries (for diversification)? What will be the role of foreign direct investment in this diversification? What kind of reforms are needed to attract more domestic as well as foreign direct investment?
When my team and I saw this boat passing by us in July 2013 in rural Bangladesh, near the border with Mizoram, Northeast India, and Myanmar, I felt immediately empathic.
How many people are on that boat? Eighty? Does it have a motor? Can those people swim, especially the women? No lifejackets! I wondered how long their trip was, and then I thought: What if they needed a bathroom break? Memories of my family's escape from Vietnam by boat in 1981 flashed back—34 refugees jammed into a traditional fishing boat normally home to a family of seven, with no motor, no life jackets, and no toilets! We floated around the South China Sea and Pacific Ocean for 16 days. Most of us could not swim, certainly not the women and girls.
In 2015 the world saw great momentum for climate action, culminating in a historic agreement in December to cut carbon emissions and contain global warming. It was also a year of continued transformation for the energy sector. For the first time in history, a global sustainable development goal was adopted solely for energy, aiming for: access to affordable, reliable, sustainable and modern energy for all.
To turn this objective into reality while mitigating climate change impacts, more countries are upping their game and going further with solar, wind, geothermal and other sources of renewable energy. As we usher in 2016, these stories from around the world present a flavor of how they are leading the charge toward a climate-friendly future.
1: Morocco is rising to be a “solar superpower.” On the edge of the Sahara desert, the Middle East’s top energy-importing country is building one of the world’s largest concentrated solar power plants. When fully operational, the Noor-Ouarzazate power complex will produce enough energy for more than one million Moroccans and reduce the country’s dependence on fossil fuels by 2.5 million tons of oil.