The World Bank suggests Bangladesh create an additional 10 lakh (1 million) jobs for the people who run the risk of losing employment both at home and abroad in the global financial crisis.
“At least 2 million to 2.5 million new local jobs will be needed until the global economy recovers fully, compared with 1 million to 1.1 million local job creation needed prior to the global economic crisis,” the WB said in a report “Bangladesh: State of the Economy and Policy Response to the Global Economic Crisis” launched yesterday.
At a press meet, Zahid Hossain, senior economist for WB’s Dhaka office, presented the report to journalists.
Earlier in his address, WB Country Director Xian Zhu said: “The government needs to think about precautionary measures to mitigate the impact of the crisis, especially on Bangladesh’s poor. It is the poor who are hardest hit in times of such crisis.”
Due to the global meltdown, the jute sector job loss is projected to reach 50,000 by the end of fiscal 2009, the report said. Twelve spinning mills out of 341 have been shut in the textiles sector.
“Demand for labour in the frozen food and leather sector weakened,” the WB said.
“The labour force is increasing by two million people a year. If manpower exports revert to the pre-boom era in the Middle East (up to 300,000 a year), the domestic economy will have to create jobs for another 500,000 people a year,” the WB said.
The multilateral lending agency feared layoffs in the export sectors.
The report said the Bangladesh economy has averted the first round of assaults from the global financial crisis, but recession in developed countries and a slide in global trade pose major risks to exports and remittances.
“Bangladesh has started seeing the impact of the global economic crisis and the scale may worsen quickly,” the report said.
Manpower export has slowed, while the number of migrant returnees has increased, WB pointed out.
In the first nine months of fiscal 2009 (July-March), 537,000 migrant workers found employment abroad compared to 720,000 in the same period last year.
The migrant outflow to Gulf Cooperation Council member countries has declined by 16 percent from 407,000 in fiscal 2008 (July-Feb) to 342,000 in fiscal 2009 (July-Feb).
Data shows that 13,540 Bangladeshi workers returned between December 2008 and February 2009.
According to Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), export orders have been slowing since September 2008 and experienced negative growth in December-March 2009, the WB report said.
Buyers are renegotiating prices in some cases, according to the WB report. Frozen shrimp has experienced a steep decline in prices from $5 per kg to $3.7 per kg.
Presenting the report, Hossain said the WB has three main messages for Bangladesh:
The current economic situation in Bangladesh is stable, but this cannot be taken for granted.
Recession in developed markets and slowdown in the Middle East have already begun to pose a threat to Bangladeshi exports and remittances.
Affected countries have begun responding to the crisis with monetary and fiscal expansion but Bangladesh can afford to be more strategic.
Xian Zhu said: “The government has received requests for different kinds of bailout packages. In deciding how to respond to these requests it will be important to keep in mind that the government is resource-constrained and therefore the tradeoffs would have to be made.”
“Whatever policy package the government designs, protecting the poor through new job creation and adequate well-targeted safety net programmes should remain the highest priority,” he said.
The WB suggested Bangladesh take effective stimulus measures that include strengthening social safety nets, frontloading existing projects and increasing maintenance spending, expenditure increase tends to be more effective than tax cuts.
The WB said the measures Bangladesh should avoid include new large-scale entitlement programmes, increase in public-sector wage bill, increase in subsidies to specific industries, reduction in corporate tax rates, increase in tariffs, tax amnesties for companies and interest rate ceilings.
On the constraints to a bailout package, the WB report said the government does not have adequate space to finance large bailout packages.
“There is some room for higher fiscal deficit, because of savings from subsidy provision, but it needs to be used wisely. These may not benefit the poor,” it said.
There are better candidates for spending the improved fiscal space: infrastructure, support to small and medium enterprises, microcredit schemes, health and education, safety net programmes, it said.
The WB stressed the need for structural reforms to improve investment climate.
The WB recommended immediate measures such as reassessing public spending priorities: rural and urban infrastructure, especially power sector, basic health and education.
It also emphasised support to the microfinance sector and enhancing the small enterprise fund and support to the housing finance market.
Recommending giving transit, the WB said it would promote regional connectivity and trade. It said Bangladesh could earn an additional $1.0 billion or more from exports, transit charges and port fees.
On the overall economy, the WB said economic growth is on track to achieving 5.5 percent in fiscal 2009. But in the worst-case scenario, it could be as low as 4.5 percent if export and remittances collapse in the last quarter of FY09.
Source: The Daily Star, 14 April 2009