The growth helix

ONCE upon a time, disasters happened to the other people, the other person in the city, the others who we didn’t know. Gradually, the circle began to close in and mishaps started happening to us only. People dying in the launches suddenly happen to be our children, our friends, our professors, and the kid next door. People being abducted and killed just happen to be our husbands, friends or brothers. Once media covered the others, today it covers us. Once the world was in the focus, today we are. The structure of public forum has expanded. Private has become public and public has effectively gone global. It’s one huge world that we belong to where politics of fear and wealth play upon our psyche and we regularly watch witch-fearing men burning women.
Bangladesh today is in world focus and as a nation we cannot isolate our existential helix. We connect to the world and the world talks back to us. It’s also a world of witch-hunt, and very often nations burn like paper cups crumpled in the hands of those have power. This is essentially a time where we watch the power of geopolitics playing a crucial role; this is essentially a time where maximum diplomacy must be invested to secure the best possible outcome. This is not a time to turn anyone away in the defense of nationalism. Post national tragedies as huge as Rana Plaza, we need as many friends as possible to muster global support.
A review of a recent Vietnamese error will possibly clear the air. Vietnam is the fifth largest textile and garment exporter in the world, having 4,000 enterprises, and having exported 20.4 billion in 2013 in textile and readymade garments, which accounts for 15% of GDP. And yet…Vietnam just made a huge mistake by playing the ultra-nationalism card. The Vietnamese government fuelled nationalistic flames by broadcasting videos of a Chinese coast guard vessel using water cannons against a Vietnamese vessel. That particular move led to 20,000 workers protesting against China in the Binh Duong province in the South of Vietnam, where more than 15 foreign owned garment and footwear plants have been set on fire. Mistakenly, many workers even burnt factories that belonged to South Koreans and Taiwanese.
China’s deployment in an oilrig in the disputed waters near the Paracel islands in the South China Sea that led to the government publicising a particular event not only fanned protests but has also affected the bigger global picture where biggest investors are today questioning their faith in Vietnam along with the proposed Trans Pacific Partnership (TPP) trade treaty which will benefit Vietnam while trading with countries like the US and Canada. For example, the Taiwanese have started calling their shots and have been pressing for an immediate solution while large companies like Nike are looking for contingency plans. I wrote the name of a company and a nation in a single sentence just because, in the globalised scenario, companies call shots in national and international issues and no sensible government should ever ignore that reality. Since geopolitical situations do lead to instabilities in supply chains and cause global concerns, it is imperative for governments to wake up to freshly negotiated terrains where the politics of global wealth outplays national politics…
I was in Madrid last week visiting a few brands. To my utter surprise, most of the stores carrying ladies wear had 90% of their products from India. Burning in rage, I bought a few blouses from the stores and have washed and rewashed them in the last 48 hours, testing the dimensional stability of the fabric and the appearance of the garments after being beaten up with rough detergents. To my utter disappointment, the garments, post-rough-wash, look fine and very, very wearable. The designs are great, the stitching is almost flawless and the handwriting of fashion is very evident all over the garment. It was only a few days ago when the president of the Apparel Export Promotion Council of India was quoted as saying that India hopes to secure chunks of business from Bangladesh and China. I am sure it does.
A 15% year on year growth in India confirms that diversifying and stricter compliance has led to this growth miracle. A few years back, we were given a duty free opportunity with India. Yet Indian stores carry their own brands with pride…mostly made in India. Exporters like ourselves have tried breaking the barriers with a few better brands in India and have sported occasional exports to our neighbour, only to discover their requirement in inspection is tighter than most of the western brands! In fact, India is currently going through a reversal phase. Today, Shri Govindaraja Textiles is investing in Rockingham County in North Carolina in textiles. SGT is the largest spinner in India with 1.1 million spindles and has a workforce of 30,000 employees. Today’s South Asia is now creating new jobs in the US!
What has actually happened to all of us in South Asia? Asian Development Outlook 2014: Fiscal Policy for Inclusive Growth — released in April — clearly states that despite positive growth, South Asia is one of the slowest growing sub-regions where the regional economy expanded by only 4.8% in 2013 with the hope of the GDP being likely to increase to 5.3% in 2014, which too is subject to successful reforms in India, the region’s major economic player. In 2013, India’s economic growth bottomed because of sudden draining of foreign investment and pressure on exchange rate. But, strong policy measures are being put in place so that India can push the growth to 8% in 2014.
And what about the rest of us in this region? Security challenges and macroeconomic issues bog Pakistan down to an expected GDP growth of 3.4% this year with an economy that has a high fiscal deficit and a low tax-to-GDP ratio of 8.5%. Both Afghanistan and Sri Lanka have a huge gap between domestic revenue and government spending. For Afghanistan, the expected GDP growth is set to be 3.5% and for Sri Lanka, it’s 7.5%. For Sri Lanka to achieve this growth rate, massive administrative policy reforms are required. However, Sri Lanka is more than likely to survive any economic challenges as exports are likely to improve in the coming years as it has been performing better with its major export partners in the EU and the US. Nepal, which has a slow GDP growth of 3.6%, is expected to do better in 2014 with a 4.5% target, provided it tames its two-digit inflation, owing to weak currency, supply-side constraints and anticompetitive practices. Lack of diversification has strapped Maldives to a 3.7% GDP growth in 2013 with an expectation of 4.5% in 2014. Bhutan, which is expecting inflation to rise to 10.2% this year, has had a decrease to a GDP growth of 5.2%.
Bangladesh happens to be facing new credibility challenges by the minute. Our identity, resolve and resilience are being tested in murky waters. There is no other option left for us but to win. While brands may be postponing orders in response to delays in implementing agreed fire and building safety standards to prevent further industrial accidents, the local scene must improve immediately. And, unfortunately, the local scene is far from being healthy. With pressures to relocate factories, gas connections are an endless nightmare. More than 200 factories are waiting for gas permissions while the 2009 restriction on new gas connection to industries still exists. Well, this is not 2009 anymore and we are in post-Rana plaza 2014 where we cannot afford to have lack of gas stopping us from setting up compliant manufacturing units. Adjustment in the national policy level seems to be crucial at this point of time unless the policy makers are ready to accept responsibility for a failure of the national economy.

The writer is Managing Director, Mohammadi Group.