It has become fashionable for politicians, civil servants and donors alike to talk about the growth potential of this country. But like the trees need the sun to grow, Bangladeshis need energy to be productive. Bangladesh with a GDP per capita income of less than US$ 800 is categorised as a “Least Developed Country” by the UN General Assembly. According to the 2005 Millennium Development Goal (MDG) jointly published by the Government of Bangladesh and the UN Development Program, Bangladesh aspires to become a middle income country by 2021. To achieve this status, the GDP per capita income must rise to a threshold of US$ 4,000. According to the MDG, Bangladesh is committed to reform and develop a few key infrastructure sectors two of which are power and telecommunications.
Back in 2001, less than 1 in 10,000 Bangladeshi people had access to a telephone; in 2011, that figure grew by a factor more than 65 times when 53 people per 10,000 had access. However, over the same period, the power generation capacity of the country increased by a factor of 1.5 times from 4000MW to 6000MW. The GDP per capita income went up from around US$ 370 to US$ 750 or a factor of 2. Thus it is safe to discard claims from a decade ago from certain quarters that increased tele-density would result in a significant (even exponential) growth of the economy. Instead, the facts show that in the case of Bangladesh, the influence of the telecom sector growth is almost insignificant compared to that of the power sector.
A few local telecom companies sprouted with a promise to utilise and develop local technical know-how and expertise and utilising the pool of science and engineering graduates. The lack of billions dollars in the local financial market needed to build an adequate telecom infrastructure meant that they were quickly acquired by wealthy foreign multi-national operators. What started as Grameen Telecom became Grameenphone owned by TeleNor of Norway; Sheba Telecom became Banglalink owned by Orascom of Egypt; Aktel became Robi owned by Axiata/AirTel of Malaysia/India etc. Since Bangladesh lacks the technology to build telecom equipment, foreign technology and service is now sold to millions of local consumers leaving behind little or no added direct economic value for Bangladeshis.
GDP of Bangladesh went from being 45% agro-based in the 1970s down to 20% in 2009. The service and industrial sector evolved significantly and now account for 50% and 30% of GDP respectively. Since real “wealth-creation” comes from production, the MDGs can only be met by rapid industrialisation. At the core of any production or manufacturing industry lies their need for energy. Thus, Bangladesh literally needs power to grow into a middle income country.
A plot of per capita energy consumption vs GDP per capita income based on data published on the internet by the World Bank and the CIA World Factbook shows that there is a direct relationship between a nation’s energy consumption and the income of its population. Furthermore, the current energy consumption of Bangladesh needs to increase from 17W per hour per person to 120W or by a factor of 7 in order to become a middle income country in the next 7 years.
Bangladesh should take active steps not to repeat the mistakes made with the telecom sector in the inevitable development of its power sector. Instead of jumping on the bandwagon of immature, inappropriate and expensive cutting edge renewable energy technologies such as solar power, Bangladesh must choose the path which will best help meet its energy demand to meet the MDG. Investment should be made on upgrading the electricity transmission lines and clamping down on systemic losses from poor electricity distribution equipment used in the public and private sector.
Unlike telecom equipment, high power electrical equipment production requires less sophisticated engineering technology. Bangladesh already has a handful of indigenous manufacturers who are able to meet the demands of government run electricity agencies such as BPDB, REB, DESCO, DPDC etc, as well as that of the private industrial and service sectors. Government policies should focus on nurturing and actively growing local engineering, manufacturing and management skill sets. There are growing opportunities to set up collaboration between government, academia and industry for R&D. This will not only accelerate the growth of local industry and reduce dependence on foreign expertise by creating skilled workers, but also save foreign exchange, act as “deemed export” and effectively retain the bulk of wealth and benefits for Bangladesh. This will in-turn help seed new – higher value – export industries.
Garments and textiles industries have shown that the local labour force can be trained to be a well disciplined and productive force which can be employed to generate billion dollar export revenues. The local leather and ship building/breaking industries are also examples of this. What is lacking, however, is the absence of middle management skills in the country: many of these factories and most multi-national companies employ foreign managers. Thailand and Malaysia – both middle income countries – derive a large portion of foreign exchange from the well planned, delegated and executed electronics assembly lines. In Bangladesh, the culture of “one man show” – a serious cultural barrier and ailment – must make room for employee education, empowerment and recognition. People must be made to feel proud of their own capability and given feedback on areas that require improvement. With these simple changes combined with the provision of adequate power supply, the huge population of the country can be transformed from an army of consumers of imported goods to one that is self confident and self reliant.
Another major factor that works directly against the interest of local manufacturing industry is the out-dated tax policies of the country. One is confounded by the heavy taxes – a legacy of the British Raj perhaps- on raw materials such as copper and silicon steel which are used in producing key elements of high power electrical equipment. Since these factories also require meticulous labour intensive manufacturing processes, Bangladesh with abundant low cost labour should have an inherent advantage. But thanks to adverse pre- and post- production taxes, these industries have little or no such advantage over a foreign competitor. Although the British left these lands over half a century ago, it is a pity that Bangladeshi bureaucrats regard themselves as the masters of a population that can be so much more productive. A careful analysis will show that increased tax revenues from the income taxes of local workers would over shadow the revenues from the damning import taxes on industrial raw materials. Local companies will be able to export their product to the surrounding Indian states paving the road for another export income.
Electrical power infrastructure manufacturing technology is a key to industrial growth in Bangladesh. Bangladesh needs to increase electricity generation, transmission and distribution by a factor of 7 in the next 7 years to meet the MDGs. Developing national engineering skills are essential for growth, deployment of qualified and talented young population, creating and conserving wealth and opening up new export oriented industries. Bangladeshis can do more than just make shirts or serve as global janitors. It is possible to create a locally owned, well managed and operated engineering manufacturing facility of international standards but the mindset must change quickly from one of micro-management to one of delegation and accountability. Adverse import taxes on industrial raw materials must be removed. Forming a collaborative platform between academia, national research facilities and industry – a tried and tested vehicle for cost effective innovation – will lead to global competitiveness. Planned and executed well, these actions will indeed unleash Bangladesh’s power to grow – both literally and metaphorically.
Shabbir A. Bashar is an electrical engineer by training and is currently a Director at a leading transformer and sub-station manufacturing company in Bangladesh.