Vietnam has attracted major manufacturing and export-oriented industries that have relocated from China as the US-China trade war heated up. This process further accelerated during the COVID19 pandemic in the year 2020. As a result, Vietnam is now labeled by many analysts as "The Newest Asian Tiger". Bangladesh, too, has attracted export-oriented garment manufacturing industries. Can Pakistan follow Vietnam's and Bangladesh's examples? Pakistan was the original Asian Tiger back in the 1960s when other developing Asian nations sought to emulate its development model.
With rising manufacturing costs in China and the US-China trade war, many major manufacturers are relocating to other countries in Asia. This situation has helped Vietnam emerge as a hub of foreign direct investment (FDI). FDI flow into the country has averaged more than 6% of GDP, the highest of any emerging economy. The country’s recent economic data shows a rise of 18% in exports, with a 26% jump in computers/components exports and a 63% jump in machinery/accessories exports. These figures have earned Vietnam the moniker of the newest "Asian Tiger".
|South Asian Countries' Export Growth. Source: Wall Street Journal|
Bangladesh's garment exports have helped its economy outshine India's and Pakistan's in the last decade. Impressed by Bangladesh's progress, the United Nations’ Committee for Development Policy has recommended that the country be upgraded from least developed category that it has held the last 50 years.
The next challenge for Bangladesh is to move toward higher-value add manufacturing and exports, as Vietnam has done. Its export industry is still overwhelmingly focused on garment manufacturing. The country’s economic complexity, ranked by Harvard University’s Growth Lab, is 108 out of the 133 countries measured. That is actually lower than it was in 1995, according to the Wall Street Journal.
|History of Pakistan's Manufactured Exports|
South Asia Investor Review
Pakistan's Debt Crisis
Declining Investment Hurting Pakistan's Economic Growth
Brief History of Pakistan Economy
Can Pakistan Avoid Recurring IMF Bailouts?
History of Pakistan Business and Industry
CPEC Financing: Is China Ripping Off Pakistan?
Pakistan's Lagging Industrial Output
Pakistan is 5th Largest Motorcycle Market
"Failed State" Pakistan Saw 22% Growth in Per Capita Income in Last 5 Years
CPEC Transforming Pakistan
Pakistan's $20 Billion Tourism Industry Boom
Home Appliance Ownership in Pakistani Households
Riaz Haq's YouTube Channel
PakAlumni Social Network
Can it? Yes
will it? prob not
Asian tiger seems like aiming for less.
Ali: "Asian tiger seems like aiming for less"
Achieving per capita gdp levels of Asian Tigers for its 200 million people will make Pakistan a great economic power and put it in the G20 group.
Pakistan does not produce raw materials which are needed for exports or local consumption. I think the author should talk about how expensive imported raw materials are in Pakistan. One should talk about high taxes on everything the government places and how much money is wasted on electricity generated from foreign fuel sources. Pakistan does not need to import huge amount of oil, much machinery and transport systems can be easily converted into electric local coal can also be used to produce diesel. Pakistan also needs to remove all taxes on farm and construction machinery. Pakistan should force all construction activity to follow strict safety and energy insulation standards. Pakistan should ban all crops like sugarcane which need excessive water supply and force drip irrigation of crops instead. Pakistan should allow market forces to determine electricity prices and government should remove itself from electricity ecosystem. Government should not give sovereign guarantees to anyone and only act like a regular and let market forces decide about electricity and gas prices. All local industry should be shifted to foreign LNG or LPG and should be removed from local gas network.
Consider the infrastructure and current industries set up in Pakistan, there are four industries Pakistan should focus on, IMHO, in which it can become competitive. Things that may initially require a lot of labor but have a well worn path to become more efficient in as investments into technology are made from the profits earned.
1. Medical devices
2. High quality, high export price, high yield Organic farming
3. Petrochemicals and Pharmaceuticals (if those major pipelines and refineries are built)
4. Tourism/hospitality along the motorways built up all along the country (Similar to Route 66 in the US and Roadside attractions), offering local and foreign visitors convenient access to rich cultural experiences
Vietnam has a Nominal GDP in 2021 of 370 Billion USD,and a population of 120 million - which makes for a per capital nominal GDP,of 3400 USD.
India had a GDP of 2.8 Trill in 2021,with a per capita of 2300 USD.And so,how can Vietnam be a LDC,for exports,to the US/EU ?
PRC has directed high pollution and effluent sectors and low skill sectors (which are being automated) - to exit China.With the labour cost curve and logistics costs - they HAVE ONLY 1 OPTION - to go to Vietnam.Some foreign supply chains,are also relocating - but it is not much,as labour and management skills,in Vietnam,are pathetic.
So Vietnam is soaking in the poison to LIFT its people from poverty and make FOREIGNERS INVEST IN UPGRADING THE LABOUR AND MANAGEMENT SKILLS OF ITS PEOPLE.In time,the poison will seep through,and growth will stagnate,and education and skills will NOT keep pace,with the next WAVE.
In the interim,if there is ECO-SHOCK,Vietnam will be doomed.Eco-growth means construction, auto and debt boom,as Viets go on a debt induced spending spree.There will be many more BIO-ECO-SHOCKS - at least 1, in each year - and that will be the shock wave for Vietnam - akin to the Hiroshima shock wave.
Therefore,let Vietnam soak in the poison,and lose the LDC status
IF PRC saw potential in Vietnam - THE CPEC would be in VIETNAM.The Chinese know the worth of Vietnam,as a nation and a race.It is the Chinese supply chain,which shifted to Vietnam - but no one made a CPEC there.
CPEC is for long term strategic ventures.The SEZs in Vietnam are there to leverage on opportunities arising out of supply chain dislocations and regulatory changes in PRC - which is a short term opportunity.dindooohindoo
Should Pakistan aspire to be a Vietnam ? I present some magical wonders of the incredible wonderland of Vietnam !
No.1 Counterfeit Condom Makers
Fertility crisis (consequence of the poison of manufacturing)
Their women have stopped lactating and feeling love
They have a street of infertile women !
And there is this DISASTER !
Their women have vagina massages
Is this the role model for Pakistan ? dindooohindoo
Pakistanis have this fantasy love for Vietnam,based on assumed notions of the Viet struggle, against "Imperialism",and especially, "so called" American Imperialism.
This is a hyped fantasy,built up by the media and Viet Int.
Pakistanis bite into this cake,as Pakistan has suffered the hell of Afghanistan and Terror (as an incidence,of American "so called" imperialism and expansionism)
It is basic intellectus,that an invading military needs to employ 10 to 100 times the milutary force to hold and keep territory,and then,win the war.In the interim,the invaded nation has to just choke the supply lines of the adversary,to make the adversary retreat - and then tom tom it,as a "Big kill",to their ignoramus populace.
The Americans INVADED Viet.If you look at the map of the world - the herculean effort in moving men and armour into Viet is evident.W/o Soviet aid - the Viets would have collapsed in a few hours.No invasion lasts for long - not even of the Mongols ! You invade, kill,loot and then exit !
So the American invasion was doomed by the duration - and that alone.Credit goes to the Invader -as it is easy for the invaded nation,to defend its land - BECAUSE TIME IS ON THEIE SIDE - AS THEY HAVE NOWHERE ELSE TO GO !
The same applies to Genghis Khan.It is true that he lost several wars in Vietnam.But the credit goes to the invader - as the odds were stacked against him - on land and in the sea invasion.But Genghis kept trying,and eventually won and destroyed and looted Viet and then EXITED Vietnam.
A TRUE WARRIOR invades OTHERS like, the Ottomans and the Mongols. Every rat is secure in his hole !
The Purpose of the invasion is DOMINATION of the Master race - money and women - comes later - as a perquisite of victory ! So the Military and Martial History of Vietnam,has to be seen in the right context.dindooohindoo
Pakistan: 1.2 million #smartphones manufactured in first two months of 2021. These phones were manufactured at the 33 local #mobile devices assembly plants in #Pakistan. #manufacturing – Gulf News
The number of smartphones assembled and produced in January and February 2021 indicate a significant increase as compared to the last two years. The country produced 2.1 million smartphone devices in 2020 and 119,639 in 2019, according to Pakistan Telecommunication Authority (PTA).
The country has produced over 25 million mobile devices including 4G smartphones following the successful implementation of PTA’s Device Identification, Registration and Blocking System (DIRBS).
“With the successful execution of DIRBS, the local assembly industry has evolved from infancy to well-growing stage, with significant growth seen in the local assembly of smartphones,” PTA said. The system implemented in 2019 also led to a significant increase in legal imports of mobile devices.
In 2020, Pakistan approved its first mobile device manufacturing policy to attract investment and encourage manufacturers of major cell phone brands to set up plants in Pakistan.
The policy also aims to create more job opportunities in Pakistan, create smartphone research and development centers and boost the production of electronic equipment in Pakistan.
The government’s offered several tax incentives and abolished withholding tax on locally assembled phones which encouraged the investors to set up companies in Pakistan, says Minister for Information Technology and Telecommunication Syed Amin ul Haque.
Leading smartphone brand Infinix currently has the largest mobile phone production and assembly plant in Pakistan where 3 million units are produced each year.
Vivo, Airlink and Advance Telecom are the three new companies that will soon establish their manufacturing units in Faisalabad, Lahore and Karachi.
PTA also received several mobile device manufacturing applications after finalizing its mobile device manufacturing regulations which “will help create more jobs in this technical sector, as well as enable consumers to buy locally manufactured mobile devices.”
Pakistan’s telecom sector offers attractive investment opportunities as it boasts of 178 million mobile phone subscribers with 93 million 3G-4G users, according to the January 2021 data.
Pakistan is also set to launch 5G mobile phone connectivity by December 2022 following a successful trial by PTA in February 2021.
The demonstrations included remote surgery, cloud gaming and overview of anticipated 5G technology applications for social and economic development of Pakistan.
“With the successful 5G trial in a limited environment, we believe that this technology will unlock new realities for eHealth, smart homes and cities, agriculture, autonomous vehicles, cloud computing, Internet of Things and Artificial Intelligence” Nadeem Khan, acting CEO of PTCL Group said.
Speaking at a Karachi Chamber of Commerce and Industry webinar in December, Adviser to the Prime Minister on Institutional Reforms Dr Ishrat Husain stressed the importance of looking beyond the textile sector and diversifying Pakistan’s exports. Otherwise, he warned, we will remain “stuck” at 25 to 30 billion dollars in exports per year.
“If we can capture just one percent of the Chinese market by providing components, raw materials [and] intermediate goods to the Chinese supply chain,” he had said, “we can get 23 billion dollars in exports to China, which is very favourably inclined towards Pakistan...”
From the looks of it, others were on the same page as Husain. Last month, it was reported by China Economic Net (CEN) that China will import dairy products from Pakistan. The Commercial Counsellor at the Pakistan Embassy in Beijing, Badar uz Zaman, told CEN that Pakistan got this opportunity due to its high quality dairy products, available at a low price.
Pakistan is the fourth largest milk producer globally, Zaman pointed out.
Indeed, the country’s dairy industry has great potential and can prove to be ‘white gold’ for Pakistan. Unfortunately, the sector is currently struggling due to various reasons but, if its export potential is realised, it can transform not only the sector itself but Pakistan’s economy as well.
According to the Food and Agriculture Organisation at the United Nations, in the last three decades, global milk production has increased by more than 59 percent, from 530 million tonnes in 1998 to 843 million tonnes in 2018.
This rise in global milk consumption is an opportunity for countries such as Pakistan to earn foreign exchange by exporting milk and dairy products to countries which have insufficient milk production. According to a Pakistan Dairy Association estimate, with support from the government, Pakistan can earn up to 30 billion dollars from exports of only dairy products and milk.
Pakistan Plastic Industry Overview
by State Bank of Pakistan
The use of plastic is increasing all the time as
they have replaced other materials like metal,
wood, paper, ceramics and glass in a wide variety
of uses due to its exceptional qualities such as
high heat resistance, durability, light weight, and
many more, which has placed it as one of the
fastest emerging markets in Pakistan.
The leading markets for plastics are in packaging,
building and construction and the
automotive/transport industries, all of which have been generally buoyant. According to Pakistan
Plastic Manufacturers Association, the industry is growing at an annual average growth of 17
percent and will continue to grow at a faster pace in years to come with current exports reaching
USD 400 million1
Despite high demand for plastic due to its superior qualities, the industry still has not reached its
full potential in Pakistan. Plastic industry has huge investment potential, which can lead to its
high growth. The main area which requires attention is the absence of locally made dyes and
molds and locally manufactured raw materials, which are imported. Skilled man power and
training institutions are also of utmost need.
Overseas competition from more developing countries is having an impact on domestic demand,
as cheap imports of relatively low added-value products are causing some parts of the world’s
plastics industry to restructure. This is carried out by setting up their manufacturing units in third
world countries and have themselves import plastic products, as well as exporters of plastic raw
materials, having double benefits.
China Pakistan Economic Corridor (CPEC) has provided Pakistan an excellent opportunity to transform from an agriculture-based economy to an industrial-based state that ultimately helps decreasing poverty to a significant level.
According to Gwadar Pro, economists in Pakistan believe that CPEC will provide solid support to the industrial sector to modernize itself and become more efficient and competitive for achieving the desired goals.
The various energy projects, coupled with improvements in infrastructure and road networks have already addressed some of the key constraints to growth and for poverty allivation.
Various projects completed under the CPEC have employed more than 100,000 Pakistanis.
More importantly, the development of Special Economic Zones (SEZs) would enable industries to smooth supply chains, enhance collaboration and innovation capabilities, and help reap significant economies of scale.
Analysts believe Pakistan will be the biggest beneficiary of CPEC. It has already won hearts in Pakistan. This project has emerged on Pakistan’s horizon as the biggest source of jobs for Pakistani youth. The experts added, Pakistan also needs to learn a lesson from China’s five-year plan policy. As the building of SEZs takes pace, Pakistani authorities expect the transfer of technology and spillovers from China into Pakistan in a few years.
While China has already transferred coal and road construction technology to Pakistan, authorities here are expecting the transfer of technology in the pharmaceutical, auto sector, and chemicals industry which will boost the economic activity here employing a great number of people.
Authorities are expecting the relocation of Chinese firms making pesticides and synthetic fertilizers to Pakistan.
The relocation of such firms to Pakistan becomes a possibility and CPEC envisions joint ventures in fertilizer and pesticide manufacturing between the Pakistani and Chinese enterprises which will open job opportunities for thousands of graduates of Agriculture sciences.
Pakistan needs to offer incentives to encourage local and foreign companies to set up factories and plants in Pakistan which can employ a huge number of local labor both skilled and unskilled. Independent analysts and experts in Pakistan believe, Pakistan cannot achieve desired growth unless the manufacturing sector and exports are strengthened. Pakistan needs an export-driven growth strategy following China’s vision.
Chinese company to carry out marketing for Rashakai SEZ
The China Road and Bridge Corporation (CRBC) would carry out the marketing campaign for the Rashakai Special Economic Zone under China Pakistan Economic Corridor (CPEC) expressing interest to work with the Board of Investment in this regard.
In a meeting with Minister for Planning Development and Special Initiatives Asad Umar here on Friday, the CRBC Vice President Sun Yaoguo along with a delegation said that external marketing of the SEZ to local and foreign investors was crucial for its full operationalization.
The meeting reviewed the Rashakai Special Economic Zone (SEZ) and CRBC’s mega-project Karachi Coastal Comprehensive Development Zone. The vice president of CRBC stated that the development work of Rashakai SEZ was being carried out at a fast pace and to that end the necessary resources had already been mobilized.
He assured the minister that the timelines for the projects would be strictly observed. The minister said that the industrial cooperation was the need of CPEC and the government was keen to see early completion of the project and the ministry of energy had already expedited the work on supply of electricity and gas to the SEZ.
He said that BOI would fully cooperate with CRBC for effective marketing of the SEZ. Asad Umar said that it was the first time in Pakistan that the foreign developer would be marketing an Industrial zone. He hoped that CRBC would be able to attract substantial investment in the SEZ from Chinese investors.
During the meeting Mr. Sun also briefed about CRBC’s mega project Karachi Costal Comprehensive Development Zone in collaboration with the Ministry of Maritime Affairs and the government of Sindh.
He said that the project would add substantially to the city’s economy landscape and would be generating employment opportunity for a very large number of populations of the city.
The minister said that the Karachi Costal Development Project was an important project and the federal cabinet had approved the signing of a Memorandum of Understanding (MoU).
It will give a boost to the business and technology sectors and provide employment opportunities to the people.
Pakistan has potential to push annual exports upto $88.1 bn: World Bank
Given Pakistan’s observable characteristics in terms of economic size, level of development, remoteness, and factor endowments, it is estimated that Pakistan’s potential annual exports are at US$ 88.1 billion, about 4 times the actual current level, World Bank said in its recent report “Pakistan Development Update”.
This large gap between actual and potential exports, or “missing exports,” places Pakistan among the top quartile of the distribution of countries with missing exports. Were Pakistan’s exporters to tap into that potential, the resulting export-to-GDP ratio would place the country at around the middle of the distribution of countries according to export orientation. To reach that point, Pakistan’s exports would need to grow at the same rate as Vietnam’s for 10 years, or Bangladesh’s for 13 years.
The report said that the opportunity cost of Pakistan’s “missing exports” is estimated at 893,000 jobs and US$ 1.74 billion in foregone taxes. Of these, 152,000 jobs could be created in the agriculture export sector, and 741,000 jobs could be created in the
manufacturing export sector.
While some of these jobs could be newly created, others may imply the reallocation of labor from relatively lower productivity, domestic-oriented firms, to higher productivity, export-oriented firms.
In terms of foregone tax revenue, a back-of-the-envelope calculation suggests that realizing the export potential would bring an additional US$ 1.74 billion in direct tax revenues annually, taking into account Pakistan’s value added share in gross exports, as well as the implicit direct tax rate across sectors.
The report added that since the turn of the century, Pakistan has become a more inward-oriented economy. A long-term examination of export performance reveals structural stagnation.
In 1990, Pakistani firms served 0.19 percent of the world’s imports. By 2019, they served only 0.12 percent—a nearly 40-percent decline in their market share. As a share of the economy, exports stood at 16 percent of GDP in 1999, but less than 10 percent in 2020.
To tap into the export potential, Pakistan needs to upgrade its trade policy framework. Specifically, it needs to reduce the anti-export bias of tariff policy. This entails gradually reducing import duties across the board, as well as reducing the extent of the cascading by applying larger import duty cuts to final goods relative to intermediates and raw materials.
Analysis shows that protecting the domestic market through high rates of import duties, as the ones observed in Pakistan, comes at the expense of missing out in terms of exports, because it incentivizes firms to sell domestically rather than to export.
The high levels of protection observed in Pakistan carry a high opportunity cost in terms of export-oriented jobs lost, and a higher productivity path the economy could undertake.
Second the government needs to reorient trade enhancement schemes. Currently, schemes such as those put forward in Statutory Regulatory Order (SRO) 711(I) 2018, provide support to exporters that reach destinations with low export potential and low
dynamism, thus not leading to an effective and efficient allocation of scarce public funds.
High-potential Asian destinations should be targeted rather than low potential African, Latin American, or Pacific Islands ones.
Thirdly the Pakistan government needs to negotiate market access with high potential destinations. Central Asian republics are a high potential for Pakistan, because of high missing exports to those countries, and because of their import dynamism.
Pakistan has an untapped export potential of $66.1 billion
The authors stress the fact that Pakistan's current policies such as protectionist trade policies, including high tariffs deterring the industries like the textile sector of Pakistan from modernizing, accessing global markets, and being regionally competitive.
The World Bank in its recent report states that Pakistan’s potential annual exports are $88.1 billion, about four times the current level. The opportunity cost of these missing exports is estimated at “893,000 jobs and $ 1.74 billion in foregone taxes alone, of which 152,000 jobs could have been created in the agriculture export sector, and 741,000 jobs could have been created in the manufacturing export sector.”
However, neglecting this potential by seeking short-term economic fixes, raising the cost of doing business, and making procedures unnecessarily bureaucratic has retarded any progress in the economy.
The present government took cognizance of the essential nature of regionally competitive energy tariffs to allow exports to even continue at the present level or increase marginally. However, there remains a large gap between actual and potential exports, or “missing exports,” placing Pakistan among the top quartile of the distribution of missing export countries.
Pakistan’s exports would need to grow at the same rate as Vietnam’s for 10 years, or Bangladesh’s for 13 years, to match its potential. This is quite achievable given the growth achieved in the past by China, Vietnam, and Bangladesh, but will require focused dedicated long-term policies, and a level playing field on energy rates in particular.
There is an urgent need for transparency and rationalization in Pakistan’s tariff policymaking. Import tariffs on industry inputs ultimately serve as a tax on exports thereby hampering the profitability of the very sector that is positioned to enable economic growth for Pakistan.
Research has shown that productivity in Pakistan has been stagnant and aggregate gains have been mostly driven by more productive firms gaining market shares. This situation is likely to persist if timely efforts are not made to ease import conditions, rationalize tariffs, value competition, and markets and modernize education in the country.
High-potential Asian destinations must be targeted as export destinations, rather than low potential African, Latin American, or Pacific Island ones.
Furthermore, the Pakistan government needs to negotiate market access with high potential destinations. “Central Asian republics are a high potential for Pakistan, because of high missing exports to those countries, and because of their import dynamism. Preferential trade agreements with Uzbekistan or Kazakhstan should be priorities, along with the negotiation of agreements on transit trade with Afghanistan to facilitate physical access to those markets.”
It is about time the government, academia, and industry linkages were strengthened to stimulate R&D and innovation, thereby paving the way for enhanced productivity. Policies should target and facilitate young innovative companies to build them up and help to modernize Pakistan’s business environment.
Furthermore, the focus should be shifted towards taxing profitability, as taxing before giving the chance to be productive would be akin to jumping the gun, and would stifle many potential startups. Tariffs on intermediate inputs hamper productivity downstream, creating burdensome import conditions. This phenomenon serves to increase the cost of production, hampers profitability, and results in price escalation. Products are thus rendered uncompetitive in the international market.
#Pakistan welcomes surge in knitwear #exports. Exports of leggings, t shirts, sweaters & underwear jumped 30% in the first 10 months of the current fiscal year as the industry continued its recovery from the negative impact of the #coronavirus #pandemic. https://www.knittingtradejournal.com/circular-knitting-news/14571-pakistan-welcomes-surge-in-knitwear-exports
Total knitwear exports were US$3.1 billion, up from from $2.3 billion over the same period in the previous year, according to the latest data from the Pakistan Bureau of Statistics (PBS).
CPEC to aid Pakistan’s industrial development
On the whole, weak foundation, and small scale are major problems holding back speed of Pakistan's industrial development. Industries such as cement and automobile manufacturing have long been overly protected, some analysts say.
Secondly, Pakistan's economic development relies heavily on external markets, but the dominant export industry, the textile industry, does not have outstanding advantages.
Thirdly, Pakistan has low domestic savings rates and low domestic investment rates. The Pakistani government attaches great importance to attracting and utilizing foreign investment, but the level of foreign investment in Pakistan is significantly affected by the regional and domestic security situations.
Fourth, low fiscal revenues and heavy external debt burdens have been major problems in Pakistan's economic development, limiting the government's ability to invest. The heavy debt burden has limited the government's ability to invest in public sectors.
Since the COVID-19 outbreak, the significance of the construction of the CPEC has become a key highlight for the country's economic development. The construction of the CPEC will play a supporting role in Pakistan's economic recovery in the post-pandemic era. Pakistan should seize the opportunity to formulate scientific development plans to advance domestic industries with competitive advantages.
Speaking of China-Pakistan industrial cooperation, agriculture is the sector that could help Pakistan consolidate its industrial advantages and industrial chain, and help the country quickly gain foreign exchange earnings through exports. At the same time, China should open its market to Pakistani agricultural products and fruits, and expand imports of Pakistani agricultural and industrial products.
The textile industry is a traditionally strong industry in Pakistan. When China's textile industry is shifting outward due to labor price rises, Pakistan should seize the opportunity to use the advantages accumulated by China's textile industry to upgrade its own industry and accept orders from aboard. In addition, the Indian textile industry has largely come to standstill due to the latest resurgence of the pandemic, and a large number of global orders have been transferred to other markets, including China.
Pakistan should seize the opportunity of global value chain and industrial chain restructuring to develop its emerging industries.
For example, since 2020, affected by India's increasingly hostile attitude towards Chinese companies, many Chinese mobile phone brands in India have begun to move their factories to countries like Vietnam, the Philippines, and Indonesia. This is also an opportunity for Pakistan.
Bangladesh’s monthly minimum wage lowest in Asia-Pacific region: ILO
Neighbouring country Pakistan topped the chart in South Asia with a monthly minimum wage level of $491, while India has the second lowest minimum wage level of $215
The monthly minimum wage level in Bangladesh was $48 or around Tk4,070 in 2019 – the lowest among all nations in Asia and the Pacific region, reveals the Global Wage Report 2020–21.
Published by the International Labour Organization (ILO) on Wednesday, the report calculated the "Gross Monthly Minimum Wage Levels in Asia and the Pacific" using the Purchasing Power Parity (PPP) values.
Globally, Bangladesh ranked fifth from the bottom among 136 countries. Neighbouring country Pakistan topped the chart in South Asia with a monthly minimum wage level of $491, while India has the second lowest minimum wage level of $215 in the region, it says.
In the Asia and the Pacific region, the median (average) minimum wage is $381, which is $333 or around Tk18,250 higher than that of Bangladesh. However, the ILO report excluded agriculture and domestic workers while calculating Bangladesh's monthly minimum wage level.
Commenting on the matter, Policy Research Institute's Executive Director Dr Ahsan H Mansur said, "Actually, minimum wage is only applicable to Bangladesh's garments sector, and it has no application in any other ones. Elsewhere, the minimum wage is even lower.
"So, the report is not a real reflection of the true picture, and if the minimum wage is increased artificially, it would not be very beneficial at all. If we increase the minimum wage level only in a particular segment and exclude the whole economy, there will not be any positive."
He added that Bangladesh does not have a minimum wage level in every sector and for every job, so the comparison made by the ILO is not appropriate.
Additionally, the report mentions that Bangladesh's actual monthly minimum wage was only $18 last year.
In the region, Australia has the highest monthly minimum wage of $2,166 in terms of PPP, followed by New Zealand with $2,126 and South Korea with $2,096.
What is the situation in South Asia?
Nepal is following the chart-topper Pakistan with a minimum wage level of $396 in this region, and Afghanistan is just behind Nepal with $306.
At the bottom end, Bangladesh and India is followed by Sri Lanka, which has the third lowest minimum wage level of $247 in the South Asia region.
Bangladesh revises the minimum wage every five years and last did it in December 2018. The report mentions that out of 149 countries, only Bangladesh and Angola have not yet made any schedule for the next adjustment of the minimum wage.
About the issue, Dr Mansur said, "Amid this Covid-19 crisis and the ongoing export situation, if the minimum wage is increased now, unemployment may rise further. Instead, we should focus on increasing our labour productivity.
"Productive workers can get an annual pay rise automatically."
Globally, the median value of gross minimum wages for 2019 is $486 per month, indicating that half of the countries across the globe have minimum wages set lower than this value, and half have minimum wages set higher.
Largest decrease in real minimum wage
Bangladesh has seen 5.9% decrease in real minimum wage growth annually, from the period between 2010 and 2019. This was the largest decrease in Asia and the Pacific region.
Meanwhile, the neck and neck RMG export competitor Vietnam (11.3%) observed the highest increase of real minimum wage growth.
Addressing the issue, Dr Mansur said, "This is not desirable and a matter of deep concern too."
On a separate note, the annual labour productivity growth increased by 5.8% in Bangladesh, compared to 5.1% of Viet Nam for the same period.
Is #Bangladesh heading toward a #SriLanka-like #economic crisis? #Imports surging to reach $85 billion this year, #exports $50 billion. $35 billion trade deficit, leaving $10 billion current account deficit after #remittances. #energy #food #inflation https://www.dw.com/en/is-bangladesh-heading-toward-a-sri-lanka-like-crisis/a-61838597
Like Colombo, Dhaka has also taken on massive foreign loans to embark on what critics call "white elephant" projects. The economic turmoil in Sri Lanka should serve as a cautionary tale, say experts.
Sri Lanka has been mired in economic turmoil over the past few months, with the country battling severe shortages of essential items and running out of petrol, medicines and foreign reserves amid an acute balance of payments crisis.
The resulting public fury targeting the government triggered mass street protests and political upheaval, forcing the resignation of Prime Minister Mahinda Rajapaksa and his Cabinet, and the appointment of a new prime minister.
Many in Bangladesh fear that their country could face a similar situation, given the rising trade deficit and foreign debt burden.
Bangladesh imported goods worth $61.52 billion (€58.48 billion) in the first nine months of the 2021-2022 fiscal year, a rise of 43.9% compared to the same period last year.
Exports, however, rose at a slower pace of 32.9% while remittances from Bangladeshis living abroad — a key source of foreign exchange — dropped about 20% in the first four months of 2022 from the year before, to $7 billion.
'Foreign reserves will go down to a dangerous level'
Muinul Islam, a Bangladeshi economist and former professor at Chittagong University, fears that the trade deficit could grow in the coming years as imports are increasing at a faster pace than exports.
"Our imports are set to reach $85 billion by this year, while exports won't be more than $50 billion. And, the trade deficit of $35 billion can't be bridged by remittances alone," Islam told DW, adding: "We will have to live with around a $10 billion shortfall this year."
The expert also pointed out that Bangladesh's foreign exchange reserves have fallen from $48 billion to $42 billion over the past eight months. He is worried that they may drop further in the coming months, likely down another $4 billion.
"If the trend of more imports against exports continues and we fail to minimize the gap with the remittances, our foreign reserves will go down to a dangerous level in the next three to four years," he stressed, underlining that this would lead to a significant devaluation of the nation's currency against the US dollar.
Massive loans for 'white elephant' projects?
Bangladesh, like Sri Lanka, has also taken on foreign loans in recent years to fund what critics call "white elephant" projects, which are expensive but totally unprofitable.
These "unnecessary projects" could cause trouble when the time comes to repay the debts, Islam said.
"We have taken a loan of $12 billion from Russia for a nuclear power plant which has a production capacity of just 2,400 megawatts. We can repay the debt in 20 years but the installments will be $565 million per year from 2025," he pointed out. "It's the worst kind of a white elephant project."
In total, the country will likely have to repay $4 billion per year from 2024, as installments for foreign loans, Islam estimated.
"I fear Bangladesh won't be able to repay those loans at that time because of the shortage of income from the mega projects," he stressed.
China's dominance of manufacturing is growing, not shrinking
Country gaining market share in both low- and high-tech sectors
William Bratton is author of "China's Rise, Asia's Decline." He was previously head of Asia-Pacific equity research at HSBC.
When it comes to discussions about China's manufacturing capabilities, there is an all-too-frequent disconnect between rhetoric and reality.
On the one hand, it is widely understood that Chinese producers are losing relative competitiveness. Higher labor costs, bitter trade frictions, rising geopolitical tensions and the domestic pursuit of zero-COVID are all encouraging exporters to leave the country.
China, it is thus argued, has passed "peak manufacturing" and its status as the world's manufacturer stands to be superseded by other countries in the region. By extension, this will materially impact China's economic trajectory and the region's evolving geopolitical balances.
On the other hand, there has been a lack of substantive evidence offered to support the above argument. Although anecdotes abound about certain companies relocating production out of China, the data suggests that such moves are not at the scale necessary to reverse the upward momentum of the country's manufacturing base, nor its international competitiveness.
The most obvious evidence of this is in trade flows.
It is not just that Chinese exports have remained remarkably robust despite COVID-related lockdowns. More than that, the latest numbers from the U.N. Conference on Trade and Development imply that Chinese producers have become more competitive in recent years, not less.
China's manufactured exports, for example, have been growing significantly faster than those of Germany, the U.S., Japan or South Korea. As a result, its share of global manufactured exports by value surged to a new high of 21% last year, compared to just 17% in 2017. The country is now a more important international supplier than Germany, the U.S. and Japan combined.
Furthermore, contrary to the view that supply chains are reducing their exposure to China, Chinese manufacturers have consolidated their primacy across the vast majority of sectors over recent years. In fact, what is particularly remarkable about China's evolving trade structure is that it has been able to simultaneously gain export share in both low- and high-technology industries, including those as eclectic as leather products, truck trailers and optical instruments.
Such gains are hardly indicative of an industrial base under stress. They instead highlight the hyper-competitiveness of China's producers, who increasingly dominate the East and Southeast Asian manufacturing landscape.
For all the chatter about companies leaving China and the changing geographies of supply chains, the reality is that it generated nearly half of the region's manufactured exports in 2021, compared to less than a third 15 years ago.
This competitiveness is derived from the complex and self-reinforcing interaction of multiple factors, many of which are a function of China's size. This allows the country to support far higher levels of domestic competition, innovation and specialization than its neighbors, and results in greater efficiencies and lower production costs, which regional rivals will always struggle to replicate. These scale benefits are subsequently magnified through aggressive industrial development policies that have no obvious precedent in terms of scope or ambition.
So China's manufacturing advantages must be viewed holistically, especially as it can be highly misleading, however tempting, to draw conclusions based on the trends of any specific factor.
China's dominance of manufacturing is growing, not shrinking
Country gaining market share in both low- and high-tech sectors
William Bratton is author of "China's Rise, Asia's Decline." He was previously head of Asia-Pacific equity research at HSBC.
The country's rapidly rising wages, for example, attract much attention. But it would be a mistake to assume that this signals the loss of competitiveness in more labor-intensive industries.
Rather, it reflects dramatic improvements in productivity and a broader structural shift into higher technology sectors. Furthermore, the use of national averages masks the diversity of China's labor force, with a substantial pool still on relatively low wages.
This is seen in the irrefutable fact that the country's manufacturers are still gaining export share across low-technology and labor-intensive industries, including textiles. In other words, their innate advantages are so substantial and so overwhelming that higher labor costs by themselves have no material impact on their competitiveness.
As such, despite all the frequently cited anecdotes, there is no real evidence that the factors underpinning China's competitiveness are being reversed. Rather, Asia's manufacturing industries will continue to concentrate in China, further entrenching its status as the core of the region's economic system.
This is the challenge for the rest of the region. No matter how hard they try, few countries, if any, will be able to replicate or match China's natural advantages. And this will have profound longer-term economic and geopolitical consequences.
Against the onslaught of highly competitive Chinese products, emerging economies will struggle to develop the manufacturing sectors they need to achieve and sustain productivity-led growth over the long-term.
But even more advanced nations are not immune from the pressures created by China, with the hollowing-out of their industrial structures a very real danger. The displacement of Japanese and South Korean manufacturers from the global telecommunications equipment and shipbuilding markets demonstrates just how quickly China can engage with its neighbors at their own games -- and win.
So for all the suggestions that China's grip on manufacturing is weakening, the reality could not be more different. It is not the Chinese producers that are losing influence, but their rivals across the region.
In fact, the natural forces driving the country's competitive advantages are now both so substantial and entrenched that the rest of Asia is seemingly engaged in an unfair trade fight -- and one it is unlikely to win. The region's slide toward a clearly defined economic core-periphery structure -- with China dominating and the rest being disadvantaged -- now looks inevitable.
In turn, this is creating dependencies which will prove evermore difficult to disentangle, no matter how strong the apparent political commitment in some countries to do so.
This is seen in how recent attempts to diversify imports away from Chinese producers have been constrained by the lack of credible alternative suppliers. It is noticeable that Australia and India, countries positioning themselves as regional rivals to China, have increased -- not reduced -- their reliance on Chinese manufactured imports over the last three years.
It is true that this manufacturing mastery may not have been developed as a deliberate geopolitical tool. But in the same way the U.S. was able to use its post-World War II industrial leadership to advance its own interests, the reliance on Chinese products will naturally give Beijing unrivaled power and influence within Asia. As such, China's future economic and political dominance of the Asian regional economy is set to be underpinned by its vibrant, dynamic and hypercompetitive manufacturing industries, whatever the country's doomsayers may claim.
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