Labour Intensive Export DevelopmentPolicies and Strategies

- JAMSHED UZ ZAMAN∗ - MD. ABDUS SAMAD SARKER*

Abstract
This paper tries to explore the policies and strategies that should be followed in developing export sector of Bangladesh in order to address the unemployment problem. In exploring this, the paper studied other empirical research works and found that as capital is very scarce, Bangladesh must embark upon a labour intensive export development strategy. The paper estimates the elasticity of substitution between capital and labour which also supports this view. Potential export sectors that use more labour have been identified and found that non-traditional and small scale manufacturing sectors are highly labour intensive with tremendous export potentials. Government is also aware of this and has already introduced labour intensive export development policies and strategies. The urgent need is to implement those policies and strategies in appropriate and efficient manner.

Introduction Faced with limited resource endowment and domestic market, the nations having abundant labour supply must find ways to help them survive in the competitive world. In the past, the general practice was to forcibly transfer labour force from the surplus areas to the deficit areas for cultivation, plantation and other activities. With the passage of time voluntary international migration seeking employment became a common phenomenon. But in the very recent years, the mobility of the labour force, particularly of the unskilled ones has been seriously impeded. Apart from language and cultural barriers, by strict immigration laws imposed by the labour importing countries. In such a situation, growing labour force has become a serious burden to the economy having already abundant unemployment labour force. To overcome this problem, economists suggest the development of labour intensive export sector, which will not only pave the opportunity of domestic employment of labour force but will also contribute to the movement of resources which do not move readily among nations and here the movement of goods and services can provide an effective substitute. Bangladesh is a labour surplus economy with dominance of unskilled labour force. Historically, a large section of the labour force from Bangladesh migrated to the neighbouring countries, as well as to Europe, North America, Near East and the Far East for employment who remitted valuable foreign exchange, which, not only improved the lots of

The authors are Deputy General Manager and Joint Director, Bangladesh Bank respectively. The views expressed in this article are authors' own.

1

It also constructs and estimates an export demand function to assess positive and negative determinants to labour intensive export-led development. Therefore. 2 . Towards this end Granger Causality test was employed using data for GDP at constant (1985/86) market prices converted to dollar terms and exports in US dollars for the period 1980 to 1998. Bangladesh is striving hard through adopting various policies and strategies but the achievement is much below expectations. In this connection. With this introduction the rest of the paper has been organised as follows. Finally. it may be mentioned that ”Export or Perish” has now-a-days become a very popular slogan among the development economists and policy makers showing a causal relationship between export and economic development. Our present paper is an attempt towards reviewing the past and on-going policies as well as suggesting ways that will not only boost up export. summary of observations and conclusions have been placed.those people but also improved the balance of payments position of the country. Section-III provides a brief review of performance of the export sector in Bangladesh. R. Shu-chin (1964). SECTION-I Role of Export Sector in the Economic Development of Bangladesh In the quest of her economic development. Generation of employment was identified in all the past five-year plans as the most important means to alleviate poverty. We have also tested this proposition. which is also a major target of the current plan and expected to be achieved through adoption of labour intensive production technologies.F. Section-II shows the comparative analysis of capital vs. In Section-IV export strategies of several labour surplus economies have been presented in nutshell and with those experience we have tried to identify possible strategies for Bangladesh. the scope of unskilled labour migration may continue to shrink considerably in near future. labour intensive techniques. The result as given in Table -1 also supports earlier studies. The economic development of the countries during the nineteenth century and the miraculous success of some of the Asian countries in the current century provide strong evidence of export-led growth. But with the present phase of infra structural development of the countries in the Near and Far East. It discusses elasticity of substitution between capital and labour. Section-I highlights the role of export sector in the economic development of Bangladesh. Ragnar Nurkse (1961) also tested the hypothesis and found positive correlation between export and economic growth. Enury (1967) came to a conclusion that higher rate of economic growth was associated with higher rate of export growth. it has become most important for Bangladesh to find out alternative ways to utilize these labour force to overcome difficulties in the days ahead. This suggests that the country has yet to develop a suitable policy package for sustained growth and development. in Section-V. but will also generate employment opportunity for the vast labour force.

5 15. 1998. however. The ratio is much lower compared to the newly industrialized countries of the South-East Asia.8 10. Export from Bangladesh stood at 15 per cent of the country’s GDP during 1996-97 which is lower as compared to the neighbouring countries except that of India. Table 2 below shows the comparative position of Bangladesh’s export share to GDP with some selected countries.059 0.0 76.0 92.Table 1: Granger Causality Test (Sample 1980-1998) Null.0 24.6 14. June. Hypothesis GDP is not Granger Caused by Exports(US$) Export (US $) is not Granger Caused by GDP F-Statistic 3.3 24.0 Note: Exports include goods and services.0 27.0 17. concerted efforts are needed towards the development of export-oriented activities.665 These empirical works and evidences strongly suggest that Bangladesh needs to pursue export oriented development strategy in order to achieve rapid growth and employment The dynamism and efficiency of this sector as well as related activities of the other sectors are.3 10.0 14.3 6. To overcome this constraints.0 1993-94 9.0 1996-97 15.0 90. 3 .545 Probability 0.1 24.0 27.5 6. Table 2: Share of Exports to GDP in the Selected Countries Country/Period Bangladesh India Nepal Pakistan Sri Lanka Indonesia Malaysia Thailand 1972-73 5.3 14.3 1980-81 6. Source: IFS.2 22.0 33.787 0.5 9.0 32.0 35 0 26.7 3. limited by the narrow base of the domestic market and lower effective demand due to little ’entitlement’ of the vast majority of the people.4 4.8 1990-91 7.6 6.0 47.0 11.

is reasonably good. nothing remarkable has been achieved so far as it is evident from the table. It is needless to mention that capital is one of the most binding constraints on the development of Bangladesh. Our equation reads. Therefore. which removed trade restrictions to a large extent and opened up the economy to the international community experienced a substantially higher rate of growth and per capita income. In this section.0 per cent of the GDP. however.The trade regime of Bangladesh for a considerable period was very much restrictive among the nations considered in Table 2 except India. In this situation. such as Sri Lanka. Looking at the table it appears that the Indian economy is less open than the economy of Bangladesh as measured by the ratio of exports and imports to GDP. Bangladesh has to find out alternative technique which may obviously be labour intensive. Despite vigorous measures domestic savings could not be raised to even 10. World Bank in its country report (Report No. It will not be an exaggeration that with the limited domestic market. We have used a Constant Elasticity of Substitution type of production function to estimate the elasticity of substitution between labour and capital. Although substantial progress has been made in liberalising trade regime of the country. Roy(1988) conducted a detailed study on labour intensity and efficiency of capital use in Bangladesh manufacturing industries and came to a conclusion that the ratio of profit to value added in labour intensive industries.11569-BD) also expressed this view and advocated for a export based policy framework for the country. Countries. SECTION. Malaysia and Thailand. the restrictive trade policies which discouraged exports were largely responsible for our low growth rate.II Labour Intensive Vs Capital Intensive Export Development for Bangladesh In the preceding analysis. faced a financial turmoil recently. They. The policy for labour intensive export development is appropriate so long elasticity of substitution between capital and labour is notable. due mainly to large domestic markets. Indonesia. The availability of foreign capital in the face of changed global economic situation is also in the grip of uncertainty. the importance of export-led strategy for Bangladesh was highlighted. there is a strong possibility of employment generation and accelerated growth of output simultaneously by adopting labour intensive technique of production in Bangladesh. He showed the performances of the labour intensive small industries in terms of capital productivity and profitability. India achieved much higher growth and rise in the per capita income compared to Bangladesh presumably. Despite this. we have tried to identify the policy regime that might be most appropriate for the country’s export sector. 4 .

.615 1... =1.” Results of the non-liner regression are given in the following Table... (i) L = Annual employment of labour in the manufacturing sector.. including manufacturing. Data for value added. Shortcomings of these data are discussed in Bakht and Bhattacharya (1991)...644 0.l 6.587 Elasticity of substitution was calculated at 1/(l+) = 0...199 D.. K = Value of fixed assets in the manufacturing sector. assembling. etc.W.......224 Variable β0 βl ρ l/ρ Adjusted R2 =0. Despite deficiencies. packing.. though it supports existence of substitutability among labour and capital.. sales and services workers..948E-10 5. because of delayed inclusion of certain firms in CMI it becomes difficult to ascribe changes in the reported capital stock in a particular year as investment belonging to that year. We have used both the categories of employment while running non-linear regressions to find the best fit..VA= β 0 {β 1 L-ρ + (1-β1 ) Κ-ρ } -1⁄ρ ....9776 Coefficients 1. = Substitution parameter. Salaried employees include professional and technical. 1991 )... In the CMI. Where.. More importantly. ”CMI leaves out all of cottage industries and a significant proportion of small industries and even within the stipulated purview it suffers from under-reporting.067 0. which seems to be much lower.... According to them.... the persons engaged in the units are distinguished in terms of ’all employees’ and ’production workers/operators’.. repairing..186 7. All employees comprise of both salaried employees and production workers...393 1... VA= Value added in the manufacturing sector.360 F=132. administrative and managerial. 5 .. Production workers mean those who are engaged directly in production process.. we have collected figures of fixed assets in manufacturing sector from CMI.. clerical... fixed assets and employment have been collected from Census of Manufacturing Industries (CMI) and also from Bakht and Bhattacharya (1991).. Table 3: Non-linear Regression Estimates T-statistic 1. (Bakht and Bhattacharya.

In sum.. contribute only a meager proportion to our total export earnings..linear transformation. jute. Augmented Dicky Fuller test is not appropriate for variance or other form of a non. bitumen.. we may focus our attention on the export sector. Prior to estimating equation... 1969). Statistical results of the best fit is reported below. whether those factors remained an impediment to export-led development. Therefore.. Trade in invisible and capital flows are much less sensitive to exchange risk and price uncertainties than trade in merchandise in a developing country. ADF test shows that EV1 and EV2 are also random walk.. is spectacularly susceptive to price fluctuations and exchange rate volatility. tea. etc.. by formulating and estimating an export demand model for Bangladesh.. In spite of the importance of supply factors in the developing countries we have estimated single equation export demand function ignoring completely the significance of supply of exports. The danger is that labour intensive export sector as some propound.. Impact of the volatility and fluctuations is perhaps more on labour intensive exports than on capital intensive ones. 6 . at present are labour intensive. The technology intensive products.... fertilizer and chemicals. Although.. ready. we have constructed the demand function by maximizing a CES utility function subject to a budget constraint. PX (Base 1979/80) R = PX/PW.. unit root test was conducted to find that all the variables are random walk (Table 4). furnace oil. XQ = Export volume derived as export receipts (million US$) adjusted by export price index. fishes. Afterwards we conducted a co-integration regression analysis. To name some. our analysis is limited to merchandise trade of the country. By including a proxy for exchange rate volatility and aggregating over all the goods exported and over all the trading partners.made garments and hosiery products. PX = Export price index (1979/80 =100) PW= World price index (1990=l00) WY= World income index (1990=100) EV = Exchange rate volatility measured either by per centage change in exchange rate (EV1 ) or quarterly moving average standard deviation of the exchange rate (EV2 ) Sample = 1976 to 1996. This assertion has encouraged us to check historically. Following traditional practice (Houthakker and Magee.. newsprint...... leather.Having discussed the elasticity of substitution. (ii) Where.. Most of the export goods are labour intensive rather than capital intensive. our export products. the export demand function can be written as. all are labour intensive. log XQ = β o +β 1 log R+ β 2 log WY+ β 3 EV+c .

65 -3.65 -3. 7 .60** -5.85 ADF -3.28* -8.01 -3.2. Table 5 also shows that price elasticity is more than unity.26 -2.4457 (1. LR and EV2 form a co-integrated set and that least squares technique will generate consistent estimates for coefficients of equation (ii).01 -1.603 (18.95 -3.0 Our results show that LXQ.68 .47 -3.33 DW 0.62 -2.79 .75* -3.65 * Significant at 1% level.56) LR -1. The results do not reject at most one cointegration vector. To ascertain existence of only one co-integrating vector.28) EV2 0. the table also shows that exchange rate policy that was pursued has some positive accomplishments.3576 (-3. Our results further show income inelasticity of export demand function.26 -3.79 . With three or more variables in the co-integration equation. Johansen test was conducted.79 Mckinnon Critical Values 5% -3.4. ** Significant at 5% level. One implication of this result is that by lowering price we may boost our exports.805) R2 0.65 -3.86* -3. Johansen and Juselius (1990) have shown that there may be more than one co-integrating vectors since there may be more than one equilibrium relationship among three or more variables.01 10% -2.4.Table 4: Unit Root Test First Difference of Variables Augmented Dicky Fuller Test Statistics 1% LXQ LXV LWY EV1 EV2 LR -3.02** -2. Table 5: Cointegrated Regression Results Intercept 6.3.65 -1.47 .44** .3. Further.

66 19.04 16.00 116.00 2.62 57.32 1556.00 25.46 3.00 313.76 1% Critical Value 35.84 148.00 329.00 74.00 2547.42 23.84 221.00 38.00 3882. Table 7 below shows the commodity-wise trend of exports from Bangladesh since liberation.00 47.68 15.318. SECTION . Furnace Oil Newsprint Chemical Fertilizer Others Total 1972-73 1979-80 1984-85 1989-90 1993-94 1995-96 1996-97 1997-98 133.98 66.00 321.93 348.36 51.00 59.71 2533.41 3. majority of which are unskilled.50 4.00 190.932 0.00 .00 16.00 104.15 934.00 9.18 26.43 1523.85 137.20 609.III Review of Export Performance The Prime objective of economic policy of Bangladesh is to provide employment for the vast labour force of the country.68 20.00 195.80 178.81 124.43 17.85 389.084 Likelihood Ratio 63.00 5161.86 2.04 6.49 382. of CE(S) None At most 1 At most 2 * Significant at 1% level.65 Hypothesized No.00 6.26 406.94 69.49 * 7.00 294.17 212.99 86.00 1.08 150.69 34.79 16.00 16.68 8.00 0.Table 6: Johansen-Juselius Test Eigen Value 0.18 33.67 116. 8 .37 11.00 61.00 3001.00 3.00 318.62 0. fishes Source : Export Promotion Bureau.28 38.90 251.87 168.06 2.81 10.00 4418. froglegs.30 287.02 39.15 428.00 281. Table 7: Commodity-wise Export of Bangladesh (In million US$) Year Raw Jute Jute Goods Tea Leather Frozen Food @ Ready-made Garments Naphtha.80 331. we have to identify the sectors that use more labour and at the same time have export potentialities.00 10800 179.86 5% Critical Value 29.02 91.217 0. Therefore.85 20.00 95.00 @ Includes shrimps.00 3784.

Leather-based labour-intensive cottage and small industries have high potential in the country.18 million in 1972-73 increased to $69. Thereafter the export of tea became very much volatile and export receipts from this commodity remained around $ 40 million up to 1993-94. toys.98 million in 1989-90. earnings from this item could not be raised to the level of 1984-85. It may be observed from Table 7 that export of tea increased rapidly and reached to a peak level of $61. Although its export recorded some decline in 1990. However.80 million in 1984. jackets. Not only shoes. In 1997-98 export earnings from this sector declined somewhat due to some problems that arose with the importers.26 million in 1972-73.06 million in 1972-73 reached to a level of $38. Export of frozen food added a new horizon in the export regime of Bangladesh. The growth of export of frozen food was rapid up to 1986-87 and thereafter it remained stagnant up to 1991-92. belts. However.It may be observed from Table 7 that earnings from raw jute amidst wide fluctuations reduced substantially from 1972-73 to 1993-94.85 and further to 178. it started declining. on the other hand. Thailand. Trends in export of leather.85 million in 1979-80 from the level of $179. bags. This sector is very highly labour intensive sector and as such the country has large potential to develop it. This suggests that there is little hope to significantly expand the share of tea export to total exports in near future. Export receipts of 1995-96 and 1996-97.00 million in 1997-98. various items having high export demand can be produced substantially at much cheaper cost through the development of labour-intensive activities.02 million in 1984-85. Export of this commodity which was only $3. However. despite severe competition. necessary steps have been taken to remove those problems and it is hoped that export earnings from this sector will continue to show a very spectacular growth in future. suggests that the relative importance of this item in total export earnings is increasing overtime and there is a lot of possibility to enhance its share in future. Although there were a substantial rise in the price of tea in the international market in the recent years. however. vigorously entered into the market with much more competitive price compared to Bangladesh. 9 . Leather exports which was only $16. Bangladesh can earn a substantial amount of foreign exchange by developing this sector through the application of modem method of production and providing appropriate incentives for its exporters. This had been mainly due to decline in world export prices of shrimps and prawns as more efficient producers like Taiwan.23 million in 1979-80. On the other hand. amidst fluctuations declined to the level of $281. export performance of raw jute is encouraging in the recent years which is reflected in the export earnings of 1995-96 and onwards. export of tea. export receipts from this commodity continued to rise till now (Table 7) which suggests that export of leather is more promising given the world demand. etc. Earnings from raw jute increased up to 198485 but thereafter. export of jute goods although showed a substantial rise of $406.91 due to some unfavourable circumstances in the world market. and leather increased overtime. suggests that despite severe competition. etc.

26 30.45 86.14 97. This indicates the possibility of new items to get entrance into the export horizon of Bangladesh. Labour intensity of this sector is well known for which Bangladesh has already put all out effort to reap this benefit.55 14.08 61.98 23.70 43.51 13. The export receipts from the ready-made garments which was only $ 0.41 per cent in the same period. There are several technical studies on the export elasticities of Bangladesh.54 92.02 56.46 8. Matin (1984) shows that elasticity estimates of traditional items of exports are very low.The most striking feature of labour-intensive export regime of Bangladesh is the emergence of ready-made garments. Bahar and Samad (1995 ) also show that export elasticity of non-traditional items such as frozen food and ready-made garments are very high.73 90. while that of nontraditional items are very high. the share of traditional items came down from 97 to only 8.31 1997-98 7.54 per cent in 1997-98. Sectoral trend of export receipts as it is given in Table 8 below shows that the share of jute to total export earnings stood at about 90 per cent in 1972-73 which came down gradually to 7.72 1993-94 13. Therefore.69 86. Table 8: Trend in the Composition of Export Receipts (In percentage) Commodities Jute Non-Jute Traditional Non-Traditional Primary products Manufactured Products 1972-73 89.73 88.86 10.33 60. Bangladesh will have to shift the export strategy towards the non-traditional and the manufacturing items.67 million in 1979-80 sharply increased to $116. From 1984-85 onwards export receipts from this single item showed an unprecedented growth. On the other hand. Similarly.41 91.49 85.30 2.27 Source: Export Promotion Bureau. 10 .32 11.00 57. From these analyses we may argue that Bangladesh should increase her efforts to augment the export of manufactured and non-traditional items.67 43.59 9.95 1988-89 29.28 76. Increased share of manufacturing exports to total export earnings indicates that primary product of Bangladesh is no longer an effective source of export earnings.68 38.00 1978-79 69.20 million in 1984-85. the share of nontraditional items increased substantially from 3 per cent in 1972-73 to more than 91 per cent in 1997-98.

the country experienced a very restrictive and complex set of industrial and trade policies which discouraged the expansion of manufacturing sector including those having high export potentialities. despite removal of development surcharge and regulatory duty at the beginning of 1992. An employment-output maximization trade-off or simultaneous employment-output maximization estimate is a good solution for this purpose. Among large industries about 38 per cent are highly labour intensive. country’s tariff regime continued to discriminate strongly against export production. such as.5 per cent (IBRD. the weak policy framework of export regime coupled with 11 . import bans or quantitative restrictions. requires less capital but more labour and in that sense these are labour intensive. the nominal protection ranged between 2. including primary inputs. From this analysis.5 per cent and thereafter.IV Review of Export Policy of Bangladesh Export policy of Bangladesh up to 1990 was basically characterized by ad hoc measures adopted on year to year basis. it did not contain any clear-cut objective of employment generation through encouragement of labour intensive exportoriented industries. Non-tariff measures. In addition to that. It is obvious that production of primary products such as jute. Moreover. In this paper we shall not go deep into the matter but simply try to present a descriptive analysis. tea. World Bank estimated that up to FY 1989.5 per cent to 508. In 1993.5 per cent to 352. Frozen food is a highly labour intensive activity which has high export potential. had been applied to a considerable range of importable items. Similarly leather and leather products and ready-made garments are very high labour intensive activities (Roy 1988) which have tremendous export potentialities. a two. it is fair to conclude that Bangladesh should attach high priority to the production and export of non-traditional and manufactured items. But the fruits of the many of those incentives could not be enjoyed by all the exporters. Coupled with these. due to availability of number of numerous substitutes in the world market. etc.year export policy was announced by the Government which contained a lot of incentive framework.Having this analysis. we have to investigate the factor intensity in the activities relating to production of manufactured and non-traditional items because it has importance on employment generation. 1993). Most importantly. the country’s external competitiveness was seriously hampered due to weak exchange rate management policy. In support of our analysis we shall also present the findings of some technical studies. Roy (1988) also showed that 57 per cent of the small industries are highly labour intensive while 34 per cent are medium labour intensive. In short. But the trend of export shows that export potentials of these items are very low. SECTION . it ranged between 2.

baggage and fashion goods. Providing more facilities to establish new ready-made garments factory having higher value addition. Toys. consignment sale. particularly labour intensive industries. gift items. import of raw materials. 6) Undertaking activities for enhancing export of computer software. leather goods.ineffective implementation of announced policies resulted in slowly growing manufacturing sector in Bangladesh which in turn failed to stimulate competitive export oriented sector that could help generate productive employment for the country’s vast labour forces. Go vernment of Bangladesh announced the Five-year export policy for 1997-2003. development of marketability of export items. stationary items. 5) Initiating measures to improve quality. 3) Establishment of manufacturing units of leather products in clusters to provide increased employment. To achieve those objectives the major strategies to be followed are: 1) Simplification of export procedures and strengthening export led cooperation of the Government. Duty on import of computer has been totally withdrawn. market promotion. increase productio n and expand markets for exportable agricultural produces. engineering consultancy and services. jewelry. bank credit on easy terms. improving the balance of payment through narrowing down the trade gap with the diversification of exportable and expanding the export base. assistance shall be provided for further development. vegetables and engineering and consultancy services are included in this programme. attracting entrepreneur to establish export oriented. 2) Encouraging establishment of backward linkage industries through reactivating the process of utilization of locally available raw materials. Expediting the process to BMRE of existing wet blue leather processing tanneries and help them to switch over to finished leather process and export. 4) Expediting the expansion of improved traditional/semi-intensive method of shrimp cultivation for enhancing export of shrimps. establishment of backward linkage with export oriented industries and expansion. The government also identified some items for crash programme in the export sector. Arrangement has been made to establish an information technology village to develop infrastructure of the export of computer software. cut and artificial flowers and orchid. electric items. In order to boost production and promote export of these crash programme items. More integration of the private sector with the export related activities. duty drawback/bonded warehouse and for 12 . 7) Developing and expanding infrasturctural facilities within the country for exports trade. consolidation and creation of new market for Bangladesh’s exportable. The policy aims at fostering employment opportunities through increased production and trade. diamond cuttings and polishing. In this backdrop. silk fabrics.

to traverse this difficult path we recommend the following measures. Bangladesh can also utilize this opportunity. The existing labour market of Bangladesh is characterized by pervasive politicization of labour disputes. the noble attempt towards the gradual liberalisation process and the removal of anti-export. Japan is an ideal example in this respect. Towards this end. particularly in private sector employment. SECTION-V Observations and Conclusions The policy of labour-intensive export development requires a set of rules that augment labour intensive production of exportable and encourage the exporters to export more. Labour market reform is an essential element for ensuring labour intensive export growth. Although more is to be done. anti-private sector bias as it is evident from export policy framework will certainly boost up labour-intensive export sector The concerned authority should be committed to implement the policy without any negligence. in many cases. However. frequent strikes and lock-outs. The successful macro-economic stabilization of the country during the current years provides the foundation for boosting up production and export. labour-intensive export development would be a far reaching goal and hence a very effective reform should be introduced in this sector. fiscal and institutional has been developed. the steps needed to be taken are: establishment of corporate 13 . Government also set up various committee forum and task forces to oversee the problem associated with export and accordingly solve those without any delay. 1991. These have been done so that resources are normally diverted towards the production of labour intensive exportables. Japan emerged as one of the major economic powers of the world by utilizing the country’s labour force (Henderson and Poole. p. These include credit facilities like concessional credit for semi-intensive cultivation of shrimp.securing joint venture partners. What is more important to note is that the current export policy contains the clear-cut objective of employment generation through encouragement of labour intensive export-oriented activities. 632). weak labour-management relationship. 1. small and cottage industries and easy term loans for leather sector. A close look into the export policy of 1997-2002 reveals that it contains a lot of elements of labour-intensive export development strategy and incentive framework. although it would not be an easy task. In such a situation. absence of correlation between wage and productivity. lack of job security and absence of safety nets for displaced workers. With poor resource base. To provide incentive for the production of labour intensive export items a package of incentives including financial. The country’s vast labour force can be used as a dynamic source for this purpose.

Therefore. health and nutrition. collection of labour market information regularly to design effective strategy with a view to maximizing employment and output. any efforts may be nipped in the bud. Measures in terms of basic indicators of literacy. The existing level is high compared to that in the newly industrialized countries of the East Asia. banks demand additional collateral which many firms. which have become a common phenomenon in international trade. It is gathered from various sources that in addition to long delay of sanctioning of working capital loan. In the context of quota and other types of restrictions. abolition of minimum wage to make it commensurate with the productivity level. Finally. At this stage. credit policy should have adequate provision for automatic sanctioning of working capital loan for export-oriented industries. all-out efforts should be given to this end. 6. 5. the suitable policy should be the production of newer exportable items through gradual shifting of labour force from the traditional activities while creating opportunities for the unemployed. 7. vigorous attempts should be undertaken for publicity of the various measures that the Government adopted for the development of the export sector. In formulating exchange rate policies. continuation of the review of labour laws. 3. Government should attach top priority to human resource development.partnership between management and labour to promote industrial relation. 2. the production of primary and traditional exportable items should not be drastically reduced because this may adversely affect the unemployment situation of the country. The tariff level should be lowered to reduce input costs for export oriented industries. These two policies should be designed in such a way that resources are allocated normally in favour of labour intensive export products. There are sufficient reasons to believe that in the past Government policy packages relating to export incentives 14 . development in the country’s labour market should be taken into account. human resource development is extremely low in Bangladesh. 4. the cure of massive domestic unemployment problem should be sought in the country’s monetary and fiscal policies. Therefore. education. Inadequate provision for working capital loan is a major hindrance for the development of export oriented industries. the rise in unit labour cost must be offset by appropriate depreciation of Taka. In order to keep export competitive. This has resulted in low efficiency and productivity of the country’s labour force in general. etc. especially the smaller ones are unable to provide. Therefore. regulations and labour market. In such a situation.

” Oxford Bulletin of Economics and Statistics.(1969). Henderson. (1991). Johansen. H. 1993-94. and M. Lindert. Numbers l & 2.S. D. 51. 43. Government of Bangladesh. and Stephen P. Samad Sarker. (1993). Magee. Review of Economics and Statistics. The Bangladesh Institute of Development Studies. ”Income and Price Elasticities of World Trade”. Bangladesh Bureau of Statistics. BIDS Report No. May 1969. Dhaka. A. were unable to provide clear and credible signal to the foreign as well as domestic investors. and W. M.” The Bangladesh Development Studies.”A paper presented in a seminar held at Bangladesh Bank(unpublished).V. May 1990. A. March 1995. Soren. Annual Report. (1984). Various Issues. J. 1993-95. Pp.(1990). H. International Economics. Bakht and Bhattacharya. Employment and Value Added in Bangladesh Manufacturing Sector in 1980s:Evidence and Estimate. the current situation is quite conducive and the Government has also put its all-out effort to attract the investors. Irwin. Matin. ”Performances of Merchandise Exports of Bangladesh During 1985-94.(1995).With Application to the Demand for Money. Pp. 169-210. Bangladesh Bank. (1986). March-June 1991. (1991). XIX. Export Policy.C. (8th Edition). Heath and Company. (1994). as such. REFERENCES Bahar.were not well articulated and publicized and. Principles of Macro-economics. Vol. Vol. 111-125. ”Investment. P. 15 . and Katarmna Juselius. However.H. Houthakker. Dhaka. Bangladesh Census of Manufacturing Industries. Poole. ”Maximum Likelihood Estimation and Inference on Cointegration.

Sign up to vote on this title
UsefulNot useful