Sustainable Industrialization and Economic Growth

Abstract

The purpose of this research study is to examine the relationship between economic development and
sustained industrialization in Bangladesh. To address this topic, many measures were examined,
including manufacturing value added (MVA), gross domestic product (GDP), employment rate, and
factors affecting environmental sustainability. The findings indicated a favorable connection between
the variables. As a result of the findings, policies have been proposed. Additionally, the findings
indicated that additional study is necessary in this field.

Introduction

Bangladesh has fared well during the 1990s period of rapid development. It is obvious that the
modest growth of the 1970s and 1980s has been exceeded by recent expansion, especially in the last
two decades [ CITATION Tar15 \l 1033 ] . While it is impossible to accept continuous growth as a
reality.

It is critical to emphasize here that private sector investment was the main driver of overall
development. Since 2010, meanwhile, private sector participation has stagnated, increasing at a rate
of around 1% per year [ CITATION Sam13 \l 1033 ]. The magnitude of annual development is
proportional to the latter in terms of private investment. Now, we are seeing growth rates that are
unsustainable with the amount of economic investment. This is an issue of concern.

Many authors contributed their valuable thoughts regarding economic growth and sustainable
industrialization. Dr. Md Mamunur Rashid proposed a research direction for sustainable small-scale
industries in Bangladesh[CITATION Ras12 \n \t \l 1033 ] . On the other hand, researcher Prottasha
Sarkar including her team overviewed the major industries in Bangladesh to evaluate
industrialization sustainability. They came up with theoretical concept while examining the country's
main industrial expansions and their effects on employment generation, public safety, health, and the
environment[ CITATION Pro17 \l 1033 ].

Industrialization is a necessary condition for a growing nation like Bangladesh to have fast economic
development. This research is established using the capacity, productivity, and outsource values of
industrial goods. As a result, Bangladesh still has a lot of room to grow in this area. The writers
suggest prospects and makes suggestions for Bangladesh's main industrial sectors in order to ensure
safe and sustainable industrialization. While following the articles and papers the questions that
arises are as follows:

1. What elements contribute to Bangladesh's economic development?

2. Where does sustainable growth fit into the framework of Bangladesh's industrialization?

3. What changes and consequences are required to improve the indices of sustainable
industrialization?

4. How can a strong and effective relationship between industrialization and economy assist
guarantee Bangladesh's future socioeconomic sector's sustainability?

The research questions are going to be answered through analysis of statistical data of sustainable
industrialization indicator such as small-scale industries, environmental sustainability, manufacturing
production, employment, technology advancement and Real GDP growth of Bangladesh.

The objective of this study is to find the reasons behind growth rates that are responsible for
unsustainable industrialization. Besides, the purpose is to find to the amount of investment that
would sustain the economic growth.

Literature Review

In the early researches, scholar Kazi addresses and suggests methods to overcome the obstacles
impeding Bangladesh's economic growth, including the measures the government has done and is
doing to ensure a brighter future [ CITATION Ahm11 \l 1033 ]. The inadequacy of government policies,
administration, processes, and management has been addressed, as well as the critical necessity of
education in raising awareness among the nation's mass illiterate people.

The Agriculture Administration of Bangladesh's research and development efforts to quadruple the
harvest in order to feed the country's massive population, as well as ideas used to protect crops from
being washed away by flood water, have been highlighted. The study has been backed by the views
of prominent economists interested with economy of Bangladesh. Nevertheless, author Kamal
believes that the complex interconnectedness of macroeconomic variables leads in an expanded
range of elements that have varying effects on the sustainability of the environment [ CITATION
MdK17 \l 1033 ]. Thus, maintaining a desirable level of environmental intensity requires sophisticated
research to understand the many effects of its components and to guarantee proactive actions to
address them.

He articulates that a route model to evaluate the indirect effects of industrialisation and exchange rate
on Bangladesh's environmental intensity is essential. The findings confirm that industrialization has a
significant positive effect on energy intensity, whereas trade openness has a direct negative effect;
but both industrial growth and trade openness have a negative indirect effect on industrialization via
technological growth and innovation, respectively. Individually, only industrialization has a
beneficial effect on energy intensity, while trade openness, technical innovation, and economic
development have a negative effect. According to researcher Das, Bangladesh has significant natural
gas reserves and overall consumption has grown doctrinally in recent years. He establishes a causal
connection between natural gas use and GDP throughout Bangladesh from 1980 to 2010.

The author [ CITATION Anu13 \l 1033 ] asserts that there is a definite unidirectional causal relationship
between GDP and natural gas consumption: changes in GDP influence natural gas consumption but
not vice versa. He is in favour of measures that promote energy conservation. The author argues that
adopting these measures will be critical in given the fact since Bangladesh's existing natural gas
reserves would not be sufficient to satisfy the country's present condition of consumption demand
over the next two decades. That being said, researcher Asif examines the overall state of
sustainability in the manufacturing sector, why developing nation suppliers are embracing
ecologically and socially sustainable methods, and how the effective implementation is both
hampered and facilitated. At the moment, the sustainability of the fashion business on a global scale
is a significant problem.

Bangladesh's garment sector is now experiencing severe problems with regard to labour conditions.
He asserts that seeing fashion as a reflection of morals or ethical issues is both humane and
sustainable. He examines [ CITATION Asi17 \l 1033 ] the working environment, fire, and safety hazards
in Bangladesh's garment industry and makes major recommendations for improving the environment
and ensuring sustainability. Author Rahman emphasizes on the agroindustry sector's present level of
development sustainability in terms of product variety, foreigners and locals, export value, and
product destination by area and country. A systematic questionnaire was developed for the random
sample survey, and a focus group.
According to his [CITATION Lat15 \l 1033 ] statements, the top exported agro processes product in
terms of value is spices at 21.46 million US dollars which is 25 percent of the GDP, whereas the
greatest shipped agro processed product in terms of weight is beverages that is 26735 ton. He
estimates 81 percent of Bangladesh's agricultural processed products are exported to Asian markets,
worth US$ 70.13 million. In terms of export value, the Kingdom of Saudi Arabia (KSA) is the
primary destination for Bangladesh agro-processed products, accounting for 20.2 million US dollars.
In terms of export volume, India is Bangladesh's primary destination for agro-processed products that
is 24372.88 metric ton.

From the stated papers all the factors have been covered but no relation has been established among
the industrialization sustainability and economical growth. My research would address interconnect
sections to find out a comprehensive picture so that the limitations in this study field can be
minimised.

Theoretical Discussion

Sustainable development has been one of the most talked and sought concerns in Bangladesh and
around the world over the last several decades. However, due to several obstacles, developing and
implementing a good plan for attaining sustainable growth is extremely difficult. The purpose of this
study is to ascertain the key problems that Dhaka's urban environment has encountered in terms of
sustainable development.

Industrial development that is inclusive implies that all segments of society profit from industrial
expansion. Historically, fast industrial development increased income disparity initially and then
levelled out only when considerable economic progress was accomplished some years later (Kuznets,
1955). In latest days, a growth in the income of a tiny portion of the population has triggered deadly
confrontations in a number of regions of the world. Inequality renders social growth unsustainable.
Today, industrialisation should be aimed towards raising the standard of living of the whole people,
regardless of gender, ethnic group, or geographical location.

Manufacturing is a significant source of employment generation, even more so at low income levels,
when nations enjoy a comparative advantage in labour-intensive industries. As incomes and wages
grow, the country must transition away from these early-stage sectors and create competitive
manufacturing in further capital-intensive and technologically complex industries.
However, as a country develops and reforms, the agriculture sector is increasingly disregarded.
Nonetheless, it is critical to understand agriculture's function and its relationship to economic growth.
Manufacturing, construction, public utilities, and mining all contribute to Bangladesh's steady
economic growth. According to Kaldor (1967), production is a growth engine for the economy
because industrial products have a larger demand elasticity with wealth. In Bangladesh, industries
have been unable to develop much as a result of deliberate instability and natural calamities. Despite
these unfavourable circumstances, export growth has increased to an average of 30%, while
economic growth has remained remarkably constant at 6.3 percent on average over the last five years
(Rahman, 2011).

Empirical Model

Population Model

A linear connection between sustainable industrialisation and economic development may be

assumed for the empirical model. As a result, economic growth will accelerate if sustainable
industrialization accelerates. The objective is to determine the extent to which sustainable
industrialization has an effect on the growth of the economy.

More complex linear model is needed which can present the linear relationship between a dependent
variable Y and independent variables as x 1,x2..xn. The population model for the multiple regression is
as follows:

Y = β0 + β1X1 + β2X2+...+ βkXk+ εk

Here,

Y= Dependent variable;

β0= Y-intercept

β1, β2,...,βk= Regression coefficient for each x 1, x2...xk;

εk= Residuals of the observation k

ε is the error indicator of the regression. It is the empirical model's residual component. Because
independent variables are almost never precise predictors of dependent variables, a regression line
will always contain an error term. Rather than that, the line represents an approximation based on
existing data. Thus, the error term indicates the degree of certainty associated with the formulation.
The formula for ε is as follows:

ε = ∑y2 - β0 ∑ y - β1 ∑xy

Sample Equation

The coefficient of the multiple regression model is estimated using sample data. Hence, for the
sample multiple regression equation with k independent variable is given as follow:

ŷ = b0 + b1x1 + b2x2 +…+ bkxk

Now,

Ŷ= Predicted value of the dependent variable y

b0 = estimate value of β0 based on the sample data

b1, b2...bk = sample estimates of the coefficients β1, β2...,βk

x1, x2...xn = Independent variables;

k= Number of independent variables;

For the empirical model, x-axis is the sustainable industrialization whereas y-axis is the economic
development. As per the equation, X represents the variable of sustainable growth indicators such as
manufacturing, production and employment, small-scale industries, environmental sustainability,
technology upgrading. On the contrary, Y is the data of economic growth like Real GDP growth per
capita.
Data will be converted to log format for analytical purposes. Since the sample regression equation is
in log level of the parameters, each parameter will signify the percent change in the dependent
variable attributable to a 1% change in the independent variable.

Data

Records that has been collected for the research is secondary data. All the information has been
sourced through the website of world bank. For the analysis, data from 1961-2020 has been gathered.
Time series of the data is as follows:
 Time Series

2.00

1.50

1.00

0.50

0.00
1950 1960 1970 1980 1990 2000 2010 2020 2030

-0.50

-1.00

-1.50

GDP per capita growth Manufacturing Production and Employement

Small Scale Industries Environment Sustainbility
Technology Upgrading

Figure 1 Economic indicators from 1960-2020 of Bangladesh [ CITATION The202 \l 1033 ]

Hypothesis

In order to construct the hypothesis to reject the null hypothesis significant tests are needed. The tests
are as follows:
Robustness Test: Robustness tests are entirely dependent on assumptions. It is hard to avoid making
assumptions, even if they are quite self-evidently correct. These are rather significant assumptions.
Without making assumptions, it is impossible to forecast with certainty even whether there is any
link between both the variables, much alone identify the effect of quantitative easing on investment.

That is why robustness tests exist. The test is qualified to determine either -

(1) whether or not the assumption is accurate, or

(2) whether or not the results would alter if the assumption is not accurate

Robustness studies validate the format's hypotheses:

Ho: The analysis's premise is true.

HA: The analysis's premise is incorrect.

Autocorrelation Test: Autocorrelation quantifies the degree of resemblance between a time series and
its laggard version over consecutive time periods. Autocorrelation quantifies the connection between
the present value of a variable and its previous values. Until there is a clear reason to believe
otherwise, presume that now the error terms remain independent. Typically, this assumption is
violated while there is a significant temporal component to whether the observations were made. The
simplest approach to determine whether there is reliance is to plot the residuals against the
measurement of time for that observation. If the data genuinely independent, the residuals should
appear to be randomly distributed about zero. However, if a discernible pattern develops, dependence
is very certainly an issue. Recall that if the errors have a first-order autocorrelation, they are
represented as:

Εt = pEt-1 + wt

Here, |p|<1 and wt ~ iid. If researchers suspect first-order autocorrelation between the mistakes, a
formal test for the parameter p exists. The autocorrelation analysis is created as follows:

Ho: p = 0
 HA: p ≠ 0

Thus, the null hypothesis indicates that, p ≠ 0 that the error term in one period is unrelated to the
error term in the previous period, but the alternative hypothesis indicates that the error term with one
period would either be positively or negatively connected to the error term in the previous period.
Often, the researcher already knows if the mistakes are positively or negatively linked. HA: p < 0 in
the case of negative correlations or H A: p > 0 in the case of positive correlations.

Heteroscedasticity Test: To test for heteroscedasticity, you must examine the residuals using fitted
value plots. Typically, heteroscedasticity is shown by an increase in the variability of the residuals as
the fitted values rise. Identifying the heteroskedasticity of data is critical for deciding whether or not
it can run the standard regression models on it. The researcher uses a formal technology known
Spearman's rank correlation to indicate the location of heteroscedasticity. The researcher next adapts
the statistical model by calculating the exact number of each residual but instead ranking them
ascending or decreasing to find heteroscedasticity.

Multicollinearity Test: Multicollinearity occurs when two or more variables exhibit a high degree of
correlation in a multiple regression analysis. Multicollinearity, in general, can result in larger
confidence ranges and therefore less trustworthy probability on the influence on independent
variables in the model. The variance inflation factor (VIF) is one approach to quantify
multicollinearity. It quantifies what the variance of such an estimated regression coefficient rises
when the predictors are correlated. If there are no correlations between the variables, the VIFs would
all be equal to one.

For constructing the hypotheses, the null and the alternative hypothesis for the whole model are as
follows:

Ho: β0 = β1 = 0

HA: β0 or β1 ≠ 0

Here,

Ho = The coefficients of regression (β0, β1) are equal to zero.

HA = Minimum one regression coefficient (β0, β1) is not equal to zero.

Therefore, the hypothesis for the research is as follows:

Ho: There is positive linear association between economic growth and sustainable industrialization.

HA: There is no linear association between economic growth and sustainable industrialization

Interpretation of the empirical test results

Empirical analysis is a method for studying and interpreting data that is evidence-based. Rather than
ideas and notions, the empirical method is founded on real-world facts, measures, and outcomes.

The time series demonstrates that the graph lines are relatively parallel. This demonstrates that the
variables' relationships are neither entirely opposing nor excessively tight. Thus, the simulated
interpretation of the empirical test results shows that there might be a somewhat positive relation
between economic growth and sustainable industrialization.

Tests of probable anomalies in the residual distribution

Anomaly detection can be done to test the probable anomalies in the residual distribution. It is a data
mining process that finds data points, events, and/or observations that vary from the expected
behaviour of a dataset. Anomalies in data can signal either serious occurrences, such as a
technological malfunction, or possible possibilities, such as a change in economic development.

The primary method for finding data abnormalities is to highlight data points that differ from the
distribution's like mean, percentile, mode, quantiles and common statistical characteristics.

Conclusion:

The study only emphasis of the research to be conducted in the study region, which is based on
Bangladesh's sustainable industrialisation. When it comes to industrialization's long-term viability, it
has been found that economic growth may have an impact on it at times. Having said that, the study
did not uncover a critical value above economic development that may have an impact on long-term
sustainability. Having said that, the study needs access to statistical data of Bangladesh. There is a
limited public access to the data which resulted in brief sample size. Besides, there was a lack of
aforementioned research on the field which failed to provide a firm theoretical foundation for the
study. However, this is one of the researches that opens the door to further in-depth investigations.
To conclude, policies that can be recommended are as follows:

 Invest in long-term growth projects, such as infrastructure. Economic and financial policy are
employed to run an economy, job prosperity, and inflation in order to facilitate long-run
growth.
 Major decisions should be made to ensure the profitability of small and medium-sized
industries.
 Recognize the limited resources available to conduct periodic reviews of the environmental
effect and take necessary action.
 Multilateral structures and alliances must be designed to promote the creation of job
opportunities.

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