5e770bc2a68c8jaunary Issue 2019

ISSN 1010-9536
REVISITING MIGRATION-DEVELOPMENT NEXUS
1 China’s Belt and Road Initiative and Economic

Implications for Bangladesh
Rashed Al Mahmud Titumir
Md. Zahidur Rahman
41 Localization of Jobs in the GCC Region:

Implications for Bangladesh
Benuka Ferdousi
67 Revisiting Migration-Development Nexus: A

Micro-level Study in Dhaka City of Bangladesh
Syeda Tanzia Sultana
87 Demystifying International Informal Trade within

Formal Trade: A Case Study of Bangladesh
S.M. Humayun Kabir
Muhammad Shahadat Hossain Siddiquee
109 Book Review
Volume 40
Number 1
2019
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VOLUME 40 NUMBER 1 JANUARY 2019
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TABLE OF CONTENTS
VOLUME 40 NUMBER 1 JANUARY 2019

Md. Zahidur Rahman
China’s Belt and Road Initiative and Economic
Implications for Bangladesh 1
Benuka Ferdousi
Localization of Jobs in the GCC Region:
Implications for Bangladesh 41

Revisiting Migration-Development Nexus: A Micro-level
Study in Dhaka City of Bangladesh 67
S.M. Humayun Kabir

Demystifying International Informal Trade within Formal Trade:
A Case Study of Bangladesh 87
Book Review 109

BIISS JOURNAL, VOL. 40, NO. 1, JANUARY 2019: 1-40

Md. Zahidur Rahman
CHINA’S BELT AND ROAD INITIATIVE AND ECONOMIC IMPLICATIONS

FOR BANGLADESH
Abstract
The article provides a unique analytical framework to identify the compulsions

and contradictions arising out of China’s Belt and Road Initiative (BRI) and
offers feasible sets of solutions amidst burgeoning growth of literature
on BRI which is either marred in assertive dogmatization, or excessive
apprehensions, or non-feasible utopian (lack of ) solutions. The proposed
analytical framework, combining necessary and sufficient conditions for
deriving gains from new form of cooperation under BRI, suggests integration
of production network, transfer of technology and risk-sharing of capital
for achieving mutual stability and growth outcomes. The article also deals
with alignment of domestic political settlement and normative legitimacy
by proposing an equiangular balanced pathway for development for the
participating countries with particular emphasis on Bangladesh.
Keywords: BRI, Strategic Alignment, Normative Legitimacy, Equiangular

Development Diplomacy, Globalization
1. Introduction
Chinese President Xi Jinping’s Belt and Road Initiative (BRI) with a vow to
create a ‘new regional economic order’ has garnered much of coverage but less of an
analytical scrutiny. BRI involves an over-land “Silk Road Economic Belt” reminiscent
of the historical Silk Road across Eurasia and a “Maritime Silk Road” connecting China
to the world. The initiative assumes global significance more so due to its economic
and geo-strategic implications in a complex milieu of rising Chinese prominence and
apprehensive responses from other global and regional powers.1
The BRI provides China both an ‘institutional and normative’ framework

to guide its foreign policy agenda and cater for its needs of an expanding and
Rashed Al Mahmud Titumir is Professor, Department of Development Studies, University of Dhaka. His
e-mail address is: rtitumir@unnayan.org; Md. Zahidur Rahman is Lecturer, Department of Development
Studies, Bangladesh University of Professionals. His e-mail address is: zahidur.rahman@bup.edu.bd
© Bangladesh Institute of International and Strategic Studies (BIISS), 2019.

1
Yong Wang, “Offensive for Defensive: The Belt and Road Initiative and China’s New Grand Strategy”, The
Pacific Review, Vol. 29, No. 3, 2016, pp. 455-463; Ashlyn Anderson and Alyssa Ayres, “Economics of Influence:
China and India in South Asia”, Expert Brief, Council on Foreign Relations, New York, 2015.
1
BIISS JOURNAL, VOL. 40, NO. 1, JANUARY 2019
transforming economy.2 The prevailing approaches, however, emphasize more on

geopolitical aspects and provide less emphasis on explaining the internal compulsions
arising from a transitioning Chinese economy.3 The slowing down of Chinese economy
from its three-decade-long 10 per cent GDP growth rate to a ‘New Normal’ of 6 to 7
per cent is driving Chinese leaders to pursue policies appropriate for a third wave of
industrialization in China creating new networks of trade, connectivity and markets
for Chinese goods and technology.4 This necessitates more regional integration and
cooperation rather than rivalry and confrontation.
Nonetheless, BRI offers an alternative to the hitherto dominant form of global

market order created by the so-called Washington Consensus – which is popularly
known as neoliberalism and instrumentally involves liberalization, deregulation
and privatization. The predominant system of liberalization based globalization
has delivered restricted benefits to most of the developing countries and created
widespread disquiet.5 In this context, China has devised this new policy initiative to
strengthen its close relations with neighbouring countries with an enhanced focus
on connectivity, infrastructure, investment and trade.6 Since China is the world’s
second largest economy and expected to take the top position by 2030, economic
implications of the Chinese-led initiative has potential for rejuvenation from the
recent sluggish global economic trends.7 Thus, the BRI could act as a ‘key growth
engine’ for the global economy and create considerable opportunities for not only
participating countries, but also offer direct and indirect benefits to a range of actors
from developing and developed countries.8
2
David Arase, “China’s Two Silk Roads Initiative: What it Means for Southeast Asia”, Southeast Asian Affairs,
Vol. 1, 2015, pp. 25-45.
3
Peter Cai, “Understanding China’s Belt and Road Initiative", Lowy Institute for International Policy, 2017.
4
Yi Wen, “The Making of an Economic Superpower-Unlocking China’s Secret of Rapid Industrialization”,
Working Paper 2015-006B, 2015, available at http://research.stlouisfed.org/wp/2015/2015-006.pdf,
accessed on 28 January 2018; Zou Lixing, “The Third Industrial Revolution and Development Strategies of
China”, International Affairs Forum, Vol. 4, No. 1, 2013, pp. 79-82.
5
Joseph E. Stiglitz, Globalization and Its Discontents, New York: W. W. Norton & Company, 2002.
6
Michael Clarke, “The Belt and Road Initiative: China’s New Grand Strategy?”, Asia Policy, Vol. 24, No. 1, 2017,
pp. 71-79; Tai-Wei Lim, Henry Hing Lee Chan, Katherine Hui-Yi Tseng and Wen Xin Lim, China’s One Belt One
Road Initiative, London: Imperial College Press, 2016; D. P. Nicolas, Chinese Infrastructure in South Asia: A
Realist and Liberal Perspective, Doctoral Dissertation, Monterey, California: Naval Postgraduate School, 2015.
7
Size of US economy was 1.7 times of that of China and jointly they constituted 40 per cent of global
economy in 2016. China is already the largest trading nation in the world and its economy is projected
to overtake US economy by 2028. See for details, Malcolm Scott and Cedric Sam, “Here’s How Fast China’s
Economy is Catching Up to the U.S”, Bloomberg, 12 May 2016, available at https://www.bloomberg.com/
graphics/2016-us-vs-china-economy/, accessed on 15 March 2017; PricewaterhouseCoopers (PwC), “The
Long View: How will the Global Economic Order Change by 2050?”, February 2017, available at https://
www.pwc.com/gx/en/world-2050/assets/pwc-the-world-in-2050-full-report-feb-2017.pdf, accessed on 20
December 2017.
8
L. M. Leong, “China’s belt and road strategy offers a winning growth formula, and the world must get
on board”, South China Morning Post, 31 May 2017, available at http://www.scmp.com/comment/insight-
opinion/article/2096323/chinas-belt-and-road-strategy-offers-winning-growth-formula, accessed on 20
December 2017.
2
CHINA’S BELT AND ROAD INITIATIVE
In the South Asian context, India being a regional power with global
ambition, the discussion of BRI is largely dominated by realist perspective. Growing
involvement of China in the Indian Ocean Rim surrounding South Asian countries has
been presented as an “encirclement strategy” inciting a deep sense of fear among
many Indians.9 Moreover, the USA considers China’s strong presence in the Indian
Ocean as a challenge to its continued influence as well.10 Hence, BRI would face a
huge challenge undeniably.11 The case of smaller countries in the region is different
where BRI would offer much-needed capital and infrastructure with multiplier effects
on their local economies.12 China appears to be a viable development partner for
small countries in South Asia including Bangladesh since their bilateral relations with
China have strengthened in recent years.13
Within the parlance of Sino-Bangladesh relations, BRI would certainly offer

immense potentials for Bangladesh which has not yet received enough critical
academic scrutiny.14 Bangladesh regards China as a trusted friend and bilateral
relation between the countries has reached a new height when President Xi Jinping
visited Bangladesh in October 2016.15 Taking into account the historic connections
with China through Southern Silk Road, vibrant cultural ties and active trade links,
Bangladesh appears to be in a much better position in South Asia for promoting a
sustainable partnership with China.16 Bangladesh has strategic partnership with
China while at the same time its relations with the US, India and Myanmar have also
seen heightened developments creating divergent geopolitical contradictions and
economic compulsions. The article argues, however, that benefits the participating
countries can derive from BRI would depend on an alignment capable of overcoming
geopolitical apprehensions and leveraging new forms of cooperation to achieve
growth and stability.
In this backdrop, a new approach is needed to better explain the conditions

for transforming given potentials from BRI into the reality of increased growth and
9
Jabin T. Jacob, “China’s Belt and Road Initiative: Perspectives from India”, China & World Economy, Vol. 25,
No. 5, 2017, pp. 78-100; J. W. Garver, “The Diplomacy of a Rising China in South Asia", Orbis, Vol. 56, No. 3,
2012, p. 392.
10
W. R. Mead, “National Security Strategy of the United States of America”, Foreign Affairs, Vol. 97, No. 2, 2018,
pp. 174-175.
11
David Arase, op. cit.; Simeon Djankov and Sean Miner (eds.), China’s Belt and Road Initiative: Motives, Scope,
and Challenges, Washington DC.: Peterson Institute for International Economics, 2016.
12
D. P. Nicolas, op. cit.
13
Ashlyn Anderson and Alyssa Ayres, op. cit.
14
R. A. M. Titumir, “Sino-Bangladesh Relations: In Search of an Equiangular Partnership”, The New Age, Dhaka,
14 October 2016; M. S. Islam, “Xi Jinping’s Visit: Implications for Bangladesh-China Relations”, The Daily Star,
14 October 2014; Ruksana Kibria, “Strategic Implications of Bangladesh-China Relations”, Bangladesh and
the World, 15th Anniversary Special, The Daily Star, 2006.
15
M. M. Rahman, “South Asia’s View on China’s One Road One Belt Initiative”, Fudan IIS Working Paper Series,
University of Fudan, 2015.
16
M. Shahidul Islam, “China-Bangladesh Relations: Contemporary Convergence”, The Daily Star, 2012.
3
prosperity. The article, therefore, aims to develop a comprehensive framework

relating to economic implications of BRI for Bangladesh in the context of regional
developments in South Asia. The article attempts to cover potential gains from
participating in the BRI as it relates to infrastructure building, regional connectivity,
trade, investment and economic development in Bangladesh. The article offers
feasible sets of solutions amidst burgeoning growth of literature by pointing out
necessary and sufficient conditions to achieve mutual stability and growth outcomes
and it generates useful policy directions for Bangladesh’s probable approach and
available ways to maximize benefits and potential gains from BRI in particular and
from active Sino-Bangladesh cooperation in general.
2. Theorizing Sino-Bangladesh Relations within BRI: A Framework
Understanding and explaining China’s BRI requires formulating explicit

conceptual framework. In explaining China’s BRI, mostly realist and liberal perspectives
are employed both of which offer contrasting analysis about its implications. Taking
into view the inadequacy of existing approaches, as elaborated below, the article
attempts to add new theoretical insights that will broaden the understanding of
China’s current undertaking.
2.1 Realist Approach
Realist perspective holds that the world is anarchical where the state is only
concerned with power and international relations are based on the assumption of the
zero-sum game.17 Rooted in the ideas of Machiavelli (1469-1527) and Hobbes (1588-
1679), among others, realists mainly focus on state interest, war and conflict in world
politics where interests of and interaction among states are profoundly shaped by a
constant fear of one another.18 According to Walt, realism “depicts international affairs
as a struggle for power among self-interested states and is generally pessimistic about
the prospects for eliminating conflict and war”.19
Consequently, prospects for cooperation and effectiveness of international

arrangements are too bleak to pursue. Essentially, this reflects a hawkish tendency
that is not interested in peace rather it lets the states to externalize their internal
compulsions as they have problems in their home constituencies. This might be visible
in case of India as well as the USA – how they frame the external threat perceptions
17
T. G. Moore, “Racing to Integrate or Cooperating to Compete? Liberal and Realist Interpretations of China’s
New Multilateralism", in Guoguang Wu and Helen Lansdowne (eds.), China Turns to Multilateralism: Foreign
Policy and Regional Security, London and New York: Routledge, 2008.
18
J. A. Frieden, D. A. Lake and K. A. Schultz, World Politics: Interests, Interactions, Institutions, (3rd Edition), New
York: W. W Norton & Company, 2015.
19
Stephen M. Walt, “International Relations: One World, Many Theories”, Foreign Policy, No. 110, 1998, p. 31.
4
to manipulate their internal politics.20 Instead of confronting reality, their analysis is

based on speculation. The problem is that realists are always interested in violent
process of instability meaning permanent continuous instability as conceptualized
by Hobbesian notion of the ‘state of nature’. Primarily, realism leads to more tensions
and militarization ultimately creating what is known as ‘security dilemma’ and as a
consequence it makes countries buy more arms than what they actually need or can
afford.21 For example, the growing expenditure for arms and ammunition worldwide
vindicates this strategy.22 This is also evident in case of India and even in Bangladesh
along with the neighbouring regions.23 Moreover, realism is not working because
conflict over time is increasing. For instance, the incidence of conflict and number
of casualties has escalated in the world during the post-Cold War period at an
unprecedented rate.
Figure 1: Number of Armed Conflicts by Type of Conflicts, 1946-2015
Source: K. Dupuy et al., Trends in Armed Conflict, 1946–2015, Oslo, Norway: Peace Research Institute, 2016.
The total number of armed conflicts (including interstate, intrastate and

extrastate) in the world increased from 41 in 2014 to 50 in 2015 which is the highest
number since 1991. The number of people killed as a direct consequence of armed
conflicts was over 97,000 in 2015 and 104,000 in 2014 and this has been higher than
20
Raju G. C. Thomas, Indian Security Policy, Foreword by Joseph S. Nye, Princeton: Princeton University Press,
2014.
21
J. A. Frieden, D. A. Lake and K. A. Schultz, op. cit.
22
See for example data on growing trends in arms purchase and military expenditure in SIPRI, 2017.
23
5
any other time in the post-Cold War era.24 It shows that the realist perspective is not
just inadequate but also inapt to approach the BRI because theoretically it stressed
on the Chinese interest in advancing its geopolitical assertiveness under the guise
of economic diplomacy and apparently this leads to a situation which will not create
favourable ambience for the so called new regional economic order or strategic
alignment under the framework of BRI. Such excessive emphasis on geopolitical
rivalry blurs notable economic implications of China’s BRI on participating countries.
2.2 Liberal Approach
Liberal approach, by contrast, offers an analysis stressing more on

cooperation and mutual growth where international institutions play a key role. In
their view, liberals focus on interdependencies among states through global norms
and institutions, economic cooperation and exchange and they present interaction
among states a positive-sum game where interdependence affects the interest
and behaviours of the states.25 Common interests among the states are created by
potentials of ‘profitable exchanges’ that would lead to international institutions and
arrangements being set up to facilitate cooperation where conflict, though possible,
is not inevitable and can be avoided.26
Liberals, though, focus on peace and cooperation but their problem is that
they do not address the huge discontents due to neoliberal globalization which
has been accompanied by restricted trade, jobless growth and rising inequality
across nations. Because free trade does not increase the production capacity of the
developing countries, rather liberalist policies disguise the market penetration in
developing countries that render them even more vulnerable in an unequal exchange
relationship with developed countries.27 In case of liberalism, it has been observed
that though there is an increase in trade flow but it is extractive in nature because it
has not been accompanied by associated increase in production or real economy in
most of the developing countries.28
The outcomes of globalization or gains from global economic integration

and market penetration are not equally shared among participants because the poor
developing countries are on a race where they can hardly compete with forerunners
24
K. Dupuy, S. Gates, H. M. Nygård I. Rudolfsen, H. Strand and H. Urdal, Trends in Armed Conflict, 1946–2015,
Oslo, Norway: Peace Research Institute, 2016.
25
Robert Keohane and Joseph Nye, Power and Interdependence, (4th edition), Boston: Longman, 2012.
26
Jeffry A. Frieden and David A. Lake, op. cit.
27
A. K. Jorgenson and B. Clark, “The Economy, Military, and Ecologically Unequal Exchange Relationships in
Comparative Perspective: A Panel Study of the Ecological Footprints of Nations, 1975-2000”, Social Problems,
Vol. 56, No. 4, 2009, pp. 621-646.
28
See for details, UNCTAD, Trade and Development Report 2017- Beyond Austerity: Towards a Global New
Deal and Trade and Development Report 2010- Employment, Globalization and Development, United Nations
Conference on Trade and Development, 2017 and 2010.
6
due to lack of enablers such as financial capital, infrastructure, technology and trained
human capital.29 Far from being perfect, the global market rewards only the nations
with greater market power reflected in the form of trade, migration and intellectual
property rights regimes acting in their own favour at the expense of all others.30 The
consequent outcome (shown in Figure 3) points to the alarming rate of increase in
global inequality since the 1980s onwards. Overall, these two trends as explained here
– jobless growth and rising inequality worldwide present a strong case against the
fairy-tale of liberalization for development.
In an ‘era of global change’, the world has increasingly been characterized

by a process of intensified global interactions and interdependence which is,
indeed, “inescapably plugged into the neo-liberal world order”.31 Nevertheless,
the process of globalization, as stressed by Schech and Haggis32, is tantamount
to “the spread of capitalism as a production and market system” where it can
facilitate economic development through realizing potentials from free trade.
However, gains are not evenly shared among countries participating in the global
production network causing an alarming rate of inequality not just among groups
of countries but also within a country.33 For example, by looking at the ‘global
shift’ in the manufacturing sector, homogeneity in the patterns of consumption
and heterogeneity in the pattern of production are found with adverse outcome
for developing countries.34
Globally, only few countries are getting benefited while trade has
concentrated in a small group of products. As a result, this process is not creating
devolved and egalitarian outcomes, rather intensifying the existing divide among
the developed and developing countries. UNCTAD reports35 critically analyzed and
presented the summarized experience of globalization and trade. Major trends due
to globalization which include primary commodity dependence, dependence on a
narrow range of products, no export diversification and limited technological up-
gradation are clogging the process of economic transformation, industrialization and
trade creation in the developing countries. Moreover, the prospect of global trade is
showing weaker growth rising less than the global GDP growth rate in recent years.
29
Ibid.
30
Nancy Birdsall, “Rising Inequality in the New Global Economy”, International Journal of Development Issues,
Vol. 5, No. 1, 2006, pp. 1-9.
31
Robert Potter et al., Geographies of Development: An Introduction to Development Studies, UK: Routledge,
2017, p. 128.
32
Susanne Schech and Jane Haggis, “Culture and Development: A Critical Introduction”, UK: Wiley-Blackwell
Publisher, 2000, p. 58.
33
UNCTAD, op. cit.
34
Peter Dicken, Global Shift: Mapping the Changing Contours of the World Economy, London: SAGE
Publications, 2015.
35
UNCTAD, Trade and Development Report 1997- Globalization, Distribution and Growth and Trade and
Development Report 2000- Global Economic Growth and Imbalances, United Nations Conference on Trade
and Development, 1997, 2000.
7
According to IMF report, the growth of trade volumes in the world decreased from 3.5
per cent from 2014 to 2.8 per cent in 2015.36
Another aspect is the jobless growth of economies around the world.

For example, the absolute number of jobless people would rise by 3.4 million
in 2017 making total 201 million unemployed persons in the world due to the
underperformance of the global economy as well as its inability to generate enough
jobs. The world unemployment is also going to increase from 5.7 per cent in 2016 to
5.8 per cent in 2017 reversing the slightly declining trend from its high position on the
onslaught of the global financial crisis.37 The unemployment situation is more severe
in developing and emerging countries compared to the developed countries. It turns
out that growth enhancing and employment generating benefits of globalization to
developing countries largely defy the typical expectations by neoliberal quarters.38
Figure 2: Trends in Total Unemployment Rate in the World, 2000-2018
Source: "World Employment and Social Outlook – Trends 2017", International Labour Organization, 2017.
Further, the exacerbating rate at which global inequality is increasing cogently

questions the viability of the current global economic system driven by liberalization-
based globalization.39 With the expanding reach of the market globally and for the
inherently ‘dis-equalizing nature’ of globalization, the severity of inequality among
developed and developing countries and within developing countries themselves is
becoming ‘more rather than less likely’.40
36
"Global Economic Outlook: Gaining Momentum?", International Monetary Fund, 2017.
37
"World Employment and Social Outlook – Trends 2017", International Labour Organization, 2017.
38
Sanjaya Lall, “The Employment Impact of Globalization in Developing Countries”, in E. Lee, and M. Vivarelli
(eds.), Understanding Globalization, Employment and Poverty Reduction, New York: Palgrave Macmillan,
2004, pp. 73-101.
39
Narcís Serra and Joseph E. Stiglitz (eds.), The Washington Consensus Reconsidered: Towards a New Global
Governance, Oxford: Oxford University Press, 2008; Thomas Piketty, “About Capital in the Twenty-First
Century”, American Economic Review, Vol. 105, No. 5, 2015, pp. 48-53.
40
Nancy Birdsall, op. cit.
8
Figure 3: Gini Coefficient and Trend in Global Inequality
Source: B. Milanovic, “The Two Faces of Globalization: Against Globalization as We Know it”, World
Development, Vol. 31, No. 1, 2003, pp. 667-683, (Note: Gini coefficient: unweighted intercountry inequality,
1950-1998. Each country is one observation).
Taken together, liberalism and realism, however, do not explain analytically
the new form of globalization promoted by the Belt and Road initiative both at
the normative and structural levels. This is because there are limitations at the
theoretical and empirical levels. Empirically it is observed that due to liberalization
the growth pattern is job-less, extractive in nature and this benefits only a handful
of large corporations and a few countries at the expense of million others.41 During
the post-liberalization era, the world has experienced growth without job creation
along with rising global income inequality.42 The consequence is more severe in many
developing countries where the promised outcome of faster economic growth has
not been realized despite their integration into the global market has deepened.43
Apart from the observed flaws of liberalist approach where trade and
cooperation among states left many countries no better-off, realist approach tends to
spread fear and apprehension among competing states when it comes to taking part
in a mutual development initiative. Departing from the traditional understanding, the
paper advances a new approach for explaining Belt and Road Initiative and it defines
the sufficient condition for a successful regional alignment under BRI by bringing in
two concepts – the notion of normative legitimacy and political settlement.
41
UNCTAD, 1997, 2000, op. cit.
42
F. Alvaredo, L. Chancel, T. Piketty, E. Saez and G. Zucman, “World inequality report 2018”, The World
Inequality Lab, available at https://wir2018.wid.world/, accessed on 15 March 2018.
43
UNCTAD, "Trade and Development Report 2010: Employment, Globalization and Development", United
Nations Conference on Trade and Development, 2010.
9
2.3 An Alternative Conceptual Framework
This formulation has been informed by the understanding that the internal
conditions of a given country define the external conditions of that particular country.
This is because historically all transformations have taken place due to the changes
in the social-property relations or driven by internal contradictions within the system.
The transition to capitalism is due to internal compulsion and contradiction within the
society, not because of some external forces.44 Therefore, strategic directions of that
country are defined predominantly by political settlement and shaped by normative
legitimacy. In this regard, the notion of strategic alignment means that for effective
cooperation there needs to be an alignment of interests at multiple levels across
political and productive classes among the countries. Drawing on the preceding
discussion, it is formulated that the relations among neighbouring states and China
within the framework of BRI can create two conditions with deferring outcomes. First
is the stability and growth condition and second is the dis-stability and dis-growth
condition.
2.3.1 Stability and Growth Framework
The question is in which conditions there will be stability and growth or in

other words, what are the necessary conditions for stability and growth as a result of
new forms of cooperation. The first scenario of growth and stability is contingent upon
three necessary conditions. Three necessary conditions are: (a) if it creates production
network and activities in real economy as opposed to extraction from the cooperating
country to China, (b) if capital is invested on a risk-sharing basis rather than the
current practice of liability with the country that receives the credit and (c) if there
is transfer of technology instead of the existing practice of import of technology. For
these necessary conditions to materialize, there is a need for a sufficient condition of a
political settlement that ensures capitalist class is interested in productive expansion
of the economy. The growth and stability will persist and will not follow a path of
growth reversal, if there is normative legitimacy. This will also create a virtuous circular
flow through better outcome leading to higher ideational and structural support
coming from politics and people which would create conditions for each of the nodes
in necessary conditions leading to higher outcome in a dynamic setting through their
endogeneity (Figure 4).
44
Paul Sweezy and M. Dobb, “The Transition from Feudalism to Capitalism”, Science & Society, Vol. 14, No. 2,
1950, pp. 134-167; See also, C. Harman and R. Brenner, “The Origins of Capitalism”, International Socialism,
Vol. 111, 2006, pp. 127-165; J. B. Foster, “The Commitment of an Intellectual: Paul M. Sweezy (1910-2004)”,
Monthly Review, Vol. 56, No. 5, 2004, pp. 4-40, available at https://monthlyreview.org/2004/10/01/the-
commitment-of-an-intellectual-paul-m-sweezy-1910-2004/, accessed on 13 June 2017.
10
Figure 4: Stability and Growth Framework
Sufficient and sustainability Necessary conditions Outcome

Conditions
Political
settlement Integration with
production network
Political level
Strategic Stability
Risk - sharing of and
Alignment asset and liability growth
Peoples’ level
Normative Technology transfer

legitimacy
Circular flow of virtuous cycle
Source: Prepared by authors based on relevant literature.
2.3.2 Dis-stability and Dis-growth Framework
As opposed to the Scenario - 1, the conditions which will create dis-stability

and dis-growth in the participating country include (a) when there will be extractive
trade with excessive net import and limited participation in production network, (b) if
the per capita debt grows more than per capita GDP due to the injection of credit and
(c) if the catching up of technology is not enhanced through transfer of technology.
Finally, if there is political contestation within the country, if there is no convergence
at different levels of distribution of power, if there is lack of legitimacy and if there is
no regional alignment among participant countries, it will create conditions for dis-
stability and dis-growth. It will also create a vicious cycle, if the credit is taken without
the required sufficient and sustainability conditions (Figure 5).
11
Figure 5: Dis-stability and Dis-growth Framework
Sufficient Conditions Necessary conditions Outcome
Political Extractive liberalization

settlement and limited production
No strategic Dis-stability
Extractive liberalization
alignment and disgrowth
and limited production
No or limited No Techology transfer

legitimacy
Circular flow of virtuous cycle
Source: Prepared by authors based on relevant literature.
2.3.3 Equiangular Development Diplomacy
Based on the above explication, the approach taken here is the ‘equiangular
development diplomacy’. This refers to a balanced pathway to progress where
relations among countries would focus on mutual development needs and priorities
rather than on divergent geopolitical interests or disputes. While this approach does
not deny or ignore existing conflicts or contradictions, because that would be hugely
impractical, it basically calls for a balanced approach that would align the interests and
requirements of countries in question in ways to maximize gains and minimize loss. It
will show in which condition there will be stability and growth and in which condition
there would be dis-stability and dis-growth, while explaining the potential gains for
countries from participating in Belt and Road Initiative. Both frameworks are given
below (Table 1). This framework combines economic and geostrategic conditions for
enhancing regional growth and development.
12
Table 1: Growth Enhancing Matrix within the Framework of BRI

Situation 1 Situation 2
Necessary 1. Integration into production network 1. Extractive liberalization and lim-
conditions leading to employment creation and ited production
labour skill up-gradation 2. Debt augmentation
2. Risk-sharing of asset and liability 3. No technology transfer or only
3. Technology transfer technology import
Sufficient 1. Normative legitimacy coming from 1. No or weak normative legiti-
conditions general favourable perception macy
2. Political settlement based on consen-
sus from below where the capitalist class 2. Political contestation and no
interested in productive expansion productive class
3. Strong strategic alignment
3. No or weak strategic alignment
Outcomes Stability and growth Dis-stability and dis-growth
Source: Prepared by authors based on previous frameworks.
2.3.4 Sufficient Condition – 1: Normative Legitimacy
The first sufficient condition for the BRI to succeed is the presence of normative
legitimacy in the participating country. Normative legitimacy emanates from broad
social approval and general favourable consensus among public about the perceived
effects and outcomes of BRI within the ambience of existing bilateral relations among
the countries involved.
Legitimacy is a contested and elusive term involving numerous attempts to

define its meaning and usage in political and social science disciplines.45 In recent
years, the primary debate concerning legitimacy has drawn much attention from
International Relations scholars broadening the focus on the relationship between
citizens and international institutions besides the legitimacy nexus between the state
and its subjects.46 It is often defined to be “a generalized perception or assumption
that the actions of an entity are desirable, proper, or appropriate within some socially
constructed system of norms, values, beliefs, and definitions”.47
45
See for details, A. Levitov, “Normative Legitimacy and the State”, Oxford Handbooks Online, Oxford: Oxford
University Press, 2015; M. Zelditch, Jr., “Theories of Legitimacy”, in J. T. Jost and B. Major (eds.), The Psychology
of Legitimacy: Emerging Perspectives on Ideology, Justice, and Intergroup Relations, New York: Cambridge
University Press, 2001, pp. 33-53.
46
J. Steffek, “Legitimacy in International Relations: From State Compliance to Citizen Consensus”, in A.
Hurrelmann, S. Schneider and J. Steffek (eds.), Legitimacy in an Age of Global Politics: Transformations of the
State, London: Palgrave Macmillan, 2007.
47
M. C. Suchman, “Managing Legitimacy: Strategic and Institutional Approaches”, Academy of Management
Review, Vol. 20, No. 3, 1995, p. 574.
13
Among a number of conceptualizations, the notion of ‘normative legitimacy’

is adopted drawing on Gramscian and Habermasian formulations. According to
Gramsci48, consent or consensus is not automatic; it is engineered in a hegemonic
process by the ideological superstructures such as civil society and is not outside the
coercive influence by the state.49 In Habermas50, though he considers necessity of
legitimacy for the stability of the social order, “the contradiction between base and
superstructure is the contradiction between monopoly capitalism and liberal ideology
– an unfree market justified by a free market ideology” which creates legitimacy crisis
for the liberal states in the long run.51
It is stressed that legitimacy is essentially a normative process and it is also

an inherently social phenomenon “grounded in intersubjective meanings and values,
and constructed through social communication”.52 Legitimacy requires justification in
terms of social recognition of any initiative or action, procedures or practices as well
as institutional arrangements where at best active cooperation and at least a general
favourable perception of citizens are needed to carry out the intended objective. This
makes more sense when applying the concept of normative legitimacy to understand
cooperation between two or more states engaged in a multilateral arrangement or in
any international setting.53
In a national context, legitimacy also refers to popular consensus or political

support for political community, political regimes and for their actions or decisions
where it is argued that the stability of a political system depends on normative
legitimacy arising from the convergence between political culture and political
structures.54 This connection between legitimacy and political order is emphasized
when there is ‘crisis of legitimacy’ or even ‘international crises of legitimacy’.55 Moreover,
legitimacy is also considered to be a key component of a country’s development and
its entrepreneurial success.56
48
A. Gramsci, Selection from the Prison Notebooks, 1947.
49
M. Zelditch, Jr., 2001, op. cit.
50
J. Habermas, Legitimation Crisis, translated by T. McCarthy, Cambridge, UK: Polity Press, 1976.
51
M. Zelditch, Jr. op. cit., p. 47.
52
Christian Reus-Smit, “International Crises of Legitimacy", International Politics, Vol. 44, No. 2-3, 2007, p. 161.
53
J. Steffek, 2007, op. cit.
54
The earliest systematic approach to the conceptualization of political support stems from Gabriel Almond’s
and Sidney Verba’s study of political culture in the late 1950s. Their main hypothesis was that congruence
between political structure and political culture is necessary to guarantee the stability of a political system.
The term political structure designates the type of political system with regard to its network of institutions.
Political culture is defined as ‘the particular distribution of patterns of orientation toward political objects
among the members of a nation’ (1963, 14-15). See for details, B. Westle, “Political Beliefs and Attitudes:
Legitimacy in Public Opinion Research”, in A. Hurrelmann, S. Schneider and J. Steffek, 2007, op. cit., p. 93.
55
“International crises of legitimacy can be resolved only through recalibration, which necessarily involves
the communicative reconciliation of the actor’s or institution’s social identity, interests, practices, norms, or
procedures, with the normative expectations of other actors within its realm of political action”, Reus-Smit,
2007, op. cit..
56
E. Díez, C. Prado-Román, F. Díez-Martín, A. Blanco-González, “The Role of Normative Legitimacy in the
14
In effect, ‘normative legitimacy’ derives from the cognition level as well

as based on perception or social recognition within the country. This emanates on
the one side from base structure or production level and on the other side from the
superstructure or ideational level. In order to forge a relation between countries that
would eventually foster effective cooperation, trade and mutual development, the
deals of cooperation need to be based on normative legitimacy. It is only possible
when there will be a convergence between structure and agency, between state’s
policies, actions and institutional arrangements and popular consensus as well as
people to people exchange. In other words, beneficial outcomes from cooperation
can be attained through a grand strategy that would create congruence between
ideational and structural levels merging the interest of political and productive forces
with popular consensus and social acceptance. If there is weak legitimacy or crisis
of legitimacy, the strategy would not work. Ultimately, as it is argued here, relations
between two countries can be explained if there is normative legitimacy.
2.3.5 Sufficient Condition – 2: Political Settlement
A particular type of political settlement in the participating country is

required as sufficient condition for the BRI to succeed. When an existing form of
political settlement creates and patronizes a capitalist class interested in productive
activities in the economy, a country can seize opportunities made available from BRI.
This also needs to involve the alignment of interests of both productive and political
classes across participating countries to facilitate gainful interactions and exchange.
The concept of ‘political settlement’ is defined as the forms of distribution of

power within a given society.57 The ‘political settlement’ approach helps to analyze a
number of interrelated questions about the policy evolutions and their development
outcomes from institutional and political economy perspectives.58 A political
settlement refers to “a reproducible ‘equilibrium’ of institutions and organizations,
where the institutions and organizations can be both formal and informal” and which
Development of Efficiency-Driven Countries”, in M. Peris-Ortiz and J. Merigó-Lindahl (eds.), Entrepreneurship,

Regional Development and Culture, Switzerland: Springer, 2015.
57
“The term “political settlement” is commonly used to describe the informal power arrangements or “social
order” in a country. The key elements of a political settlement are actors, interests, and institutions. In most
cases, it is a coalition of powerful elite factions that make up the key actors in a political settlement. The
critical element that holds a political settlement together is the alignment of interests within the dominant
elite coalition, and the dynamic relationship between elite interests and the broader array of interests in
the society. Institutions are viewed as malleable – as the product of ongoing conflict, negotiation, and
compromise among powerful groups, with the ruling coalition shaping and controlling this process. In
most cases, power relations are fluid and dynamic, and political settlements are constantly and subject to
renegotiation and contestation. As a result, political settlements should not be interpreted as one-time
events, but rather as rolling agreements between powerful actors.” Asia Foundation, 2010.
58
Mushtaq H. Khan, “Political settlements and the governance of growth-enhancing institutions”, 2010, available
at http://eprints.soas.ac.uk/9968/1/Political_Settlements_internet.pdf, accessed on 28 December 2017.
15
are often modified to be compatible with distribution of power and rents/income

across all relevant actors.59
Political settlement approach elucidates the conditions in developing

countries where the interests of powerful groups may not be supportive of broad-
based economic growth. In the prevailing form of political settlement, “[p]olitical
parties may want to capture resources for their clients in ways that are socially
damaging.60 Productive firms may be few in number and have low competitiveness,
and they may prefer to ally with clientelist politicians to augment their incomes.”61 In
particular, the way different groups comprising coalitions from government, military
and/or private sectors share and distribute political power and economic rents, create
legitimacy using state resources, maintain security and stability and lead to capitalist
accumulation provides useful insights about the nature and outcomes of economic
change.62
Whether the prevailing political settlement or distribution of power within it

promotes and fosters particular institutions and policies that would lead to the creation
of a group interested in transforming the productive capacities of the economy will
determine how much gain the country can realize from opportunities made available by
mega initiatives like China’s BRI. Connecting with the concept of normative legitimacy,
this means when agency and structure come to a synergic position meaning when there
is political consensus and social recognition over the distribution of power and resources
and a productive class interested in entrepreneurial activities along with enabling set of
institutions and policies, this would create conditions of stability and growth.
Overall, the theoretical framework posits that deriving economic and

geostrategic gains from the potentials unleashed within the framework of BRI
necessarily needs to be based on production orientation by integrating a participating
country in the production network. This process needs to be facilitated by financial
flow based on sharing of risk and appropriate transfer of technology. In the overall
mechanism, the sufficient conditions include political settlement which is interested in
production centric expansion of the economy as well as an ‘equiangular development
diplomacy’ driven by strong strategic alignment among the countries in question.
The sustainability is contingent upon the normative legitimacy coming from general
favourable perception among masses. Either of two outcomes is contingent upon
the necessary, sufficient and sustainability conditions. An involvement without
59
Mushtaq H. Khan, “The Political Settlement, Growth and Technical Progress in Bangladesh”, DIIS Working
Paper, 2013:01, Danish Institute for International Studies, DIIS, 2013, p. 12.
60
See for details, Mushtaq H. Khan, “Introduction: Political Settlements and the Analysis of Institutions”,
African Affairs, Vol. 117, Issue 469, p. 17.
61
Ibid., pp. 1-20.
62
P. Behuria, L. Buur and H. Gray, “Research Note: Studying Political Settlements in Africa”, African Affairs, Vol.
116, Issue 464, 2017, pp. 508-525.
16
considering the conditions may lead to a vicious cycle while the opposite (virtuous
cycle) will hold if the contracting parties fulfil the conditions.
3. China’s Belt and Road Initiative
The Chinese undertaking of the BRI is a grand framework enveloping the

country’s imperatives for economic development and its vision of geo-economic
diplomacy. It is unsurpassed in its vision and potential, yet deeply rooted in millennium
long history of ancient Silk Road with an unprecedented appeal for grandeur, enormity
and transformation potential in today’s world. BRI will see the development of six major
economic corridors connecting three continents across a large group of countries.
Building transport and communication infrastructure will beget the development of
energy and industrial clusters along these economic corridors. BRI projects will boost
the construction outlooks for many developing countries along the route through the
development of substantial transportation and associated physical infrastructure. China
wants to build a global network of infrastructure with wide reach and scope of BRI that has
only around four years of existence while also taking up all other related projects under its
umbrella (Figure 6).
Figure 6: Belt and Road Infrastructure Projects, Planned and Completed (June 2018)
Source: MERICS Research, 2018.63

Under BRI, a number of mega projects in infrastructure building, economic
connectivity including economic corridors and deep-sea ports is being implemented
See for details, MERICS Research, 2018, available at https://www.merics.org/en/bri-tracker/mapping-the-

63
belt-and-road-initiative, accessed on 20 July 2018.
17
in countries across Asia, Europe and Africa. A special US$ 40-billion Silk Road Fund
for financing BRI related projects has been arranged and importantly Chinese led
Asian Infrastructure Investment Bank (AIIB) and the New Development Bank by BRICS
countries are also there to leverage the progress of BRI.64
Crucially, BRI facilitates financing of such growth, providing alternative

sources of funding to traditional public finance. The initiative is driven largely
through Public Private Partnerships (PPPs), with the standard BRI financing model of
Chinese loans paying for Chinese contractors.65 For example, China’s massive inflow
of investment in five years since 2017 as part of BRI could amount to as much as US$
502 billion, or equivalent to 4 per cent of the total gross domestic product of the 62
countries along the routes in 2015.66 Other sources estimate the amount to be as high
as US$ 1 trillion.67 Latest economic simulation analysis suggests that BRI economic
corridors will generate sizeable gains across participating countries with a combined
welfare gain well exceeding US$ 1 trillion and particularly, participating countries like
Vietnam and Bangladesh could experience 7 to 17 per cent increase in their output
levels over next few years due to participation in BRI initiative.68
Since the introduction of BRI in 2013, attention and efforts have been put
forward from Beijing to transform as well as to repackage the model of its economic
diplomacy.69 While most observers of China’s peaceful rise see this as an expression
of skillful manoeuvre of Chinese foreign policy and of President Xi Jinping’s game
changing plan, debates exist regarding the actual motivations and interests of
China.70 The Action Plan on One Belt One Road (OBOR) provides the national interest
of China in undertaking this initiative which promotes a common path towards
shared prosperity, peace and win-win cooperation based on five Principles of Peaceful
Coexistence highlighting the solemn message of equal growth, respect for sovereignty
and win-win cooperation.71 This is the continuation of China’s effort since the Bandung
64
J. Villafuerte, E. Corong and J. Zhuang, “The One Belt, One Road Initiative: Impact on Trade and Growth”,
19th Annual Conference on Global Economic Analysis, 2016.
65
N. Hayes, “The Impact of China’s One Belt One Road Initiative on Developing Countries”, LSC Blog, 2017,
available at http://blogs.lse.ac.uk/internationaldevelopment/2017/01/30/the-impact-of-chinas-one-belt-
one-road-initiative-on-developing-countries, accessed on 13 July 2017.
66
Credit Suisse, 2017.
67
A. Bruce-Lockhart, “China’s US$ 900 billion New Silk Road. What you need to know”, World Economic
Forum, 26 June 2017.
68
H. Hahm and S. Raihan, “The Belt and Road Initiative: Maximizing Benefits and Managing Risks - A
Computable General Equilibrium Approach”, Journal of Infrastructure, Policy and Development, Vol. 2, No.
1, 2018, p. 140.
69
Michael Clarke, “The Belt and Road Initiative: Exploring Beijing’s Motivations and Challenges for its New
Silk Road”, Strategic Analysis, Vol. 42, No. 2, 2018. pp. 84-102.
70
Yiping Huang, “Understanding China’s Belt & Road Initiative: Motivation, Framework and Assessment”,
China Economic Review, Vol. 40, 2016, pp. 314-321.
71
An action plan on the Belt and Road Initiative was issued by the National Development and Reform
Commission, Ministry of Foreign Affairs and Ministry of Commerce of the People’s Republic of China, with
authorization of the State Council on 28 March 2015.
18
Conference in 1955 to pacify the fears of its Asian neighbours maintaining policy of
peace and cooperation to assist in the development of the global community.72
The underlying motivations and interests are manifold and often intertwined
with political, economic and geo-strategic calculations related to domestic, regional
and global issues. Although many stressed on geopolitical considerations while other
emphasized economic necessities, in fact, China’s underlying motives are not only
economic or geopolitical, but also include a number of concrete compulsions faced
by a transitioning economy and a rising power. In spite of the Chinese assurance, one
group of foreign policy analysts explained the Chinese initiative from a geopolitical
lens, arguing the intention of China is to advance a ‘new geo-economic strategy’ to
assert its diplomatic and economic leadership.73
Basically, what motivates China to take up BRI is predominantly economic in

nature rather than geopolitical despite the fact that geo-strategic implications would
not leave the discussion table. It seems more convincing that the main driving force for
undertaking BRI is internal economic compulsions and this policy has a more domestic
focus to transform and take over to the next phase of development rather than to
extend its international influence as the first priority. The realist tendency to highlight
power game and China’s ambition for regional hegemony appears to overlook the
internal economic challenges that China is facing. It seems more plausible that BRI
created an arrangement with the potential of promoting win-win cooperation,
encouraging involvement in bilateral and multilateral institutions seeking to address
the drawbacks of the current form of globalization and neo-liberal order of the world.
4. Economic Implications of BRI: Conditions for Realizing Gains
This section investigates the economic implications of Belt and Road strategy
along with the forms and mechanisms that would benefit the participating countries
in terms of infrastructure development, increased connectivity, investment financing,
employment generation, trade creation and improvement in people’s standard
of living. Measuring economic implications of a massive initiative like BRI is well
beyond the limited scope of this article. Rather, the focus is to specify the necessary
conditions of leveraging gains from the new form of cooperation under the Belt and
Road initiative and then discuss the sufficient conditions for promoting enabling
environment for equiangular development. The framework specifies three necessary
conditions for growth and stability that includes – (a) if BRI integrates participating
countries into the production network and creates activities in real economy as
opposed to extraction, (b) if capital is invested in risk-sharing basis rather than risk

72
73
Xiaoyu Pu, “One Belt, One Road: Visions and Challenges of China’s Geoeconomic Strategy”, Mainland
China Studies, Vol. 59, No. 3, 2016, pp. 111-132.
19
transfer mechanism leading to debt augmentation and (c) if there is technology

transfer instead of just technology import.
4.1 Production, Employment and BRI
With the business as usual scenario, Bangladesh will not be benefitted from
China’s Belt and Road initiative by just becoming a part of it. As the dis-stability
and dis-growth framework entails, if more connectivity and integration through
BRI primarily raise the level of imports and consumption but not production and
exports, this will only deteriorate the balance of trade and put further pressure of the
participating economies. So, assessing a participating country’s potential gains would
depend on a number of related questions of how BRI will impact the position of the
country in the regional and global production network, whether it can increase its
level of production and export, how and in what conditions local capital and business
enterprise will be benefitted from this initiative, will it become only importing country
or exporting country, what will be their location in the Chinese production network,
what types of goods – primary, intermediate or finished can a country supply to
Chinese markets as well as the wider export market in the region within the new aura
of enhanced connectivity and cooperation.
Notably, key variables like (a) changes on labour intensity, (b) level of
technology used and (c) access to Chinese domestic market for import would help to
map out how Bangladesh and similarly other countries participating in the initiative,
can realize benefits from BRI. Due to rising real wage, labour intensive industries
become less competitive which create compulsions on firms to relocate their
production facility to less expensive regions as well as shift their enterprise towards
more capital-intensive industries.74 This clearly applies to Chinese case and indicates
to real possibilities that Bangladesh can significantly take on to expand its labour-
intensive manufacturing sectors.
In case of Bangladesh, the one commodity dependence, lack of product

diversification and low level of technology used presumably mark the nature of
industrial manufacturing sector.75 The share of RMG exports is more than 82 per
cent in total export earnings whereas the growth of other industrial subsectors is
showing little promising sign.76 With the concentration of exports in few products and
production in few regions, the industrial sector can not grow sustainably. Deceleration
in manufacturing growth rate coupled with arrested structural transformation of the
economy is one of the key challenges for Bangladesh economy.
74
Robert C. Allen, Global Economic History: A Short Introduction, Oxford: Oxford University Press, 2011.
75
Rashed Al Mahmud Titumir, “Industrialization”, in Ali Riaz and Mohammad Sajjadur Rahman (eds.),
Routledge Handbook of Contemporary Bangladesh, New York: Routledge, 2016.
76
Ministry of Finance, “Bangladesh Economic Review 2017”, Dhaka: Finance Division, Ministry of Finance,
Government of the People’s Republic of Bangladesh, 2017.
20
Bangladesh, however, is not well connected to the global production

network except the case of RMG sector and value addition that takes place in its
manufacturing is quite low due to heavy dependence on imported raw materials
and capital machinery.77 Nonetheless, Bangladesh has the potential to become the
manufacturing hub of Asia within decades.78 Moreover, Bangladesh is predicted to be
the 28th largest economy in the world by 2030 doubling its domestic output from US$
628 billion in 2016 to US$ 1.3 trillion in 2030.79 Realizing gains from BRI would depend
on how much Bangladesh can align its conditions with China’s economic and market
transformation.
Besides, the extent of trade creation within the BRI arrangement would be
a major determinant of how much a participating country can benefit from the new
form of globalization. Exporting to Chinese markets and using network connectivity
to boost trade with other participating countries in this initiative including access to
South East Asian markets through Myanmar and China and exporting to central Asian
countries would also create considerable growth potentials for Bangladesh as well
as other South Asian countries. In particular, trade creation may involve, on the one
hand, ensuring export markets for existing Bangladeshi products, on the other hand,
specializing on manufacturing of products with high demand in the Chinese market
and also in other Asian countries. Arguably, BRI would offer large opportunities for
cooperation between Chinese firms and local enterprises in all stages of production
networks from innovation to implementation to financing and other intermediaries
in trade, investment and infrastructure building.80 Much of the success would depend
on how Chinese enterprises involve local counterparts and share benefits i.e., jobs,
trades, profits with them.
Considering the above situation, a key strategy that needs to be emphasized

again is the expansion of labour-intensive manufacturing sector with large potential
for employment creation. In Bangladesh, labour market is characterized by high
unemployment, disguised underemployment, low labour skill formation and high
percentage of inactive population.81 In fact, Bangladesh has one of the highest
77
S. Raihan and M. Ahmed, “Supply-Side Capacity and Export Response in Leather and Home Textile Sectors
in Bangladesh”, MPRA Paper No. 37895, 2009, posted online on 2012, available at https://mpra.ub.uni-
muenchen.de/37895/1/MPRA_paper_37895.pdf, accessed on 15 September 2017.
78
This view was expressed by garments exporters and foreign buyers in a roundtable organized in Dhaka on
26 October 2016 by Foreign Trade Association, a Brussels-based organization. See for details, “Bangladesh
holds potential to be Asia’s manufacturing hub”, The Daily Star, 27 October 2016.
79
PricewaterhouseCoopers (PwC), “The Long View: How will the Global Economic Order Change by 2050?”,
2017, available at https://www.pwc.com/gx/en/world-2050/assets/pwc-world-in-2050-summary-report-
feb-2017.pdf, accessed on 15 March 2017.
80
C. Dong, M. Davis, S. Yu and Y. Wu, “The Belt and Road Initiative in 2018”, DLA Piper, 2018, available at
https://www.lexology.com/library/detail.aspx?g=a81cc888-49d7-4b35-82b3-9406f77a2f43, accessed on 20
December 2017.
81
R. A. M. Titumir and M. Z. Rahman, “Changes in Population Age Structure and Economic Development:
The Case of Bangladesh”, Florya Chronicles of Political Economy, Istanbul Aydin University, Year 3, No. 1, 2017.
21
rates of unemployment in South Asia and despite continued economic growth job
creation in the economy remains quite low. The economy needs to graduate from the
current state of high unemployment to generating more productive employment of
labour and their skill up-gradation in line with the changing dynamics of the labour
market and growing trade potentials. Moreover, the country is passing through the
demographic dividend phase with almost 65 per cent of the population concentrated
at working age groups.82 As a result, it can be argued that Bangladesh’s competitive
advantage in terms of available cheap labour would last quite longer and thus, the
country can pocket in the labour-intensive Chinese industries which would need to
be relocated somewhere.
4.2 Financing Mechanisms and BRI Projects
One of the key challenges for advancing BRI centres on the overall mode of
financing mechanism and its viability that would certainly involve a wide spectrum
of actors with varying interests and diverse institutional settings along the Belt and
Road regions. Long term economic returns from any particular project will depend,
besides the nature of the project and its implementation, on the types and sources of
investment, nature of deals between the host country and investors and will also be
conditioned by other local and regional geopolitical factors. Generally, three types of
financing mechanisms including funding from multilateral agency, supplier’s credit or
line of credit (LOC) and private sector borrowings are used to carry out development
projects and trades. Experience with each of these mechanisms and their effectiveness
are found to have significant downsides that need critical examination when it applies
BRI projects.
First, the multilateral agencies give loans or aid packages to the developing
countries on given conditions the experiences of which are mixed and even mostly
negative. For example, problems of the multilateral credit or loans can be found from
chronic debt crisis during the 1980s in many developing countries, while the recent
case of Greek economic crisis also shows the outcomes of this form of financing.83
Because, one of the main problems is conditionality which comes with multilateral
credits and this predominantly characterizes lending from World Bank, IMF, Asian
Development Bank and similar other sources. Although this mechanism provides a
large share of development financing, multilateral debt has been a perennial problem
for the entire developing world and particularly for the poorest countries due to their
high level of indebtedness.84
82
UN, World Population Prospectus: 2017 Revision, New York: United Nations Department of Economic and
Social Affairs, 2017.
83
“Greece and its creditors: Feud for thought”, The Economist, 10 July 2015.
84
N. Woods, The Globalizers: The IMF, the World Bank, and Their Borrowers, Ithaca: Cornell University Press,
2006.
22
Second, suppliers’ credit or LOC are short-term loans where credit for imports
offered by overseas suppliers.85 This mechanism is basically practiced in the context of
bilateral trade or development cooperation where there is also a long list of purchase
conditionality involved. For example, in recent times, several billion-dollar credits
offered by India to Bangladesh as well as financing mechanism of the Padma Bridge
construction by China are types of LOCs. The implications of suppliers’ credit are even
worse if compared to the multilateral credit as because in case of LOC the terms of
interest rate are quite high, grace period for loan repayment is relatively short and
is accompanied by a long list of procurement conditionality which mostly benefits
enterprises of the loan providers rather than the recipient countries. Although there
are some differences between multilateral and suppliers’ credit in terms of their
financing procedures and priorities, both types of financing ultimately lead to debt
augmentation and entrapping many developing countries in under mounting debt
burden or so called ‘debt trap’.86 It is now evident that large burden of public debts
creates negative pressures on growth performance of developing countries.87
Third, financing for development also includes private sector credit and its
implication for the economy is no more favourable. The problem with private sector
borrowing is that it decreases the rate of private sector investment.88 In the developing
country context, it has been found that one dollar worth of government borrowing
may cause crowding out of private credit by up to 80 cents in the long run.89 In effect,
it creates debt augmentation which means the size of public debt is increasing but not
the production capacity. A comparative assessment makes it clear that these forms of
financing mechanism generally do not render developing countries in good standing.
With regards to financing of BRI projects, China has not published any
comprehensive list of all BRI-related projects or deals and details about its financing
mechanisms.90 A dedicated Fund for Silk Road projects, China-led Asian Infrastructure
Investment Bank (AIIB) along with China Development Bank and the Export-Import
Bank of China would lend money to countries involved in the Belt and Road Initiative for
the development of infrastructure and connectivity.91 Besides, state-owned enterprises
and many commercial banks are also financing BRI related projects. BRI involves massive
85
UBS, “Supplier’s credit”, 2016, available at https://www.ubs.com/ch/en/.../trade...==/fs-lieferantenkredit-
en.pdf, accessed on 20 March 2018.
86
Cheryl Payer, The Debt Trap: The International Monetary Fund and the Third World, New York: NYU Press,
1975.
87
A. F. Presbitero, “Total Public Debt and Growth in Developing Countries”, The European Journal of
Development Research, Vol. 24, No. 4, 2012, pp. 606-626.
88
Md. Saidjada Khan and Syeda Ishrat Jahan, “Public and Private Investment Nexus in Bangladesh:
Crowding-In or Out?”, The Journal of Developing Areas, Vol. 52, No. 4, 2018, pp. 115-127.
89
M. S. Emran and S. Farazi, “Lazy Banks? Government borrowing and private credit in developing countries”,
Institute for International Economic Policy, Working Paper No. 9, 2009.
90
Huang, 2017, op. cit.
91
L. Jagan, “Asia is central to China’s strategic vision”, The South China Morning Post, 17 May 2017, available at
http://southasianmonitor.com/2017/05/17/asia-central-chinas-strategic-vision/, accessed on 20 July 2017.
23
investment in mainly infrastructure projects for which China has already committed US$
1.4 trillion and when completed this would generate over US$ 21 trillion of Global GDP
covering 4.4 billion world population.92 Credit Suisse estimates that China’s investment
in BRI projects could surpass US$ 500 billion during the next 5 years. The major recipients
of FDI along the BRI trade routes as estimated by Credit Suisse in 2017.93
Table 2: Estimates on China’s Foreign Direct Investment along the Trade Routes
(in billion US$)
Country Estimated Increase 2015 Country Estimated Increase 2015
Invest- in GDP GDP Invest- in GDP GDP
ment ment
India 84-126 30-46 2095 Philippines 12-18 6-9 292
Russia 53-80 27-40 1331 Pakistan 11-16 5-8 271
Indonesia 35-52 15-23 862 Thailand 4-12 1-4 395
Nigeria 19-29 20-30 481 Bangla- 8-12 3-4 195
desh
Iran 17-26 10-15 425 Vietnam 8-12 2-4 194
Egypt 13-20 8-11 331 Kazakhstan 7-11 5-7 184
Source: Credit Suisse, 2017 in South China Morning Post, 2017.94
As the estimates show (Table 2), India, Russia, Indonesia and Nigeria would
pocket in highest shares of Chinese investments in total US$ 191-287 billion during next
five years. Bangladesh can also expect to get US$ 8-12 billion of investment which is equal
to 6-4 per cent of country’s GDP. According to Chinese Ministry of Commerce data, China
invested US$ 14.4 billion in 59 BRI countries in 2017 which is almost same as previous
year (14.5 billion) but increased to 12 per cent as percentage of China’s total outbound
investment (3.5 up from 2016 level).95 China’s outward investment flow along the Belt
and Road countries (Figure 7) show that Southeast Asia received highest share (34 per
cent) followed by South Asia (26 per cent) and Middle East and North Africa (24 per
cent) between 2014 and 2016. Looking at the sectoral distribution of China’s total official
commitments (Figure 7), it is found that main emphasis is given on infrastructure projects
including energy generation and supply (US$ 134 billion or 38 per cent), transport and
storage (US$ 89 billion or 25 per cent) and industry, mining and construction (US$ 30
billion or 8 per cent).
92
J. P. Meltzer, “A View from the United States”, The ASAN Forum, 10 June 2017, available at http://www.
theasanforum.org/a-view-from-the-united-states-2/, accessed on 20 December 2017.
93
P. Sito, “India and Russia tipped to be the big winners from China’s massive ‘Belt and Road’ investment”,
South China Morning Post, 13 May 2017, available at http://www.scmp.com/business/article/2094224/india-
and-russia-tipped-be-big-winners-chinas-massive-belt-and-road, accessed on 30 March 2018.
94
Ibid.
95
J. Suokas, “Chinese investment in Belt and Road countries remains stable in 2017”, GB Times, 17 January
2017, available at https://gbtimes.com/chinese-investment-in-belt-and-road-countries-remains-stable-
in-2017, accessed on 15 March 2017.
24
Figure 7: (a) China’s Outward Investment along the BRI by Region (2014-2016) and
(b) Sectoral Distribution of China’s Total Official Commitments in 2017
Source: A. G. Herrero, “How is Belt and Road Initiative changing China-Mena economic relations”, IIS Bahrain
Bay Forum, 17 September 2017; AIDDATA, “China’s Global Development Footprint”, 2018.
South Asia experienced a 6 per cent increase in FDI inflows to US$ 54 billion
in 2016, despite 15 per cent decline of inflows to developing Asia. While FDI inflows
to India remained stagnant to US$ 44 billion, Pakistan secured a 56 per cent increase
largely due to massive Chinese investments in China Pakistan Economic Corridor
projects. FDI inflows to Bangladesh also increased by 4.4 per cent attracting US$ 2.3
billion — the fourth largest among all least developed countries – mainly due to large
scale infrastructure and electricity projects.96 South Asia, including Bangladesh, expects
to receive growing investment in coming years due to gradual shift in the division of
labour where more developed economies are now adopting higher value-added
industries leaving labour-intensive sectors for the developing countries. Notably, as
discussed earlier, this would strengthen country’s position in the regional and global
production networks.
Significantly, China became the second largest investor in the world for
the first time with US$ 183 billion outflows (44 per cent up from earlier year).97 This
has important implications for Bangladesh. During the visit of Chinese President Xi
Jinping in October 2016, 27 deals were signed between Bangladesh and China with
a total worth of US$ 24.4 billion in assistance. In addition, US$ 13.6 billion worth
of 13 joint ventures were also inked between two countries to boost mutual trade
and cooperation.98 Realizing these funds as well as attracting more investments
96
UNCTAD, World Investment Report 2017, United Nations Conference on Trade and Development.
97
UNCTAD, ibid.
98
Refayet Ullah Mirdha, “Deals with China a turning point for Bangladesh”, The Daily Star, 17 October 2016.
25
in Bangladesh would depend on a number of institutional and entrepreneurial

environments as discussed later. Nonetheless, an assessment of Chinese financing in
Bangladesh in comparison to funding from other bilateral and multilateral agencies
provides some useful directions.
Table 3: Comparison of Terms and Conditions of Selected Loans to Bangladesh
from Different Bilateral and Multilateral Sources
SL Country/ Amount Interest Win- Dura- Conditions/ Com- Deals/Proj-
Agency (US $) rate dow/ tion ments ects
grace (year)
period
Infrastructure
Have to purchase
projects: elec-
20 65 to 75 per cent of
4.5 bil- tricity, rail-
1 India99 1% 5 years years the services, goods
lion roads, roads,
(2017) or works from the
shipping and
Indian market
ports
US$ 82.5 million
in soft loan and For building
30 the remaining US$ a deep-sea
554 mil-
2 China100 2.25% 5 years years 467.8 million in single point
lion
(2017) preferential buyers’ mooring at
credit from Exim Bay of Bengal
Bank of China
Power, road
40 Soft loan from
1.5 bil- 0.01% 10 communica-
years Japan Interna-
lion years tions and
(2016) tional Cooperation
disaster man-
Agency (JICA)
3 Japan101 agement
Soft loan from Coal based
30
3.7 bil- 0.1% 10 Japan Interna- electric-
years
lion years tional Cooperation ity plant and
(2017)
Agency (JICA) deep-sea port
99
This is the third line of credit (LOC) agreement. Previously, India provided US$ 1 billion in 2010 and US$
2 billion in 2016. See for details, “Bangladesh signs US$ 4.5bn loan deal with India”, BDNews24, 04 October
2017, available at https://bdnews24.com/economy/2017/10/04/bangladesh-signs-4.5bn-loan-deal-with-
india, accessed on 15 March 2018; Haroon Habib, “Bangladesh signs US$ 4.5 bn loan deal with India”, The
Hindu, 04 October 2017.
100
This is a part of MoUs signed for 27 projects with a total estimated cost of US$ 24 billion during Chinese
President Xi Jinping's Dhaka visit in 2016. See for details, BDNews24, “Bangladesh signing US$ 554 million
credit deal with China for single point mooring”, 27 October 2017, available at https://bdnews24.com/
economy/2017/10/27/bangladesh-signing-554-million-credit-deal-with-china-for-single-point-mooring,
accessed on 27 October 2017.
101
Japan is Bangladesh’s largest development partner. See for details, “Japan signs largest ever loan agreement
with Bangladesh”, BDNews24, 29 June 2016, available at https://bdnews24.com/economy/2016/06/29/japan-
signs-largest-ever-loan-agreement-with-bangladesh; Aminur Rahman Rasel, “US$ 4.5bn deal sealed with
Japanese consortium”, Dhaka Tribune, 10 August 2017.
26
The interest rate

for IDA credit from
Health,
38 a fixed allocation
515 mil- nutrition, and
0.75% 6 years years is 0.75 per cent for
lion population
(2017) a lower middle-
services
income country.
World (Soft loan)
4
Bank102 As the amount
of credit exceeds
30 the fixed alloca-
59 mil- Power system
2.85% 9 years years tion, Bangladesh is
lion development
(2017) taking it from the
scale-up facility.
(Hard loan)103
Market-based loan
Power
25 of US$ 600 million
616 mil- >1% distribution
5 ADB 104
5 years years and a concessional
lion systems im-
(2017) loan of US$ 16
provement
million
Bank will provide at
the Bank’s standard
25 interest rate for Power
165
years sovereign-backed distribution
6 AIIB105
million 2-2.2%* 5 years
(2016) loans with the upgrade and
corresponding expansion
weighted average
maturity.106
Source: Compiled by authors from press releases of Economic Relations Division of Bangladesh Government,
news reports and websites of respective organizations.
Comparative assessment of terms and conditions of selected loans/funds
to Bangladesh (Table 3) reveals that China’s official finance is less concessional than
102
World Bank, 2017, available at http://www.worldbank.org/en/news/press-release/2017/08/28/bangladesh-
receives-515-million-world-bank-financing-to-improve-health-and-nutrition-services, accessed on 28 August
2017.
103
“Bangladesh signs US$ 59m hard loan deal with World Bank for power project”, BDNews24, 25 August 2017,
available at https://bdnews24.com/economy/2017/08/25/bangladesh-signs-59m-hard-loan-deal-with-world-
bank-for-power-project, accessed on 28 August 2017.
104
“Bangladesh gets US$ 616 million loans from ADB to improve power systems”, BDNews24, 29 May 2017,
available at https://bdnews24.com/economy/2017/05/29/bangladesh-signs-616-million-loan-deal-with-adb-
to-improve-power-system-coverage. See also, “Bangladesh signs $150 mn loan deal with ADB”, BDNews24,
27 August 2012, available at https://bdnews24.com/bangladesh/2012/08/27/bangladesh-signs-150-mn-loan-
deal-with-adb, accessed on 29 May 2017.
105
AIIB also approved US$ 60 million for Natural Gas Infrastructure and Efficiency Improvement Project in 2017
and another US$ 60 million on a project in Bhola to increase power generation capacity in Bangladesh. See for
details, "Bangladesh Natural Gas Infrastructure Document", AIIB, 2017, available at https://www.aiib.org/en/
projects/approved/2017/bangladesh-natural-gas-infrastructure.html; and https://www.aiib.org/en/projects/
approved/2018/bangladesh-bhola-ipp.html, accessed on 15 March 2018.
106
AIIB, “Bangladesh Natural Gas Infrastructure Document”, ibid.
27
funding from other multilateral or bilateral sources. This is also visible in the above
table as it shows that China charges high interest rate, 2.25 per cent for relatively
shorter grace period but longer duration in comparison to India and other multilateral
agencies. Loans from India are mostly tied with conditions to purchase from Indian
enterprises. Japan provides most favourable terms of loans to Bangladesh, whereas
funding from World Bank and ADB involves a number of macroeconomic conditionality.
China-led AIIB provides loans with fewer conditions than World Bank. 107 Nonetheless,
recent evidence from a new global development finance dataset shows that official
development assistance by China positively contribute to economic growth in
recipient countries and it does not affect the effectiveness of grants and loans from
western multilateral aid and lending agencies.108
In general, these forms of financing add to existing debt burden and may
not prove to be financially viable in the long run due to drawbacks in selecting
projects, implementing timely and maintaining the expenditure as a result of political
consideration, corruption and inefficiency on the part of the local counterparts. As
per the dis-growth and dis-stability framework, when there will be huge line of credit
leading to debt augmentation or rise in per capital debt ratio without any growth
in per capita production rate, more credits from Chinese sources under BRI may not
generate expected results. In other words, if per capital debt ratio grows more than
per capita GDP rate in the participating/borrowing country, the result would largely
be negative and burdensome in the long run.
Moreover, economic viability of large-scale infrastructure projects posit

considerable uncertainly and risks of generating low returns in the long run.109 In
this connection, growing concerns are being expressed from different quarters,
often motivated by realist apprehensions, that China is pushing many participating
countries to inevitable debt crisis citing the example of Sri Lanka, Pakistan and several
African states.110 There remains valid grounds for raising questions that participating
107
Koh Gui Qing, “China’s AIIB to offer loans with fewer strings than World Bank sources”, The Japan Times,
15 September 2015, available at https://www.japantimes.co.jp/news/2015/09/02/business/chinas-aiib-
to-offer-loans-with-fewer-strings-than-world-bank-sources/#.WpMNA7puK00, accessed on 20 December
2017.
108
A study using new global dataset of official financing from China to 138 countries between 2000 and
2014 shows that for the average recipient country, one additional Chinese ODA project produces a 0.7
percentage point increase in economic growth two years after the project is committed. See for details,
Axel Dreher, Andreas Fuchs, Bradley Parks, Austin M. Strange and Michael J. Tierney, “Aid, China, and Growth:
Evidence from a New Global Development Finance Dataset”, AidData Working Paper No. 46, 2017, available
at http://aiddata.org/data/chinese-global-official-finance-dataset, accessed on 20 December 2017.
109
Jane Perlez and Yufan Huang, “Behind China’s US$ 1 Trillion Plan to Shake up the Economic Order”, The
New York Times, 13 May 2017, available at https://www.nytimes.com/2017/05/13/business/china-railway-
one-belt-one-road-1-trillion-plan.html, accessed on 28 July 2017.
110
B. Chellaney, “China's Creditor Imperialism”, Project Syndicate, 20 December 2017, available at
https://www.project-syndicate.org/commentary/china-sri-lanka-hambantota-port-debt-by-brahma-
chellaney-2017-12, accessed on 28 July 2017; also see, A. Hodge, “China’s debt-trap diplomacy snares our
Asian neighbours”, The Australian, 13 January 2018, available at https://www.theaustralian.com.au/news/
world/chinas-debttrap-diplomacy-snares-our-asian-neighbours/news-story/7c6b04ac4e473f96d9ff3b7ec
5abe102, accessed on 28 July 2017.
28
countries may find themselves “taking unrealistic financial obligations” and “struggling
to repay and forced to swap key assets for debt” as it happened in case of Hambantota
Port in Sri Lanka which was handed over to a Chinese state-owned company under a
99-year lease and also in case of a number of other BRI projects elsewhere.111
In this context, the alternative would be sharing of risk of capital which is

a better option for the participating countries. Risk-sharing means sharing profit
and loss by both parties involved. Otherwise, crisis like what happened in Greece
cannot be averted, because in this system one is essentially feeding the creditors
not the real economy. Examples may include risk-sharing financial instruments by
European Investment Bank that provides financing to medium sized enterprises with
a guarantee of covering 50 per cent of the loss of any loan or lease agreements.112 This
also applies to risk diversification in cross border investments and even in economics
with low institutional quality.113 Drawing on principles of risk-sharing from Islamic
finance as discussed in Maghrebi and Mirakhor114, it can be asserted that sharing
gains from increased prosperity from BRI projects need to be ensured through risk-
sharing rather than the dominant risk transfer mechanisms that are responsible for
growing inequality and instability of global financial systems. So, mutual agreements
on joint projects need to be transparent and debt repayments are to be made easier
for recipient countries by sharing risks and returns on mostly large-scale infrastructure
projects that mainly characterize Chinese investments.
4.3 Transfer of Technology and BRI
Transfer of technology from developed countries to the developing countries

is essential for the transformation of the latter’s economy. Role of technology
transfer to the developing and least developed countries is widely emphasized
and recognized in all major international conventions and agreements within the
UN and WTO. In fact, in the initial stages of development, most countries resorted
to borrowing technology from developed countries and diffusion of technology
facilitated faster growth during this ‘catching up’ process in the last century.115
International transfer of technology may occur through four major channels:
111
N. Chandran, “China's using cheap debt to 'bend other countries to its will,' academic says”, 22 December
2017, available at https://www.cnbc.com/2017/12/22/one-belt-one-road-china-loans-are-debt-bondage-
says-brahma-chellaney.html, accessed on 20 July 2017.
112
European Investment Bank, “RSI Implementation Status”, 2017, available at http://www.eif.org/what_we_
do/guarantees/RSI/rsi-implementation-status.pdf; European Investment Fund, “Risk Sharing Instrument
(RSI)”, available at http://www.eif.org/what_we_do/guarantees/RSI/index.htm, accessed on 15 March 2019.
113
M. Fratzscher and J. Imbs, “Risk Sharing, Finance, and Institutions in International Portfolios”, Journal of
Financial Economics, Vol. 94, No. 3, 2009, pp. 428-447.
114
N. Maghrebi and A. Mirakhor, “Risk sharing and shared prosperity in Islamic finance”, Islamic Economic
Studies, Vol. 23, No. 2, 2015, pp. 85-115; Also see, O. I. Bacha, A. Mirakhor and H. Askari, “Risk Sharing in
Corporate and Public Finance: The Contribution of Islamic Finance”, PSL Quarterly Review, Vol. 68 No. 274, 2015.
115
R. C. Allen, op. cit.
29
“trade in products, trade in knowledge and technology, foreign direct investment,

and intranational and international movement of people”.116 Particularly,
technology transfer may take the form of FDI, joint ventures, franchising, technical
service contracts, management contracts and international subcontracting.117
Effectiveness of international transfer of technology and hence increase in productivity
would depend on the availability of skilled human capital, strong incentives for
technological up-gradation, alignment of interests among productive classes and
enabling institutions and favourable policy inducements.118
Although the forms and mechanisms of technology transfer from developed

countries to developing countries are specified, in reality, there has been little or no
visible attempt to materialize the transfer. Overall experience is that little technology
transfer has taken place; this has always remained in the book and has never been
implemented except in some sporadic cases.119
World Trade Organization’s (WTO) Agreement on Trade Related Aspects of

Intellectual Property Rights (TRIPS) outlines the standards of intellectual property rights
and patents which makes it difficult than before to borrow technology from developed
countries. Although there are provisions for technology transfer in several international
treaties and agreements adopted by United Nations and WTO, there is no binding
or mandatory clause for it. This has resulted in limited or less favourable transfer for
developing countries “except dumping [of] obsolete forms of technology”.120
Reality of technology transfer and different agreements under the initiative

of BRI is still too early to be assessed. Based on some successful cases of technology
transfer, some conditions can be provided which will be necessary for fruitful leveraging
of BRI. For example, the case of technology transfer and structural transformation in
the Asian economies provide a practical illustration of how technology transfer can
augment gradual transition to higher-end industrialization (Figure 8). The Flying Geese
pattern of development formalizes a mechanism of technology transfer and gradual
industrialization led by Japan during 1950s and followed by Newly Industrialized
Economies (NIEs) and some ASEAN countries like Malaysia and Thailand. Gradually, East
and South East Asian countries developed into industrial economies throughout the
1980s to 1990s and this process still continues.121
116
Bernard M. Hoekman, Keith E. Maskus and Kamal Saggi, “Transfer of Technology to Developing Countries:
Unilateral and Multilateral Policy Options”, World Development, Vol. 33, Issue. 10, 2005, pp. 1587-1602.
117
Saon Ray, “Technology Transfer and Technology Policy in a Developing Country”, The Journal of Developing
Areas, Vol. 46, No. 2, 2012, pp. 371-396.
118
Matleena Kniivilä, “Industrial Development and Economic Growth: Implications for Poverty Reduction
and Income Inequality”, Industrial Development for the 21st Century: Sustainable Development Perspectives,
Vol. 1, No. 3, 2007, pp. 295-333.
119
Manas Chatterji (ed.), Technology Transfer in the Developing Countries, London: Springer, 2016.
120
Saon Ray, op. cit.
121
Saburo Okita, “Flying geese pattern of development”, The 4th Pacific Economic Cooperation Council
Conference, Seoul, Korea, 29 April-1 May 1985. For details, see, “Flying Geese Model”, available at http://
www.grips.ac.jp/forum/module/prsp/FGeese.htm, accessed on 27 March 2017.
30
Figure 8: Technology Transfer and Structural Transformation of Asian Economies
Source: Saburo Okita, “The Flying Geese Pattern of Development”, 1985.

As the leading country advances through the progressive stages of
industrialization from low-end to high-end manufacturing, neighbouring economies
take up leftover opportunities by borrowing standards, technologies and financial
and management supports. However, understanding why and how some countries
managed to industrialize faster than others is important. As for South Asian countries,
this process did not occur comprehensively.
For the development of Bangladesh, what can be done is like ‘flying geese’
model of technology transfer similar to earlier experiences of East Asian countries.
In fact, the RMG sector, the number one export earning sector of the country,
first shifted from Japan then to Korea and finally to Bangladesh when the former
countries transitioned to higher end manufacturing industries. This has been a type
of successful technology transfer. However, following the progressive stages of catch-
up industrialization, Bangladesh now appears to position in the first stage with simple
manufacturing still under foreign guidance (Figure 9).
31
Figure 9: Progressive Stages of Catch-up Industrialization
Source: Prepared by authors based on Ohno, 2009.122
The next step is the phase of technology absorption where Bangladesh can
graduate with technology support and guidance from China under the auspices
of the BRI framework when China itself would fully transition to creativity stage or
higher. So, it seems practical and feasible to relocate the production possibilities,
as China is facing mounting challenges of excess capacity and shifting towards
higher trajectory of catch-up industrialization stages as shown in the above
figure. At present, China is the largest exporters of creative goods and there is a
continuous decline in its production of labour-intensive products like garments.123
This could trigger process of technology transfer from countries participating in the
initiative to effective levels. Taking into account the changing context and nature
of transformation of China’s economy, BRI may create complementary effects of
relocation of industries, transfer of technologies to lower end developing countries.
China can transfer technologies which no longer viable for their industry to the
developing countries who are below the ladder of industrialization.
The economic implications of BRI are manifold but this consideration about
technology transfer can generate sizable benefits not only for a particular country
but also for the entire region to become more integrated in the production network.
122
Kenichi Ohno, “The middle income trap: implications for industrialization strategies in East Asia and
Africa”, Tokyo: GRIPS Development Forum, 2009, p. 37.
123
UNCTAD, Creative economy outlook and country profiles: Trends in international trade in creative industries,
United Nations, 2015.
32
Diversifying export basket, improving product quality and increasing productivity

and competitiveness all require technological up-gradation and adoption of up-to-
date technologies. The manufacturing sector in Bangladesh is largely dependent
on imported technology with very limited research and innovation capacity.124
Following the growth and stability framework, if there is no technology transfer or
delay in technology frontier, mere import of obsolete technology would generate no
stimulus to transform the local economies into industrial ones.
4.4 Status of Bangladesh-China Trade and Transformation Potential under BRI
Reality of Bangladesh China trade relations is tilted towards China with huge
trade deficits against Bangladesh. Within this existing condition, Bangladesh seems
to be in a not-so-good position to benefit from economic and trade facilitating
infrastructure of BRI. Relevant questions are: how will Bangladesh be integrated or
what will be its location in the Chinese production network? Whether Bangladesh
can increase its level of production? Will Bangladesh be only importing country or
exporting country? How and in what conditions local capital and enterprise will
be benefitted from this initiative? What types of goods – primary, intermediate or
finished Bangladesh can supply? And finally, how would the entire process lead to
integration into the production networks, industrialization and major shifts from
unemployment to productive employment of labour and their skill up-gradation to
match the transitioning economy? Most of these questions will significantly affect the
potential gain of other developing countries as well.
In Bangladesh, however, the one commodity dependence, lack of product

diversification and transformation to industrial economy have stalled the growth
of exports in recent times. The RMG sector takes around 82 per cent of total export
earnings in FY 2016-17 and this overwhelming dependence on one sector makes
the economy vulnerable in the international market. Further, Bangladesh is not
well connected with the global production network that would foster a rapid
transformation and diversification of its export sectors. In addition, the regional
experience is not good in any of the instances such as SAARC, SAFTA, BIMSTEC and
other regional arrangements. South Asia remains one of the least integrated regions
in the world with share of regional trade being 5 per cent of combined total trade
volume of all countries in South Asia. Hence, realizing gains from BRI would depend
primarily on the extent of trade creation in the region.
In recent years, bilateral trade relation between Bangladesh and China is

burgeoning rapidly. China is the largest trading partner of Bangladesh making up 26.5
124
Selim Raihan and Mansur Ahmed, “Supply-Side Capacity and Export Response in Leather and Home
Textile Sectors in Bangladesh”, MPRA Paper No. 37895, 2009.
33
per cent of its total trade whereas Bangladesh is its third largest trading partner in
South Asia. Bilateral trade between the two countries crossed US$ 10 billion in 2016 but
Bangladesh’s exports to China still remains only about half a billion dollars with large
trade gaps. With improved relations with China and growing opportunity for trade and
investments, total bilateral trade figure is expected to reach US$ 18 billion by 2021.125
Aligning or complementing interests of productive classes across countries

is important. At present, Bangladesh is in the ‘start-up phase’ of industrialization
producing only light engineering products (Figure 10), whereas China is completing
the transition through the growth phase and aspiring to high-end manufacturing and
high-tech industrialization. Since the Chinese economy is facing problems of over
production and excess capacity in sectors which fall mostly under the start-up phase
of industrialization, there could be much complementarily between Bangladesh
and China. As a result, creating complementarities between China’s sunset industrial
sectors with Bangladesh’s start-up phase of industrialization can offer Bangladesh
sizable dividends as well as opportunities for transfer of technologies which are no
longer cost effective in China but can be suitable for Bangladesh.
Figure 10: Bangladesh in the ‘Start-up phase’ of Industrialization
Source: Based on Titumir, 2016 126
125
HSBC, Belt and Road Initiative: Opportunities for Bangladesh, 2017, available at http://www.about.hsbc.com.
bd/news-and-media/belt-and-road-initiative-opportunities-for-bangladesh, accessed on 15 March 2018.
126
Rashed Al Mahmud Titumir, 2016, op. cit., p. 170.
34
Some examples of relocation potentials between Bangladesh and China may include
labour-intensive sectors like garment manufacturing, leather processing and low-end
technology dependent sectors like electronics and light engineering. Once China will
be producing high end products like telecoms, high speed train, there is likelihood
that China has to depend on import of those low-end products such as RMG and
other labour-intensive consumer goods for domestic use.127
Bangladesh may approach to grab that vacuum. In order to arrest the
opportunity, Bangladesh needs to expand trade with China by diversifying its export
volume in complementary products as well as by narrowing the trade gap. Bangladesh
China Chambers of Commerce and Industry identified a list of ‘High priority industrial
sector’ consisting of Agribusiness, Garments and textiles, ICT and Business Services,
Pharmaceutical sector and Leather and Leather goods (LLGs) as well as a list of ‘Priority
potential industrial sector’ consisting of plastic industry, light engineering, renewable
energy, frozen food, tourism, ship building and automobile manufacturing which
could be benefitted from trade cooperation under BRI framework. Industrial Policy
2005 and Export Import Policy 2015-2018 of Bangladesh outlined detail plan for
priority attention to potential export sectors.
Given Bangladesh’s present export portfolio, some of the most promising

exports to China can be RMGs and LLGs.128 Bangladesh has duty-free trade privilege
in Chinese market for 4,721 products mostly including garments items which was
granted in 2011. Supported by strong bilateral relations, trade between the countries
is growing rapidly. In 2016-17 Bangladesh’s total export to China was US$ 949.4
million increasing 17.5 per cent from previous year where amount of garments export
was US$ 391.6 million which also increased 14.8 per cent from the previous year.129
There are a number of factors that signal a promising sign for Bangladeshi
exporters. First, China is becoming a major export destination of garments products
127
Eloot et al., op. cit.
128
Leather and leather goods (LLGs) are the second largest export sector in Bangladesh. This sector has
large potential for expansion and export diversification. The export policy of 2015-18 aims to raise export
earnings to US$ 60 billion by 2021, of which US$ 5 billion is expected from LLGs. Mohammad A. Razzaque
reported that “in 2017, the total value of leather and leather goods exports from Bangladesh stood at US$
1.2bn, accounting for 3.54% of the country’s total merchandise exports. The industry’s contribution to total
output or gross domestic product (GDP) is estimated to be 0.35%. Total employment in the industry in 2016
was 129,000 — up from 91,000 in 2013. During the same period, the industry’s share in total employment
rose from 0.16% to 0.22%. The leather export sector has a strong backward linkage in terms of its usage
of mostly locally sourced raw materials. The estimated domestic value addition is as high as 80-95%. The
global experience shows that successful garment manufacturing countries tend to find it easier to develop
specialization in leather products and footwear (and vice versa). The leather sector should thus be a natural
driver of export diversification in Bangladesh.” See for details, Mohammad A. Razzaque, “Leather goods:
Bangladesh’s next cash cow”, Dhaka Tribune, 24 February 2018.
129
Refayet Ullah Mirdha, “Rising apparel exports to China a sign of new opportunities”, The Daily Star, 26
July 2017.
35
with a huge population and a growing size of the middle-class consumer market
which Bangladeshi entrepreneurs trying to seize.130 Second, China is a better
alternative market compared to Bangladesh’s current top destination in the US and
European markets due to better prices and shorter distance trade. Third, as China is
moving towards high-tech and high-end manufacturing industries, Bangladesh can
tap into the low-end manufacturing industries that China currently operates. Under
the auspices of BRI, Chinese state-owned enterprises and business communities
are interested to invest in Bangladesh. China has initiated works to develop a 750-
acre industrial zone in Bangladesh’s port city Chittagong for Chinese manufacturing
firms along with sizable investments in transportation, infrastructure and energy
sectors roughly amounting to US$ 10 billion.131 Besides, investment in infrastructure
development is one of the main priorities for Bangladesh which has been reflected in
different government plans. There are plans to invest US$ 40 billion in infrastructure
related projects in next five years. Chinese investment under BRI mainly goes to
infrastructure, energy and transportation sector.132 BRI generated infrastructure will
facilitate investment and trade and contribute to the global output. In some poorer
countries like Bangladesh, where infrastructural development is significantly low,
this initiative can create new market demand and employment opportunities. BRI
infrastructure could further boost growth in an already rapidly growing part of the
world. GDP growth in BRI countries averaged 4.2 per cent in 2014-16, compared to the
global average of 2.6 per cent. BRI region will account for 80 per cent of global GDP
growth by 2050 making the participating countries benefit considerably.133
5. BRI: Sufficient Conditions for Transforming Potentials into Gains
In the growth and stability framework, the sufficient condition holds that a
favourable political settlement creates a capitalist class interested in the productive
expansion of the economy, together with a strong regional alignment that advances
the cooperation and guarantees security, culminating into growth and stability. The
sustainability of such is contingent upon normative legitimacy coming from general
130
China would produce 750 billion-dollar worth of garments from the current 300 billion dollars by the end
of 2020. At present, China produces about 80 per cent of its garment products for local consumption. The
remaining export-focused 20 per cent make up about 40 per cent of global apparel trade, worth nearly US$
200 billion. So, Bangladesh should focus on this Asian economic giant for its future export growth. See for
details, Refayet Ullah Mirdha, 2017, ibid.
131
“Dragon’s big push into South Asia: China to now develop industrial zone in Bangladesh”, The Financial
Express, 04 April 2018.
132
The Hong Kong and Shanghai Banking Corporation Limited, 06 December 2017, available at http://www.
about.hsbc.com.bd/news-and-media/belt-and-road-initiative-opportunities-for-bangladesh, accessed on
15 March 2018.
133
Kazi Ahmed Arif Fuad, “One Belt, One Road (OBOR) Initiative: How Bangladesh can benefit through
the new horizon of regional co-operation”, Light Castle Partners, 19 June 2017, available at http://www.
lightcastlebd.com/insights/2017/06/19/one-belt-one-road-obor-initiative-bangladesh-can-benefit-new-
horizon-regional-co-operation, accessed on 15 May 2018.
36
masses in the form of social approval. By contrast, if there is political contestation

within the country, if there is no convergence in distribution of power at different
levels, and if there is no regional alignment among participating countries, it will
create conditions for dis-stability and dis-growth.
5.1 Legitimacy and Production Centric Political Settlement
A greater sense of legitimacy at the normative and perception levels of the

country would also foster strong regional alignment among the participating countries
under BRI. The key for transforming potentials into concrete gains is to ensure these
conditions for successful regional alignment strategy. Strategic and economic gains
will only be materialized when there will be a political settlement that would lead to
productive expansion of the economy rather than rent-seeking and extraction. This
new initiative would accrue benefits only when the political class would complement
the productive class. Historically growth happens when fundamental changes occur
within the internal political system through distribution of power or power sharing.
The stability of the political order is what makes growth sustainable in a country.
There needs to be an alignment of perceived interests or consensus between

China’s and Bangladesh’s domestic political process to realize gains from BRI.
Otherwise, it would become essentially regime centric with limited potential gains.
Lack of normative legitimacy is clearly observed between neighbouring countries in
South Asia. Over recent years Bangladesh’s relation with China is getting stronger.
China is addressing normative legitimacy with its own characteristics. China is not
getting involved in domestic politics or not siding with any particular political party
or faction. Based on popular perception, it is observed in case of India that it is taking
sides with political parties in power manifestly. That is why India has weak normative
legitimacy which is evident by seeing decreasing level of trust from neighbouring
countries to India. But China’s strategy to address normative legitimacy is not to take
any sides directly. For example, in case of the Maldives, China is not getting involved
directly and said that they would uphold international norms, would not interfere in
domestic affairs and will not allow anyone to do so.134
Hence, rather than being regime centric, the relationship has to be geared
internally by political consensus among the countries and supported by social
recognition and popular approval. Within this internal process, one dimension would
be among the political class and another would be among the capitalist class so that
they are interested in productive capacity expansion and work for maximizing their
share in the process in a way that is not damaging to the country’s development.
“China says international community should play constructive role in Maldives”, Reuters, 09 February
134
2018, available at https://www.reuters.com/article/us-maldives-politics-china/china-says-international-

community-should-play-constructive-role-in-maldives-idUSKBN1FT07O, accessed on 15 March 2018.
37
In other words, the emphasis is on two elements, one is on the political

level and the other on the production level which will ensure the condition of
growth and stability. For example, in the context of BRI, if FBCCI wants to remain
merely as a commission agent, it would not work for the benefits of the country.
Does the distribution of power in two levels - one in the party process and another
in the composition of political/productive class reach growth enhancing political
settlement? This question assumes greater importance if the capitalist class acts
like an intermediate body just to take in quick commissions from the process rather
than to get productively employed. Achieving this alignment would be the biggest
challenge for the domestic political process.
More importantly, if political settlement and regional alignment remain

confined to regime to regime variation, it would also be a problem. It needs to be
production centric and must entail people to people exchange including regular
interaction between commercial, state level and socio-cultural lines. So, if the capitalist
class cannot utilize these opportunities, the country will not benefit from the process
only by becoming a mere participant in BRI.
5.2 Regional Alignment Strategy and Approach of ‘Equiangular Development

Diplomacy’
In essence, politically stable relationship based on production orientation is

the key process which is not found in the contrasting narratives provided by both
liberals and realists and this is what the paper tries to advance. Implications of the
realist approach are that it undermines the positive outcomes of BRI. As this approach
dominates the way India perceives the Chinese initiative and thereby remains
unstitched from participating, this points to a key challenge to overcome fear and
apprehensions overwhelmed by the realists’ pattern of thinking. Also, the liberal focus
on uncritical celebration of cooperation and interdependencies may result in little or
no favourable gains for small developing countries.
As a consequence, relations for development will only be fruitful when there

will be strong regional alignment based on the principle of ‘equiangular development
diplomacy’ which would direct to a balanced pathway to progress. Particularly, a
strong strategic alignment is vital to the success of BRI in the South Asian region full
of tensions and apprehensions among neighbours. The idea of regional alignment
entails that common grounds for cooperation in the field of trade, investment and
infrastructure building will emanate from internal compulsions that the countries
in the region are facing. That means countries are better off cooperating with each
other because they need each other. For successful industrialization and integration
into the global economy, strengthening regional cooperation in the areas of financial
arrangements, infrastructure projects, technology and knowledge sharing and
38
aligning trade and industrial policies among developing countries is essential going
beyond mere trade liberalization or free trade rhetoric.135
Revisiting the growth enhancing matrix that specifies the outcomes at the
end, growth and stability would follow when interests and compulsions of countries
concerned will merge in mutually complementary ways ensuring everyone gains.
Finally, Bangladesh’s relation with China will only bear fruits when all the necessary
and sufficient conditions will be fulfilled.
6. Conclusion
China’s Belt and Road Initiative is a grand strategy which aims to create
greater trade and investment among a large group of countries while providing
Chinese economy much leverage to avert challenges of slowing down of growth
and transitioning of the economy. The article examines the potential gains from
participating in BRI as it relates to infrastructure building, regional connectivity,
trade, investment and economic development in South Asia along with a particular
focus on Bangladesh. It has made an attempt to theorize and explore mainly
economic implications of China’s BRI for neighbouring countries. More specifically,
the research has tried to explore the economic implications as well as the processes
and mechanisms associated with the BRI strategy that will ensure growth enhancing
environment to benefit participating countries while taking relations between
countries on a balanced footing that would put forward an ‘equiangular development
strategy’ for the region.
The significance of the article lies in the fact that the economy of Bangladesh
needs a fundamental transformation away from agriculture to industrialization which
would require a huge flow of investment, infrastructure building, technological up-
gradation, productive expansion and large-scale employment generation. In this
connection, Bangladesh needs to divert increasing attention to effectively reap
opportunities from strengthening regional economic ties and more so with China
which has opened a wide-gate of potentials to be realized from BRI strategy. As per
the findings of the article, the future success of Sino-Bangladesh relations will largely
depend on how well Bangladesh can customize and align its strategies with regard
to attracting more investment, transfer of technology and exploring markets through
diversification of domestic capacities and export competitiveness.
The article attempts to theorize the relations among the participating countries
and China within the framework of BRI while specifying the necessary and sufficient
conditions for explaining the economic gains from participation in the initiative. It is
argued that leveraging within the framework of BRI needs to be necessarily based
135
UNCTAD, Trade and Development Report 2017, op. cit.
39
on production orientation by integrating Bangladesh in the production network and

further, this process needs to be facilitated by financial flow based on risk-sharing
principle and appropriate technology transfer.
In this overall mechanism, the sufficient condition is the favourable political

settlement that has to be interested in production centric expansion of the economy
as well as equiangular development diplomacy between Bangladesh and China and in
other similar contexts. It is noted that how much benefits the participating countries
can derive from BRI would depend, however, on a regional alignment capable of
overcoming geopolitical apprehensions and other non-economic challenges. In this
regard, forming a strong regional alignment supported by normative legitimacy
can create conditions for stability and growth for all the countries. Further, ensuring
production and employment, appropriate and complementary technology transfer
and financing based on risk-sharing principle which are emphasized should be
explored in further research in future.
40
Benuka Ferdousi
LOCALIZATION OF JOBS IN THE GCC REGION: IMPLICATIONS FOR

BANGLADESH
Abstract
The Gulf Cooperation Council (GCC) region is home to about three fourth of
Bangladesh’s expatriates. In 2018, labour migration from Bangladesh to the
GCC countries fell by about 60 per cent. Although fluctuation is common
in overseas employment, this fall in labour migration to the GCC appeared
as a concern because it took place at a time when the Gulf countries had
started a renewed drive for localization of jobs. In this context, this paper
attempts to see the implications of recent drive on localization of jobs by the
GCC countries on overseas employment of Bangladesh. The paper argues
that although the earlier localization efforts in the GCC region achieved little
success and the success of recent localization drive is still uncertain, there
is not much room for complacency for labour sending countries either.
Growing youth unemployment and uncertain future of oil are mounting
pressure on the governments of the GCC countries and hence things might
not go as before. It, therefore, seems that although the labour countries like
Bangladesh may not worry just now, they should get themselves prepared
for change in the GCC labour market in long run, if not in short run.
Keywords: Saudization, Localization, Segmented Labour Market, GCC Labour

Market, Bangladesh Labour Migration
1. Introduction
History of labour migration from Bangladesh (after independence) is closely

related with the Gulf countries. During the boom in oil price in 1970s, demand for
low skilled labours in the Gulf countries increased tremendously which acted as the
pull factor for labour migration from Bangladesh while pressure of unemployment
and poverty at home acted as the push factor. Since then, a total of 12,199,194
Bangladeshis went abroad in search of a better living and 75 per cent of them went to
the GCC countries. Among the GCC countries, Kingdom of Saudi Arabia (KSA), with 30
per cent of Bangladeshi expatriates, tops the list of destination followed by the United
Arab Emirates (UAE) and Oman which account for 20 and 12 per cent of the country’s
expatriates respectively.
Benuka Ferdousi is Research Fellow at Bangladesh Institute of International and Strategic Studies (BIISS).
Her e-mail address is: benukabd@gmail.com
41
Figure 1 shows the trend of labour migration from Bangladesh to the GCC.
One can see that labour migration from Bangladesh to all GCC countries except KSA
has been falling for two consecutive years; 43 per cent in 2017 and again 26 per cent
in 2018.1 After ban of seven years, labour migration from Bangladesh to KSA resumed
in 2015 and witnessed an unprecedented growth in 2017 so much so that despite
falling trend in all other GCC countries, total labour migration reached a historic peak
in 2017. This trend of migration to the Kingdom reversed dramatically in the very next
year leading to a 60 per cent fall in Bangladesh’s overseas employment to the GCC.
Figure 1: Overseas Employment from Bangladesh to GCC Countries, 1995-2018

900000
800000
700000
600000
500000
400000
300000
200000
100000
0
2006
2011
2018
2009
2010
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2007
2008
2012
2013
2014
2015
2016
2017
KSA UAE Oman Qatar
Kuwait Bahrain Total GCC
Source: Bureau of Manpower Employment and Training (BMET).
Fluctuating trend in overseas employment is quite natural because overseas
employment of a country depends on many factors ranging from bilateral economic
and political relations to economic and political condition in destination country to
status of global economy. Nevertheless, the recent fall in labour migration to the KSA
and the declining trend in other GCC countries deserve attention as those are taking
place amidst a renewed drive for localization of jobs by the GCC countries.
The GCC countries have long been trying to localize jobs, i.e., to replace
migrant workers with national ones. They have reinforced their attempt recently in the
wake of financial crisis caused by fall in oil price starting in 2014. This recent drive of
the GCC countries is swelling the rank of returnees in major labour sending countries.
1
Bureau of Manpower Employment and Training (BMET), available at http://www.old.bmet.gov.bd/BMET/
stattisticalDataAction, accessed on 03 March 2019.
42
LOCALIZATION OF JOBS IN THE GCC REGION
Given that remittance is the second highest source of foreign currency earnings in
Bangladesh after Readymade Garments (RMG) and that GCC countries account for
overwhelming share of Bangladeshi expats, it is imperative to see the implications of
such attempts on the country’s overseas employment.
In this context, the paper attempts to examine the implications of recent

drive on localization of jobs by the GCC countries on overseas employment of
Bangladesh. The paper is organized as follows. Following the brief introduction,
section 2 describes the evolution and nature of GCC labour market to see the context
in which the GCC states took repeated attempts to localize jobs. Section 3 attempts
to evaluate their earlier localization efforts to see why the earlier efforts had little
success in reducing foreign labour dependency. Section 4 discusses the recent drive
of GCC countries on localization of jobs and looks into its impact on migrant workers.
Section 5 tries to examine whether as a labour sending country Bangladesh should
worry about the recent localization drive and then tries to find out its implications
(if any) for Bangladesh’s labour migration. Section 6 concludes the paper. The paper
is a qualitative one and it uses secondary data from relevant government and
non-government institutions. Besides article journals and books, various reports,
documents and newspapers have been consulted.
2. GCC Labour Market: Evolution and Nature
This section aims to provide a brief description of GCC labour market. First, it
will attempt to see the economic structure of GCC on which its labour market is built
upon. Then, following a sketch of evolution of GCC labour market, the nature of GCC
labour market will be described in brief.
2.1 GCC Economy and Role of Government
GCC countries are heavily dependent on oil revenue. One can see from Table
1 that in GCC region fossil fuel, majority of which is in the form of oil, accounts for
about half of GDP, 66-94 per cent of export and about 80 per cent of government
revenue. Even in the UAE, the least fossil fuel dependent country, about 40 per cent of
GDP and 65 per cent of government revenue comes from fossil fuel.
43
Table 1: Dependency of GCC States on Fossil Fuel

Country Fossil fu- Fossil fuels Fossil fuels as Share of petro- Oil rent as
els as % of as % of ex- % of govern- leum in export % of GDP
GDP ports ment revenue (2017) (2013)
Kingdom of 45.1 85.7 78 73.3 43
Saudi Arabia
Kuwait 62.6 94.3 80 80 56
Oman 49.7 66.1 87 55 40
United Arab 38.9 31.1 65 43 24
Emirates
Qatar 54.4 91.7 80 38 26
Bahrain 26.2 73.1 85 5
Source: Laura El-Katiri, Vulnerability, Resilience and Reform: The GCC and The Oil Price Crisis 2014–2016, New York:
Center on Global Energy Policy, Columbia University, December 2016, p. 6; OEC, "Economic Complexity Ranking",
available at https://atlas.media.mit.edu/en/rankings/country/eci/;World Bank, accessed on 12 December 2018.
Despite long-standing call for diversification, GCC economies remains to be
largely oil dependent where many of the established industries like petrochemicals,
steel and aluminium are energy-sensitive and hence depends on oil market. Another
common feature of GCC economies is that the government is the primary employer
for nationals and government spending acts as engine of growth, including that of
private sector.2
Table 2: Share of Public Sector Employment in Total Employment of Nationals in

the GCC, 1990-2008
Country 1990 2000 2006 2008
Bahrain 68 80 38 29
Kuwait 42 75 87 86
Oman 76 50 47
Saudi Arabia 70 82 73 72
Qatar 89 88
Source: Martin Baldwin-Edwards, Labour Immigration and Labour Markets in the GCC Countries: National
Patterns and Trends, The London School of Economics and Political Science, Global Governance, London,
UK, Number 15, March 2011, p. 15.
2.2 Evolution of GCC Labour Market
Prior to the development of oil sector as the primary source of income, number
of foreigners was relatively few in the largely agrarian and nomadic population of the
2
Laura El-Katiri, Vulnerability, Resilience and Reform: The GCC and the Oil Price Crisis 2014–2016, New York:
Center on Global Energy Policy, Columbia University, December 2016, p. 6.
44
GCC.3 During the late 1930s when crude oil exploration started on a large scale, the
GCC countries had to depend on foreign labour force due to small population and
lack of skill among the native labour force. Majority of the foreign labour force in this
period were from neighbouring Arab countries.4 The composition of foreign labour
force of the region changed during the oil boom of 1970s. This time, due to increasing
regional political tension, the GCC states started hiring Asian labours to meet their
rapidly growing demand for expansion of infrastructure, public and private services.
Asian labourer, who were hired through ‘guest worker’ model, were considered by
GCC states as logical replacement for Arab workers because of their geographical
proximity, historical economic ties to the region, and above all their abundant supply
at very low wage rate.5
Increasing dependence on foreign labour in turn changed the composition

of GCC labour market dramatically. By early 1980s, foreign workers constituted more
than half of the total labour force in each of the GCC states and this trend strengthened
in the following years (see Table 3).
Table 3: Share of Expatriates in GCC Labour Force and Population

Country Share of expatriate in labour force (%)
1975 1985 1990 199 2000 Share of expatriate in population (%)
Saudi Arabia 42.9 64.9 59.8 55.8 50.6 32.7
Kuwait 69.8 81.2 86.1 82 83.2 69.2
Bahrain 39.5 58 51 63.2 76.7 52
Oman 34.1 64.2 70 61.7 74.6 44
Qatar 80.6 89.7 91.6 87.1 94.3 85.7
UAE 84.8 89.5 89.3 90.4 85 88.5
Source: Nasra M. Shah, “Socio-demographic transitions among nationals of GCC countries: implications
for migration and labour force trends”, Migration and Development, Vol. 1, No. 1, June 2012, p. 142; Martin
Baldwin-Edwards, op. cit., p. 9; Gulf Research Centre, GLMM Database, available at https://gulfmigration.
org/total-population-and-percentage-of-nationals-and-non-nationals-in-gcc-countries-latest-national-
statistics-2010-2015/, accessed on 07 December 2018.
3
Martin Baldwin-Edwards, Labour Immigration and Labour Markets in the GCC Countries: National Patterns
and Trends, The London School of Economics and Political Science, Global Governance, London, UK,
Number 15, March 2011, p. 7.
4
Júlia Palik, “The Challenges of Dual-Societies: The Interaction of Workforce Nationalisation and National
Identity Construction through the Comparative Case Studies of Saudisation and Emiratisation”, in
Philippe Fargues and Nasra M. Shah (eds.), Migration to the Gulf: Policies in Sending and Receiving Countries,
Cambridge: Gulf Research Center, University of Cambridge, 2018, p. 116; Steffen Hertog, Arab Gulf States:
An Assessment of Nationalisation Policies, Gulf Labour Markets and Migration programme (GLMM) Research
Paper No. 1/2014, p. 5.
5
Júlia Palik, op. cit., p. 117.
45
2.3 Nature of GCC Labour Market
Baldwin summarizes the characters of GCC labour market as follows:6
• Low participation and employment rate among the nationals (see Table 4).
• Extreme segmentation of the labour market, especially between public

and private sector and national and foreigner workers where nationals
are mainly employed by the government while majority of the jobs in
private sector are done by the foreign labour (see Figure 2).
• Rising unemployment rate among the women and the youth.
• Jobs highly concentrated in service and construction sectors; female are

almost exclusively employed in service sector, with migrant women in
housekeeping and native women in service like education and social
services.
• Recruitment of foreign workers through kafala system, a system that not

only ensures the flexible and temporary character of foreign labour force
but also obstructs mobility of foreign labour.
Table 4: Labour Force Participation Rate (15+) of Nationals in GCC, 2008

Country Labour Force Participation Rate (Male and Fe-
male National)
Saudi Arabia 36.3
Kuwait 51.1
Qatar 49.3
UAE 45.6
Source: Martin Baldwin-Edwards, op. cit., p. 13.
6
Martin Baldwin-Edwards, op. cit., p. 6.
46
Figure 2: Distribution of Employment by Sector and Nationality in the GCC

Public sector: nationals Public sector: expats
Private sector: nationals Private sector: expats
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Bahrain Kuwait Oman Qatar Saudi Arabia UAE
(2013) (2012) (2011) (2012) (2013) (2013)
Source: Steffen Hertog, Arab Gulf States: An Assessment of Nationalisation Policies, op. cit., p. 4.
The most discussed feature of GCC labour market is its segmented character
which is closely related with other features of the labour market. And, while explaining
GCC labour market, instead of traditional Human Capital Theory which explains the
distribution of jobs and incomes by differences in human capital,7 analysts mostly
use Theory of Segmented Labour Market. Human capital theory views workers in
low wage jobs simply as low productivity workers who are unwilling or unable to
obtain the skills necessary for access to higher paying jobs while Segmented Labour
Market Theory views the labour market not as a single competitive market but as a
composition of several non-competing segments which, facilitated by presence of
various institutional barriers, reward human capital unequally.8
According to Segmented Labour Market Theory, labour market is divided

in primary labour market characterized by higher wage, better working condition,
stability of employment and opportunity for improvement and secondary labour
market characterized by absence of one or more of these desired features of
employment. Advocates of this view argue that jobs of primary labour market are
rationed and certain groups who are disadvantage or discriminated against like
women, blacks, immigrants and other minorities find it difficult to get a job in primary
labour market. Various non-economic and institutional barriers including barriers on
7
See, for example, Jacob Mincer, Schooling, Experience and Earnings, New York: National Bureau of Economic
Research, 1974.
8
Ibrahim Mohamed Abdalla et al., “Labour Policy and Determinants of Employment and Wages in a
Developing Economy with Labour Shortage”, Labour, Vol. 24, Issue 2, June 2010, p. 166; Sandra Jackstiene,
“Labour Market Segmentation: Theoretical Aspect”, Ekonomika ir vadyba: aktualijos ir perspektyvos, Vol. 4,
No. 20, 2010, pp. 53-63.
47
labour mobility prohibits these groups from finding a job in primary labour market.9
With low participation rate of national labour force, overwhelming

concentration of employed nationals in government jobs which pay the nationals
several times higher wages compared to the foreigners engaged in private sector (see
Table 5) and kafala system which successfully restricts the mobility of foreign labour,
GCC labour market offers a classic example of segmented labour market.
Table 5: Average Monthly Wage in the Private Sector in Saudi Arabia, 2004-2007, (SR)
Year 2004 2005 2006 2007
Saudis 4367 3878 3596 3624
Non-Saudis 1037 1028 1060 1011
Total 1385 1360 1384 1354
Source: Steffen Hertog, “A comparative assessment of labor market nationalization policies in the GCC”, in
Steffen Hertog (ed.), National employment, migration and education in the GCC, Berlin, Germany: Gerlach
Press, 2012, p. 6.
3. Earlier Efforts of Localization of Jobs: An Evaluation
Overwhelming share of expats in workforce and population amidst an

increasing native youth population became a concern for all GCC countries by as early
as 1980s.10 The governments realized that it would no more be possible for them to
provide job for all their young people who were joining the workforce every year at
a growing number. They tried to direct their youth to private sector for employment
which by that time had already been saturated by low paid foreign migrant workers.11
It is in this context that the concept of localization of job emerged in the

GCC countries. Governments of all GCC countries have been repeatedly including
localization of jobs in their consecutive national plans. It is called Saudization in Saudi
Arabia, Emiratization in the UAE, Omanization in Oman, etc. Whatever the name is and
whatever be the particulars, main objectives of this localization efforts were:12
• Increased employment for native people across all sectors of the

domestic economy.
9
Kevin Lang and William Dickens, “A Test of Dual Labor Market Theory”, American Economic Review, Vol.
75, No. 4, February 1985, pp. 792-805; Sandra Jackstiene, op. cit.; Ibrahim Mohamed Abdalla et al., op. cit.
10
Horinuki Koji, “Controversies over Labour Naturalisation Policy and its Dilemmas: 40 Years of Emiratisation
in the United Arab Emirates”, Kyoto Bulletin of Islamic Area Studies, Vol. 4, No.1&2, March 2011, p. 44.
11
Dr Adel S. Al-Dosary and Syed Masiur Rahman, “Saudization (Localization) – A Critical Review”, Human
Resource Development International, Vol. 8, No. 4, December 2005, p. 496.
12
Robert Looney, “Saudization and Sound Economic Reforms: Are the Two Compatible?”, Strategic Insights,
Volume III, Issue 2, February 2004.
48
• Reduce and reverse over-reliance on foreign workers.
• Recapture and reinvestment of income which otherwise would have

flowed overseas as remittances to foreign worker home countries.
Localization of jobs has been a common concern for Gulf countries for
years. Hence, there exists a plethora of literature on localization effort in various
GCC countries.13 Most of the literature argues that so far localization efforts by GCC
countries achieved little success because they failed to address the micro and macro
factors which perpetuate the segmentation of labour market in these countries.
Macro factors include:
• Heavily oil-dependent economy where the non-oil sectors are labour

intensive and are indirectly dependent on government spending.
• States’ use of public job as a means of distributing a part of oil revenue

with a view to maintaining stability of regime.
• Large gaps in wage and labour rights between public and private sector
which is partly promoted by the pattern of government spending (easy
access of nationals to government jobs which pay higher salary, benefits
and pensions, requires less skill, demands less working hour and provide
various privileges compared to private sector).
Micro factors include:
• Mismatch between the skill demanded by the private sector and skill
achieved by nationals since despite repeated calls for education reform,
there has been little changes so far.
• Unwillingness of nationals to take up jobs in private sector since better

jobs (in terms of wage, benefits, working conditions and rights) are
available in public sector thanks to generous government spending.
13
See, for example, Dr Adel S. Al-Dosary and Syed Masiur Rahman, “Saudization (Localization) – A critical
review”, op. cit.; Dr Adel S. Al-Dosary and Syed Masiur Rahman, “The Role of the Private Sector Towards
Privatisation”, International Journal of Arab Culture Management and Sustainable Development, Vol. 1, No.
2, January 2009; Horinuki Koji, op. cit.; Robert Looney, “Saudization and Sound Economic Reforms: Are
the Two Compatible?”, op. cit.; Robert Looney, “Saudization: A Useful Tool in the Kingdom’s Battle Against
Unemployment?”, Journal of South Asian and Middle Eastern Studies, Vol. XXVII, No. 3, Spring 2004; Anthony
H. Cordesman, Saudi Arabia Enters The 21st Century: Economic, Demographic, and Social Challenges,
Washington, DC: Center for Strategic and International Studies, 3 December 2002; Manal Soliman Fakeeh,
Saudization as a Solution for Unemployment: The Case of Jeddah Western Region, Ph.D Thesis, University of
Glasgow, May 2009; Steffen Hertog, Arab Gulf States: An Assessment of Nationalisation Policies, op. cit.
49
• Unwillingness of private companies to recruit nationals instead of expats

as locals are much costlier than foreigners since there is almost unlimited
supply of labour from sending countries who work at much lower wage,
have greater skill and are willing to compromise greatly in terms of
labour rights.
According to them, the first generation localization efforts characterized by

quotas and prohibitions (limitation of specific jobs to nationals) could not address
the micro and macro factors mentioned above and hence merely led to a very
uneven distribution of cost across businesses. Consequently, these localization
efforts had led to evasion and in some cases corruption between businesses and
labour administration. In many cases, these efforts have given rise to various forms of
“phantom employment” of nationals instead of real employment.
Steffen Hertog observes that after the failure of first generation “Localization”
policies, GCC economies have recently opted for market-based mechanisms for
attaining higher national employment results. The basic idea behind reforms taken
in GCC economies in 2000s is that nationalization has to be induced through market
mechanisms, primarily by narrowing the wage and rights gap between locals and
foreigners.14 He also observes that market based localization policies had brought
some success in most of the GCC economies but the process was halted in 2011 with
the advent of Arab Spring which prompted the GCC governments to again proceed
to creation of more government jobs, increasing unemployment and other welfare
benefits and thus reversing the process of localization.
4. Recent Drive on Localization of Jobs in the GCC
This section will first attempt to illustrate the context in which recent drive on
localization of jobs is taking place in the GCC countries. In other words, it will try to see
which factors have prompted these countries for this thrust. Then it will endeavour to
see the various ways the governments of the GCC countries are attempting to replace
foreign migrant workers with native ones. Finally, it will draw on the impacts of recent
localization drive on migrant workers.
4.1 Oil Price Fall, Financial Crisis and Revamped Localization of Jobs in the GCC
Region
Price of crude oil, the life line of the Gulf countries, plunged dramatically in
2014 from US$ 115 per barrel to US$ 30 per barrel and the fall continued thereafter.
Fall of oil price by 43 per cent over the last four years15 acted as a heavy blow to the oil-
14
Steffen Hertog, “Arab Gulf States: An Assessment of Nationalisation Policies”, op. cit., p. 7.
15
Luiz Pinto, “Sustaining the GCC Currency Pegs: The Need for Collaboration”, Brookings Doha Center Policy
Briefing, February 2018.
50
dependent economies of the GCC (see Figure 3 and 4). In 2015, KSA, UAE, Oman, Bahrain
saw budget deficit by the amount of 3-18 per cent of GDP while Kuwait and Qatar saw
their budget surpluses to fall from 28 and 11 per cent of GDP to 5.6 per cent and 5.4 per
cent respectively. The situation further deteriorated in 2016 for all GCC countries.
Figure 3: Budget Balances in GCC Countries, 2000-2019
Source: International Monetary Fund, Regional Economic Outlook: Middle East and Central Asia, p. 14.
Figure 4 shows that as a result of decline in oil revenue, real public expenditure
in GCC countries fell by about 10 per cent in two consecutive years – 2015 and 2016.
And, it is the foreign migrant workers who had to bear the brunt of this cut. For
example, faced with a budget deficit of 16 per cent of its GDP in 2015, Saudi Arabia
had to cut its infrastructure and transport budget by 63 per cent in 2016.16 Due to the
budget cut and delayed payment by the government, many construction companies
could not manage the money to pay their employees who remained stranded and
in some cases even suffered from food shortage. Bin Laden Group, KSA’s largest
construction group, alone laid off about 50000 workers in a few months in 2016 many
of whom were left stranded in the country.17 Similar was the case with Qatar. Thus,
shrinking of construction sector in GCC region left thousands of migrant workers from
India, Philippine, Bangladesh and Nepal in a marooned condition.18
16
Adam Bouyamoum, “Saudi Arabia cuts spending after posting record $ 98 billion budget deficit for 2015”,
The National, 28 December 2015, available at https://www.thenational.ae/business/saudi-arabia-cuts-
spending-after-posting-record-98-billion-budget-deficit-for-2015-1.104894, accessed on 13 November
2018.
17
Amy Kazmin and Simeon Kerr, “India offers aid to stranded workers in Saudi Arabia”, Financial Times,
01 August 2016, available at https://www.ft.com/content/364db72c-57c2-11e6-9f70-badea1b336d4,
accessed on 22 January 2019.
18
Rama Lakshmi, “Thousands of Indian workers stranded in Saudi Arabia without pay or provisions”, The
Washington Post, 01 August 2016, available at https://www.washingtonpost.com/world/middle_east/
thousands-of-indian-workers-stranded-in-saudi-arabia-without-pay-or-provisions/2016/08/01/4cae2d00-
51
Figure 4: Change in Real Public Expenditure in GCC Countries (Year-on Year %

Change)
15
10
-5
-10
-15
2011-13 2015 2015 2016
(avg)
Source: Aasim M. Husain et al., “Economic Reform and Political Risk in the GCC: Implications for U.S.
Government and Business”, Middle East Policy Council, Vol. XXIII, No. 3, Fall 2016.
Financial crisis led by the fall of oil prices, revamped the localization effort all
over the GCC. Saudi Arabia adopted Vision 2030 in 2016; other countries soon followed
the suite. Kuwait and Oman adopted similar visions in 2017. Qatar already had National
Vision 2030, Bahrain had Economic Vision 2030 and the UAE had Vision 2021.
One common feature of the visions mentioned above, except that of the UAE,
is emphasis on localization of jobs. For example, Saudi Arabia’s “Vision 2030” vows
to reduce Saudi unemployment rate from the existing 12 per cent to 7 per cent19 by
a08c-4611-b975-cef59ff83d3a_story.html?noredirect=on, accessed on 16 January 2019; Beh Lih Yi, “‘Bring

us home,’ plead Filipino migrants stranded in Saudi Arabia”, Reuters, 08 August 2016, available at https://
www.reuters.com/article/us-philippines-migrants-saudi-idUSKCN10J1E5, accessed on 25 January 2019.
19
These are the kingdom’s ‘official’ unemployment rates which does not include the large numbers of working-
age Saudis who are not looking for a job and hence are not counted as part of the labour force. Recent
government figures show that the labour force participation rate of the kingdom, meaning people who are
in jobs or who say they are looking for work, is 36.4 per cent, about half the global average, say economists.
“More than 1 million Saudis on unemployment benefit”, Reuters, 28 March 2012, available at https://www.
reuters.com/article/us-saudi-unemployment-subsidy/more-than-1-million-saudis-on-unemployment-
benefit-idUSBRE82R0L320120328, accessed on 29 January 2019.
52
2030 by creating 450,000 private sector jobs for Saudis by 2020. Given that expatriates
account for 90 per cent of the KSAs private sector jobs,20 job creation for Saudis in the
private sector implies replacement of foreign workers by native workforce.
Similar is the case with other GCC countries. Qatar’s National Vision 2030,
adopted in 2008 considers over dependence of migrant workers as a source of
economic, social and cultural challenge.21 “New Kuwait” 2035 Development Plan
attempts to bring down the proportion of expatriates to the country’s total population
from 70 to 60 per cent by 2030. Oman’s Vision 2040, adopted in January 2017, aims
to cut down the number of expats in Oman and thus bring down their share from the
current level of 44.5 per cent to 33 per cent by 2040.22
4.2 Various Dimensions of Localization of Jobs: KSA and Others
In their drive to localize jobs, KSA has taken the following measures:
• Over the period of 2014-2018, KSA has declared about 75 types of jobs as
limited to nationals only.23
• With Saudi Vision 2030, the kingdom is implementing its Nitaqat system with
renewed force in recent years. In Nitaqat system, all farms are catergorized in
various ranks based on their compliance with the ‘saudization’ target. Farms
with higher rank are given various incentives such as flexibility in recruiting
and managing migrant workers, lower processing fees, etc. while the lower
graded farms get limited immigration and sponsorship benefits and are
fined for redundant migrants at the amount of US$ 640.
• Also in 2017, the Ministry of Civil Service in Saudi Arabia asked all
ministries and government departments to terminate all contracts with
expatriate workers within three years.24
20
Ahmed Al Omran, “Saudi Arabia raises the alarm over rising unemployment”, Financial Times, 24 April
2018, available at https://www.ft.com/content/df579534-47c3-11e8-8ae9-4b5ddcca99b3, accessed on 12
June 2019.
21
National Development Strategy and Ministry of Development Planning and Statistics, State of Qatar,
National Development Planning and Implementation Human Development, Sustainable Development and
National Well-being, p.10.
22
“Oman’s vision 2040”, Times of Oman, 03 January 2018, available at https://timesofoman.com/
article/125303/Oman/Expat-population-likely-to-be-throttled-back-by-2040, accessed on 15 June 2018.
23
“More jobs off-limits to expats”, Arab News, 16 August 2015, available at http://www.arabnews.com/
featured/news/792061, accessed on 26 May 2019; Rafiqul Islam Azad, “Saudi job policy to affect Bangladeshi
workers”, op. cit.; “41 job types designated as Saudi only”, Arab News, 16 December 2018, available at http://
www.arabnews.com/node/1421836/saudi-arabia, accessed on 05 June 2019.
24
“Saudi Arabia’s public sector will fire all expat workers within 3 years”, available at https://stepfeed.com/
saudi-arabia-s-public-sector-will-fire-all-expat-workers-within-3-years-9052, accessed on 18 November 2018.
53
• Attempts have been taken to make the foreign workers costlier to

the employer than before. For example, at the beginning of 2018, an
additional levy of SR400 per month per expat worker has been imposed
for companies where expats outnumber Saudis and SR300 per month per
expat worker for companies where number of expat worker is equal to
that of Saudi workers. Moreover, this levy is set to increase every year. 25
• KSA also took several other measures which are meant to make migration
to the kingdom a less profitable option than before, particularly for
the semi skilled and low skilled labours. It has imposed a new tax on
dependents of expatriates in July 2018. The fee starts at SR100 for each
individual dependent per month. The monthly fee is set to increase to
SR400 for each dependent in 2020.26
• In KSA, ‘saudization’ is being accompanied by rigid implementation of

existing migration rules resulting in increased number of deportation.
For example, in the KSA, if a migrant works in a company other than that
for which he had been hired, he becomes illegal. Although such practice
has been in place for many years and the law enforcers have been lenient
so far, under the new policies, the authorities are now enforcing the law
very strictly.27
As mentioned before, neither KSA was alone in localization effort, nor was it
a new phenomenon. Table 6 shows the various measures taken by the GCC countries
even before the oil price shock, many of which was implemented with renewed
vigour after 2014.
25
Francoise De Bel-Air, Demography, Migration and Labour Market in Saudi Arabia, Gulf Labour Markets and
Migration (GLMM) Explanatory Note, No. 5/2018, p. 6.
26
“Expat dependent fee takes effect in Saudi Arabia”, Gulf Business, 03 July 2017, available at https://
gulfbusiness.com/expat-dependent-fee-takes-effect-in-saudi-arabia/, accessed on 10 November 2017.
27
Porimol Palma, “Saudi job market shrinking fast”, The Daily Star, 08 October 2018.
54
Table 6: Approaches to Localization: Various Policy Measures in the GCC

Demographic Balancing Human Capital Formation
Incentives for citizens’ higher fertility (UAE) Promoting citizens’ study and training in
technology and medicine (all GCC)
Organizational Development Economic Engagement
Strict implementation of ILO standards for State subsidy (up to 50 per cent) of private
remuneration and workplace conditions sector pay for native worker (KSA)
(Oman) Quotas for natives in public/private
Subsidized start-up loans for national employment (KSA, Kuwait, UAE, Qatar)
entrepreneurs (UAE) Reform/near-abandonment of the kafala
Allowing employers to recruit from and system (Oman, Bahrain)
encouraging the Bahrainis to compete in the Subsidies for hiring of indigenous workers
local labour market (with the non-nationals) (to decrease cost of hiring citizens) (Oatar,
(Oman) KSA)
Demand Management: Targeting Migrants Demand Management: Targeting Employ-
Closing migrant employment in specific sec- ers
tors or professions (all GCC) Raising costs of hiring foreign workers (Bah-
Ceiling of proportion of foreign workers in rain, Kuwait, Oman)
company (KSA, Kuwait, UAE) Reducing labour-intensive projects in the
Tax on non-diversity of nationalities (i.e. ≥30 public sector (Kuwait)
any nationality) (UAE)
Demand Management: Targeting Investors Supply Management: Targeting Citizens
Preferential award of government contracts Directing new labour market entrants to the
to private companies satisfying nationaliza- private sector (all GCC)
tion quota objectives (Oman) Skills upgrading for citizens, especially in
Restrictions on visa issuance (Bahrain, KSA) technology and medicine (all GCC)
Taxes on hiring migrant workers (Bahrain, On-the-job training facilities and priorities
Kuwait, Oman) (targeted cooperative programs) (UAE)
Social responsibility tariff (e.g. an annual US Public-Private-Partnership (PPP) in
$ 3180 fee for every migrant employee) to recruitment, training, and retention (UAE)
increase the cost of hiring non-nationals
(Oman)
Supply Management: Targeting Migrants Supply Management: Targeting Economic
Health insurance to be paid by migrant Structure
workers (Kuwait, KSA, UAE) Development of economic sectors for
Degree validation fee to be paid by migrant nationals’ employment (Bahrain, KSA, Qatar,
workers (UAE) UAE)
Direct tax on migrant workers (KSA) Using the Market Information System as a
Deportation of irregular migrants (all GCC) job data bank (Oman)
Source: Samiul Hasan, “Workforce localization in the GCC Countries: Policies, Practices, and the Labor-
Exporting Countries’ Responses”, Philippine Political Science Journal, Vol. 36, No. 2, 2015, p. 151.
55
4.3 Impact of Recent Localization Drive on Expat Workers
In the years immediately after the adoption of localization efforts, GCC

countries succeeded to reduce the number of expat workers to a significant extent.
According to Saudi Labour Market Update, a quarterly report published by Jadwa
Investment, a total of 1.8 million expat workers left KSA over the period of 2017-2018.
According to the report, the departures were mostly correlated with the expat levies
and expat dependent fees.28 According to a survey conducted by recruitment specialist
Robert Walter, Saudi national hiring has doubled in 2018 and the survey expects this
trend to continue onto 2019.29 In Oman, more than 115,000 foreign workers left the
country between March 2016 and March 2018 as a result of the Omanization drive.30
A report of KNOMAD (The Global Knowledge Partnership on Migration and

Development), a World Bank initiative, shows that the localization drive of the GCC
states has severely affected employment opportunities of migrants from South Asia,
particularly from India, Pakistan and Bangladesh31 – the top three labour sending
countries for GCC. According to the report, India, the top most labour sending country
for the GCC region, experienced a 25 per cent drop in migrant workers’ deployment to
the GCC in 2017 and 12 per cent drop in the first three quarters of 2018. The situation
was worse for Pakistan whose migrant workers’ deployment reduced by 41 per cent in
2017 and further dropped by 26 per cent in the first eight months of 2018. Bangladesh
migration to GCC dropped by about 60 per cent in 2018.
Naturally, India, Pakistan and other labour sending countries are concerned
about the recent developments of the GCC states and are looking for solution.32
Like other source countries, Bangladesh has reasons to be worried about these
developments in the GCC countries. To have an idea on the extent by which Bangladeshi
migrants might be affected by these new policies, one example can be given. Almost
60 per cent of the mobile phone shops in Riyadh were run by Bangladeshis, and
around 80,000 Bangladeshis were involved in the business. But after the declaration
of September 2018, foreigners would no longer be allowed to do such business. As
28
Jadwa Investment, Saudi Labour Market Update 2018, p. 3.
29
“Saudization to continue at brisk pace, pay hikes of professionals in Kingdom highest in region”, Arab
News, 19 February 2019.
30
“Oman faces property crash as foreign workers leave”, The National, 12 May 2018.
31
“Job Opportunities recede for South Asian Migrants in GCC”, Gulf Times, 30 March 2019, available at
https://m.gulf-times.com/story/625149/Job-opportunities-recede-for-South-Asian-migrants-, accessed on
21 July 2019.
32
See, Samiul Hasan, op. cit.; G. Gurucharan, The Future of Migration from India: Policy, Strategy and Modes
of Engagement, India Centre for Migration, Senior Fellowship Programme Report 2013; “Arabian Nights
are over: Gulf no longer the dream land for Indians”, Economic Times, 07 June 2018, available at https://
economictimes.indiatimes.com/nri/arabian-nights-are-over-gulf-no-longer-the-dream-land-for-indians/
articleshow/64493367.cms?from=mdr, accessed on 17 June 2018; Bureau of Emigration and Overseas
Employment, Government of Pakistan, Mid Year Analysis of Manpower Export January-June 2019, available at
https://beoe.gov.pk/files/statistics/yearly-reports/2019/mid_2009.pdf, accessed on 09 July 2019.
56
a result, these 80000 Bangladeshi migrants became unemployed and many of them
had returned home.33 Bangladeshi Ambassador to Riyadh Mr. Golam Moshi estimates
that about 2 lakh Bangladeshi migrants could be affected by the new Saudi policy.34
According to officials from Expatriate Welfare and Overseas Employment

(EWOE) Ministry of Bangladesh, around 2,000 Bangladeshi workers were deported by
the KSA every month in 2018, making the total figure of deportation 24,000,35 while
according to BRAC’s Migration Program till August 2018, at least 48,000 workers have
returned from the Middle Eastern countries most of whom were Saudi returnees.36
Bloomberg reports that during 2017-2018, while 1.6 million expats left Saudi
Arabia, the number of Saudis employed outside the security and military sector
increased by only 50,000.37 It implies that the young Saudis are not taking up the
jobs made vacant by the exodus of expats. In case of Oman, however, the fall in the
number of expats has been associated with fall in unemployment among its native
workforce.38
Although the figures of exodus of expats are significant, from data of two
years one cannot say for sure that the declining trend of foreign labour recruitment
by GCC states will continue or that this decline will be permanent because fluctuation
in foreign labour migration is a common phenomenon. Exodus of expats from GCC
countries at the times of oil price shock or vulnerability of GCC economies to ups and
downs of oil market are also not new.39 For the present case, much will depend on
how the GCC economies will fare in future and whether or not any structural change
will take place in GCC economy and labour market. And, this is what the following
section will deal with.
5. Implications for Bangladesh
This section will first try to see whether as a labour sending country
Bangladesh needs to worry about the recent drive on localization of jobs by the GCC
countries and if yes, to what extent. The first question is of particular importance
given that localization of job is not a new phenomenon in these countries. As section
3 has already identified major micro and macro factors which held back the earlier
localization efforts of GCC, this section will examine whether situation has changed
33
Porimol Palma, op. cit.
34
Rafiqul Islam Azad, “Saudi job policy to affect Bangladeshi workers”, The Independent, 23 March 2018.
35
“Overseas jobs sharply shrink for Bangladeshis”, The New Age, 18 December 2018.
36
“Is the job market in Saudi Arabia shrinking for Bangladesh?”, Dhaka Tribune, 18 October 2018.
37
“As expats leave Saudi Arabia, no one is replacing them”, Bloomberg, 03 April 2019.
38
“Expat population continues to fall”, Oman Observer, 08 April 2019, available at https://www.omanobserver.
om/expat-population-continues-to-fall-2/, accessed on 10 April 2019.
39
J. S. Birks, I. J. Seccombe and C. A. Sinclair, “Labour Migration in the Arab GuIf States: Patterns, Trends and
Prospects”, International Migration, Vol. 26, No. 3, July 1988; Laura El-Katiri, op. cit.
57
in this regard. It will also examine whether new situations have arisen which might
contribute to the success or the failure of recent localization attempt. Then it will try
to outline the probable implications of the localization efforts for Bangladesh’s labour
migration.
5.1 Recent Localization Drive: Anything to Worry?
One can recall from section 3 that several distortions like easy access of
nationals to high salary government job, mismatch between required and existing
level of expertise and working ethics among nationals and flow of cheap foreign
labour resulted in strong segmentation of GCC labour market and previous localization
efforts have failed to achieve target because those efforts could not strike this
segmentation significantly. A closer look at the above mentioned factors will reveal
that governments’ acting as primary source of employment (which is more often than
not better in terms of wage, benefits and rights compared to jobs in private sector) for
nationals lies at the heart of this segmentation process.
According to some analysts, spending policy of the GCC states reflects an

unwritten social contract of the rulers with their citizens through which they win the
loyalty of the latter in return for various direct and indirect benefits like availability
of high salaried government jobs, various subsidies and welfare benefits, exemption
from income tax etc.40 Such government spending thus contributes in the stability
of the regimes against political upheavals.41 In the words of Gause, “Oil wealth, when
it is abundant, allows regimes that use it wisely to expand their support coalitions,
reducing the zero-sum aspect of most political conflict, and to reduce the economic
incentives for mobilization of opposition and for cross-ideological opposition
coalitions to form.”42 As mentioned before, the GCC states used this technique heavily
during the turbulent period of Arab Spring.
Figure 5 shows that this strategy might have practically reached its limits
because the wage bill has become too large to keep rising. The wage bill now accounts
for more than 10 per cent of GDP and more than 30 per cent of total expenditure in
most countries. The problem is more severe in KSA where during 1997-2001, wage bill
represented more than 15 per cent of GDP and about 50 per cent of total government
expenditure. The situation did not improve thereafter as can be seen from Figure 5.
40
Laura El-Katiri and Bassam Fattouh, “A Brief Political Economy of Energy Subsidies in the Middle East and
North Africa”, in G. Luciani (ed.), Combining Economic and Political Development: The Experience of MENA,
International Development Policy Series 7, Geneva: Graduate Institute Publications, 2017, p. 55; Hazem
Beblawi, “The Rentier State in the Arab World”, Arab Studies Quarterly, Vol. 9, No. 4, Fall 1987, pp. 383-398.
41
Many attribute the comparable political calm and stability of the majority of the GCC states amidst the
Arab Spring in part to their ability to spend on their citizens in a way other Arab states could not.
42
F. Gregory Gause III, Kings for All Seasons: How the Middle East’s Monarchies Survived the Arab Spring,
Brookings Doha Center Analysis Paper, No. 8, September 2013, p. 25.
58
Figure 5: Wage Bill in GCC

Wage Bill in GCC (average for the period General Government Wage Bill as
1997-2001) % of GDP (average for the period
2005-16)
High demographic pressure is making the situation worse. Over the period of
1975–1985, national population of KSA grew at the rate of 6.8 per cent a year, Oman’s
population grew by 7.17 per cent and the GCC national population as a whole grew by
an average of 3.9 per cent a year. Arab birth rates (3 per cent per year), including those
of the GCC are still among the highest in the world (global average is 1.5 per cent per
year). Due to higher birth rate, GCC countries have a youth-full population and each
year about 200,000 young people enters the labour force.43 With a population of 40
per cent of which is below the age of 14, it is conceivable that the job market of GCC
is going to be under tremendous pressure in future.
In fact, many GCC countries are already feeling the chill with a bulk of youth
population, a significant portion of whom are unemployed. In KSA, one fourth of
youth population is unemployed. Not only in KSA, in whole Arab World, 26 per cent
of youth are unemployed compared to world average of 13 per cent.44 If it is kept in
mind that labour force participation rate is much lower in GCC region compared to
other parts of the world, one can understand the gravity of the situation. Bulge of
unemployed youth is always a headache for the state.
43
Wes Harry, “Employment Creation and Localization: The Crucial Human Resource Issues for the GCC”, The
International Journal of Human Resource Management, Vol. 18, No. 1, January 2007, pp. 133-135.
44
The World Bank, available at http;//data.worldbank.org/indicator/SL.UEM.1524.ZS, accessed on 17 June
2019.
59
For a long time, the GCC governments addressed the unemployment problem
by creating government jobs and providing generous allowances for their relatively
few citizens which served their interests too. With growing demographic pressure and
consequent strain on government budget, it appears that governments may not be
able to act as primary source of employment for long and the responsibility for job
creation in the period ahead is likely to rest with the private non-oil sector.
Another factor which may severely affect future capability of GCC

governments to provide generous benefits and jobs for nationals is uncertain future
of oil. In recent years, renewable energy is becoming increasingly cheaper than
traditional energy sources like coal or oil (see Figure 6); increasingly greater share of
newly added energy are coming from renewables (see Figure 7) and thus renewable
energy is increasingly crowding out traditional energy sources. Electric vehicle are
also expected to occupy the roads in near future. In such a situation, future of oil is
really uncertain. In recent days, not only spot oil prices, price of oil futures have also
declined and oil futures are not expected to rise much even in next five years.45
Figure 6: Cost (Mean LCOE) for Different Energy Sources ($/MWh), 2009-2017
Source: Lazard’s Levelized Cost of Energy Analysis Version 11.0, available at https://www.lazard.com/
perspective/levelized-cost-of-energy-2017/, accessed on 01 July 2018.
45
Aasim M. Husain et al., op. cit.
60
Figure 7: Global Net Capacity Growth (GW) by Sources, 2010-2017 46
Source: Simon Evans, “Global Solar Capacity Grew Faster than Fossil Fuel in 2017 says Report”, Carbon Brief,
05 April 2018.
With a view to reducing gaps between the public and private sector jobs, GCC
states have taken some steps in recent years. In many GCC countries, various levies
have been imposed on foreign labours which is contributing to reduce the wage gap
albeit insignificantly. Reform in kafala system which severely limits mobility of foreign
labour and make them easily exploitable, is under discussion in all GCC countries;
some have already introduced some reforms. Last but not the least, in a historic
attempt, the Saudi government has passed a decree in 2016 to cut the salaries of the
ministers by 20 per cent and to cut the housing and car allowances for members of
the advisory Shura Council by 15 per cent. According to the decree lower-ranking civil
servants will also see wage increases suspended, and overtime payments and annual
leave capped.47 Experts hail that this is a positive move to make its people to look to
the private sector for employment;48 the decision however was revised later on.
In a more drastic move in 2015, Saudi Arabia announced its plans to cut
subsidies on petrol, diesel, kerosene and water and to raise petrol prices by up to
40 per cent.49 And, this move of Saudi Arabia was soon followed by Oman and
Bahrain.50 Such cuts in government subsidies was long prescribed by experts but was
46
Net growth was obtained after accounting for power plants that have retired. Retirement is particularly
important for coal (32GW), followed by gas (16GW).
47
“Saudi Arabia Unveils First Public Sector Pay Cuts”, BBC News, 26 September 2016.
48
“Saudi King Cuts Once Untouchable Wage Bill to Save Money”, Bloomberg, available at https://www.
bloomberg.com/news/articles/2019-04-03/as-expats-leave-saudi-arabia-no-one-is-replacing-them-chart,
accessed on 14 May 2019.
49
“Saudi Arabia Cuts Fuel Subsidy: Nigeria Next?”, The Cable, 28 December 2015.
50
Aasim M. Husain, et al., op. cit.
61
unimaginable before 2014. In fact, the financial crisis caused by drop in oil price has
made the unpopular task easier for the GCC rulers.
Although the steps are still at the nascent period having more symbolic than
real value, this might turn to be the starting point of a long-term reform. These steps
may encourage the native people of GCC states to work in private sector who earlier
preferred to be unemployed to work in private sector. In fact, the change is already
taking place, as observed by many. As observed by Ambassador Golam Moshi, “A large
number of Saudis are now taking up jobs at hotels and are also working as drivers
which they did not do in the past.” 51
Businesses of GCC countries are likely to oppose the localization efforts as

they will be hurt by replacement of cheap and efficient foreign labour by costly and
inefficient national ones. Obviously, the government will not be able to win the fight
by rigid implementation of rules and decrees only; at least past history of localization
in GCC says so.52 To win this fight, the governments must take massive effort to reform
their education systems, an initiative they have ignored so far despite repeated calls
in various government policies.53
In summary, some basic micro and macro factors which inhibited the success
of earlier localization efforts are still in place. Education is still far from desired reform;
competitiveness of GCC businesses still depend on cheap foreign labour and the
governments still depend on oil revenues to a great extent. But, at the same time,
demographic pressure is building up in GCC region which in turn is creating fiscal
pressure on GCC governments. Due to growing demographic and fiscal pressure amidst
uncertainty over future of oil, the governments are being compelled to look for new
ways to solve the unemployment problem of which localization effort is a part.
It, therefore, can be concluded that although the success of recent localization
drive is still uncertain, there is not much room for complacency for labour sending
countries either. Pressure is building up on the governments of GCC countries and
hence things might not go as before. It, therefore, seems that although the labour
countries may not worry just now, they should better get themselves prepared for
change in GCC labour market in long run, if not in short run.
5.2 Implications for Bangladesh’s Labour Migration
Labour migration from Bangladesh is male dominated (see Figure 8.c),

heavily concentrated in the GCC region which is destination of about three fourths of
51
Porimol Palma, “Saudi job market shrinking fast”, op. cit.
52
Steffen Hertog, Arab Gulf States: An Assessment of Nationalisation Policies, op. cit.
53
Dr Adel S. Al-Dosary and Syed Masiur Rahman, “Saudization (Localization) – A Critical Review”, op. cit.; Wes
Harry, op. cit.
62
Bangladeshi expats (see Figure 8.a and Figure 8.b) and most of the expats go to GCC
to work as labours (see Figure 8.d) who mainly work in construction, manufacturing
and service sectors.
Source: BMET
Unfortunately, construction sector was one of the sectors in GCC which were
most affected by the financial crisis caused by oil price shock. One of the reasons
is that construction sector depends in many ways on government spending in
infrastructure and transport which in turn depends on government’s fiscal condition.
The plight of construction workers in various GCC states during the crisis has been
already described in section 4. In 2018, construction sector of Saudi Arabia saw the
largest decline in the number of foreigners with departure of around 910,000 foreign
workers. Moreover, as Figure 9 shows, over the last three years, Saudi Arabia has
drastically reduced the number of visas issued for construction workers.
63
Figure 9: New Work Visa Issues by Saudi Arabia for Foreign Workers (Excluding
Domestic Worker)
Source: Jadwa Investment, Saudi Labour Market Update 2018, p. 3.

Furthermore, one can see from Table 7 that of all the occupational groups in
Saudi Arabia, Kuwait and Bahrain, production workers and labourers have the highest
share of foreigners, followed by the occupational group of service holders. Higher share
of foreigners may bring a part of these sectors under localization attempt. The risk of
foreign workers of these sectors is increased by the fact that jobs in GCC region are
highly concentrated in construction and service which implies that while trying to
accommodate the unemployed youth, the governments may target these sectors first.
Table 7: Occupational Distribution of Nationals and Foreign Workers in Three

GCC States
Occupation Bahrain (2008) Kuwait (2010) Saudi Arabia
National Foreigner National Foreigner National Foreigner
Professional/ 13.5 8.8 26.8 8.8 27.9 11.9
Technical
Administration 17.4 3.2 1.7 1.5 7.2 1.7
Clerical/ related 23.5 1.3 61.5 10.8 13.8 2.4
Sales workers 6.3 4.7 0.9 5.8 5.2 13.5
Services 7.0 12.8 5.0 28.0 36.1 28.8
Agriculture 0.4 0.6 0 1.5 2.6 6.3
Production 31.8 68.5 4.2 43.6 7.4 35.4
(workers and
labourers)
Source: Nasra M. Shah, “Labour Migration from Asia to GCC Countries: Trends, Patterns and Policies”, Middle
East Law and Governance, Issue 5, 2013, p. 55.
64
With an overwhelming majority of expats working in construction, production

and service, labour migration from Bangladesh is thus exposed to the risk of volatility
of oil price as well as to the risk of falling in the target group of localization attempt. It
is true that the low end jobs, in which most of the Bangladeshi expats are engaged, are
not that attractive to the GCC nationals and at least with the present state of attitude
the nationals will prefer to be unemployed than being engaged in these jobs but as
indicated in the previous sub-section, growing pressure of unemployment might
change the situation in future.
In Bangladesh, as of today, there exists no documentation of returnee

migrants. Absence of such data makes the assessment of impact of the localization
effort difficult. Even if such data were available, the impact could not have been
assessed from the number of departure only. This is because those migrants, who
had managed to migrate after spending a lot of money which often is borrowed, do
not outright leave the country after losing a job. They try to switch job and continue
staying with less income and more hardship than before. Many of them may end up
in informal jobs. Localization attempt thus may impact the welfare of the migrant
workers of Bangladesh which is not reflected in the figure of returnee.
Therefore, it can be said that the recent drive of localization of jobs in

GCC deserves concern as it is taking place amidst mounting pressure of youth
unemployment and in environment of uncertain future of oil. As a labour sending
country where about 10 million people are working abroad, three fourth of whom
are in the GCC, and where remittance accounts for about half of the country’s foreign
currency earnings, Bangladesh cannot afford to take ‘wait and see’ approach regarding
this localization drive. Rather the country should start preparing itself for a probable
change in GCC labour market which among others should include diversification of
destination as well as improvement of the skill of the expatriates.
6. Conclusion
By swelling the rank of returnees and limiting the opportunity for labour
migration, recent drive of localization has raised concern among the labour sending
countries including Bangladesh. GCC labour market can be characterized by low
participation and employment rate among the nationals, extreme segmentation of
the labour market, especially between public and private sector and national and
foreign workers; rising unemployment rate among the women and the youth and
high concentration in service and construction sectors.
Overwhelming share of expats in workforce and population amidst an

increasing native youth population has led GCC countries to attempt for localization
of jobs since 1980s but those attempts achieved little success because they failed
to address the micro and macro factors which created strong segmentation in GCC
65
labour market. These factors include easy access of nationals to government job, wide
gap between private and public sector jobs in terms of salary, benefits and rights,
mismatch between required and existing level of expertise and working ethics among
nationals and flow of cheap foreign labour.
Fall of oil price by 43 per cent over the last four years acted as a heavy blow
to the oil-dependent economies of the GCC which resulted in 10 per cent decline in
real public expenditure with great consequence on migrant labourers. Financial crisis
caused by the fall of oil prices led GCC governments to revamp their localization effort
which resulted in departure of 1.8 million expat workers from Saudi Arabia alone
over the period of 2017-2018. India, Bangladesh and Pakistan - the top three labour
sending countries for the GCC states saw significant decline in their labour migration
to GCC.
Although from data of two years one cannot say with certainty that the
declining trend of foreign labour recruitment by the GCC states will continue
and although the success of recent localization drive is still uncertain, there is not
much room for complacency for labour sending countries either. Growing youth
unemployment and uncertain future of oil are mounting pressure on the governments
of GCC countries and hence things might not go as before. It, therefore, seems that
although the labour countries like Bangladesh may not worry just now, they should
get themselves prepared for change in GCC labour market in the long run, if not in
short run. Overwhelming majority of Bangladeshi expats in the GCC region works in
construction, production and service sectors which are more exposed to the risk of
volatility of oil price and more prone to be the target of localization effort. Given the
sheer volume of expats and significance of remittance in the economy, Bangladesh
cannot afford to take ‘wait and see’ approach regarding this localization drive.
Rather the country should start preparing itself for a probable change in GCC labour
market which among others should include diversification of destination as well as
improvement of the skill of the expatriates.
66
REVISITING MIGRATION-DEVELOPMENT NEXUS: A MICRO-LEVEL

STUDY IN DHAKA CITY OF BANGLADESH
Abstract
Migration has been intimately linked with development throughout

history. International labour migration has contributed to enrich societies
and economies of both countries of origin and destination. The academic
discussion on the impact of migration on development has varied from
time to time. Consequently, literature on migration-development nexus
can be classified into three phases. Chronologically, from 1950 to 1960s,
scholars viewed migration as beneficial to development. From 1970
to 1980s, literature considered migration to contribute to poverty and
underdevelopment in the country of origin. Since 1990s, migration has
been seen as a facilitator to development. In effect, to assess the influence
of migration on development, existing literature in these phases tends to
focus only on economic indicators, e.g., poverty reduction, national income
and GDP growth rate, etc. of development. However, the development
paradigm since the 1980s focuses on human indicators, e.g., freedom, choice,
opportunity and capability of development. It argues that obsession with
economic growth and creation of wealth denies the fact that development is
ultimately about people. In this respect, the existing literature on migration-
development nexus not only ignores the human face of development but
also pushes people from centre to periphery of development. In this context,
the paper comes up with an alternative framework to understand the
migration-development nexus. It also argues that by creating opportunities,
building capabilities and enlarging choices, international labour migration
influences development of the origin country at the micro (household) level.
Based on these arguments, to revisit migration-development nexus, the
paper takes account of successful international labour migrants’ household
in Dhaka city of Bangladesh as a case study.
Keywords: Migration, Development, Human Resource, Financial Resource,

Natural Resource, Manufactured Resource
1. Introduction
Linking migration to development is not a new topic for the international

community. From 1950s scholars started to inspect direct and indirect impact
Syeda Tanzia Sultana is Research Officer at Bangladesh Institute of International and Strategic Studies
(BIISS). Her e-mail address is: syedatanziasultana@gmail.com
67
of migration on development. Consequently, different scholars link migration to

development differently. Chronologically, the literature on migration-development
nexus can be categorized into three phases. In the first ‘optimistic phase’ of the 1950-
60s, scholars focussed on the effect of remittance and return migration which was
then considered to be beneficial for development.1 It was believed that migrants
not only bring back remittance but also new ideas, knowledge and entrepreneurial
attitudes.2 In the 1970s and 1980s, scholars of the second phase challenged the idea
that migration could benefit development.3 They argued that migration contributes
to poverty and underdevelopment in the South, as well as increasing its dependency
on the North. The concept of ‘brain drain’- skills and knowledge could be lost to
migration - dominated the debates at that time.4 In the third phase (since the 1990s),
‘optimism’ once again prevailed and migration was seen as leading to or facilitating
development.5 The notion ‘brain drain’ was replaced by one of ‘brain gain’: that is by
a focus on the knowledge and qualifications that returning migrants bring to their
home countries. Consequently, discussions about remittance attained the status of a
‘development mantra’ which shapes the debate to the present day.6 The literature of
the first and third phase portrays the linkage between migration and development
positively. On the contrary, the second phase portrays it negatively.
Indeed, over the past five decades, the analytical framework applied
economic indicators, e.g., poverty reduction, GDP growth, remittance and national
income, etc. to measure the impacts of migration on the development process of
originating countries. However, since 1980 the concept of development has been
viewed from the human perspective instead of economic perspective. It focuses on
human indicators, e.g., freedom, choice, opportunity and capability. It argues that
the basic goal of development is to create an environment that enables people to
enlarge their freedom, choices, opportunities and capacities, etc.7 Hence, the existing
literature on migration-development nexus ignores the human face of development
and pushes people from centre to periphery of development. In this backdrop, the
paper provides an alternative framework to understand the migration-development
nexus. It also argues that by enlarging choices, creating opportunities and building
1
Charles P. Kindleberger, Europe’s Postwar Growth: The Role of Labor Supply, Cambridge, MA: Harvard
University Press, 1967, p. 127.
2
Hein de Haas, “Migration and Development: A Theoretical Perspective”, International Migration Review, Vol.
14, No. 1, 2010, pp. 227-264.
3
Demetrios G. Papademetriou, “Illusions and Reality in International Migration: Migration and Development
in Post World War II Greece”, International Migration, Vol. 23, No. 2, 1985, pp. 211-223.
4
George B. Baldwin, “Brain Drain or Overflow?”, Foreign Affairs, Vol. 48, No. 2, 1970, pp. 358-372.
5
Stephen Castles, “Development and Migration-Migration and Development: What Comes First? Global
Perspective and African Experiences”, Theoria, Vol. 56, No. 121, 2009, pp. 1-31.
6
Martin Geiger and Antoine Pécoud, “Migration, Development and the ‘Migration and Development Nexus”,
Population, Space and Place, Vol. 19, No. 4, 2013, p. 369; Hein de Haas, “The Migration and Development
Pendulum: A Critical View on Research and Policy”, International Migration, Vol. 50, No. 3, 2012, p. 8.
7
Mahbub ul Haq, Human Development in South Asia 1999: The Crisis of Governance, New York, USA: Oxford
68
capabilities international labour migration influences the development of the country

of origin at the household level. Though numerous cases show high risks associated
with failed migration, the paper limits its scope to those households of Dhaka city
whose members are gainfully employed in foreign countries.
International labour migration plays a significant role in the development of

Bangladesh. It has increased rapidly since 2007 which put Bangladesh as one of the
dominant labour migrant-sending countries.8 According to the Bureau of Manpower
Employment and Training (BMET), a total of 12,583,936 Bangladeshi workers migrated
to the Gulf and other countries of destination from 1976-2019 (up to July). Data
from 2001 to 2019 reveals that 70 per cent of total labour migration was in different
countries of the Middle East and Southeast Asia.9 One of the largest international
labour migrant-sending districts of Bangladesh is Dhaka which constitutes 4.84 per
cent of the total labour migrants of Bangladesh. It is the fourth important source
district after Cumilla, Brahmanbaria and Chattogram.10
In this context, the paper attempts to revisit migration-development nexus

from the perspective of human indicators of development. The paper follows an
eclectic method comprising both qualitative and quantitative methods. It examines
existing literature on migration-development nexus that comes from variety of
sources, e.g., government and non-government documents, academic journals, books
and newspaper articles. It also relies on primary data from the semi-structured in-
depth interview of Bangladeshi international labour migrants and their households.
A basic survey had been done also over the households. For the convenience of
the discussion, the paper is divided into five sections including introduction and
conclusion. The second section comprehensively discusses the concept of migration
and development. It also explains the analytical framework of the paper. The third
section deals with the basic features of international labour migration from Dhaka
city of Bangladesh. The fourth section revisits the migration-development nexus from
the perspective of human indicators of development. The fifth section concludes the
paper.
2. Migration and Development: Conceptual Contours
The term migration-development nexus refers to the complex interrelations

between migration and development. Throughout history, two divergent views
regarding development and migration are visible. The first view is the ‘balanced
8
Md. Abdul Hye, “Impact of Remittances on Remittance-Recipient Households’ Socio-Economic Behavior:
A Study in Moulvibazar District of Bangladesh”, IOSR Journal of Humanities and Social Science, Vol. 22, No. 1,
2017, p. 44.
9
Bureau of Manpower, Employment and Training (BMET), available at http://www.old.bmet.gov.bd/BMET/
stattisticalDataAction, accessed on 27 August 2019.
10
Ibid.
69
growth’ approach which refers that migration enhances development in countries

of origin, narrows inter-country income disparities and eventually makes migration
unnecessary by alleviating unemployment and providing economic support through
remittance and developing migrants’ skills.11 The second view is the ‘systematic view’
which suggests that migration often distorts the development process through
poverty, dependency and widening of income disparities.12 Although migration is
an integral part of the development process, migration-development nexus is a very
complex subject of discussion.13 On the one hand, migration cannot be explained in
terms of simple movement of people from one place to another. On the other hand,
development cannot be explained only in terms of economic growth. Hence, the
understanding of the relationship between the two concepts is limited as both are
highly dynamic and can be assessed from different perspectives.14 To revisit migration-
development nexus, the existing definitions of migration and development need an
assessment.
2.1 Concept of Migration
Migration is one of the distinguishing features of human beings that have

been occurring since their appearance in this universe.15 The concept of migration
is very complex. Different scholars have tried to define the concept of migration
distinctly because of their different approaches.16 As a result, scholars remain unable
to provide a universally accepted definition which in all circumstances recognized as
standard criteria applicable at all spatial units and scales.
Literally, migration refers to the shifting of people or an individual or group of

an individual from one cultural area to another, which may be permanent or temporary.
Colin Newell considers migration as one of the important components of population
change.17 According to John Innes Clarke and Glenn T. Trewartha, migration is the
movement of an individual from one place of residence to another to remain in a new
place for some substantial period.18 International Organization for Migration (IOM)
defines a migrant as any person who is moving or has moved across an international
border or within a state away from his/her habitual place of residence, regardless of
11
Ronald Skeldon, Migration and Development: A Global Perspective, Harlow, England: Longman, 1997, p. 30.
12
Hein De Haas, “Migration and Development: A Theoretical Perspective”, op. cit.; Hein de Haas, “The
Migration and Development Pendulum: A Critical View on Research and Policy”, op. cit., p. 15.
13
Md. Shahidul Haque, “Orderly and Humane Migration: An Emerging Paradigm for Development”, BIISS
Journal, Vol. 23, No. 1, 2002, p. 3.
14
Ibid.
15
G. J. Lewis, Human Migration: A Geographical Perspective, London and Canberra: Croom Helm, 1982, p. 145.
16
A.A.I.N. Wickramasinghe and Wijitapure Wimalaratana, “International Migration and Migration Theories”,
Social Affairs, Vol. 1, No. 5, 2016, pp. 13-32.
17
Colin Newell, Methods and Models in Demography, London: Belhaven Press, 1988, p. 82.
18
John Innes Clarke, Population Geography, Oxford: Pergamum Press, 1965, p. 123; Glenn T. Trewartha, A
Geography of Population: World Patterns, New York: John Wiley & Sons Inc, 1969, p. 139.
70
the person’s legal status, whether the movement is voluntary or involuntary, what the
causes for the movement are and what the length of the stay is.19
Migration can be classified differently because it takes various criteria and

factors into consideration. Depending on the length of time, migration may be
classified as short-term and long-term, depending on legality it can be divided as
free migration, managed migration, regular migration and irregular migration and
depending on the length of distance migration may be classified as short-distance
and long-distance.20 Depending upon decision-making approach, it is known as
voluntary and involuntary, based on cause and motivation it can be divided as labour
migration, health migration, study migration and business migration and based on
number it can be divided as individual and group migration. Broadly, migration is
categorized as international and internal migration.21 As the paper takes account of
international labour migration from Bangladesh as a case study, hence, the existing
concept needs an assessment.
IOM defines international labour migrants as those who move for employment.
According to International Labour Organization (ILO), it refers to a person who
migrates from one country to another with a view to being employed other than
on his own account and includes any person regularly admitted as a migrant for
employment.22 The International Convention on the Protection of the Rights of all
Migrant Workers and Members of their Families defines labour migration as a person
who is to be engaged, is engaged or has been engaged in a remunerated activity
in a state of which he or she is not a citizen.23 Depending on employment it may be
categorized as professionals, skilled, semi-skilled and unskilled. Doctors, engineers,
teachers and nurses are considered as professional workers, while manufacturing or
garment workers, cooks, drivers, computer operators and electricians as skilled. Tailors
and masons are considered as semi-skilled and housemaids, agricultural workers,
hotel workers and menial workers as unskilled workers.24 The paper limits its scope to
the voluntary movement of a skilled individual across the international boundaries for
employment. It includes those individuals who keep on moving between their place
of origin and destination.
19
International Organization for Migration, “Who is a Migrant?”, available at https://www.iom.int/who-is-a-
migrant, accessed on 14 January 2019.
20
R. C. Chandna, Geography of Population: Concepts, Determinants and Patterns, New Delhi: Kalyani Publishers,
1998, p. 88.
21
Pieter Kok, “The Definition of Migration and its Application: Making Sense of Recent South African Census
and Survey Data”, SA Journal of Demography, Vol. 7, No. 1, 1999, pp. 19-30.
22
International Labour Organization, “Migrant Workers”, available at https://www.ilo.org/public/english/
standards/relm/ilc/ilc87/r3-1b2.htm, accessed on 18 January 2019.
23
Erica Usher, “Migration and Labour”, in Erica Usher (ed.), Essentials of Migration Management: A Guide for
Policy Makers and Practitioners, Geneva: United Nations Publications, 2004, p. 23.
24
K. S. Farid, L. Mozumdar, M. S. Kabir and K. B. Hossain, “Trends in International Migration and Remittance
Flows: Case of Bangladesh”, Journal of the Bangladesh Agricultural University, Vol. 7, No. 2, 2009, pp. 387-394.
71
2.2 Concept of Development
Similarly, development is inherently both complex and ambiguous concept

and for almost every writer, a different definition of development exists. It can
be defined from two perspectives, e.g., economic and human. From economic
perspective, development is considered as a natural consequence of economic
growth. It considers growth as capable of promoting society’s development through
solving problems arising from varied dimensions.25 Peter Preston refers development
as economic growth.26 He argues as the economy grows it makes greater availability
of resources for the population, therefore benefiting the poorest.27 Michael P. Todaro
and Stephen C. Smith define development as achieving sustainable rates of growth
and income per capita to enable the nation to expand its output faster than the
population.28 Economic perspective on development concentrates to a great extent
on ways of achieving economic growth and in particular, increasing the gross national
product (GNP) and total employment.29
Human perspective on development arose as a result of growing criticism of

the leading development approach of the 1980s which focussed on national product,
aggregate income and supply of particular goods. Many scholars, especially Amartya
Sen, Mahbub ul Haq and Martha Nussbaum have played a key role in formulating
an alternative development paradigm focusing on human choices, capabilities and
freedom. As economic growth is one of the aspects of development, Sen calls for
broadening of the term ‘development’ beyond the current narrow focus on economic
measures such as per capita Gross Domestic Product (GDP) and national income
level.30 He defines development as the process of enlarging a person’s “functionings
and capabilities to function”.31 He also argues that the purpose of development is to
improve human lives by expanding the range of things that a person can be and do,
such as to be healthy and well-nourished, to be knowledgeable and to participate in
community life.32 In his book, Development as Freedom, he defines development as
25
Jair Soares Jr. and Rogério H. Quintella, “Development: An Analysis of Concepts, Measurement and
Indicators”, Brazilian Administration Review, Vol. 5, No. 2, 2008, p. 108.
26
Peter Preston, Development Theory: An Introduction to the Analysis of Complex Change, Oxford: Blackwell
Publishers, 1996, p. 169.
27
Ibid.
28
Michael P. Todaro and Stephen C. Smith, Economic Development, New York: Addison Wesley, 2011, p. 269.
29
P. N. Rosenstein-Rodan, “Problems of Industrialization in Eastern and South-Eastern Europe”, The Economic
Journal, Vol. 53, No. 210/211, 1943, pp. 202-211; Kurt Mandelbaum and J. R. L Schneider, The Industrialization
of Backward Areas, Oxford: Blackwell, 1945; Maurice Herbert Dobb, Some Aspects of Economic Development,
Delhi: Delhi School of Economics, 1951; Bhabatosh Datta, Economics of Industrialization, Calcutta: World
Press, 1952; Paul A. Baran, Political Economy of Growth, New York: Monthly Review Press, 1957; Amartya
Sen, “The Concept of Development”, in H. Chenery and T. N. Srinivasan (eds.), Handbook of Development
Economics, Amsterdam: North Holland, 1988.
30
Amartya Sen, “Development: Which Way Now?”, The Economic Journal, Vol. 93, No. 372, 1983, pp. 748-752.
31
Ibid.
32
Amartya Sen, “Development as Capabilities Expansion”, Journal of Development Planning, Vol. 19, 1989,
pp. 41-58.
72
the removal of various types of unfreedoms that leave people with little opportunity
of exercising their reasoned agency.33 Development can be seen as a process of
expanding the real freedoms that people enjoy, the expansion of the ‘capabilities’
of persons to lead the kind of lives they value. Sen describes human freedom as
both the primary end objective and the principal means of development; economic
measures are merely the means to this end.34 From his viewpoint, development is
about removing the obstacles, e.g., illiteracy, ill health and lack of access to resources.
With a view to shifting the focus of development economics from national

income accounting to people-centred policies, Mahbub ul Haq launched the first
Human Development Report (HDR) in 1990. Sen’s work on development provided the
strong conceptual foundation for HDR. Sen’s ideas over development as enlarging
capabilities and functionings are expressed in the HDRs as expanding ‘choices’.35
HDR defined human development as a process of enlarging people’s choices. The
most critical of these wide-ranging choices are to live a long and healthy life, to be
educated and to have access to resources needed for a decent standard of living.36
In the subsequent HDRs, there is a clear common definition of human development
as a process of ‘enlarging people’s choices’. Enlarging human choices is critically
linked to two issues: capabilities on the one hand and opportunities on the other.
Human choices are enlarged when people acquire more capabilities and enjoy more
opportunities to use those capabilities. 37
The development process covers complexity of relationships. Its analysis,

therefore, cannot be restricted only to the economic dimension. Hence, this paper
defines development as economic growth associated with creating opportunities,
building capabilities and enlarging choices of human.
2.3 Analytical Framework
The paper mostly concurs with the assertion of human development. It

therefore, acknowledges that economic growth is one aspect of the process of
development and it is no more than a means to some other objectives. Moreover, the
process of development has to be concerned with human well-being and it can be
assessed by how well it expands the capabilities of people.
33
Amartya Sen, Development as Freedom, New York: Alfred A. Knopf, 1999, p. 366.
34
Ibid.
35
Sakiko Fukuda-Parr, “The Human Development Paradigm: Operationalizing Sen’s Ideas on Capabilities”,
Feminist Economics, Vol. 9, No. 2-3, pp. 303-304.
36
Mahbub ul Haq, Human Development Report 1990, New York, Oxford: Oxford University Press, 1990.
37
“Human Development: Definition, Concept and Larger Context”, available at https://pdfs.semanticscholar.
org/71d7/650ac5c96457adeda4079c8be8146411be6a.pdf, accessed on 23 January 2019.
73
In the current debate surrounding migration-development, migration is

viewed as a constituent part and an independent factor influencing development.
However, to measure the influence of migration over development, existing literature
focuses on the economic indicators of development like growth, productivity, national
income, GDP, equality and equity. But, preoccupation with economic growth and the
creation of wealth and material opulence has obscured the fact that development is
ultimately about people. Consequently, it has had the unfortunate effect of pushing
people from centre to periphery of migration-development debates. Thus, the paper
attempts to revisit the migration-development nexus from the perspective of human
development and put people back where they belong at the centre of the debate.
The analytical framework employed for this paper is the construct of

development by synthesizing different scholars’ analytical framework mentioned
above. It chooses three indicators of human development, e.g., creating
opportunities, building capabilities and enlarging choices. Creating opportunities
refer to better access to more favourable and advantageous circumstances to do
something. Building human capabilities refers to the increasing ability of a person to
do effectively something. Capabilities cannot be enlarged unless opportunities exist.
Enlarging human choices refer to the formation or enhancement of capabilities by
which a person gets a series of options to make a choice among them. On the other
hand, migration provides incentives for resource formation in the source country.38
In other words, the impact of migration transferred to the origin country through
the formation of various resources like financial, natural, human and manufactured.
Different studies found that the level of resource formation in the source country is
positively correlated to migration. Certainly, these accumulated resources through
migration have development implication.39 Hence, the analytical framework also
identifies four types of resources, e.g., financial, natural, human and manufactured
to measure the impact of international labour migration on human development. By
providing an improved and alternative understanding of the relationship between
migration and development, these resources would help to assess the elements of
human development.
38
Jean-Pierre Vidal, “The Effect of Emigration on Human Capital Formation”, Journal of Population Economics,
Vol. 11, No. 4, 1998, pp. 589-600.
39
Gordon L. Clark and Meric Gertler, “Migration and Capital”, Annals of the Association of American
Geographers, Vol. 73, No. 1, 1983, pp. 18-34; J. A. Ekpere, W. C. Weidemann and S.W. Eremie, “Rural-urban
Migration and Capital Transfer: Possible Effects on Food Prices in Nigeria”, Agricultural Administration, Vol.
11, No. 2, 1982, pp. 97-106; Savina Ammassari and Richard Black, Harnessing the Potential of Migration
and Return to Promote Development: Applying Concepts to West Africa, Geneva, Switzerland: International
Organization for Migration, 2001, pp. 25-30; Sayre P. Schatz, “The Role of Capital Accumulation in Economic
Development”, The Journal of Development Studies, Vol. 5, No. 1, 1968, pp. 39-43.
74
3. International Labour Migrants in Dhaka City of Bangladesh: An Overview
The social order in Bangladesh has largely depended on kinship.40

Consequently, it helps Bangladesh to receive the benefits of international labour
migration as the migrants having strong ties with home tend to send a sizable portion
of their income back to Bangladesh.41 Thus, money sent from abroad directly reaches
the household level and it has greater impacts on the development of Bangladesh at
the micro-level. Hence, this section gives an overview of international labour migrants
and their households.
Primary data collected from the semi-structured in-depth interview of the

selected migrants’ household in Dhaka city is the core of this study. The study area
was selected based on the availability of households left behind by migrants in the
Sutrapur Thana. The study was designed to conduct a semi-structured in-depth
interview in a pre and post-recall method as there is no baseline data along with
the inability to have an experimental study. The sampling unit is solely the migrants’
household. Purposive sampling was conducted in the absence of the documentation
and the database of the studied population of Sutrapur Thana. Lists of 25 households
were identified. Households whose member has been gainfully employed abroad for
at least four years but not more than twelve years were selected as the population
of the study. It was assumed that migrants needed a few years to settle in a foreign
country and also the impact of migration would be negligible during the early period
of migration. The maximum period of twelve years is deliberately chosen as recall
method would be comparatively less effective and the impact of migration would be
difficult to measure. The survey was done in the study area in 2018.
International labour migrants are divided into professional, skilled, semi-

skilled and unskilled category but all the migrants of the sampled households are
skilled labour and male. Only 38.9 per cent were married and 61.11 per cent were
single when they migrated abroad. At present, only 5.6 per cent are single and 94.44
per cent are married. Main destination of the migrants are the Middle East and
Southeast Asian countries. Among them, 27.78 per cent migrants reside in Saudi
Arabia. The following figure shows the main destination of the migrants.
Willem Van Schendel, A History of Bangladesh, New Delhi: Cambridge University Press, 2009, p. 134.
40
41
Md. Nurul Islam, “Bangladesh Expatriate Workers and their Contribution to National Development”,
Bureau of Manpower Employment and Training (BMET), Dhaka, BMET, 2011.
75
Figure 1: Destination Countries of Migrants
Source: Author’s calculation from the survey.

From the studied sample, it is found that the duration of migrant’s staying
abroad could be one of the most important factors in determining its impact on
households. In this respect, the paper categorized migrants’ period of staying abroad
into four parts, e.g., four years to six years, six years to eight years, eight years to ten
years and ten years to twelve years. The sample of the study would be the households
who have received the benefits of migration for at least four years but not more than
twelve years. The following figure shows the percentage of migrants’ years of staying
abroad.
Figure 2: Migrants’ Years of Staying Abroad
76
Most of the migrants of the sampled households have sufficient education.

In figure 3, approximately 16.67 per cent hold postgraduate degree, 27.78 per cent
hold graduate degree, 44.44 per cent completed Higher Secondary School Certificate
(HSC) and 11.11 per cent completed only Secondary School Certificate (SSC).
Figure 3: Education Level of Migrants

Economic factors, i.e., poverty, economic upliftment, sudden economic crisis
and lack of employment opportunities were the main reasons for their migration. As a
result, income from employment abroad is the main source of income in 94.44 per cent
households. Moreover, 83.33 per cent of the household is living in extended families
and 16.67 per cent in nuclear family. On average, the number of family members of
the nuclear household is 4.1 per cent and extended family is 7.1 per cent.
4. Migration-Development Nexus Revisited
The paper assesses the impact of migration on development by how

well it expands the opportunities, capabilities and choices of people. It also views
economic growth only a means and not an end in itself. Therefore, this section starts
with analyzing the impact of migration on financial resources to revisit migration-
development nexus.
77
4.1 Financial Resource
Financial resource refers to cash, credit, savings and other tangible assets
of economic value.42 It is an asset that exists in the form of currency that can be
owned or traded. It reflects the productive power of other types of resources also. It
facilitates economic production, though it is not itself productive. Financial resource
is what allows all these productive activities to get going. To understand the impact
of migration on development, the paper identifies two important components, e.g.,
income and saving of financial resource.
From the studied households, it is found that migrant’s money consists of 65

per cent and even in some cases it consists of 90-95 per cent of the total income of the
household. As a result, all the households experienced a rise in their income. It is also
found that on an average each migrant remitted 65.75 per cent of his income. There is
a great difference in terms of the monthly income of households before migration and
during overseas stay. The following table makes a comparison between the monthly
income of households before and during their staying abroad.
Table 1: Monthly Income of Households before and after Migration

Before Migration After Migration
Income in Bangladesh (%) of House- Income in BDT (%) of Household
Taka (BDT) (monthly) hold (monthly)
40000-50000 11.11 Above 100000 11.11
30000-40000 11.11 80000-100000 22.22
20000-30000 61.11 60000-80000 38.89
10000-20000 16.67 40000-60000 16.67
Below 40000 11.11
Before migration, the households’ income did not vary from time to time.
But after migration, the amount of the income does not remain the same. Because
the amount of money depends on migrants’ duration of stay, level of their wage
and necessary expense for subsistence, accommodation and transport abroad.
Households whose members are staying abroad for more than ten years contribute
90-95 per cent of the household’s income. On the contrary, migrants who are living
abroad for more than six years share 65 per cent of the households’ income. In effect,
a longer stay can provide families with more financial resources; hence, all migrant’s
households are not progressing in the same way and at the same pace.
42
Syeda Rozana Rashid, Uncertain Tomorrows: Livelihoods, Capital and Risk in Labour Migration from
Bangladesh, Dhaka: The University Press Limited, 2016, pp. 6-13.
78
There is a close link between income and saving. The more a person earns, the
more he is able to save. From zero level of savings, households now save a quarter of
their total income. On an average, it accounts for 4.25 per cent of their total remittance.
Savings are kept in banks, a few made fixed deposits, some created a monthly deposit
in the bank and still, a few others have taken insurance policies. Of these households,
61.11 per cent have savings in banks. Moreover, every household tries to save some
money at home. One of the migrants stated:
“When I was in Bangladesh I had to borrow money from my friends as

sometimes it became difficult for me to maintain the household expenses
with my income. After migrating abroad, my family now saves minimum BDT
3,000 each month.”
The bread earners, who were mostly unemployed or engaged in a job below
their standard due to lack of employment opportunity in their home countries, have
now jobs in overseas places. Therefore, international labour migration certainly
creates employment opportunity for the bread earners of the households which in
turn enlarges the capabilities and choices of the households to increase their income
and saving.
4.2 Natural Resource
Natural resource refers to air, water, land and other environmental assets.43 It
is the natural assets and processes needed for producing goods and services. It is not
man-made and considered as scarce materials also. Among these enormous natural
resources, migration has a crucial impact on access to land.
The cost of migration varies from case to case basis. On average, the expense
of migration for per migrant is BDT 2,10,000.44 From the sample, it is found that while
going abroad 61.11 per cent of the households arranged the fund for migration by
selling land, 22.22 per cent by mortgaging land and 16.66 per cent by taking loan
from the bank. After migration, a considerable portion of households’ income and
in some cases saving is spent for purchasing land. All households consider land as
the safest and most profitable investment. About 61.11 per cent households remain
able to purchase additional land. Moreover, these households choose to invest in all
kinds of land: arable, homestead and commercial, etc. Of these households, 72.72 per
cent bought arable land and 27.27 per cent homestead land. Some changes have
occurred in the landholding pattern of the households also. In two cases, there has
been a reduction in ownership over arable land, while with regard to homestead
land there has been an increase. Purchase of land also depends on the duration of
migrants’ staying abroad. The households’ percentage of using remittance for buying
43
Ibid., p. 11.
44
Md. Abdul Hye, op. cit., p. 50.
79
lands are higher who have been receiving remittance for a longer period of eight to
twelve years. In contrast, 38.88 per cent of the households could not buy additional
land as they are receiving remittance for four to six years. The analysis also reveals
that these migrants’ households dream to build tangible properties especially on land
after repayment of the loan and mortgaged land.
Releasing mortgaged land is also quite important in the rural context as it re-
establishes the right of a person to cultivate the land. Migrant’s money also helped to
retrieve the mortgaged land. About 75 per cent households who are staying abroad
for more than six years retrieved their mortgaged land.
Therefore, international labour migration creates an opportunity for the

household to accumulate financial resources. Later, these financial resources build the
capabilities of the household to purchase additional land and release the mortgaged
land. Moreover, it also enlarges the choices of the household to invest in agricultural
production. Households contributed to agricultural development more by using
improved seeds, adequate fertilizer, regular irrigation, irrigation pump and insecticides.
Consequently, arable land immediately accumulates financial resources through crop
production and value of both arable and homestead land increases over time.
4.3 Human Resource
Human resource refers to the knowledge, skills, intellectual outputs,

motivation and capacity acquired through nurturance, physical and mental health
and education. There are two contrasting views regarding the impact of international
labour migration on human resource. The first view argues that remittance spent
on consumption to raise the status and comfort of migrant’s family but these
types of expenditure could be invested elsewhere in a more productive way. They
denote expenditure on health care, food and schooling as unproductive and non-
developmental.45 The second view argues that the distinction between consumption
and investment expenditure is rather blurred. In fact, it can be argued that spending
on consumption and services (education and health) is considered productive as it
increases productive capacity and brings income to households.46 Laura Diaconu,
Andrei Maxim and Cristian C. Popescu assert that investment in education requires
not only material resources but also a long period of time, resulting in the increase
of the income of the family members. From a study, it is evident that each additional
schooling year increases the income with about 20 per cent.47 The paper supports the
45
Savina Ammassari and Richard Black, op. cit., pp. 27-29.
46
Sharon Stanton Russell, “Remittances from International Migration: A Review in Perspective”, World
Development, Vol. 14, No. 6, 1986, pp. 677-696; Sharon Stanton Russell, “Migrant Remittances and
Development”, International Migration, Vol. 30, No. 3-4, 1992, pp. 267-287.
47
Laura Diaconu (Maxim), Andrei Maxim and Cristian C. Popescu, “The Impact of Migration on Human
Capital and Economic Development”, Economy and Management, 2014, pp. 32-39.
80
second view. It also identifies three sub-indicators, e.g., ability to access, quality of the
service and improvement in social status and living standard of the macro-indicators
of education and health.
The study found that the largest use of remittance received by households of
international labour migrants is for consumption and services (education and health).
Research completed by Refugee and Migratory Movements Research Unit (RMMRU)
found that the total expenditure on education and health of international migrant
producing households on average grew by 30 per cent.48 Another study found that
55.65 per cent of the total remittance is spent by families on health care and children’s
education.49 A similar study found that around 40 per cent of migrants’ families used
remittance to educate children and treat sick members.50
Before migration, 20-22 per cent of the households’ income was used
for services. In contrast, after migration, 40-42 per cent of the households’ income
was utilized for food and medical treatment. International migrant producing
households are spending on average BDT 2000-2500 monthly for medical treatment
and medicines. The study observed a very rapid increase in health expenditure.
Households use both private and public hospital for health services. The use of the
private clinic is more frequent among households who receive remittance for more
than ten years. Approximately, 18.2 per cent of households who receive remittance
for eight to ten years use private clinics, which increased to 33.33 per cent for those
who receive remittance for ten to twelve years. In contrast, 10.03 per cent of the
households who receive remittance for four to six years use public hospitals. Moreover,
households’ spending on food is not conspicuous rather they ensure a better diet
to help meet their caloric needs, particularly for the younger ones. Similarly, a study
undertaken by RMMRU found that international migrants spent 71 per cent more in
health services compared to non-migrants and 65 per cent more than the internal
migrants’ household.51 Due to migration, households’ ability to access quality health
services (use of private hospitals instead of the public hospitals) intensifies which
consequently improves the social status and living standard of the household.
Besides, a better prospect is associated with migration influence towards

gaining higher and quality education. The study revealed that in almost all cases,
remittance is used to educate children mostly at SSC, HSC and for higher studies levels
48
Refugee and Migratory Movements Research Unit (RMMRU), “The Impact of Migration on Household
Income, Expenditure and Poverty”, Policy Brief No. 24, Dhaka, RMMRU, 2017.
49
Tasneem Siddiqui, Transcending Boundaries: Labour Migration of Women from Bangladesh, Dhaka:
50
Rita Afsar, “Internal Migration and the Development Nexus: the Case of Bangladesh”, paper presented
in the Regional Conference on Migration, Development and Pro-poor Policy Choices in Asia, organized by
RMMRU and Department for International Development, Dhaka, on 22-24 June 2003.
51
Refugee and Migratory Movements Research Unit (RMMRU), “Impact of Migration on Poverty and Local
Development”, Policy Brief No. 14, Dhaka, RMMRU, 2014.
81
but patterns changes. After migration 44.05 per cent of the households admitted their
child in private institutions because they believe it will provide quality education. One
migrant expressed,
“It’s been a great pleasure to hear from my son that his new school is very
good and in the final exam he secured 3rd position.”
The study showed that the current budget for educational expense increases
compared to the previous budget. In general, 8-10 per cent of households’ income was
used for child education before migration. However, after migration 20-22 per cent
of households’ income was used for education. Similarly, a study found that school
enrolment rates among members of migrants’families in rural areas are greater compared
with age cohorts of non-migrant families.52 The households who receive remittance for
a longer period have higher expenditure on education. The expense involves study
materials such as books and stationary, uniforms, snacks, school fees, transport and
private tuition. A parallel study found that international migrants’ household spent 33
per cent more on private tutoring compared to internal migrants and 37 per cent more
than non-migrants’ household.53 Because of migration, households’ members’ abilities
to access to education and acquire quality education (SSC, HSC and higher education
both in Bangladesh and abroad) expanded which in turn increase their employment
opportunity and income. As a result, the social status and living standard of the
households enhanced. For example, the study also found that 11.11 per cent of the
households sent their sons aboard (Australia and Canada) for better education. After
finishing their studies successfully, they are now working in private companies abroad.
Another 27.77 per cent of the households’ members after finishing their higher studies
are employed in public and private services in Bangladesh.
Hence, migration certainly creates opportunities for households to enhance

their financial resources. For instance, financial resource assists them to build the
capacities and enlarge the choices of families to expand their daily food intake,
eating quality food, taking good care of health and sending their children to better
educational institutes with adequate learning materials. Consequently, expenditure
in such areas facilitates households’ well-being and ability of the family members to
get better employment with greater income which in turn enhances the social status
as well as the living standard of the household.
4.4 Manufactured Resource
Manufactured resource is material goods and infrastructure that contributes

to production or service provision but do not become part of its output. It consists
Rita Afsar, op. cit.

52
Refugee and Migratory Movements Research Unit (RMMRU), “Impact of Migration on Poverty and Local
53
Development”, op. cit.
82
of financial, human and natural resources. In other words, it is generated through

applying financial resources or human productive activities or both to natural
resources which in turn is capable of providing the flow of goods or services.
From the studied sample, it is found that 66.66 per cent of the households
have used remittance for various investment purposes. Among these households,
three kinds of investment are visible, e.g., agriculture, business and home construction
and extension for rent. The following table illustrates the portion of households who
have invested remittance for these purposes.
Table 2: Household Investment in Creating Manufactured Resources

Types of Investment Percentage of Households
Agriculture 22.22
Business 27.78
Home Construction and Extension 16.67
Approximately, 22.22 per cent of the households have invested in agriculture
purposes like irrigation schemes, crop cultivation and trading in agricultural items,
cultivate fish in the pond, small poultry and dairy farm and livestock in their purchased
land. For example, one of the migrant’s households started a poultry farm in its
land. In the first year, the household earned a handsome profit. In the second year,
they bought additional land and expanded the poultry. Currently, they have three
employees working on the farm.
On the other hand, construction, repair and extension of the house for rent
consist of 16.67 per cent of the households’ investment. Of these households, some
rented shops on the ground floor of their houses. One of the migrants’ wives stated,
“When my husband went abroad in 2010, we lived in a tin-roofed house.

From his remittance, we were able to purchase a homestead land in 2015
and in 2018 we successfully built a two-storey house in that land. Currently,
we are receiving handsome rent from the house.”
Moreover, 27.78 per cent of the households have invested in business

ventures, e.g., opening top-up card outlets, cloth and stationery shop, tailoring shop
and restaurant, etc. From the studied sample, 11.11 per cent of the migrants during
vacation came to Bangladesh with improved financial, human and physical resources
and invested these resources in business ventures. Households’ whose members are
staying abroad for more than eight years preferred to invest in business ventures.
For example, the migrant who works as a chief cook in a restaurant in Malaysia set
up a restaurant. After his return, his oldest and youngest brothers are managing
the restaurant now. In another case, the migrant who was employed in a handloom
factory purchased a piece of land in the nearby market place. Later, he built some
83
tin-shed shops there. In one of the shops, he opened a tailoring shop and rest of the
shops were rented. When he went back, his wife along with her sister-in-law now
manages the shop. From these productive ventures, two households are making
good financial returns. Hence, migration creates opportunities to accumulate financial
resources, builds capacities through new ideas and knowledge which in turn enlarges
the choices of migrants to invest those financial, physical and human resources in
different productive ventures.
4.5 An Alternative Framework to Understand Migration-Development Nexus
By creating opportunities, building capacities and enlarging choices migration

with the accumulation of four types of resources create a virtuous circle54 where one
resource reinforces other resources and ensures development at the micro-level.
But the range of human development depends on the duration of migrant’s staying
abroad. Consequently, all the migrants’ households are not progressing in the same
way and at the same pace. The paper examines the linkage between migration and
development following the flow chart in figure 4.
Figure 4: An Alternative Framework to Understand Migration-Development Nexus
Source: Author’s analysis.
54
The term virtuous circle refers to complex chains of events that reinforce themselves through a positive
feedback loop.
84
The flow chart shows the impact of the financial resource through migration
on human, natural and manufactured resources. For example, international labour
migration certainly creates opportunities for households to multiple financial
resources. Once received, these financial resources, in case of human resources, build
the capacities and enlarge the choices of the households to increase its expenditure in
health and education, in case of natural resources to have additional land ownership,
e.g., agricultural and homestead and in case of manufactured resource to invest in
productive ventures, e.g., established small scale enterprise at local level, agricultural
production and home construction and extension for rental purpose. Again,
these enlarging choices of the households to invest in land, health and education,
construction of house and business certainly maximized the financial resources of the
households. Hence, in this paper, enlarging opportunities, capabilities and choices of
the households through migration considers as both the primary end objective and
the principal means of development; financial resources are merely the means to this
end.
5. Conclusion
Over several decades, in development paradigm, migration has come forth

as an important issue and generated considerable attention among policymakers
and academia. Consequently, it has created a debate regarding migration and
development. Previously, migration was seen as a problem with a negative connotation
for development. Presently, there is a growing recognition that migration and
migrants can contribute to the development of the countries of host and origin, their
families and communities through remittance. However, most of these debates have
underpinned migration as a purposive intervention and privileging economic aspects,
e.g., poverty reduction, national income and GDP growth of development. Moreover,
limited attention has been paid to human aspects, e.g., freedom, choice, opportunity,
capability of development. Hence, the paper aims to bring human development
literature to bear on migration-development nexus. In this respect, it identifies three
indicators, e.g., creating opportunities, building capabilities and enlarging choices
to measure the impact of international labour migration on development over four
types of resources, e.g., financial, natural, human and manufactured. The paper also
takes account of international labour migrants’ household in Dhaka city of Bangladesh
as a case study.
Based on the above discussion, this empirical study reveals that migration
plays a significant role in the human development process of origin country at the
micro-level through accumulating financial, natural, human and manufactured
resources. With respect to the financial resource, it increases the employment, income
and saving opportunities and choices of the households. Moreover, accumulated
financial resource through migration not only creates opportunities for the households
to purchase additional land and release the mortgaged land but also enlarges the
85
choices of the households to invest in agricultural production. Regarding human

resource, it increases choices and opportunities to invest in education and health at
the household level. In case of manufactured resource, accumulated financial, human
and natural resources provide opportunities and choices for the households to invest
in three kinds, e.g., agriculture, business and home repair and extension of productive
ventures.
Through the accumulation of four types of resources, migration by enlarging

opportunities, capabilities and choices of the households creates a virtuous
circle. In this circle, one resource initiates others and contributes to development.
However, different patterns are seen in the circle. Financial resource directly creates
opportunities, choices and capacities of the households to initiate natural, human and
manufactured resources. In another way, financial resource together with human and
natural resources initiates manufactured resources. Further, these resources maximize
the financial resources of the households. Henceforth, this paper views the well-being
of human as both the main end objective and basic means of development. However,
the accumulation of financial resources is only a tool to gain this objective.
86
S.M. Humayun Kabir

DEMYSTIFYING INTERNATIONAL INFORMAL TRADE WITHIN FORMAL

TRADE: A CASE STUDY OF BANGLADESH
Abstract
General discussions on formal and informal trade do not reveal the actual
scenario concerning informal trade within formal trade though a significant
part of Bangladesh’s informal trade takes place through formal channels. This
paper attempts to demystify such informal imports through the legitimate
channels. Data collected from different entry points for the fiscal years (i.e.,
FY 2015-16 and 2016-17) have been analyzed using descriptive statistics for
providing a fresh perspective in this regard. Findings reveal that importers
show less import quantity or value and hide true description of commodities
to evade duties and taxes. Some unscrupulous importers show higher and
lower volume as lower and higher duty items respectively for dodging
taxes. Money laundering in the name of import is also evident. The policy
implication to reduce such illegitimate imports into Bangladesh is to put
more emphasis on physical examination using non-intrusive scanning or
examining tools at the import stage.
Keywords: Informal Trade, Formal Channels, Tax-dodging, Mis-declaration
1. Introduction
This paper focusses on international informal trade within formally imported

commodities to Bangladesh. At the outset, it is imperative to justify what the term
‘informal’ refers to the current context. This paper uses the term ‘informal’ to denote
the illegal trades hidden in the formal way of imported commodities to Bangladesh.
Such illegal trades are taking place in Bangladesh primarily for dodging tax. This is
also an emerging issue for the developing countries in Asia and Africa.1 However,
this has not been addressed so far for imported commodities to Bangladesh. Though
empirical literature focusses on illegal economic activities (e.g. narcotics), parallel
markets (e.g. smuggling of commodities across borders) and extra-legal activities
S.M. Humayun Kabir is Commissioner of Bangladesh Customs. His e-mail address is: humayun.kabir.
customs@gmail.com; Muhammad Shahadat Hossain Siddiquee is Professor, Department of Economics,
University of Dhaka. His e-mail address is: shahadat_eco@yahoo.com. The authors are grateful to the
anonymous referees for their valuable comments.

1
S. Bensassi, J. Jarreau and C. Mitaritonna, “Regional Integration and Informal Trade in Africa: Evidence from
Benin’s Borders”, Journal of African Economies, Vol. 28, No. 1, 2018, pp. 89-118.
87
(e.g. unregistered or unlicensed informal trading enterprises),2 illegal trades within

formally imported commodities to Bangladesh have been neglected to a great extent.
This paper draws on data collected from different entry points of imported goods
from different countries to Bangladesh with a view to providing fresh perspectives
as well as background for further analysis to be introduced in the national and/or
international policy agenda or strategies that would help to reduce grey part hidden
in the legal declaration of the imported commodities to Bangladesh.
The traditional meaning of the informal or grey economy implies the part
of a country’s economy which is neither taxed nor monitored by any agency of the
government or both. Moreover, the activities of the grey economy are excluded from
the gross national product (GNP) and gross domestic product (GDP) of a country.3
Similar approaches of informal economy include black market (i.e., shadow or
underground economy), agorism and the System D (growing share of the world’s
economy which comprises the underground economy). To this day, informal economy
is contributing a significant portion of the economies in developing countries as well
as providing critical economic opportunities for the poor.4 This implies the importance
of the policy challenge for integrating the informal or grey economy into the formal or
legitimate economy. Schneider et al. find that informal economies in 107 economies
out of 162 comprise 30 per cent or more of the GNP.5
Grey economies like black market, agorism and the System D consist of partly
informal international commodities trade.6 This raises the issue of governance for
customs as informal sector of the developing and emerging economies may deprive
the state of part of its resources.7 In addition, it is sometimes difficult to make a
distinction between the formal and informal international commodities trade as the
operators pay the portion of the taxes or mix informal international commodities (i.e.,
mis-declaration of the quantity, value or description of the imported commodities)
within formal channels. As a part of trade facilitation, customs administration clears
more than 80 per cent of consignments through ‘green channel’. Traders take this
opportunity to clear their informal goods through formal declaration. It continues to
exist as the government and the customs administration may fear that creating too
2
J. N. Bhagwati and B. Hansen, “A Theoretical Analysis of Smuggling”, The Quarterly Journal of Economics, Vol.
87, No. 2, 1973, pp. 172-187; J. N. Bhagwati and B. Hansen, “A Theoretical Analysis of Smuggling: A Reply”,
The Quarterly Journal of Economics, Vol. 89, No. 4, 1975, pp. 651-657; M. E. Lovely and D. Nelson, “Smuggling
and Welfare in a Ricardo‐Viner Economy”, Journal of Economic Studies, Vol. 22, No. 6, 1995, pp. 26-45.
3
K. F. Becker, “The Informal Economy: Fact Finding Study", 2004, Sida.
4
J. Vanek, M. Chen, R. Hussmanns, J. Heintz and F. Carré, “Women and Men in the Informal Economy: A
Statistical Picture”, 2012, Geneva: ILO and WIEGO; K. F. Becker, op. cit.
5
F. Schneider, A. Buehn and C. E. Montenegro, “New Estimates for the Shadow Economies all over the
World”, International Economic Journal, Vol. 24, No. 4, 2010, pp. 443-461.
6
J. Dongala, “The Informal Sector Trade among Sub‐Saharan African Countries: A Survey and Empirical
Investigation”, The Developing Economies, Vol. 31, No. 2, 1993, pp. 151-170.
7
T. Cantens, “Informal Trade Practices”, WCO Research Paper, Vol. 22, 2012.
88
DEMYSTIFYING INTERNATIONAL INFORMAL TRADE
much pressure on informal operators in international commodities trade may reduce

the economic activity and deprive the national budget of the whole potential tax
revenue.8 Moreover, customs administration sometimes suffers from incapacitation
from human resources, absence of non-intrusive inspection tools and noncooperation
from stakeholders (i.e., importers, exporters, clearing and forwarding agents, shipping
agents) through false declaration. Congestion of container at port is a great barrier for
mitigating this informal trade.
In the last couple of decades, Bangladesh has adopted not only unilateral
trade policy reforms but also has undertaken liberalization as per Uruguay Round
and successive rounds of South Asian Preferential Trade Arrangement (SAPTA), which
helped to form a free trading bloc consisting of the South Asian countries, namely
South Asian Free Trade Area (SAFTA).9 SAFTA aimed to dismantle all barriers and
strengthen intra-regional trade.10 However, the actual progress is not up to the mark
due to political tension (i.e., referred to as stumbling block to SAFTA) between India
and Pakistan. It is also evident that Bangladesh’s informal trade with India has no
sign to turn down in the time ahead.11 Bangladesh imports most of its commodities
from China and India. Bangladesh’s such informal trade with India may consist of
partly informal international commodities trade within formal trade. In this context,
the paper aims to understand the extent of informal trade within formally imported
commodities to Bangladesh not only from India but also from rest of the world (RoW).
The case study on Bangladesh examines the extent of such informal trade to provide
an overall background to the context that this paper aims to study as well as for further
empirical analysis in line with our argument. Specifically, this paper is interested to
explore three issues of our interest in the context of Bangladesh’s informal trade
within commodities formally imported: (i) extent of such informal trade, (ii) variations
in the extent of such informal trade across different entry points and (iii) how and why
such informal trade takes place.
Duties and taxes of the imported commodities to Bangladesh depend

specifically on the value and/or quantity or quality of those commodities. Therefore,
importers try to show less quantity or import value to evade duties and taxes at the
import stage. In addition, they try to hide true description of imported commodities
[i.e., misquotation of Harmonized System (HS) code, which is used to classify imported
items]. Such incorrect declaration usually corresponds to lower duty structure.
Moreover, some importers import assorted items in the same consignment. Such
assorted items are heterogeneous in terms of duty and tax structure designed and
8
Ibid., p. 1.
9
S. Pohit and N. Taneja, “India’s Informal Trade with Bangladesh: A Qualitative Assessment”, The World
Economy, Vol. 26, No. 8, 2003, pp. 1187-1214.
10
N. Taneja, “Informal Trade in SAARC Region”, Economic and Political Weekly, 2001, pp. 959-964.
11
S. K. Chaudhari, “Cross-border Trade between India and Bangladesh”, National Council of Applied
Economic Research, 1995; N. Taneja, op. cit.
89
implemented by National Board of Revenue (NBR), Bangladesh. For example, a portion

of assorted items may fall in lower duty structure and other portion might fall into
higher duty structure. In such case, some unscrupulous importers sometimes try to
show higher and lower volume as lower and higher duty items respectively. However,
in reality, the reverse picture is true and import tax dodging is evident in such case.
Similar things may also happen at the export stage through artificially inflating value
of exported items with a view to receiving cash incentives or drain off money abroad.
However, this is not the focus of the paper. The paper concentrates only on informal
international trade hidden in the imported items to Bangladesh considering the fact
that the informal national economy of Bangladesh is based partly on formal and
informal international commodities trade.12
The rest of the paper comprises the followings: firstly, it clarifies the meanings
of informal trade done through the formal channels in Bangladesh. Section 3 draws
on empirical data and methods employed in this paper. Findings are analyzed in
section 4 and finally, the conclusion.
2. Informal Trade through Formal Channels in Bangladesh
This paper refers legitimate or formal channels of international trade to mean

the authorized customs points of Bangladesh such as seaport, land port, airport, land
customs station (LCS), etc. Legitimate international trade of Bangladesh is conducted
mandatorily through these customs points with submission of Bill of Entry (B/E) and Bill
of Export (Shipping Bill) for the imports and exports, respectively. This paper focusses
on the former only. For the imported commodities into Bangladesh, shipping agent
in case of seaport and authorized person in case of land port submit Import General
Manifest (IGM) data (describing imported commodities) to the customs authority.
Shipping agents submits their IGM to the customs authority electronically whereas
authorized person in case of land port submits it manually. More specifically, carrying
and Forwarding (C&F) agent (or, the importer himself ) completes the commodities
declaration (i.e., B/E) and submits to the customs system through automated system
for customs data (ASYCUDA). The specific format followed in case of declaration or B/E
is known as Single Administrative Document (SAD).
The available statistics on Bangladesh’s B/E show the increasing trend.

However, the number of skilled customs officials is too limited to deal with huge
Bill of Entry/Exit. Of the 1,790 grade 10 officers in Customs and VAT offices, majority
of them are Assistant Revenue Officer (ARO).13 Approximately 10 per cent of AROs
are directly linked with assessment process of B/Es. The promising feature is that
the number of AROs has been increased to some extent in the last couple of years.
12
J. Dongala, op. cit.
13
Yearly Report of National Board of Revenue for the Fiscal Year 2013-14.
90
However, it is not up to the mark. For example, approximately 1,700,000 Bills of

Entry/Export in 2013-14 FY were assessed by those limited number of functioning
officers. This stands at 50 B/E per ARO per working day. Therefore, it is very tough to
examine 100 per cent commodities imported into Bangladesh despite marginal rise
of the number of AROs. Only 10-15 per cent of imported commodities go through
physical examination process and partial physical examinations are done for the most
of selected consignments.
For expedition and faster clearance for trade facilitation, Bangladesh customs
authority has planned to introduce modern risk management method very soon.
These include the followings: importer profiling, commodity profiling, customs
agents profiling and country profiling, etc. An importer must pay some or all kinds
of following duties at the import stage: customs duty (CD), supplementary duty (SD),
value added tax (VAT), advanced trade VAT (ATV), advanced income tax (AIT) and
regulatory duty (RD), if applicable.
Ad valorem tax of an imported good depends largely on two things: value and
HS Code. However, an unscrupulous importer may try to maximize his gain by hiding
few details in the SAD submitted for the imported commodities. Such importers try to
pay as less duties as possible by showing lower value of the imported commodities to
the customs authority (i.e., undervaluation at the import stage). In addition, such thing
may also arise from the existing nature of competitiveness among the commercial
banks in case of opening Letter of Credit (L/C) for the importers. Commercial bankers
sometimes are influenced by importers and open L/C without due diligence. Moreover,
importers in Bangladesh rarely use the service of indenting firms for avoiding VAT. This
results in erroneous and sub-standard pro forma invoices submitted for their imports.
Recent trend of mobile phone imports shows that Chinese mobile exporters declare
artificially inflated value to Chinese customs in order to receive higher cash incentives
from the government of China. But Bangladeshi importers of Chinese mobile show
much lower value in their import documents for dodging tax. Therefore, there exists
a reasonable basis for this paper as well as the basis for doubting the value and
description of commodities (i.e., HS code) declared by the importers. Unscrupulous
importers try to provide value and description of commodities in such a way that has
lower duties and taxes (i.e., mis-declaration). This study aims to measure the extent of
such illegal activities and to lay foundation in the new area of research.
Another way of tax dodging at the import stage is the mis-declaration of

quantity imported into Bangladesh. Importers declare the less quantity to the customs
authority and release the consignments in association with stakeholders. Liaison with
stakeholders also ensures fast clearance of commodities in the name of facilitation
of trade. In addition, customs officers do not physically examine all consignments in
such case. Moreover, organized gangs unload and store imported commodities in
the port in such a way that it may not get into the customs clearance system. They
91
somehow manage all the points necessary for clearance of the commodities (i.e.,
managing the shed-in-charge of port, gate-man of port or warehouse, etc.) and clear
the commodities in a clandestine way. This is an example of Clandestine Clearance
(CC) through formal channel of the imported commodities into Bangladesh. The CC
is viewed as one of the most extreme forms of informal trade within formal trade in
developing countries.
3. Data and Methodology
This paper applies case study as a research method as it helps to understand

a critical issue and extend experience to the prevailing events. More specifically, case
studies give importance to the detailed contextual analysis of events and establish
the relationships. Yin proposes to use case study research method using multiple
sources of evidence as an empirical inquiry to a contemporary phenomenon within its
real-life context.14 Such method is also applied to a case where boundaries between
the phenomenon and context are not evident. Though it is already established that
informal international trade exists in the formal trading, no rigorous research work
has been done on this specific issue in Bangladesh. Therefore, this paper selects
Bangladesh as a case study in order to understand this complex issue as well as to
extend our experiences to the existing knowledge. For this purpose, the paper has
selected the very recent past two fiscal years (i.e., FY 2015-16 and FY 2016-17) for
the raw data in order to explore the informal commodities imported into Bangladesh
through the legitimate channels. Therefore, the issue of ‘informal international trade
within the formal trade in Bangladesh’ is contemporary and data are selected for the
recent past two years (i.e., monthly data for the selected years) as well as multiple
sources of data are used for exploring this contemporary issue.
The sampling technique used in this paper covers only small number of
observations that might fail to provide a ground for establishing generalization of
findings. But the present case study research method used here would definitely
contribute to explore the objectives in an exploratory way in addition to descriptive
analysis. Moreover, research reports using case studies across the disciplines are
widely available in the empirical literature.15 This paper explains how the authors
use case study as a research method and applies the method to explore illegitimate
trade in legitimate channels in Bangladesh. The paper examines the extent of
such illegitimate trade (i.e., illegally imported commodities) only and its variations
across the entry points in Bangladesh. Stake, Simons and Yin have suggested
some key techniques for organizing and conducting case studies successfully
drawing upon their works and have proposed six steps, which are followed in this
14
R. K. Yin, Case Study Research: Design and Methods, London: Sage Publications, 1994.
15
Z. Zainal, “Case Study as a Research Method”, Jurnal Kemanusiaan, Vol. 5, No. 1, 2007.
92
paper.16 These are: specifying and defining the research questions, selecting the
cases and determining data generation and techniques for the analytical purpose,
preparing data collection, collecting data in the field, evaluating and analyzing
data and finally, preparing the report.
The raw data are collected from Customs House Chattogram, Customs House
Benapole, Customs House Dhaka (Air Freight Unit) and imports through courier. Of
these, Customs House Chattogram is the principal customs station of Bangladesh
as it handles 82 per cent of import-export trade of the country. Therefore, the paper
analyzes the raw data giving a special focus on data collected from the Customs House
Chattogram for analytical purpose. The paper comprehensively and systematically
collects and stores multiple sources of information on total B/E submitted, physically
examined (i.e., prior to assessment), anomaly, suspect and sued, extra revenue
collected, actual and declared weight/sqm/piece, total number of scanned container
(i.e., second appraisement), total anomaly or suspect detected at scanning stage and
revenue in provisional and final assessments, revenue evasion in order to explore the
objectives of the paper and establish some relationships. Therefore, the quantitative
data gathered from different sources are used in the paper to corroborate and support
this paper’s main argument about illegitimate trade within legitimate channels in
Bangladesh.
4. Analysis of Findings
4.1. Profile of Informal Imports at Customs House Chattogram
First of all, the paper reports the B/Es submitted to the different customs
points in Bangladesh (Table 1). Henceforth, it explores the illegitimate imports hidden
in those legitimate consignments. Table 1 shows around 15 per cent higher B/Es for
the latter fiscal year (2016-17) compared to the former (2015-16), implying increasing
pressures on the responsible officers at the entry points. It also shows that Customs
House Chattogram handles nearly 82 per cent more of total import and exports of
Bangladesh.
16
R. E. Stake, The Art of Case Study Research, London: Sage Publications, 1995; H. Simons (ed.), Towards a
Science of the Singular: Essays about Case Study in Educational Research and Evaluation, Norwich: Centre for
Applied Research in Education, University of East Anglia, 1980; R. K. Yin, op. cit.
93
Table 1: Bill of Entry Submitted and Assessed in Respective Fiscal Years17

Entry Points B/E Submitted B/E Submitted
(2015-16) (2016-17)
Customs House, Chattogram 433,531 460,543
(48.03) (44.43)
Customs House, Dhaka 373,737 498,753
(41.41) (48.12)
Customs House, ICD Kamala- 12,866 12,324
pur, Dhaka (1.43) (1.18)
Customs House, Benapole 58,812 62,984
(6.52) (6.08)
Customs House, Mongla 21,051 -
(2.33)
Customs House, Pangaon 2,547 1,928
(0.28) (0.19)
Total 902,544 1,036,532
Source: Raw data collected from different Customs Points. Note: - implies unavailability of data; Figures in
the parentheses show the percentages of total B/Es in their respective fiscal years.
Now, the paper explores anomalies which are defined as informal imports
hidden in the legitimate consignments, which may be caught at different stages
of examination. The paper focusses on anomalies that are reported during the first
appraisement (i.e., also known as RED or physical examination) at Customs House
Chattogram. Month-wise data on anomalies collected for the paper are reported in
Table 2, which reveals that only 16.5 per cent and 17.2 per cent of the total B/E is
physically examined in FY 2015-16 & FY 2016-17 respectively.
Table 2: RED Anomalies at Customs House Chattogram

FY2015- First ap- Anom- Extrapolat- FY2016- First ap- Anom- Extrapo-
16 praisement alies ed Anoma- 17 praisement alies lated
(RED) lies (RED) Anomalies
July 4,757 62 372 July 6,558 32 192
(15.71) (18.92)
August 5,407 72 432 August 7,247 51 306
(15.89) (19.21)
Septem- 4,509 39 234 Septem- 6,448 45 270
ber (13.83) ber (18.91)
5,315 6,663
39 234 October 63 378
October (13.63) (17.56)
17
Yearly Report of National Board of Revenue.
94
Novem- 5,488 Novem- 7,367

41 246 101 606
ber (14.67) ber (17.41)
Decem- 6,548 Decem- 7,129
54 324 128 768
ber (17.62) ber (18.20)
6,336 7,773
41 246 January 204 1224
January (16.89) (18.80)
6,091 Febru- 6,813
44 264 221 1326
February (18.30) ary (18.31)
6,567 6,344
36 216 March 203 1218
March (19.77) (17.04)
6,696 7,113
36 216 April 151 906
April (16.94) (16.07)
7,585 6,058
65 390 May 85 510
May (16.76) (13.86)
June 6,845 63 378 June 3,735 95 570
(18.93) (12.10)
Total 72,144 592 3,552 Total 79,248 1,379 8,274
(16.5) (0.8) (17.2) (1.8)
Source: Customs House Chattogram. Note: Figures in the parentheses show the % of total B/E.
Therefore, this paper estimates extrapolated anomalies multiplying the
number of existing anomalies by 6 (i.e., the multiplier). This implies that 6 times more
anomalies would be found if they were examined physically 100 per cent of the B/
Es at the Customs House Chattogram. The anomaly rate at RED stands around 1 per
cent for the year 2015-16. But there is no visible promising feature in this regard as
it became 2.3 times higher for the year 2016-17. This may be due to either rising
trend of informal imports into Bangladesh or approximately 1 percentage more
physical examination in the year 2016-17. This is also justified by the fact that positive
correlation between the first appraisement and anomalies is found in this paper and
the Pearson’s correlation coefficient is marginally statistically significant. This finding
has policy implication to reduce such illegitimate imports into Bangladesh by putting
more emphasis on physical examination (i.e., physical, scanning) at the import stage.
More specifically, non-intrusive scanning or examining tools could be used to reduce
such informal imports through formal declaration.
Mismatch with the declared documents could be in the forms of weight,

square meter (sqm) and piece, which are clearly established in this paper. Of the 592
anomalies for the FY 2015-16, total weights, sqm and pieces declared by the importers
were 9,917,453.57, 134,218.59 and 931,224.2 respectively. This paper also predicts
that these estimates would be at least 6 times higher in case of execution of RED in
100 per cent bill of entry. Excess quantity in terms of weight, sqm or piece is measured
by the first difference between the actual and declared units. Findings reveal the
fact the actual estimates on an average are not necessary higher compared to the
declared units (see FY 2015-16 in Table 3). However, actual estimates on an average
95
are found higher than that of the declared amounts for the FY 2016-17 irrespective of
the measures used.
Extent of anomalies within imports suspected at RED stage is shown in Figure

1, which shows the highest extent of anomaly (65.4 per cent) in case of importing
products measured in square meter. This is followed by the imports measured in terms
of piece (-16.3 per cent). The negative estimate shows that importer declares more
quantity than that of the actual amounts of imports, implying money laundering in
the name of importing products from abroad. Therefore, the message conveyed here
is that it is not necessary that importers always show undervaluation of their imports.
They might show overvaluation of their imports with a view to sending money
illegally through the proper channels.
Month-wise statistical data show that 18 out of 72 cases (i.e., 25 per cent cases)
are the negative estimates, which should be a matter of concern for Bangladesh’s
customs authority to protect money laundering from Bangladesh to exporting
countries hidden in the import channels. In addition, this paper estimated the total
amount of anomalies considering absolute values of the first-difference estimate
stemmed from the difference between the actual and declared units. Anomaly
in weight per month stands at 75,067 and 631,049 for 2016 and 2017 respectively.
Similar estimate for the products measured in metre shows 10,825 and 10,209 metres
per month for the respective years whereas it stands at 30,097 and 149,880 pieces per
month for the same years. From the evidence it is clear that anomaly on an average
is getting larger in volume in the year 2017. Final observation on the same concludes
that the large variations in anomalies are clearly evident in the paper. Therefore, future
studies in this relevant field might focus the seasonality of variations by anomalies or
products.
96
Table 3: Decomposition and Extent of Anomalies at RED Stage
YEAR No of Declared Actual Excess Declared Actual Excess Declared Actual Excess
anomaly weight weight weight sqm sqm sqm piece piece piece
2015- 592 9,917,454 10,631,296 713,842 134,219 221,934 87,715 931,224 779,397 -151,827
16 (7.2) (65.4) (-16.3)
2016- 1,379 19,752,659 26,963,778 7,211,119 197,025 213,211 16,186 4,131,652 5,920,757 1,789,105
17 (36.5) (8.2) (43.3)
Total 1,971 29,670,113 37,595,074 7,924,961 331,244 435,145 103,901 5,062,876 6,700,154 1637278
Source: Raw data summarized here are collected from different customs points. Note: Figures in the parentheses show the % of the declared units.
97
Figure 1: Extent of Anomalies within Imports Suspected at RED Stage
Source: Authors’ calculation and representation.

In addition, Audit Intelligence and Research (AIR) Cell of Customs House
Chattogram inspects the suspected bill of entries and sometimes does inspection on
the basis of random assignment. This is a type of freelancing activity. The AIR team
finds additional 94 anomalies for the fiscal years considered in the paper and collected
extra revenues amounting BDT 32,969,278 (i.e., on an average BDT 1,373,719/month).
Majority of the cases suspected and sued are found to be associated with the extra
revenue generation for the government exchequer.
The paper now focusses on the second appraisement, which has been done
by unstuffing in different exit gates at the Customs House Chattogram. Scanning
process, also a part of second appraisement is applied to detect anomalies at this
stage. The summarized findings are reported in Table 4. About 73 per cent containers
are examined by scanning including mobile scanning. In such appraisement, least
risk items (i.e., capital machinery and raw material of export-oriented industries) are
scanned and sent through on chassis delivery. Average scanning rates are 26,600 and
29,465 for the fiscal years 2015-16 and 2016-17 respectively. Some may be misguided
by observing 10.7 per cent more scanning 2017 compared to 2016 as has already
been shown that 15 per cent more B/E is submitted in 2017 compared to 2016.
Therefore, Customs House Chattogram is lagging behind in scanning to keep pace
with the increasing number of bill of entries. Finally, the association between the
number of scanned containers and the number of suspected containers are explored
using Karl Pearson’s correlation coefficient. The estimated coefficient is 0.67, which is
highly statistically significant at 1 per cent level. However, it is suggested here for the
researchers to explore this relationship in their future studies using more samples or
the number of observations.
98
Table 4: Month-wise Anomalies from Scanning as a Second Appraisement

FY 2015-16 Scanned Suspected FY 2016-17 Scanned Suspected
containers containers containers containers
July 22,322 94 July 26,333 159
August 26,848 131 August 31,590 111
September 22,609 44 September 22,639 89
October 27,757 144 October 34,355 208
November 24,692 121 November 31,382 174
December 23,809 134 December 28,468 77
January 28,316 180 January 30,192 55
February 26,546 68 February 28,367 160
March 29,833 158 March 36,162 375
April 29,216 75 April 31,640 192
May 28,713 159 May 29,390 155
June 28,543 176 June 23,064 96
Grand Total 319,204 1,484 Grand Total 353,582 1,851
Source: Authors’ calculation from the raw data collected from different customs points.
Another step of examining bill of entries is the unstuffing, which is also
known as second appraisement. Here, container that already went through the
processes of RED (first appraisement) and scanning is excluded. Unstuffing is usually
applied to comparatively low risk items, previous trends of mis-declaration and
similar commodities. Numbers of anomaly cases are 124 and 66 for the FY 2015-2016
and 2016-2017 respectively. Revenue evasion at the final assessment stands at BDT
164,383,102 and 7,900,770 for the respective fiscal year. In addition, revenue evasion
per month detected at unstuffing stage stands at BDT 5,575,012 and 2,197,638 for
2016 and 2017 respectively.
4.2 Profile of Illegitimate Imports at Customs House Benapole
Benapole is the most important land customs station of Bangladesh and

strategically, it is the major border trading point between Bangladesh and India. It is
operated by the Bangladesh Land Port Authority (BLPA) and as per estimation of the
BLPA, approximately 90 per cent of the total imported items from India come through
Benapole. Table 5 shows the total bill of entry, number of bill of entry get through RED
channel and the percentage of B/E get through RED for the case study years. Physical
examination rate (i.e., rate for RED) at the Benapole port is 2.6 per cent, which is far
below compared to the Customs House Chattogram. Moreover, average rate of RED is
low (2.4 per cent) in FY 2016-17 compared to the previous FY 2015-16 (2.7 per cent).
99
The implication of these findings implies that more RED at the import stage at the
Customs House Benapole might increase the revenue to the government exchequer.
Table 5: Month-wise Statistics on B/E, RED and RED per cent of the total B/E
FY 2016 B/E RED RED % of FY 2017 B/E RED RED % of
total B/E total B/E
July 4,045 192 4.7 July 4,142 154 3.7
August 4,722 133 2.8 August 5,578 182 3.3
September 4,157 113 2.7 September 4,461 139 3.1
October 5,103 101 2.0 October 5,061 137 2.7
November 5,260 132 2.5 November 5,900 153 2.6
December 4,958 147 3.0 December 4,700 110 2.3
January 5,353 112 2.1 January 6,332 103 1.6
February 4,492 89 2.0 February 4,617 105 2.3
March 5,991 166 2.8 March 6,028 102 1.7
April 5,357 132 2.5 April 6,225 128 2.1
May 6,083 135 2.2 May 5,880 116 2.0
June 5,904 195 3.3 June 3,921 88 2.2
Total 61,425 1,647 2.7 Total 62,845 1,517 2.4
Source: Authors’ calculation from the raw data collected from Customs Points.
In addition, findings from physical examination report 13.1 per cent more
anomalies in the FY 2016-17 compared to FY 2015-16. In addition to physical
examination, post clearance audit is also conducted at the Customs House Benapole
focusing mismatch with the HS code. Total number of objection from post clearance
audit stands at 92 whereas 9 out of 92 (i.e., 9.8 per cent) were settled instantly. The
amount of earned revenue per month from the post clearance audit stands at BDT
43,602 for FY 2015-16. However, approximately 90 per cent of the objections remain
unsettled and thus revenues per month from unsettled objections stand at BDT
5,661,052. Therefore, consolidated extra revenue per month (i.e., considering all
settled and unsettled objections) from the post clearance audit objections stand at
BDT 5,704,654 for the same fiscal year. However, total number of objection at the post
clearance stage decreased to 86 for the FY 2016-17. But only 3 out of 86 (i.e., 3.5 per
cent) objections were settled and it was much lower compared to the previous fiscal
year. Earned revenue per month from post clearance audit stands at BDT 83,219 for FY
2016-17 whereas it is BDT 3,964,327 per month for the unsettled objection. Therefore,
extra revenue per month considering all settled and unsettled objections stand at
BDT 4,047,547 for the same fiscal year.
100
There is a Special Assignment Group (SAG) at Customs House Benapole

to examine the commercial consignments which clears through RED Channel. The
activities of SAG are associated with high valued commercial commodities, highest total
tax incidence (TTI) and the previous mis-declaration history. Total entry examination
by SAG, number of anomalies, anomaly percentage of the total examination and the
total extra revenue earned by SAG are reported in Table 6. SAG found 48.8 per cent
anomaly in their examined products for the FY 2015-16. This figure rose to 100 per
cent for FY 2016-17 (i.e., anomaly found in all examined products). Extra revenue
per month earned by SAG stands at BDT 14,608,125 for FY 2015-16 whereas it is BDT
20,382,970 for FY 2016-17. Despite the fact that SAG examined 41.5 per cent less in
FY 2016-17, approximately 40 per cent extra revenue was earned by SAG at Customs
House Benapole. This extra revenue may be associated with the rise of 19.8 per cent
anomalies in 2017.
Table 6: Anomalies Detected and Extra Revenue Earned by SAG

FY 2016 Total Anom- Anom- Revenue FY 2017 Total Anom- Anom- Revenue
exami- aly aly % Earned ex- aly aly % Earned
nation of SAG (BDT) ami- of SAG (BDT)
exami- na- exami-
nation tion nation
July 268 118 44.0 9,575,700 July 164 164 100 13,308,600
August 340 265 77.9 21,504,750 August 260 260 100 21,099,000
Septem- 385 231 60.0 18,745,650 Sep- 213 213 100 17,284,950
ber tember
October 436 222 50.9 18,015,300 October 180 180 100 14,607,000
Novem- 469 198 42.2 16,067,700 Novem- 263 263 100 21,342,450
ber ber
Decem- 414 151 36.5 12,253,650 Decem- 198 198 100 16,067,700
ber ber
January 437 227 51.9 18,424,050 January 315 315 100 25,562,250
Febru- 403 188 46.7 15,256,200 Febru- 235 235 100 19,070,250
ary ary
March 495 234 47.3 10,294,130 March 298 298 100 23,083,476
April 504 216 42.9 9,935,250 April 379 379 100 45,060,682
May 531 267 50.3 10,546,546 May 305 305 100 9,676,220
June 472 197 41.7 14,678,578 June 203 203 100 18,433,063
Total 5,154 2,514 48.8 175,297,504 Total 3,013 3,013 100 244,595,641
Source: Authors’ calculation from the raw data collected from Customs Points.
101
Figure 2: Anomaly per cent of the Examined Products by SAG in FY 2015-16
Source: Authors’ representation.
4.3 Case Detection by Customs House Dhaka
Of the Dhaka, Chattogram and Sylhet air freight units, Customs House Dhaka
is the largest airport customs station of Bangladesh and it collects duties and taxes for
the imports through air cargo. Apart from revenue generation for the government, it
also facilitates trade, protect smuggling of wildlife, protect national security, prepare
foreign trade statistics and trade compliance. But observation and experience during
this research in this unit show the dearth of available data. Usually, small but most
valuable things are imported frequently through this point. Air freight unit detected
72 and 31 cases for the FY 2015-16 and FY 2016-17 respectively. Excess revenue per
month collected stands at BDT 115,032 and BDT 397,484 for the respective fiscal
years. In addition, preventive unit owns some extra responsibilities and thus more
anomalies were detected at this stage. It detected 146 and 174 cases. This implies 19.2
per cent more anomaly detection in 2017 by the preventive team of the air freight
unit. Total excess revenue collected by the air freight unit of the Customs House Dhaka
stood at BDT 421,135,993 and BDT 15,990,446,076 for the FY 2015-16 and FY 2016-17
respectively. Therefore, per month excess revenue collected by the preventive unit of
the Customs House Dhaka stands at BDT 35,094,666 and BDT 1,332,537,173 for the
respective fiscal years. However, the share of excess revenue was significantly lower
in the FY 2015-16 compared to FY 2016-17. This is clearly depicted in Figure 3, which
shows that only 2.6 per cent excess revenue was collected by the preventive team in
2016 and the left portion was collected in 2017. Excess revenue by this unit increased
to 3,697 per cent in 2017, compared with the corresponding figure of 2016. The detail
findings are reported in the Annex 1.
102
Figure 3: Distribution of Excess Revenue Collected by Preventive Unit at Dhaka

Customs House
Source: Dhaka Customs House.

The paper now focusses on the scenario of the post clearance audit conducted
by the Customs House Dhaka, which scrutinizes the existence of any mismatch with the
HS code. For this purpose, the number of audits conducted by the post clearance audit
unit amounted to 12,243 and 4,817 for the FY 2015-16 and FY 2016-17 respectively.
Therefore, the number of post clearance audit decreased by approximately 61 per cent in
2017 compared to 2016. The number of post clearance audit per month stands at 1,020
for the FY 2015-16 whereas it is 401 per month for the FY 2016-17. Similar findings are also
observed in case of percentage of the audits claimed (i.e., 2 per cent in 2016 vs. 1 per cent
in 2017). Table 7 and Figure 4 show the number of audits claimed and the number and
percentage of the claimed audits settled. It also reports the revenue for the claimed audits
and earned revenue from the settled audits. It also shows that 114 out of 244 cases (i.e.,
46.7 per cent) were settled in 2016 whereas 100 per cent claimed audits were settled in
2017. For the extra revenue generation from the informal trade within formal trade, it is
found that only 3.9 per cent of the claimed revenue was collected in 2016 and 100 per cent
claimed revenue was collected in 2017 (see Figure 4). More specifically, claimed revenue is
25.8 times higher than the earned revenue. Table 7 shows that revenue claimed in 2017 is
significantly less than that of the year 2016. About 96.2 per cent less revenue was claimed
in 2017 compared to the successive previous year. However, the earned revenue declined
by only 2.4 per cent during the same time period. Average revenue per month claimed and
earned for the FY 2015-16 stands at BDT 47,557,895 and BDT 1,842,137. Therefore, revenue
claimed, on an average, is 25.8 times higher than earned revenue of the claimed amounts
in 2016. But revenue claim perfectly matches with the amount of earned revenue in 2017.
Similarly, the paper explores the number of claims, settled cases and earned
revenue through the post clearance audit conducted by the Customs House ICD,
Kamalapur. Post clearance audit in the FY 2015-16 claimed 44 cases for which revenue
claimed stood at BDT 9,644,377. But 48 per cent of the claims were settled and the extra
revenue earned stood at BDT 2,789,343 (i. e., 29 per cent of the claimed revenue). In the
FY 2016-17, post clearance audit claimed 80 cases for which claimed revenue stood at BDT
22,275,443. But only 12.5 per cent of the claims were settled and the extra revenue earned
stood at BDT 1,224,683 (5.5 per cent of the revenue claimed).
103
Table 7: Dhaka Customs House’s Month-wise Estimates: Audits Claimed and Revenue Generation
FY 2016 No of Revenue No of Earned Unearned FY 2017 No of Revenue No of Earned Un-
audits claimed set- revenue revenue audits claimed set- revenue earned
claimed tled claimed tled rev-
claims claims enue
July 12 487,125 12 49,123 July 4 1,008,066.9 4 1,008,067
438,002 0
August 64 2,668,600 7 566,522 August 2 1,859,394.1 2 1,859,394
2,102,077.75 0
Septem- Septem-
46 17,925,065.6 3 232,150 2 1,366,439.8 2 1,366,440
ber 17,692,915.41 ber 0
October 19 523,635,381 4 271,205 October 16 2,242,410.9 16 2,242,411
523,364,176 0
Novem- Novem-
14 3,282,792.45 13 2,206,410 10 2,366,583.8 10 2,366,584
ber 1,076,382.42 ber 0
Decem- Decem-
16 2,298,829.03 15 1,650,383 8 1,828,040.9 8 1,828,041
ber 648,446.38 ber 0
104
January 9 1,765,662.85 9 1,380,295 January 3 2,302,703.9 3 2,302,704
385,367.69 0
February 11 2,166,281.77 8 1,539,463 February 4 888,046.7 4 888,047
626,818.82 0
March 13 6,012,410.91 13 6,012,411 March 4 6,605,673.4 4 6,605,673
0 0
April 15 3,410,132.24 8 1,386,325 April 1 1,110,535 1 1,110,535
2,023,806.88 0
May 19 4,184,243.76 16 3,953,140 May 0 0 0 0
231,104.23 0
June 6 2,858,218.8 6 2,858,219 June 0 0 0 0
0 0
Total 244 570,694,743 114 22,105,646 548,589,098 Total 54 21,577,895 54 21,577,896 0
Figure 4: Percentage of the Claimed Audits Settled
Source: Authors’ calculation.

The key findings in regard to ‘what really happens in case of illegitimate
international trade within formal trade’ are summarized here. Insufficient scanning
is observed at the country’s main revenue hub Customs House Chattogram and thus
importers take this advantage. Partially fake import has been detected. For example,
the actual value of the import is much higher than the reported amount in the L/C.
Mismatch is found in price determination. For example, sometimes the average
declared and assessed price of raw materials is higher than the finished products as
per international value journals.
The country receives comparatively less amount of duty tax due to duty tax
dodging. Evidence of money laundering is profound through under invoicing or over
invoicing in the L/Cs. (i.e., for import cases under invoicing to dodge duty, tax and
for export cases, over invoicing to get cash incentives depending on advantages
provided by the country). Mis-declaration of the imported items (i.e., both quality and
quantity) is clearly evident in this paper. By doing so, importers evade tax. Screening
system at the ports is not up to the international best practices level and thus it delays
container/consignment clearance. Therefore, it destroys the reputation of the ports.
Consumers ultimately bears the costs (i.e., increased freight) incurred due to delayed
clearance as it pushes the price of the product up. Lack of modern laboratory facility
for testing chemical products is evident. Insufficient coordination among the trading
countries is also liable for such illegitimate trade within formal trade.
Despite these facts, the government of Bangladesh is trying to improve the

situation at the different customs points though it is very slow. However, the following
measures are proposed to expedite the process undertaken by the government as
well as to reduce the illegitimate trade within formal international trade.
105
High resolution based scanning system should be introduced at the port

for enhancing the efficiency, productivity as well as reliability. Modern laboratory
facility at the port to eliminate such trade should be introduced. The central bank
and scheduled banks should subscribe value journals to ensure value judgment
for all traded products through L/Cs. Cross-checking should be done. In this case,
Taxpayer Identification Number (TIN), National Identification (NID), passport and
all bank accounts of a trader should be informed to the clearance authority. Mutual
banking assistance and mutual customs assistance treaties should be introduced
between Bangladesh and its major import and export destinations. As Bangladesh
imports its major portion from India and China, they should let Bangladesh know the
value and quantity of their exported items. Banks linked to international trade should
open up research cell. Overseas monitoring cell of customs intelligence at major
trading countries should be introduced. Customs attachés may be employed in the
most exporting and importing countries so that they can provide value judgment
information. All these measures proposed might help Bangladesh to reduce the
informal trade within formal channels.
5. Conclusion
This paper is an attempt to provide an in-depth analysis of Bangladesh’s

informal trade within formal trade with a view to providing new insights to the
New Institutional Economics using Bangladesh as a case study. The dearth of data
on informal trade within formal trade in Bangladesh is a great barrier to conducting
research. The paper examined how formal institutions in Bangladesh are engaged in
international informal trade (i. e., mainly mis-declaration). It needs to be emphasized
that since the sample frame for the entry points was drawn from known population,
the estimates obtained from the sample observations may be firm estimates. However,
it is suggested for the future researchers to take longer time period data for more valid
estimates. In sum, this paper provides fresh perspectives and background for further
analysis with a view to introducing national and/or international policy agendas or
strategies that would help to reduce grey part hidden in the legal declaration of the
imported commodities.
From the findings, it is clear that the volume of B/E (i.e., consignments) is
increasing over the years and thus creating enormous pressure for quick clearance on
the responsible officers at the import points. Similar trend is also observed for anomaly
rate detected by physical examination for the Customs House Chattogram. Moreover,
a positive and statistically significant correlation between the first appraisement
done through physical examination and anomalies is found in this paper. The policy
implication of such finding is that lower rate of physical examination may encourage
importers to engage themselves in informal trade through formal channel.
106
This paper clearly finds the anomalies at different stages of inspections done
by different customs units. Majority of the cases suspected and sued are found to be
associated with extra revenues generation for the government exchequer. However,
it is not necessary that importers always show undervaluation of their imports. They
might show overvaluation of their imports with a view to sending money legally
through the proper channels. Findings reveal that importers show less import
quantity or value and hide true description of commodities to evade duties and
taxes. Some unscrupulous importers show higher and lower volume as lower and
higher duty items respectively for dodging taxes. Money laundering in the name of
import is also evident in this paper. The policy implication to reduce such illegitimate
imports into Bangladesh is to put more emphasis on physical examination using
non-intrusive scanning or examining tools at the import stage. Bangladesh’s customs
authority should be concerned in this regard to prevent such illegitimate trade as well
as money laundering hidden in the formal import channels. As large variations exist
in anomalies, future studies might focus the seasonality of variations by anomalies or
products.
107
Annex- 1
Excess Revenue Collected by the Preventive Unit at Dhaka Customs House
FY 2016 No. of Excess Rev- FY 2017 No. of Excess Rev-
Anomaly enue Anomaly enue
July 19 4,256,395 July 10 421,135,993
August 21 17,701,551 August 4 433,070,489
September 17 27,379.591 September 6 490,654,563
October 8 17,542,971 October 6 1,716,214,076
November 9 51,889,193 November 22 1,710,204,995
December 11 36,899,034 December 22 1,660,691,944
January 11 32,826,003 January 22 1,649,977,628
February 6 38,145,489 February 33 1,635,848,811
March 8 47,155,830 March 14 1,600,997,305
April 9 25,056,068 April 5 1,569,997,062
May 10 32,121,868 May 20 1,580,251,620
June 17 90,162,000 June 10 1,521,401,590
Total 146 421,135,993 Total 174 15,990,446,076
108
BOOK REVIEW
Bangladesh’s Neighbours in Indian Northeast: Exploring Opportunities and Mutual
Interest, edited by Akmal Hussain, published by Asiatic Society of Bangladesh, Dhaka,
2017, xvi + 212 pp, ISBN 978-984-93191-0-8.
In Bangladesh foreign policy, very few relations are as important as that of

Bangladesh-India. India surrounds Bangladesh from three sides on the border; it has
supported Bangladesh throughout its independence struggle and continues to be one
of its most important partners in trade, security and bilateral cooperation. The seven
states of Northeast India are close to Bangladesh in terms of mutual shared history,
culture and geographical nature. Thus, the interest in strengthening the relations
between them is nothing new. In fact, at both academic and policy level, increasing
the interaction between Bangladesh and Northeast of India, including creating more
opportunities for trade, communication and overall connectivity has been one of the
central discussions. The book “Bangladesh’s Neighbours in Indian Northeast: Exploring
Opportunities and Mutual Interest” contributes to that discussion in more than one way.
It includes a plethora of issues that concern the topic and tackles some of the trickiest
and most important questions regarding Bangladesh-Northeast India relationship.
The book is a collection of academic essays on different aspects of the relations

between Bangladesh and Northeast India, published following a seminar of the same title
that was held on 12-14 November 2015 by the Asiatic Society of Bangladesh. The essays
included in the book were papers presented in the seminar. The book is edited by Akmal
Hussain, a renowned former Professor of Department of International Relations, University
of Dhaka. Any person dealing with Northeast India must understand the past to analyze its
future and here, Akmal Hussain’s background in both History and International Relations
gives him unique competence to deal with the theme of the book. The central goal of the
book is to explore and analyze the relation between Bangladesh and Northeast India. As
mentioned, the book is a collection of eight chapters written by eleven different writers,
each of which engages in a different issue. To aid the readers venturing through the book,
it organizes itself by dividing the chapters into four major parts, each focusing on a core
area of Bangladesh’s relations with Northeast India. Part one is concerned with political
issues, part two with economic, part three with ecological and part four with historical
issues. Here, the inclusion of ecological issues is praiseworthy, since the shared ecology of
the region, though playing an important role, is often ignored in the policy discussion that
tends to lean more towards political and economic topics.
In the 'Political Imperatives' part, there are two chapters. First one is titled,
“Engagement with Northeast India: A New Dimension in Bangladesh-India Relations”
by Akmal Hussain and second is “External Influence, Domestic Politics, and Bangladesh
Government’s Northeast India Policy” authored by ASM Ali Ashraf and Md. Sohel Rana.
The political section maintains a good coherence between the chapters as both employ
a more realist lens in analyzing Bangladesh-India relations.
109
Akmal Hussain makes a critical analysis of both India and Bangladesh’s interests
in the region and explains how they often do not align with each other. He discusses the
benefits that Northeast India and Bangladesh can gain from interacting more and notes
that the mindset of the ruling circle of both Bangladesh and India has been a barrier to
the further flourishing of the relations. Recently though, there have been many changes
and now there are more opportunities for extending their partnership. Regarding the
changing relations, the author suggests that Bangladesh should think of its Northeast
India policy as an extension to its overall India policy. However, although the chapter
mentions the discontent between the central government and people of Northeast India,
it does not delve into how that plays a role in Bangladesh-Northeast India relationship.
In their chapter titled “External Influence, Domestic Politics, and Bangladesh

Government’s Northeast India Policy”, ASM Ali Ashraf and Md. Sohel Rana focus more
on Bangladesh and its foreign policy decision making. Taking a neoclassical realist
approach, the authors analyze the influence of various factors−domestic politics,
alignment of policy priorities, centralization of power, elite cohesion, interest groups as
well as external pressure on foreign policy decision making of Bangladesh. The authors
also review major policy decisions taken by Bangladesh regarding Northeast India on
economic, connectivity and security issues and how those have influenced overall
Bangladesh-India relations. The chapter also mentions the challenges that Bangladesh
faces in its Northeast India policy, balancing vision with pragmatism and suggests that a
broad-based discussion between Bangladesh government and the civil society regarding
Bangladesh’s national interest should be held. Though the authors have tried to make a
comprehensive analysis, their weakness is the fact that they focus more on Indian central
government policies. The influence of Indian provincial state politics as an external factor
for Bangladesh foreign policymaking has been left out of the discussion.
The second part of the book is the largest one in terms of the number of
chapters. It focusses on economic relations and includes four chapters. In the first
chapter of this part, titled “Growth Zone with NEI and Beyond: Bangladesh Perspective”,
Khondaker Golam Moazzem and Shashish Shami Kamal focus more on the idea of a
'sub-regional growth zone' to enhance connectivity between Bangladesh and Northeast
India. They examine different other regional growth zones in other countries, such
as South China Growth Triangle (SCGT) and 'Southern Growth Triangle' /SIJORI to
determine what factors influence the development of growth zones. They then focus on
the current state cooperation between Bangladesh and Northeast India and provide a
comparison between the current economic condition of the two economies. They state
that Bangladesh and Northeast India can develop a growth zone based on raw material
and hydropower energy export. The enhanced connectivity between the two regions
can enhance ways for further connectivity throughout India and Southeast Asia. They
mention that the poor state of connectivity infrastructure and policy gaps between the
two nations are the major challenges for connectivity. Based on the experience of the
countries, they claimed that political leadership can play a major role in establishing
110
BOOK REVIEW
the growth zone. However, though the authors have mentioned what factors have
influenced the development of other growth zones, they do not explain whether any of
those conditions are present in the Bangladesh-Northeast India, making it suitable for
similar initiatives.
By contrast, Abul Kalam, in his “Age of Connectivity: Facing the Challenges

of Relations between Bangladesh and India’s North-eastern States” takes a different
approach in tackling Bangladesh-Northeast India connectivity issue. He begins by tracing
the roots of ‘connectivity’ as a concept, stating that the word has classical-theoretical
roots and entails interconnection of communication platforms, systems and applications.
It also includes joining of ideas and terms and issues to create bonds. In his opinion, the
challenge of connectivity is to overcome the asymmetric structure. This chapter focuses
on the empirical nature of connectivity around the world and then comes down to
Bangladesh-Northeast India connectivity. Underlining the historical connectivity that
the two regions share; he points out the disconnecting elements that remain between
them. The author names water issues, border-killing, trust deficit and tariff/non-tariff
barriers as the disconnecting elements. Though there have been many new initiatives for
connectivity in recent years, especially after Indian Prime Minister Narendra Modi’s visit
to Dhaka, challenges remain. The challenges, in his opinion, are substantial and weighty,
requiring serious policy reflection. They are also widespread, starting from eco-security
concerns and third-party concerns to psychological barriers. He suggests that the issues
of connectivity should be taken from top of policymaking to ‘people-to-people’ level,
as they are the likely beneficiary of the initiatives. The author also believes that treating
the trade imbalance of Bangladesh and Northeast India is of paramount importance.
However, the fact that the economy of Northeast India is comparatively smaller and can
only absorb a small amount of Bangladeshi export has been ignored by the author.
Syed Rashidul Hasan, in his chapter titled, “Tourism - A bridge of Friendship

between Bangladesh and the Seven Sisters of India”, argues that tourism can bring
economic benefit and create a bond between nations. He showed that the number of
international and national tourists has increased in the seven sister states. Similarly, the
Bangladesh tourism industry is also growing. There is an opportunity for Bangladesh
and Northeast India to learn from the experience of the East Asian countries to increase
revenue from tourism. Easing visa processing and border check posts and introducing
health/educational tourism can produce better results for cross-border tourism. In
addition, creating a 'Buddhist tourism circuit' covering Bangladesh, Arunachal Pradesh
and Sikkim can be developed. Nevertheless, the idea of the Buddhist tourism circuit
remains vague; the author does not include any detailed plan or provide any example for
how the tourism plans he describes can be executed.
Subir Bhaumik in his chapter titled “Tripura: Bangladesh’s gateway to India’s

Northeast” talks about how Tripura plays an important role in overall Bangladesh-
Northeast India relations. Going back to the shared history between Tripura and
111
Bangladesh in detail, he states that there is a chance for Tripura to be the main gateway
for Bangladesh. He mentions specific examples of Bangladeshi companies working in
Tripura and states that Tripura is the most obvious choice for industrial investment for
Bangladesh due to the geographical proximity. Bangladesh can import agricultural
products, raw materials and energy from Tripura. He suggests that Bangladesh should
try to make its Tripura strategy as an example for the rest of the Northeastern states.
He believes that enhanced cooperation between the two regions can help in making
the seven Northeastern states look at Bangladesh beyond the prism of illegal migration
and realize that Bangladesh has much more to offer. However, the author does not shed
much light on increasing Bangladeshi exports to Tripura. Inclusion of that issue would
have made the discussion more balanced.
The next part of the book focusses on 'Ecological Imperatives'. The authors,
M. Anwar Hossen and M. Rafiqul Islam, in their chapter “Ecological Integrity of the
Brahmaputra Basin for Community Livelihoods in Bangladesh” talk about the nature and
development approach of the local community in the Brahmaputra basin area. They show
how unplanned development initiatives can have a severe impact on the environment
and create socio-ecological disasters. It describes how the various ongoing project such
as the National River Linking Project (NRLP) fails to recognize the ecological integrity
of the Brahmaputra basin. It is a unilateral project with some support from Bhutan
and Nepal, while the basin is shared between five countries. As a result, the project is
predicted to have a damaging effect, including loss of habitat, job displacement and
economic disruption, which will affect the marginalized people in India and Bangladesh.
The authors also suggest ways on how the basin’s development can be done in an eco-
centric way, including making alternative navigational canals to ensure water flow.
The last chapter of the book, “Three Bengali Districts and the Making and
Unmaking of Assam Bengal Borders, 1874-1947” by Ashfaque Hossain under Part IV
titled ‘Historical Linkages’ deals with one of the most sensitive issues of the Bangladesh-
India relations: illegal migration. The author dwells on the history of Bangladesh and
India to demonstrate the hard fact that a number of Bengalis have stayed back in Assam
as they view that province as the home of their ancestors. The chapter shows how the
emergence of tea business contributed to the shifting border of the two nations. He states
that historical awareness can help to understand that despite the rise of nationalism and
‘identity politics’, cultural diversity will continue to shape this region. However, the author
does not shed much light on how that long history is influencing the current realities of
Northeast India.
The book is vibrant in its selection of authors, how they approach an issue and
solutions to the challenges they provide. Each chapter deals with a particular issue of
its own and the overarching theme of the book is a realistic discussion of the situation
between Bangladesh and Northeast India, including many uncomfortable topics that
are often ignored by academics, being considered to be of sensitive nature. While some
112
BOOK REVIEW
chapters focus on Bangladesh and Northeast India issue as a whole (especially in the
political and economic part), others focus on the specific problems such as ensuring
livelihood for people. Even when approaching the same issue such as connectivity,
the authors show how their different backgrounds bring a varied opinion. So, the book
does not feel repetitive, a risk that writings focussed on policy issues often suffer from.
Even though many suggestions by the authors have been echoed by each other, it only
solidifies the fact that those are necessary actions for improving Bangladesh-Northeast
India relations. It is also admirable that the book goes through several issues that are
uncomfortable but important in discussing the relationship between Northeast India
and Bangladesh. It deals with issues such as “illegal population” in Assam, asymmetrical
power relations between neighbours and the varied preference of India and Bangladesh
in developing external relations. Authors of the chapters have also talked about the
internal politics of Bangladesh, external influence and the negative outlook people
of Northeast India have about Bangladesh and provided suggestions to tackle those
matters.
Nevertheless, several chapters of the book, even those outside the historical
part, focus too heavily on the shared history of the region which can distract the reader
from the key goal of that chapter. In the economic part, the last two chapters (which focus
on Tourism and Bangladesh-Tripura relations) feel completely different from the first two
chapters (which focus on connectivity), even though they all are on economic issues.
Although the book touches up on issues such as prisoner exchange and border killings,
a separate chapter/section focused wholly on security issues would have added value.
The biggest criticism of the book is the lack of a concluding chapter which would have
helped its readers to take away the key messages. This is important since the book covers
many diverse issues, some of them are technical in nature and a concluding chapter was
necessary to sum it up. There are also a number of noticeable editorial inconsistencies
throughout the book.
Overall, the book “Bangladesh’s Neighbours in Indian Northeast: Exploring

Opportunities and Mutual Interest” provides a comprehensive overview of the
Bangladesh and Northeast India relations, both in terms of the issues it covers and
the debates it discusses. By incorporating the points of disagreements between the
two nations, the book stands out from the rest and becomes a useful tool for both
policymakers and academics alike. Despite being one of the hot topics in policy
discussion, there is hardly any book that covers the Bangladesh-Northeast India
relations. This book fills that void quite substantially.
Reviewed by
Lam-ya Mostaque
Research Officer
Bangladesh Institute of International and Strategic Studies (BIISS)
113
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ISSN 1010-9536

REVISITING MIGRATION-DEVELOPMENT NEXUS

1 China’s Belt and Road Initiative and Economic

41 Localization of Jobs in the GCC Region:

67 Revisiting Migration-Development Nexus: A

87 Demystifying International Informal Trade within

109 Book Review

Bangladesh Institute of International and Strategic Studies (BIISS)

Fax: (880-2) 48312625, e-mail: po@biiss.org, website: www.biiss.org

Rashed Al Mahmud Titumir

Syeda Tanzia Sultana

S.M. Humayun Kabir

Book Review 109

Rashed Al Mahmud Titumir

CHINA’S BELT AND ROAD INITIATIVE AND ECONOMIC IMPLICATIONS

The article provides a unique analytical framework to identify the compulsions

Keywords: BRI, Strategic Alignment, Normative Legitimacy, Equiangular

The BRI provides China both an ‘institutional and normative’ framework

© Bangladesh Institute of International and Strategic Studies (BIISS), 2019.

transforming economy.2 The prevailing approaches, however, emphasize more on

Nonetheless, BRI offers an alternative to the hitherto dominant form of global

Within the parlance of Sino-Bangladesh relations, BRI would certainly offer

In this backdrop, a new approach is needed to better explain the conditions

prosperity. The article, therefore, aims to develop a comprehensive framework

2. Theorizing Sino-Bangladesh Relations within BRI: A Framework

Understanding and explaining China’s BRI requires formulating explicit

2.1 Realist Approach

Consequently, prospects for cooperation and effectiveness of international

to manipulate their internal politics.20 Instead of confronting reality, their analysis is

Figure 1: Number of Armed Conflicts by Type of Conflicts, 1946-2015

The total number of armed conflicts (including interstate, intrastate and

2.2 Liberal Approach

Liberal approach, by contrast, offers an analysis stressing more on

The outcomes of globalization or gains from global economic integration

In an ‘era of global change’, the world has increasingly been characterized

Another aspect is the jobless growth of economies around the world.

Further, the exacerbating rate at which global inequality is increasing cogently

Figure 3: Gini Coefficient and Trend in Global Inequality

2.3 An Alternative Conceptual Framework

2.3.1 Stability and Growth Framework

The question is in which conditions there will be stability and growth or in

Figure 4: Stability and Growth Framework

Sufficient and sustainability Necessary conditions Outcome

Normative Technology transfer

Circular flow of virtuous cycle

Source: Prepared by authors based on relevant literature.

2.3.2 Dis-stability and Dis-growth Framework

As opposed to the Scenario - 1, the conditions which will create dis-stability

Figure 5: Dis-stability and Dis-growth Framework

Sufficient Conditions Necessary conditions Outcome

Political Extractive liberalization

No or limited No Techology transfer

Circular flow of virtuous cycle

Source: Prepared by authors based on relevant literature.

2.3.3 Equiangular Development Diplomacy

Table 1: Growth Enhancing Matrix within the Framework of BRI

2.3.4 Sufficient Condition – 1: Normative Legitimacy

Legitimacy is a contested and elusive term involving numerous attempts to

Among a number of conceptualizations, the notion of ‘normative legitimacy’

It is stressed that legitimacy is essentially a normative process and it is also

In a national context, legitimacy also refers to popular consensus or political

In effect, ‘normative legitimacy’ derives from the cognition level as well

2.3.5 Sufficient Condition – 2: Political Settlement