Diversification – the Pathway for Economic Recovery

07.14.2020 | Articles | Dr. Rashed Al Mahmud Titumir

Introduction

Bangladesh’s economic recovery from the Covid-19 and global economic shutdown depends on the country’s ability to restart the economy. The curve will be shaped by how quickly the businesses can produce outputs and workers return to work. It also depends on the economic portfolio of a country. A diversified economy recovers faster because it can shift production from one sector to another. Insufficient diversification on the other hand can cause the economy to fall into the ‘I’ curve; a never-ending drop in the economy.

The Covid-19 pandemic has impacted every sector as assembly lines have been closed down, global trade came to halt as well as transportation being disrupted. The supply chain mechanism from producer to consumer has faltered amidst the crisis. Both national and international supply chains have broken as countries opted for lockdown. The Covid-19 crisis has exacerbated the already brittle state of the economy. The manufacturing sector is braced for further losses from the ongoing pandemic. Subsidies in various form coupled with low cost of labor enhanced the growth of the economy to an extent that it has turned into lifeline of the country. The export sector crashed with earnings hitting its lowest since 2005-06.[1] International supply chains of ready-made garments, the single largest export industry, have seen order cancellations due to low demand. As a result, garment owners have failed to disburse worker salaries.

The vertical drop in export earnings calls for a paradigm shift. The agricultural sector suffered a great deal as well during the crisis as produce has been lost to wastage when it could not reach the markets. A shortage of agricultural labor in deficit areas due to immobility arising from the shutdown has slowed down an already lengthy supply chain with intermediaries at different points. The poultry and fisheries sector have faced huge losses as transportation process stood still and producers resorted to dumping. Disruption has negatively impacted the service sector involved in various stages of the manufacturing and agricultural sectors. This article proposes a 10-point agenda to reconfigure the portfolio of the economic sectors.

[1] CEIC, based upon Bangladesh Bank). https://www.ceicdata.com/en/indicator/bangladesh/total-exports Accessed on 27th June 2020.