For addressing competitiveness, technology adoption and diffusion has been an age-old strategy. Yes, technology adoption increases quality, reduces wastage, and lowers the demand for labour too. Consequently, competitiveness increases. However, does it offer a sustainable solution to strengthen the industrial economy out of labour-based value addition strategy?
During the colonial period, the Indian subcontinent was given the role of supplying natural resources to feed the British’s industrial economy, while the British industry was processing those natural resources with their ideas and labour. One of Bangladesh’s major export of natural resources during that period was jute. Subsequently, jute emerged as the main source of earning foreign currency, picking golden fiber title. Like other parts of the Indian subcontinent, Bangladesh was using that export earned foreign currency to import industrial products from the United Kingdom and the rest of Europe. After independence in 1947, the Indian subcontinent took the strategy of importing and adopting technology from Europe to process locally produced natural resources with labor. Hence, we uplifted our natural resource supplier position to importing technology for building local industrial capacity out of natural resource and labor. Since then, technology adoption and diffusion have been the policy focus for building the industrial economy.
Of course, in the absence of imported technology, we cannot add value to natural resources with labour. But has the policy of supporting the import and diffusion of technology been helping us in developing sustainable capability of value addition out of labour?
In producing industrial outputs, we need three major inputs: ideas, intermediary inputs, and labour. Of course, we also need energy, water, and many more. Economic value creation is a function of ideas and objects. We mix objects like natural resource, energy, labour, and others to create economic value through ideas. So far, our strategy has been to import ideas. We import ideas in different forms, starting from capital machinery, intermediary components to product design. In addition to improving economic value, ideas also reduce the requirement of objects, like labor. Hence, there has been continued reduction of labour requirement in producing each unit of industrial output. For example, in comparison to the 1980s, we need as low as 30 per cent of labour to produce each unit of apparel. In fact, labour requirement has been continuously eroding with the growth of imported technology adoption. As a result, the value-added capability of Bangladesh and many other developing countries has been shrinking. Subsequently, it is creating downward pressure on the market value of labour.
Does it mean that policy support for technology adoption and diffusion has been weakening Bangladesh’s industrial strength? Unfortunately, both the theory and real-life data support this unpleasant reality. Well, what could be the remedy? Should we slow down technology adoption? Of course, not. If we do so, our competitiveness will be eroding fast, posing a threat to the industrial economy’s collapse.
Right after 1947, it was a good start to begin the journey of building an industrial economy out of the import of capital machinery and product design for adding value through labour and natural resources. Till 1980s, our industrial outputs primarily targeted the local market by offering locally produced import substitution. During that time, labour content was quite high. As a result, due to the high wage differential, producers could offer import substitution at a lower cost. But such an ability to offer lower cost alternatives through sourcing of low-cost local labour has been shrinking. Because, both the labour content and wage differential have been shrinking simultaneously. Hence, the strategy of developing the industrial economy out of imported technology has been weakening, reaching an unsustainable point. Hence, there has been growing policy support for offering tax differential and other incentives. Like import substitution, our success in building an industrial economy out of export-oriented manufacturing is also highly dependent on the import of technology. Of course, since the 1980s, Bangladesh has made quite a bit of success in creating jobs in export-oriented manufacturing. But our value addition strategy has remained the same-low-cost labour. Like import substitution, export-oriented manufacturing is also losing competitiveness for the same reason. To slow down the effect on export volume, even a cash incentive policy has been adopted.
Data and theory of technology progression-creating substitution effect on labor-suggest that like many other developing countries, Bangladesh can no longer sustain the growth of industrial economy out of technology import-based strategy. Suppose tax differential, cash incentives and all other supports are removed. In that case, it’s highly likely that the sheer benefit of low-cost labour will not keep many of this country’s industrial units afloat. Hence, it’s not unfair to state that labour-based value addition to imported ideas has reached saturation.
The next option for Bangladesh is to add value to industrial outputs through ideas. After more than 70 years of the end of colonial rule and 50 years of independence, it’s highly imperative for Bangladesh to take the next big step in building the industrial economy. This is about creating economic value out of locally produced ideas. And we need to produce and trade ideas as part of product and process features in the globally connected competitive market. The graduation of Bangladesh’s strategy and policy for the industrial economy from natural resource and labor to idea has multidimensional benefits. Of course, it also poses high-level challenge.
Unlike natural resources and labour, idea-based value addition offers an exponential growth path. The economic value creation out of ideas is not linearly limited to natural resource stock and the labour pool. On the other hand, the transition to the idea economy is going to create the demand for engaging a growing number of university graduates to produce economic value out of knowledge as opposed to muscles. In addition to addressing graduate unemployment, value addition through ideas appears to be Bangladesh’s only option to meet economic aspirations set for 2030 and 2041. Furthermore, creating a market of ideas is essential to produce more with less for meeting sustainable development goals.
It’s quite encouraging to note that Bangladesh’s development planners have touched upon the importance and strategy of making the transition to the idea economy. In the 2041 perspective plan, the vision has been laid down. For taking the vision to implementation, the recently released 8th Five Year Plan has given the strategic directions of making the transition. It’s time to translate high-level directions into policies and investments for proceeding towards implementation.
M. Rokonuzzaman, Ph.D is academic and researcher on technology, society and policy. Zaman.email@example.com
CANADA STOCKS – TSX ends flat at 19,228.03
* The Toronto Stock Exchange’s TSX falls 0.00 percent to 19,228.03
* Leading the index were Corus Entertainment Inc <CJRb.TO>, up 7.0%, Methanex Corp, up 6.4%, and Canaccord Genuity Group Inc, higher by 5.5%.
* Lagging shares were Denison Mines Corp, down 7.0%, Trillium Therapeutics Inc, down 7.0%, and Nexgen Energy Ltd, lower by 5.7%.
* On the TSX 93 issues rose and 128 fell as a 0.7-to-1 ratio favored decliners. There were 26 new highs and no new lows, with total volume of 183.7 million shares.
* The most heavily traded shares by volume were Toronto-dominion Bank, Nutrien Ltd and Organigram Holdings Inc.
* The TSX’s energy group fell 1.61 points, or 1.4%, while the financials sector climbed 0.67 points, or 0.2%.
* West Texas Intermediate crude futures fell 0.44%, or $0.26, to $59.34 a barrel. Brent crude fell 0.24%, or $0.15, to $63.05 [O/R]
* The TSX is up 10.3% for the year.
Canadian dollar outshines G10 peers, boosted by jobs surge
By Fergal Smith
TORONTO (Reuters) – The Canadian dollar advanced against its broadly stronger U.S. counterpart on Friday as data showing the economy added far more jobs than expected in March offset lower oil prices, with the loonie also gaining for the week.
Canada added 303,100 jobs in March, triple analyst expectations, driven by the recovery across sectors hit by shutdowns in December and January to curb the new coronavirus.
“The Canadian economy keeps beating expectations,” said Michael Goshko, corporate risk manager at Western Union Business Solutions. “It seems like the economy is adapting to these closures and restrictions.”
Stronger-than-expected economic growth could pull forward the timing of the first interest rate hike by the Bank of Canada, Goshko said.
The central bank has signaled that its benchmark rate will stay at a record low of 0.25% until 2023. It is due to update its economic forecasts on April 21, when some analysts expect it to cut bond purchases.
The Canadian dollar was trading 0.3% higher at 1.2530 to the greenback, or 79.81 U.S. cents, the biggest gain among G10 currencies. For the week, it was also up 0.3%.
Still, speculators have cut their bullish bets on the Canadian dollar to the lowest since December, data from the U.S. Commodity Futures Trading Commission showed. As of April 6, net long positions had fallen to 2,690 contracts from 6,518 in the prior week.
The price of oil, one of Canada‘s major exports, was pressured by rising supplies from major producers. U.S. crude prices settled 0.5% lower at $59.32 a barrel, while the U.S. dollar gained ground against a basket of major currencies, supported by higher U.S. Treasury yields.
Canadian government bond yields also climbed and the curve steepened, with the 10-year up 4.1 basis points at 1.502%.
(Reporting by Fergal Smith; Editing by Andrea Ricci)
Canadian dollar rebounds from one-week low ahead of jobs data
By Fergal Smith
TORONTO (Reuters) -The Canadian dollar strengthened against its U.S. counterpart on Thursday, recovering from a one-week low the day before, as the level of oil prices bolstered the medium-term outlook for the currency and ahead of domestic jobs data on Friday.
The Canadian dollar was trading 0.4% higher at 1.2560 to the greenback, or 79.62 U.S. cents. On Wednesday, it touched its weakest intraday level since March 31 at 1.2634.
“We have seen partial retracement from the decline over the last couple of days,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.
“With oil prices where they are – let’s call WCS still at roughly $49 a barrel – I still think CAD has room to strengthen over the medium term and even over a one-week horizon.”
Western Canadian Select (WCS), the heavy blend of oil that Canada produces, trades at a discount to the U.S. benchmark. U.S. crude futures settled 0.3% lower at $59.60 a barrel, but were up nearly 80% since last November.
The S&P 500 closed at a record high as Treasury yields fell following softer-than-anticipated labor market data, while the U.S. dollar fell to a two-week low against a basket of major currencies.
Canada‘s employment report for March, due on Friday, could offer clues on the Bank of Canada‘s policy outlook. The central bank has become more upbeat about prospects for economic growth, while some strategists expect it to cut bond purchases at its next interest rate announcement on April 21.
On a more cautious note for the economy, Ontario, Canada‘s most populous province, initiated a four-week stay-at-home order as it battles a third wave of the COVID-19 pandemic.
Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 3.3 basis points to 1.469%.
(Reporting by Fergal Smith;Editing by Alison Williams and Jonathan Oatis)