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more likely to be asymmetric over different societies. The wave of globalization is not stoppable however, Bangladesh like other developing countries, must consider the benefits that can be derived by minimizing the level of threats of globalization as because the country has no way to overlook the impact of globalization. that developed was not only inadequate to face any kind of outside competition but encouraged perennially4 protectionist culture. The developed world soon became economically and politically prominent and continued to perpetuate the system that enabled them to benefit from the spoils of protectionism. In this context, Bangladesh, however, began to change its industrial policy and gradually tried to move open market economy. For moving to open market economy, Bangladesh with the prescription of World Bank and other donor agencies, moved to structural adjustment programs in 1985-86 with the objects of privatization of state owned enterprises. This entailed gradually reducing government sectors, encouraging private sectors and trade liberalization through which moving towards market economy. Moreover, during this period government tried to balance between revenue and expenditure which covered withdrawing subsidy, and reducing development expenditure and social expenses. And then the country faces the challenge of achieving accelerated economic growth and alleviating the massive poverty of majority people. To meet this challenge, market-oriented liberalizing policy reforms were initiated in the mid-1980s and Bangladesh moved decisively to embrace the wave of globalization in the 1990s (Mahmud, 2003). This process was accelerated in 90s through the opening of domestic market for international trade. And Bangladesh's economy grew rapidly during the 1990s as the country liberalized its markets and became increasingly integrated into the world economy. Aided by trade liberalization and export incentives to various kinds, the economy has much more open in the last decade or so (Osmani, 2005). The consequence of trade liberalization gradually reduced import duties. Statistics shows that in 1990 average rate of import duties was 57.3 percent whereas it became 47.4 percentage in 1992-93 and 36 percent in 1993-94 respectively. This trend indicated that Bangladesh moved to market economy over night. It continued and in 1995-96 the rate was 22.3 per cent and became 15.83 percent in 2004-05. In fact, globalization process started in the 1980s and now it is rapidly expanding. Import duties are decreasing gradually and the import-substitution barriers are not more in place to protect local industries. However, this process has prospects as well as threats particularly for the economy of poor countries. Bangladesh, in this process must, consider the benefits that can be derived by minimizing the level of threats of globalization. The reality is difficult but the county has no way to overlook globalization because the whole world is intertwined in the idea of global village5. Keeping in mind the requirements of a twenty-first century it is felt that Bangladesh facing the constraints arising from globalization, however needs a multidimensional program of action in the current context of globalization to cope with the challenges of globalization (Kalam, 2002). to trade and foreign investment, and are privatizing and deregulating important industry sectors. Even the shock of Asian financial crisis has not caused a major retreat from global financial markets. Meanwhile, Multinational Corporations continue looking for new markets and low-cost production sites, and creating new opportunities for those countries to participate in the global economy. However, Bangladesh is not beyond the reality. The potential benefits of globalization for Bangladesh are great including increased access to capital inflow and technology, availability of goods and services at lower costs and employment opportunity also. The benefits are not automatic and there are costs to liberalization. Domestic companies may be affected by foreign competition in home. After that in order to be benefited from globalization, and from foreign competition in the domestic market, Bangladesh needs to establish competitive capabilities beyond cheap labor. These can take the form of educated workers, high quality infrastructure, local R&D capabilities, and strong entrepreneurial skills. The potential benefits of globalization for the economy of Bangladesh are described below. 7.1 Employment Opportunities Employment depends on the ability of each country to cope with the liberalized trade, investment and technology flows that globalization implies (Lall, 2002). It says little whether globalization has been good for growth and employment in developing countries but the relationship between globalization and employment is of growing significance to policy makers in developing countries like Bangladesh. Because globalization has opened up the economy and forced the government to change policies. The changed policies are more attractive to TNCs7, which in turn increase job opportunities and try to reduce unemployment at great extent. The comparative advantages that developing countries have in the international market place are low wage rate (Daniels, 2004). This led to Transnational Corporations (TNCs) to spread their production processes over the globe with better paid workers. It is proven that production processes and trade have changed significantly over the past 20 years and these caused some production processes to shift from industrialized countries to low wage economies on the periphery of the world especially developing countries. Relocation of many TNCs in export processing zone of Bangladesh are exemplified which have created a lot of opportunities for many unskilled and semi-skilled workers here. They are generating employment, tax revenue and wealth in the periphery of Bangladesh. Many multinational corporations working in the telecommunication sector in Bangladesh are also exemplified which have opened a lot of white collar job opportunities. The export-oriented garment industry presently employs around 1.8 million workers - mostly women from low-income and rural backgrounds. The second dominant exportoriented activity, shrimp farming, is also very labor intensive, presently employing nearly half a million rural poor. In the wake of the 2001 global recession, Bangladesh's reliance on foreign countries as a market for exports and as a source of remittances has become obvious. More generally, import liberalization is likely to have contributed to the creation of productive employment for the poor through the strengthening of many small-scale and informal sector activities that have benefited from improved access to imported inputs (Mahmud, 2002). Another issue of great importance to
7. TNC/MNC- A multinational corporation (MNC) or transnational corporation (TNC), also

Bangladesh is that the free movement of temporary workers across borders has been expanded; the remittances from the workers play an important role in its economy. However, it can be said that globalization process, more specifically, attraction of TNCs in Bangladesh, has created job opportunities. 7.2 Minimizing Digital Divide Minimizing digital divide improves the standard of living which is significantly hallmark of development. More access to digital devices such as mobile and telephone facility, internet facility etc gradually increases productivity, creates employment and sustains economic growth. However, it is important to ensure that everyone can benefit from such technology. The rapid spread of the use of information and communication technology (ICT) around the globe is both an outcome and a determinant of the process of globalization. It has drastically facilitated technological latecomers to have access to this network and, to the extent this access is important for development because it provides a unique opportunity for low-income countries to raise per capita income. Research shows that improved access to technology is improving the demand for skilled labor in many lowincome countries (Globalizationguide, 2002). The pace of technological change in ICT in recent years has led to revolutionary changes in the processing and dissemination of data and to the emergence of an information society, with an immense effect on production, services, economic development, organization of labour and the environment (DRPAD, 1999). The well combination of satellite technology, modern telecommunication system and computer technology has developed a super information highway through worldwide communication networks. Developed, developing as well as poor countries are somehow connected with this global network (Sarker, 2005). And many within developing countries see the internet as an opportunity to gain access to knowledge and services from around the world in a way that would have been unimaginable previously. Cyber caf, mostly facilitating email with overseas relatives, for example, are springing up in many parts of Africa and South Asia. The internet may also facilitate opportunities for economic development in industries such as tourism. In Bangladesh it is commonly observed that the availability of digital devices at minimum cost have created opportunity for the lower income group to have access to internet facility and mobile phone. These are permitting the users to access databases and communicate with others over long distances. Mobile and internet banking, online education and health care service etc are some examples trying to minimize digital gap. 7.3 Technological Improvement According to Barker (2000), technology is a fundamental and necessary key to development. The economic development needs the transfer of technology from the industrially advanced country to the developing world (Shamsuddoha, 2005). It is presumed that technology is the driving force of globalization and the generation and transmission of technological knowledge is being gradually transforming by globalization process. In Bangladesh if it is looked at the telecommunication sector or even other sectors it is clearly observed that multinational companies with heavy investment have transferred latest technologies here. There have been remarkable improvement and decreased cost of the telecommunication (especially mobile phones and internet). Villagers in remote areas are using mobile phones. Virtually remote villages are somehow connected with the globe either mobile phone, internet or satellite

channels. So, globalization process drastically helped to have improved access of technological latecomers to advanced technologies. Automation in the banking system, latest design of fashion, imitation of product and process innovations, standardization of product, software development etc are technological improvement in Bangladesh. Although it is common allegation against TNCs that they are exploiting developing countries through technology transfer and FDI, they are also disseminating technology to latecomers of advanced technologies. 7.4 Capital flows and their effects An important facet of globalization is the vast increase in capital flows and their diverse composition (Yusuf, 2001). Capital inflows in the form of FDI, whether in manufacturing, services, or resource extraction, generally produces positive outcomes for the country even when spillovers are modest through competition and linkage effects. On balance, it generates more productive and better paid employment and is environmentally friendlier than similar investment by indigenous producers (World Bank 1999, cited in Yusuf, 2001). FDI can augment the stock of skills, raise the level of technology, improve access to international markets and integrate countries into international production networks which are increasingly the locus of trade flows. Another salience of capital movements and their current fairly narrow ambit has drawn attention to the role of financial development. Openness can stimulate financial deepening, the creation and strengthening of institutions and the building of a viable regulatory infrastructure. As a result global financial markets will be the principal sources of capital for developing countries. Countries can develop if they rely extensively on TNCs for capital movement. Singapore, as one obvious example, has managed to thrive. Singapore government, while welcoming and actively encouraging TNCs, did not take a laissez-faire8 attitude to TNCs; rather it deliberately directed FDI into strategic sectors. Another example is Malaysia where FDI indeed has played a crucial role in development. The experiences of two stars performers of East Asia, namely Korea and Taiwan, especially during the earlier days of industrialization, also provide interesting insights into the role of TNCs in economic development. These countries have not been hostile to foreign technology they have clearly preferred, if the situation allowed, to use such technology and capital under national management rather than relying on TNCs. In the era of Globalization capital has increased its mobility to move across countries at a rapid pace. The mobility of capital has severe implications for working people everywhere - although they differ between developing and industrialized countries (Gallin, 1996 cited in Jauch, 2000). New investment in Bangladesh is recognized as a source of extra capital contributing to a healthy external balance, a basis for increased productivity, additional employment, rational production, technology transfer and a source of managerial know-how. However FDI is unambiguously beneficial for economic development of Bangladesh. 7.5 Globalization and Insurance As the economy grows, the income and asset will increase and at the same time the demand for its protection will also increase. Logically growth of the insurance sector will meet the demand for protection
8. Laissez-faire- the theory or system of government that upholds the autonomous character of the economic order, believing that government should intervene as little as possible in the direction of economic affairs.

Globalization: A way of Prospects and Threats for the Economy of Bangladesh

Md. Saidur Rahman Sarker, ACMA*
Abstract: Globalization is viewed purely in its economic dimension-defined as increasing integration of a national economy with the world economy through exchange of goods and services, capital flows, technology, information and labour migration. It has become a rare opportunity to breakout the cycle of perennial poverty. More and more countries consider global economy as a path to economic success. Multinational Corporations continue looking for new markets and low-cost production sites, and creating new opportunities for those countries to participate in the global economy. Bangladesh with her low economic profile has already aligned with the globalization process. A number of remarkable changes have been observed in the economic arena. Obviously, the potential benefits of globalization for Bangladesh are great. Increased access to capital inflow and technology, availability of goods and services at lower costs and employment opportunity are remarkable benefits for the economy of Bangladesh. It is proven that the benefits are not automatic and there are costs to liberalization. Actually globalization is a deadly game, if we can call it a game; there will be winners and losers. In most cases developing countries are in the list of losers. It is evident that in the globalization process, developing countries are interacting in different ways with developed countries but in real sense they have very little chance to gain from this process. Meanwhile developing countries have confronted a great disaster in economic sphere, political arena, in the field of technology and even in the cultural. It should be understood that globalization is good, if it can be managed, otherwise it may be harmful. Keywords: Globalization, TNC, Post-Keynesian Doctrine, and Global Village.

2.0 General aim of the study

In line with the research topic, the overall objective of the study is to critically analyze the impacts of globalization on the economy of Bangladesh. To achieve the aim of the research, the study will try to answer the following questions: t How is Bangladesh aligned with globalization process? t What are the prospects of globalization in the development of Bangladesh? t What are the present and future threats of globalization in the economy of Bangladesh?

3.0 Methodology of the study

The methodology used in this study is largely qualitative and explorative. Basically, this is a desk study. It is entirely based on the secondary sources of data. Apart from the review of relevant literatures, the study has explained the concept of globalization and its impact on the economy of Bangladesh. The data have been collected mainly from the different books, journals, and report published by the different organizations. Furthermore, a significant number of documents have also been collected via internet which has contributed more. The collected data and information have been processed manually and report in the present form has been prepared in order to make the study more informative, analytical, and useful for the readers.

1.0 Introduction
This study presents the effects of globalization on the economy of Bangladesh. In line with topic it will explain the concept of globalization, Bangladeshs alignment with globalization and benefits and threats of globalization for the economy of Bangladesh. For the purpose of present analysis, globalization is viewed purely in its economic dimension-defined as increasing integration of a national economy with the world economy through exchange of goods and services, capital flows, technology, information and labour migration. It is a process by which capital, goods, services, and sometimes labor cross national borders and acquires a transnational character (Islam, 2009). IMF (1997) defines globalization as the growing economic interdependence of countries world-wide through the increasing volume and variety of cross-border transactions in goods and services and of international capital flows, and also through the more rapid and widespread diffusion of technology . Open market economy supported by Adam Smith and comparative trade theory by David Ricardo are the cornerstone of the idea of globalization and neo capitalism1 is the driving force of this. It is however, argued that in the era of specialization no country does not produce all products rather country will produce products with comparative advantage. Consequently, every country will be benefited and consumers will get quality products at reasonable prices. In this regard world economy has become intertwined and however, in the globalization process the multinational enterprise (MNE) has taken a global approach to foreign markets and production; thus, it is willing to consider market and production locations anywhere in the world (Bhuiyan, 2003). Bangladesh has already aligned with this process and in the

meantime many multinational enterprises are located here with production and marketing networks that have secured many changes in the economy of her. And it is also mentioned that globalization has created a lot of competitions here mainly on exportable garments (e.g. knitwear), financial sectors have secured changes with modernization, FDI flows have been increased tremendously and businesses have been diversified to compete internally and externally e.g. pharmaceuticals. Moreover, a movement of state control to privatization, starting with the financial sector, is now doing better as trading on an open market and there is an increase of local industries. The volume of exports has increased due to reduced tariffs, and national economies have become ever more closely integrated through cross- border flows of trade2, investment, and finance. The technological revolution in transport and communications, which has eroded the barriers implicit in distance and time, has also facilitated this process. Although somebody explains globalization as the panacea- the elixir that will eradicate all poverty, remove disparity and enable the global citizens to enjoy a decent lifestyle, others look at globalization as the evil that will further enslave them to the rich (Mozumder, 2007). It also poses threats for the world economy particularly the economy of third world is in the trap of globalization. One of the threats for the economy of poor countries is: the industrial initiative by the countries to be or almost ruined by the wave of globalization. Society as a whole was not benefited from the process of globalization, yet up to now, globalization has frequently been linked to increasing inequality of the society (CAFOD, 2002). So, it is evident that globalization is not necessarily going to have homogenizing effects; rather its impact is

of assets and income. In spite of all the apprehensions prevailing now over the challenges that may crop up in opening up of the market, the domestic market of insurance companies can be benefited from globalization. Although there are lot of concerns in the context of the prevailing fragile insurance market of Bangladesh, even in the present size of economy, the development of insurance industry is not quite satisfactory, weak regulatory system, inadequate capital base, large number of weak insurers competing with each other leading to unethical practices etc, it is presumed that globalization will increase domestic capacity, instil healthy competition with the advent of foreign giant insurance companies and provide better customer value and preferences. Moreover, sharing of knowledge will ensure better product innovations, better value chain management9, and new techniques of underwriting and post-sales service including claim settlement practices. Besides, there will be better scope for harnessing capital at various tiers, creating technical and catastrophic reserves and harnessing investment and risk sharing opportunities in wider geographic regions (Haq, 2008). One example may be cited here that American Life Insurance Company, a multinational insurance company, has been operating in Bangladesh since 1972. This company has already occupied a large segment of market share with its consistent marketing thrust, good corporate management etc. However, it is supposed that there is relationship between globalization and growth of insurance business in Bangladesh.

8.0 Threats of globalization

The process of globalization unleashes the most vicious game of Economic Darwinism over the entire planet. In this deadly game, if we can call it a game, there will be winners and losers. In most cases developing countries are in the list of losers. It is evident that in the globalization process, developing countries are interacting in different ways with developed countries but in real sense they have very little chance to gain from this process. Meanwhile developing countries have confronted a great disaster in economic sphere, political arena, in the field of technology and even in the cultural. Although it is true that Bangladeshs alignment with the globalization process has gained some developments in limited sectors, it as a member of LDCs with weak economic and political structure, is under the threat of globalization. Present and future threats of globalization on the economy of Bangladesh are described below. 8.1 Economy in Globalization Many governments, global financial institutions: World Bank and IMF, and the increasingly powerful Transnational Corporations (TNCs) claim that globalization will ultimately improve the lives of people all over the world. They argue that globalization is the best thing that could happen to a developing country and that opening up trade and markets will lead to prosperity everywhere (Jauch, 2000). Globalization promises a better tomorrow and harmony between the people of the world who will all benefit from greater economic efficiency and increased wealth in the long run (Ruigrok et al, 1995 cited in Jauch, 2000). Critics think differently. They claim that world economy is under the control of globalization, the sound platform of higher capitalist globalization and a process of economic production and distribution network considering the world as a single market.
9. A value chain management is a chain of activities. Products pass through all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities. It is important not to mix the concept of the value chain with the costs occurring throughout the activities.

4.0 Outlines of the Study

The first section presents introduction and objectives of the study on the basis of research topic. The second section summarizes Bangladeshs alignment with globalization process. Section three, the core of the paper, discusses the prospects and threats of globalization on the economy of Bangladesh. The final section presents conclusion and recommendations that follow the findings of the study.

5.0 Limitation of the Study

Globalization is a multi-faceted phenomenon, and each facet may have different impacts on the socio-economic structure, legal and political system and even policy of Bangladesh. Interaction and feedback of each factor has made it difficult to separate the effects of globalization on the economy. Some impacts are visible, others are implied. However, this study has considered only some visible impacts on the economy. Many invisible impacts are really difficult to explain and this is why these are deliberately excluded from the study.

6.0 Bangladeshs alignment with Globalization Process

After independence, Bangladesh followed mercantilism concept in the economic sphere. This consists of import substitution, protection of local industries through import duties and other non-tariff barriers that thoroughly crippled any prospect to survive under competition. At the same time, the developed world was moving towards a postKeynesian doctrine3. As a consequence, the economic infrastructure
3. Post Keynesian Doctrine - An economic doctrine which argues that changes in the supply of money in an economy cause changes in the general price level. Coupled with this is a stress on minimal economic intervention by government and an emphasis on the free play of market forces. According to this doctrine, the supply of money has a major impact on a nation's economic growth. For example, monetarists prefer to control inflation by restricting the growth of a nation's money supply rather than by raising taxes. School of economic thought that the money supply is the chief determinant of economic activity.

7.0 Prospect of globalization in Bangladesh

Globalization gives us a rare opportunity to breakout the cycle of perennial poverty6. Hence more and more countries see joining the global economy as a path to economic success. Countries that had previously pursued protectionist strategies to nurture industrialization, such as China, Brazil, and India have lowered barriers
4. Perennially -Lasting an indefinitely long time. 5. Global Village is a term closely associated with Marshall Mcluhan. He describes how the globe has been contracted into a village by electric technology and the instantaneous movement of information from every quarter to every point at the same time. In bringing all social and political functions together in a sudden implosion, electric speed has heightened human awareness of responsibility to an intense degree. 6. Perennial Poverty - Poverty lasting for an indefinitely long time.

* Mr. Md. Saidur Rahman Sarker, ACMA, Deputy Director, Commercial Audit Directorate Audit Complex, Segunbagicha, Dhaka. 1. Neo capitalism states that everything should be made private property (privatized) and the rule of the state should be as minimal as possible. 2. Cross-border flows of trade- Border trade, in general, refers to the flow of goods and services across the international borders between jurisdictions. In this sense, it is a part of normal legal trade that flows through standard export/import frameworks of nations. However border trade specifically refers to the increase in trade in areas where crossing borders is relatively easy and where products are significantly cheaper in one place than another, often because of significant variations in taxation levels on goods. The Cost and Management, July-August, 2010 27

called multinational enterprise (MNE), is a corporation or enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation.

(To be continued ...)

The Cost and Management, July-August, 2010


The Cost and Management, July-August, 2010

The Cost and Management, July-August, 2010