Bangladesh and Vietnam have an identical mission and time-span: become a 'developed country' (DC), the former targeting 2041, the latter 2045. Both must move significantly up the production value-chain from a low-wage fulcrum (ready-made garments [RMGs] sector dominates in both), to far higher skills. Both alternate as the #2 or #3 on the RMG exporters' chart, but the structurally different economies suggest Vietnam getting there first.
At stake may be how many industrial eggs each carries in its own basket along with the commensurate sociological structures. Since skills stem from education or training, tapping intellectual resources intimately invokes sociological mobility, in this case, upwardly. Both economic and sociological progress in our era has to also be trimmed along SDG (sustainable development goals) pathways and implicitly depict health development among other such DC features. How do both countries fare in their quest when structures evolve only glacially?
Bangladesh was the second-largest RMG exporter after China throughout this century, except in 2019, when Germany briefly intervened, then Vietnam in 2020, before recapturing that spot in 2021. Both Bangladesh and Vietnam cling on to their RMG credentials differently. For the former, it is the only major export item, earning over 80 per cent of all export income and as the top source of non-farming employment, with more than 4 million workers. In Vietnam's increasingly diversified economy, RMG exports serve as an easy source of income, but account for only a third of all exports. Yet, with gung-ho Bangladeshi entrepreneurs targeting 100 billion USD of RMG exports by 2030 and Vietnamese counterparts not even finding the workers to take up that challenge, one crucial takeaway highlights Bangladesh's one-track industrial mindset against Vietnam's diversifying counterpart. These have been structuring societies differently.
Guided by statistics, arguments can run astray. For example, when the 2008-11 Great Recession ended, Bangladesh commanded slightly more than 4 per cent of the global apparel export market, with Vietnam accounting for just under 3 per cent; yet when the 2020-22 pandemic began, with Bangladesh's share climbing to 6.3 per cent and Vietnam's flying even faster to 6.4 per cent, we come away with impressions of a tight till-the-devil-does-us-apart fight. This betrays realities.
Economic and social structures remain too far apart to back up that RMG neck-and-neck scramble. Bangladesh's are far more static than Vietnam's: its RMG sector wields monopolistic clout behind the country's economic steering-wheel, while Vietnam's RMG sector is only one of several sectors influencing policy-making. The sociological consequences may be too subtle to fit into statistical analysis, but they carry a strong staying power: Vietnam tripled its high-skilled exports to almost 40 per cent of overall exports in the last decade, while Bangladesh literally froze its low-wage RMG monopoly of exports and the economy. In turn, new and upwardly-mobile job opportunities open up in Vietnam, but Bangladesh continues playing the same game.
Vietnam's diversification is bearing fruits: blue-collar 'wages' have started shifting into white-collar 'salaries', and this overall economic balancing dynamic is most vividly evident in trade, with exports hustling to edge imports. Bangladesh remains a hard-core blue-collar country, replete with low and static wages, and where imports demand 70 per cent more money than exports have been fetching.
Vietnam's education and healthcare performances show a more robust infrastructure than Bangladesh's: even with more people (170 million versus 95 million), the size of Bangladesh's internet users remains only two-thirds of Vietnam's (41 million versus 69 million); and with hospital beds per one-thousand persons, Bangladesh's paltry beds-per-thousand score is barely one-quarter that of Vietnam's, meaning we are more prone to medical vulnerabilities and costs, with, in fact, diabetes, malaria, and tuberculosis taking far more lives in Bangladesh than in Vietnam. Those health scores and a prior reference to import costs being 70 per cent more than export revenues expose two of the constraints not evident in Vietnam: indulgence in luxury imports, and growing payments for medical treatments abroad. Both tax private accounts heavily.
If these do not give Vietnam the edge, another factor has helped vault it higher: the far easier engagement of foreign investors, particularly from the United States as the United States begins to shift its production inside China to other countries.
Though Bangladesh has shifted some attention to high-skilled production and exports, it has a long way to go: shipbuilding leads the way on both fronts, along with motor-cycles and automobiles. No rapid action of these kinds can go far without foreign investors feeling favourably inclined to come, at least to reap the opportunities possible. While quite a few of our special export zones (SEZs) and export processing zones (EPZs) have been allocated to South Korea (71), China (54), Japan (30), and India (20), we need to do better by dissolving possible hindrances.
These could be infrastructural (which is being separately tackled by a series of mega projects), terms and conditions, especially how to handle profits, and even more intractably, better supervisions of our customs and immigration flows. The country's recent shift to e-passport is a step in the right direction, but our ports and airports continue to be impeded thoroughly by obstacles and graft-seeking personnel. Cleansing production and transaction systems go a long way to inspire foreign investors. Both the 'Accord' on Fire and Building Safety (representing European retailers) and 'Alliance' for Bangladesh Worker Safety (representing North American retailers) groups sought to do so after the Rana Plaza tragedy, against opposition, particularly from the behemoth Bangladesh Garments Manufacturers and Exporters Association (BGMEA).
"Thanks to Accord and Alliance for extending support to resolve our crisis," said Md Shafiul Islam Mohiuddin, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), "but don't try to be the East India Company." That is the kind of a resistance we carry in our business genes, reflecting the patronising underbelly we must first reform in a way it has not really prevailed in Vietnam, and a warning of what might ensure otherwise.
Interest groups exact a higher toll in Bangladesh than in Vietnam. Not a single lobby group is strong enough to challenge, let alone subordinate, the BGMEA RMG platform, thus thwarting further liberalisation of the economy. Bangladesh's 'graduation' into a developing country may be held back unnecessarily, thus irreversibly derailing any DC race with Vietnam.
Negotiating trade agreements gets hurt. Vested groups remain resistant to reducing barriers. Doing so lubricates free-trade agreements, particularly with Southeast Asian countries. This may be the final straw: Vietnam has a solid regional cooperation platform, Bangladesh does not. Our average double-digit tariff level (12.5 per cent in 2020) only climbs, and contrasts Vietnam's declining single-digit counterpart (5.6 per cent in 2020, both figures from World Bank data).
As a member of the Association of South East Nations (ASEAN) and its ASEAN Free Trade Association (AFTA), Vietnam exposes why, by not having any such memberships (with the exception of Bhutan), Bangladesh cannot charge ahead. Since softening such impediments is crucial to a flowering future, Bangladesh must work out a game-plan to defuse patronisation.
It is not that only Vietnam can keep its RMG cutting-edge globally and climb the production value-chain: Bangladesh can do it too, and carries an impressive record to show that. Yet, it presently does not have the right marbles to play the evolved game.
Imtiaz A. Hussain is Professor, Department of Global Studies & Governance, Independent University, Bangladesh.
