There is a little bit of magic with out-performing countries. Measured in terms of the cumulative average growth-rate (CAGR), over a 50-year time-span, out-performance informs others of how robust the economy is, and the degree to which the government is effective. They achieve a minimum of 3.5 per cent growth-rate over that half-century period, so they are "known" quantities to investors. Both domestic and foreign investors get the freedom to make very long-term plans, knowing nothing endogenous will rock the boat, for instance, irregular or surreptitious government action.
Singapore exemplifies this by topping the list for quite some time, with a US$ 52,601 gross domestic product (GDP) per capita in 2016. Behind this is a 5.2 per cent GDP/capita growth-rate over those 50-years, which is only the third-highest after China's 7.3 per cent (against a 2016 GDP/capita of only US$ 6,894); and South Korea's 6.2 per cent (supporting a GDP/capita of US$ 25,459 USD). That Singapore has outperformed the United States for 36 of those years is a telling signal: it is more predictable, attractive, and profitable investment host over the long-haul than any other.
Those calculations, made by the McKinsley Global Institute, should be closely followed in Bangladesh if the country seriously wants to boost its GDP growth-rate faster and attain developed-country status by mid-century. It is not doing so bad thus far, although the confidence level remains far below where it should be. The latest McKinsley report places it in the third-highest category of "very recent accelerators." For instance, its 50-year CAGR is only 1.9 per cent, but democratising the country from the early 1990s doubled that figure to 4.2 per cent, a rate higher than even Singapore's 2.9 per cent during that same phase. Only one country in the highest category, called the "long-term out-performers," could beat that figure: China, with 8.6 per cent, although all 11 countries in the second-highest group, the "recent out-performers" did better, some impressively (including our RMG competitors, Myanmar, with 8.9 per cent, which was the highest score in the second group, and Vietnam, with 5.1 per cent: the lowest group score was Ethiopia's 4.8 per cent).
Our strong-point, as one can deduce, has been our export growth-rate, an impressive 14 per cent, from 1996, second to another of our emergent competitors, Cambodia's 16 per cent. But the investment meat is determined by those areas where we are weak, very weak, in fact: change in the government effectiveness score of zero might look good against Mozambique's -30 and Peru's -8 from Bangladesh's own group of countries on that list, or Belarus's -6 from the group just above Bangladesh's; but it pales by comparison against Rwanda's 93 from Bangladesh's own group, or the 81 of Serbia in the group below Bangladesh's.
A second area of concern is not enough growth in domestic savings, our 8.0 per cent since 1996 being higher than the top-group's average of 5.0 per cent (only China, with 10 per cent had more than Bangladesh's), but below the second group's 10 per cent average (with double-digit growth in Azerbaijan, Turkmenistan, Cambodia, and Laos, of 19 per cent, 16 per cent, 16 per cent, and 13 per cent, respectively), and behind Mozambique's 13 per cent and Rwanda's 14 per cent in Bangladesh's own group.
A third area suffices to show where else emphasis needs to be placed: innovation. On the Cornell University, INSEAD (Institut Européen d'Administration des Affaires), and WIPO (World Intellectual Property Organisation) lists, Bangladesh registers only 1 since 2013, a figure higher than the top-group's average of -1, but behind the second group's 4. Only Ghana (-8), Peru (-1), and Dominican Republic (0) rank behind Bangladesh in its own group, with the highest two, of 18 and 13, belonging to Mozambique and Rwanda, not only in the group, but among the 71 economies tallied. Upwardly-mobile countries just happen to be more innovative.
What do we learn? Government effectiveness from 1996 has been hampered by change-of-government interruptions, climaxing with the 'oborrodhs' in 2014. Whether caretaker governments, or the two major political parties must be held responsible for this is only a quibbling point: we need to overcome both constraints so a peaceful transfer happens regardless of exogenous or endogenous forces. That is where investor confidence, particularly of foreign direct investment, begins. Bangladesh has a chance in 2018, when a caretaker government does not seem to be in the cards, at least not in September, nor is a violence-prone pre-election atmosphere at hand. The country's future depends on how stable the next six months will be.
Once addressed, the government-effectiveness malaise could rapidly boost the second problematic area: restoring confidence in the banks, therefore attracting cash from under-the-pillow, or not being exported to Geneva. Reversing this signal would bring investors from the sidelines. That is not to downgrade domestic savings: we have plenty, but with multiple megaprojects on the slate, they will be needed, and replenishing them becomes a requirement. Above all, our banking crisis has to be addressed, particularly as the taka loses value: this is not as bad as in some other countries (India, most closely), but should be seen as a priority.
Both above reform areas feed into the third, where the context matters: innovation. Innovation does not drop from the sky, nor can it be copy-pasted. It requires stable long-term thinking and an institution capable of transplanting thoughts into realities. Investment in this one area carries enormous future dividends, but depends on clearing the other two problem areas.
These, then, are the predictors of whether we climb the middle-income ladder to the top in 10 years and become a developed country in 25. What McKinsley sees in Bangladesh as an "out-performer" actually exposes where it is an "under-performer". Put together, chances are promising the country can be an "over-performer," but prescription is no substitute for performance.
Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.