Friday, March 4, 2016

The manufacturing challenge - what is Bangladesh doing right?

It is well known that premature de-industrialization is a major obstacle to job creation and economic growth for the next generation of industrializers hoping to emulate the path of China and other East Asian economies. 

This UBS report for the World Economic Forum has two graphics that capture the contrasting trajectories of manufacturing sector growth among developing countries. The first graphic looks at the trend in manufacturing's share of output after the demographic inflexion, when the share of workforce exceeds 60%, for the early industrializing emerging economies. The trajectories show distinct upward trend.
The second graphic captures the trajectories for the late (say, post-nineties) industrializers. 
In all these economies, the trend before and after the demographic inflexion has been stagnation or decline. It is remarkable that apart from Turkey, where it is marginally higher, the share of manufacturing in all these countries is today lower than at the time of their inflexions. 

The demographic inflexion years for the various economies - India: 1996; China: 1981; Korea: 1977; Thailand: 1984; Indonesia: 1991; Brazil: 1990; South Africa: 1995; Mexico: 1997; Turkey: 1992; Malaysia: 1993; Vietnam: 1998; Bangladesh: 2003; Egypt: 2002. 

From this, the two standout economies, which have managed to buck the secular trend on premature deindustrialization have been Vietnam and Bangladesh. Coincidentally, Rahul Jacob has this article in Business Standard which may have some clues on what they are doing right compared to countries like India. Bangladesh continues to impress and puzzle.

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