An important thing to look back on, to catch up with:
The Government of Bangladesh has cooked up a new industrial policy to spur on industrialization and growth. That’s a fair enough project. But the right and the left is stirring the pot, upon this news, in a move to win their own battles.
The left wants to ask: why has the government added small, indeed micro-craft industries in the same roster as behemoths like the ship building industry. Where’s the economy of scale that might make the move viable? How can be fair to be put out in the spotlight in such a radical way?
The right wants to ask: how can private industries compete with nominally state run industries? Is there not an explicit government sponsorship that overwhelms government led innovation in those private sectors? (Just consider for a moment that some of the most successful businesses in Bangladesh are actually run by the military.)
The Industries Minister Dilip Barua has argued that the inclusion of state run industries is justified by the assertion that the new policy will make these organizations competitive. However former government advisors have come out and argued state support thoroughly skews the incentive structure of public and private models of economic exchange. The main thrust of their argument: competitive state run industries necessarily elbows out harder run private sector industries. Now the argument against state run industries is an important one, one that makes modeling and practical sense. However it turns on whether the state has sufficient monitoring capacity to curtain dead weight costs of corruption, which runs rampant in Bangladesh’s private sector.
The new policy also includes plans to set up new ‘economic zones’ for growth industries like pharmaceuticals. There is no law that covers this land, however: any such zones would have to be drawn out through public-private investment strategies. As such, its unlikely that these economic zones will go through, no matter the entrepreneurial impulse that lies behind the move.