DHAKA TRIBUNE

Long Form

Sunday, January 12, 2014

Behaving like a middle-income country

While the upgrade is inevitable, sooner or later, inter-sectorial dynamics need to adapt behaviour for it to have a long lasting effect
water-intensive industry that is highly inefficient in water use the average textile factory in Bangladesh consumes two to three times more that the amount generally needed to make one kilogram of fabric. Moreover, it pollutes the water around it, often with impunity. This double, and heavy, claim on water has not escaped the eyes of the communities. And, that is why the third finding in the chart is so impor-

It is not the speed with which we reach middleincome status that is important; it is the way we make the journey

SYed Zakir Hossain

Akhtar Mahmood n
he inevitable march of GDP will take us to the ranks of the middle-income countries in a few years. The collective aspiration is to be there by 2021, the fiftieth year of our independence. If we stay on track, we will reach that goal; if we are slightly off-track, it may just take a few years longer. That does not matter. What matters is whether we learn how to behave as a middle-income country. Becoming a middle-income country in a statistical sense is one thing; behaving like one is a different matter. What does this mean for the business sector and for issues related to business? This is a pertinent question as quite a bit of Bangladeshs good growth performance can be traced to entrepreneurship and enterprise the sharp eyes of businesses that saw the opportunities and the agile legs that moved fast to grab these.

policy imperatives of governments. They are also close to the low-level officials, who often are the interface for business, and thus have a good idea of ground realities. The attitudes and perceptions of this important tier of the bureaucracy have an important bearing on both the formulation of policies and regulations, and their implementation. These attitudes are shaped by the

This is important. The job of public policy is to help establish a conducive investment climate that creates the right combination of risks and returns, and harnesses the inherent profit-maximising goals of businesses towards the social good. Public policy can play this role effectively if there is sound policy and regulatory governance in the government. Good policy and regulatory governance is facilitated when

It needs to behave as governments in middle-income countries do, demonstrating a sense of accountability and transparency to business and society, and a willingness to listen, to consult and not to assume that it knows all the answers.

Businesses and citizens

Business operations are supposed to benefit citizens by providing them with jobs, buying inputs from them, and supplying them the goods and services they need. The market, through which businesses supply goods and services, provides some accountability since consumers can vote with their feet. However, there are limits to this. Hence, the need for additional mechanisms through which citizens can provide feedback on the quality and reliability of the goods and services provided by businesses. Such feedback, which may be provided directly to businesses, or to the regulatory agencies in the governance, can help enhance the accountability of businesses to citizens. In many countries, increased business interest in shared-value principles, whereby social good considerations are integrated into the core business strategy of companies (instead of being simply treated as nice things to do, as in most CSR initiatives), is fuelling interest in citizen to business feedback mechanisms as well as ensuring greater business to citizen transparency. Take the case of peoples attitude towards the textile industry; graph 2 is from a study done recently on the outskirts of Dhaka, an area with a large cluster of textile factories. People living around the factories were asked what they felt about industry: parts of their responses are captured in the graph. Almost two-thirds of the community members surveyed like to have the industries in their locality; in fact they want more to come because they believe that it will drive local develop-

tant: the overwhelming vote in favour of industry disappears when it comes to the important question of whether industry should have first right to resources. Only about a third agree that they should. The message is clear. There needs to be a collaborative relationship between industries and the citizens/ communities around them. People welcome industries but want them to be responsible in the way they treat the workers, the consumers, the broader community, and the natural environment in which they operate. There is room for collaborative action. If water tables are depleting and pollution is leading to lower agricultural productivity and health hazards, it is time to think how everyone in a community, industry included, can join hands to create clean clusters environmentally friendly, and resource efficient, enjoying the benefits of industry while containing its costs. If poor working conditions and maltreatment of workers are making their lives miserable and creating industrial unrest, businesses would benefit by having good feedback mechanisms that allow them to hear better what their workers are trying to tell them. As in the case of government-business relationships, a sense of accountability is at the root of a good business-citizen relationship. This is the second relationship that needs to be transformed if we are to become a middle-income country by deed, not by name only.

In a middle-income country, the leaders of industry are judged not by what concessions they squeeze out of government but by their vision and leadership that makes their industries socially responsible and economically efficient
In that race, often a blind one, businesses have sometimes forgotten to look back and see what they have overturned, what damage they may have done. Spectators, albeit impressed by the dynamism and agility of the runners, have urged them to take things easy and show concern for people around them. Some runners have heeded these calls; many have not. The referees have been confused, torn between the imperatives of bringing out the yellow cards while ensuring that the game flows unimpeded. These behaviours and relationships need to change. I would argue that a meaningful transition to a middle-income status would require transformations in three kinds of relationships: i) between government and business, ii) between businesses and citizens, and iii) between businesses themselves

Businesses and government

Consider the graph on government officials attitudes towards business issues (graph 1). In the past, an international development agency carried out a programme to build awareness in Bangladeshi government officials about business related issues. The programme was aimed at mid-level officials, mostly at the deputy secretary level. Mid-level officials are a critical part of the bureaucracy. They work closely with the senior policy-makers in government and are aware of the

awareness, or lack of it, of business related issues. Over a hundred officials from about twenty different ministries, departments and other government agencies went through this programme. Over a period of 8-10 months, they attended seminars and lectures, went on field visits and did short assignments on business related issues. They interacted with businesses and with experts who work on business related issues. They got an opportunity to go abroad and see how business-oriented governments work. Once the programme was over, an evaluation was carried out to compare the attitudes of these officials with that of their peers who had not been exposed to this programme and were presumably less aware of business issues. Individual respondents from both groups were presented with a set of statements and asked if they agreed or disagreed with them. Graph 1 provides a snapshot of the responses, focusing on three statements. Officials who attended the programme agreed with all three statements much more than their peers, who were not exposed to the programme, did. They are much more inclined to agree, for example, that many laws are unfriendly to private sector growth and need to be reformed. They believe more strongly that there is indeed scope within government to pro-actively take these reform actions. They have developed a more sophisticated understanding of how to approach the task of reform formulation. As the last bar shows, they believe more strongly than their peers that identification of reform priorities and approaches should be based on systematic diagnosis, not uninformed, gut reactions. Clearly, greater awareness of business issues has shaped their views on how to conduct public policy towards business.

governments have a sense of accountability towards society and businesses for performance and service delivery. In the middle of all this, is the attitude of government officials towards businesses. This is why the findings captured in the chart, although based on a small sample, are so important. It shows that, with some effort, the mindsets and attitudes of government officials can be changed, which can have a positive impact on their sense of accountability and on how business-related policies and regulations are framed and implemented. As we approach middle-income status, we need to transform the way businesses and the government looks at, and behaves with each other. Mistrust and collusion should give way to trust, collaboration, and consultation. In the above example, it was an international development agency that took the initiative to work with the government to build awareness among officials.

Businesses-business relationships
The third relationship that needs to change is within the business sector itself. Briefly put, factory owners who have willfully created unsafe working conditions, treated their workers unfairly and polluted the environment must be condemned. At the same time, we must acknowledge that there are people in the industry who have worked against many odds to create safe working conditions, treat workers relatively well, and protect the environment. We do not know what the percentage is. We do not know because their stories are not well publicised. But these stories must be told. We must ask: if some parts of industry can afford to adopt good practices and remain competitive, why cant others? That brings us to the all-important question: how can businesses learn from each other. Industrial development happens when laggards learn from the vanguards. This means that incentives and mechanisms need to be crafted that drive companies to learn from others and also share their own knowledge. Industry associations have a collective responsibility to create the environment for such knowledge sharing to take place. In a middle-income country, the leaders of industry are judged not by what concessions they squeeze out of government but by their vision and leadership that makes their industries socially responsible and economically efficient. So I come back to where I started. It is not the speed with which we reach middle-income status that is important; it is the way we make the journey. As an African saying goes: If you want to walk fast, walk alone; if you want to walk far, walk together! l Akhtar Mahmood works for an international development agency.

Now it is time for the business sector to take on that role, and work out similar programmes with the government. It is time for them to ensure that businesses behave in a manner such that the yellow and red cards do not have to come out that often. On its own part, the government needs to ensure that the playing field is truly level.

ment. This is not surprising. Many of them, or their family members, work in the factories. Others, such as shopkeepers, traders, rickshaw pullers, small enterprises, and landlords, have benefited from the spillover impact. But industrial development comes at a cost. Industrial operations take up resources land, water, and utilities. This is all the more true for textiles, a