So what the hell is this Dutch disease? When you hear the word Dutch disease, you will naturally think that it is the name of a disease. Yes it is a disease. But not humans. Not even an animal. So? It is basically a syndrome of economics. But why is the word disease associated with the term economy? What is the role of the Dutch or the Netherlands? No, you don't have to be a student of economics to understand this. But it is quite interesting that the article titled Dutch Diseases and Economic Illnesses Easy to Catch, Difficult to Cure, published by the Booking Institute in 2017, said - what a persistently low oil price, dose to oil richan prizes like what a long cold winter dust to people What is the significance of this?
It can be explained in simple Bengali, if the price of oil continues to fall in the world market, then the economy of oil-rich countries dependent on oil may suffer from various problems. Oil here is just a metaphor. Rice, dal, salt, sugar can be anything in place of oil. May be any industry such as textile garments or information technology. The main issue is excessive dependence on a particular product or thing. That dependence can make the entire country's economy tumultuous. Dutch disease is a concept well known to those who care about economics. There is demand for oil in Bangladesh too. So will Bangladesh be affected by the Dutch disease one day? What is the resistance? Dutch disease is a situation in the economy when a particular sector of a country's economy develops very rapidly while other sectors begin to decline. As a result, the value of that country's currency increases much more than usual. Simply put, Dutch disease is an economic phenomenon that brings positive news to a country. At the same time brings policy influence on any other sector of the economy. Suppose a country suddenly finds a natural resource. This will have a positive impact on the country's economy. If there is a negative effect on the economy instead of a positive effect or if the negative effect of that asset increases than the positive effect, then it is called Dutch disease.
The question may come to your mind, why the improvement of one sector of a country will have a negative impact on other sectors? The matter can be explained with an example. A popular theory of international trade is the theory of comparative advantage or competitive advantage.
The main point of this theory is that a country that is in an advantageous position in the production of that product should specialize or specialize in that product and export it. By doing this, compared to other countries, international trade will get additional benefits. Suppose Bangladesh suddenly discovered a natural resource. We know that such sector is not labor intensive. In other words, taking the initiative to extract these natural resources will not create much employment. On the other hand, natural resources require a lot of money to extract them from the mines and process them properly. Now let's say that Bangladesh does not have enough money to extract natural resources. A foreign company decided to invest in them. As a result, a lot of foreign currency will come to Bangladesh. As a result, the value of money in Bangladesh will increase compared to other countries. Which is called currency appreciation in economics.
As a result, Bangladesh will be able to import products from other countries at lower prices. If someone wants to import from Bangladesh, the cost will be much higher. Since products are coming from other countries at lower prices, the prices of foreign products will be lower than domestic products in Bangladesh. As a result, many industrial factories in the country will be destroyed without being able to survive in the face of foreign competition. And in this way the newly discovered natural resources can threaten the entire economy by threatening other sectors of the economy. How did the word Dutch disease come? In 1997, The Economics magazine was the first to use the term Dutch disease. After the discovery of natural gas, the term Dutch disease is used to explain the complex situation created in the economy of the Netherlands.
Nineteen sixty nine years. That year, the Netherlands discovered a large amount of natural gas. The country then began exporting natural gas in excess. Meanwhile, their export income increased a lot. The real problem started when the higher export earnings caused the Dutch currency to appreciate and the Netherlands failed to stabilize its currency. This increased export revenue in the Netherlands benefited basically everyone involved in gas. On the other hand, products that are not linked to natural gas have become less competitive in the world market. Because of this, the value of the Dutch currency against the dollar increased the cost of production. As a result, it was seen that the export income from the rest of the sectors of the economy, except for natural gas, decreased. That is, the overall export earnings were reduced. From here later came the concept of Dutch disease. Will Bangladesh suffer from Dutch disease syndrome?
When the Netherlands suffered from the syndrome, about eighty-four percent of their total export earnings came from gas. We know that currently more than eighty percent of Bangladesh's export income is coming from the garment industry. So is Bangladesh going to suffer from Dutch disease syndrome in the near future. The garment industry will be largely credited for the economic prosperity of Bangladesh. But will that sector become a curse again for Bangladesh? That possibility. how much We have said at the outset that natural resources are not a labor-friendly industry. But the garment sector of Bangladesh is a labor-friendly industry. A large number of workers are required for work in this sector. About three million people of the country are directly involved in the garment industry. Besides, many other industries are closely related to this industry. Bank. Insurance, transportation, seaport, hotel. Many sectors including construction are related to the garment industry. Garment industry is directly and indirectly contributing to the development of these industries. Many people point to the economic crisis of the oil-dependent Venice jeweler and say that Bangladesh's excessive dependence on the garment industry will lead Bangladesh to the Dutch disease. But the reality is that the economy of Venezuela and Bangladesh are completely opposite.
Venezuela is a socialist country. The economy of that country is controlled by government intervention. On the other hand, Bangladesh follows the capitalist system. Bangladesh's economy is controlled by the private sector. Garment industry of Bangladesh is not a government controlled industry that the government will hire in different garments as it wants. In 2016, research was done on remittances from Bangladesh and Nepal and Dutch disease from Saidama University in Japan. The research shows that due to remittance signing, Dutch disease in Nepal has no effect on Bangladeshi Dutch disease. As an explanation, they mentioned two reasons.
First, Nepal spends most of its remittances on consumption. But the money of Bangladesh has increased the capital by investing in various sectors. Secondly, Bangladesh has invested foreign earnings in the productive sector. Besides, Bangladesh has taken various initiatives from nineteen-nineties for the development of various sectors of the economy, such as creating economic zones, creating export processing zones, adopting contemporary industrial policies and creating infrastructure, etc. But Nepal has never adopted any such policy aimed at restructuring the manufacturing sector. So there is no challenge in Bangladesh? It is not the case that Bangladesh will sleep peacefully with oil in its nose, forgetting the worries of Dutch disease. There are several challenges in front of Bangladesh. Bangladesh will reach the ranks of developing countries by graduating from LDC in 2026. As a small country, Bangladesh will not get the benefits it is getting now from the European and American markets. And for this, Bangladesh has to take the initiative to sign free trade agreements with various countries from now on. Besides, the matter of joining various bilateral and multilateral economic forums such as ASEAN, RECEPT etc. should be considered. Still the economy of Bangladesh is largely dependent on the garment industry, the garment industry of Bangladesh has to compete with Vietnam, China and other countries in the world market. Therefore, excessive dependence on this sector may bring new challenges for the economy of Bangladesh in the coming days. So what to do in Bangladesh? Bangladesh can focus on two things for now. First is product diversification or diversification of export products. Export of other products should increase without relying only on RMG. Bangladesh can focus on the export of jute and jute products, leather products, plastic products.
Second is market diversification or market diversification. Bangladesh now mainly exports to the United States or some European countries. Bangladesh should find new markets. If this versatility is not brought, there is a risk of getting affected by Dutch disease in Bangladesh. We can mention China as a new market. In 2019, China imported goods worth two and four trillion dollars. Where Bangladesh's share was only zero decimal zero five percent. A Bangladeshi named Dr. Razzak has done research. If Bangladesh can catch only one percent of China's market. Bangladesh will be able to earn twenty five billion dollars a year. Very recently, China announced to provide duty-free export facility to 98 percent of Bangladesh products in its own market. In this, Bangladesh will get duty-free benefits in the export of eight thousand nine hundred and thirty products in the Chinese market. Bangladesh should try to increase exports to China and other new markets such as South America, ASEAN countries, Middle East countries. Then it will be possible to stay away from the consequences like Netherlands or Vietnam very easily. So far today. thank you
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