Digital Transformation and Economic Development in Bangladesh: Rethinking Digitalization Strategies for Leapfrogging

322 Pages·2022·7.766 MB·English

by  Monzur Hossain

Digital Transformation
and Economic
Development in
Bangladesh
Rethinking Digitalization Strategies
for Leapfrogging
Monzur Hossain
Digital Transformation and Economic Development
in Bangladesh
“Dr. Monzur Hossain’s factual analysis on the role of digital transformation in
the development framework of a lower middle-income country (LMIC) such as
Bangladesh is a must-read for anyone working at the confluence of development
economics, information technologies, and public policy. After having had the
opportunity to shape the ICT Policy framework of Bangladesh adopted in 2009
and continuing to this day, I had the distinct pleasure of co-authoring a book
titled‘Goingdigital:realizingthedreamsofadigitalBangladeshforall’published
bytheUniversityPressLtd.in2011.Hossain’sbookisthefirstmajorpublication
in a decade since that delves into the hopes, aspirations, and ground realities of
the digitalization initiatives of a nation whose youthful population is highly
expectant on the power of technology to bring them economic freedom.”
—Habibullah N. Karim, The founding secretary general and a past President of
the Bangladesh Association of Software and Information Services (BASIS)
“The Digital Bangladesh Vision has gained impetus and delivered benefit to
the people of the low-income country. Why does this big-push approach not
disintegrate in mid-air? How is the digital divide overcome? The author’s lucid
expositionofcarefulanalysesofpoliciesandimpactsmakesthisbookamust-read
handbook for leapfrogging economic development.”
—Tetsushi Sonobe, Dean and CEO, Asian Development Bank Institute, Tokyo,
Japan and Professor, National Graduate Institute for Policy Studies, Tokyo, Japan
Monzur Hossain
Digital
Transformation
and Economic
Development
in Bangladesh
Rethinking Digitalization Strategies
for Leapfrogging
Monzur Hossain
Bangladesh Institute of Development
Studies
Dhaka, Bangladesh
ISBN 978-981-19-2752-2 ISBN 978-981-19-2753-9 (eBook)
https://doi.org/10.1007/978-981-19-2753-9
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This book is dedicated to my mother, Pakia Khatun, who died on August
10, 2016. Her smile was like sunshine to me, and she was the source of all
my inspiration and hard work. She instilled in me to live a life with
integrity, self-respect, and perseverance. As I am as old as the independent
nation that we live in today, this is an opportune moment to dedicate a
book to a mother who struggled to raise a newborn in the bloody war of
1971.
Preface
I have planned this book to be a token of commemoration for 50 years
of independence, highlighting the role of digital transformation in the
country’s development framework. This book is the first of its kind that
considers digital transformation as a strategy for leapfrogging toward a
developed nation in the quickest possible time, embarking on the power
of the youth. Having the demographic dividend in place, this is an
opportunemomentforBangladeshtoutilizeitsyouthinthedigitaltrans-
formationprocesstomarchtowardfastergrowthtrajectories.Asuccessful
digitaltransformationwillleadtoaknowledgesociety,whichiscrucialfor
economic freedom and justice. The book has thus not restricted its anal-
ysistodifferentaspectsofdigitalizationonly;italsoanalyzesdigitalization
from a broader development framework.
Bangladesh celebrates its 50 years of independence in 2021 with high
admiration from various quarters for its impressive economic and social
performances over the last 50 years. The achievements are commend-
able for many reasons. The country by now has overcome the prevailing
pessimisticoutlookwithitsinnovativedevelopmentpoliciesencompassing
both public and private sectors and hard work and aspirations of the
people, which are reflected in hard-earned remittances from abroad, a
significant rise in readymade garments (RMG) exports that accommo-
dated over 4 million female labor force, adopting modern agricultural
technologies, and so on. Bangladesh achieved self-sufficiency in food
vii
viii PREFACE
production a decade ago. The country has reached the lower-middle-
income status in 2015 and set to attain graduation from LDC status by
2026 and developed nation status by 2041. Though various reform poli-
cies, such as trade and financial reforms undertaken in the 1980s and
1990s, have uplifted the economy from the bottom, further progression
requiressomeinnovationsandproductivitygainstoescapefromdevelop-
ment traps. This calls for a technology-driven development strategy.
In this context, the Bangladesh government adopted a digitalization
strategy in 2009 as a key development strategy by pledging to achieve
middle-income status by 2021, which is fifty years of its independence.
Digital Bangladesh has become a buzzword of development over time as
thedigitalizationtargetsarealignedwithdevelopmenttargets.Underthe
“Digital Bangladesh” vision, the government undertook a massive digi-
talization process by investing in e-governance, ICT infrastructure, ICT
parks, skills development programs, and so on. The Digital Bangladesh
vision is an innovative policy framework of the Bangladesh government
that may be considered a shifting development strategy in the context of
thedecliningimportanceoftraditionalgrowthdrivers,suchasreadymade
garments, agriculture, etc. If properly harnessed, broader digital trans-
formation could help the country avoid development traps and leapfrog
into the next level of development. As a shifting development strategy,
it is thus important to assess the context, relevance, and achievements
of Digital Bangladesh policy in terms of the digital transformation of
the economy. This book makes a modest attempt to evaluate the Digital
BangladeshPolicyfromthesecontexts,anditslikelyimpactoneconomic
growth and development.
Information and communications technologies (ICTs) could provide
leverage to developing nations like Bangladesh to catch up with industri-
alizednationsthroughatleastthreechannels:(i)increasingefficienciesin
product and process by reducing transaction costs reinforcing the “death
of distance”; (ii) facilitate innovations through the adoption of software
and information technologies that facilitate productivity gains across the
board, and such productivity gains contribute to total factor produc-
tivity and hence higher economic growth; and (iii) the development of
the IT industry with a skilled labor force that helps capture a part of
growing outsourcing businesses from the developed world with low-cost
labor advantage. Low-income countries like Bangladesh have compara-
tive advantages to gain from adopting ICTs. For example, as the ICT
sector mainly relies on human capital and a low level of investment, it is
PREFACE ix
easier for Bangladeshto build necessarycapabilities faster with its current
demographic dividends.
Acertaindegreeofdigitaltransformationoftheeconomyhasoccurred
by now with the substantial adoption of digital technologies. Digital
transformation takes place with the adoption of the digital technology
built on telecommunications networks, computer technologies, software
engineering, and so on. Nonetheless, ICT infrastructure is the precondi-
tion to achieving digital transformation. Though ICT infrastructure by
now taking better shape in the country, the affordability and accessi-
bility of digital services do matter. Furthermore, the spillovers resulting
from their use have robust bearings on economic development. The
bookdrawsuponthesupply-sideanddemand-sideperspectivesandpolicy
diffusions that are instrumental to the digital transformation. The chap-
tersarebenefittedfromtheauthor’slong-standingresearchworksonthe
topic. The importance of the book lies in the fact that it examines a first-
hand developing country experience that aspires to embark on a higher
development trajectory with a “big push” policy for digitalization.
The chapters are thematically organized in three parts. Part I
encompasses chapters highlighting development perspectives of “Digital
Bangladesh,” achievements, and policy and regulatory frameworks. The
chapters provide a snapshot of the digital Bangladesh vision, associated
investments in ICTs, and the current state of digitalization from both
national and regional perspectives. Part II focuses on the supply-side
aspect of digital transformation. This part provides a detailed discussion
on the current state of the ICT industry, its performances, and chal-
lenges, including the ICT sector’s contribution to service exports, ICT
products, and services, types and nature of ICT firms, etc. It also reviews
the policy of building ICT parks in various districts from the perspectives
of agglomeration economies. In addition, this part provided a detailed
analysis of the existing human resources and skills gap in the sector. Part
III focuses on digital transformation and its impact on productivity and
growth. Both micro- and macro-level analyses are done in this part of
the book. The firm-level analysis focuses on innovations, market access,
and financial access. From a macro perspective, ICTs’ role in economic
growth, particularly total factor productivity growth, has been assessed.
ICTs’ role in digital finance and sustainable development has also been
highlighted here. Finally, the book draws conclusions based on the find-
ings in various chapters and identifies the areas where more focus needs
x PREFACE
to be given to expedite the development outcomes. Though it is some-
what an earlier attempt to assess the digitalization policy in its ten years
of inception, the analysis in this book could serve as a basis for further
evaluation of digitalization policy as a shifting development strategy in
the coming years.
Dhaka, Bangladesh Monzur Hossain
Acknowledgments
The book consists of chapters based on my long-standing research works
in the areas of ICTs and knowledge economy. In particular, I use data
collected from various surveys conducted by the Bangladesh Institute of
Development Studies (BIDS) under my leadership with funding support
fromtheSEIP,JICA,ADB,andothers.Thedatasetsareusedtogenerate
further knowledge, and interpretations and the findings provided in the
book do not necessarily reflect the views of the sponsoring institutions. I
sincerely thank them for the data. I also thank BIDS and all the relevant
institutionsfortheirsupportinsteeringresearchintheseimportantareas.
I also express my sincere gratitude to the BASIS, BCS, BACCO, and
ISPAB for providing necessary information and extending their support
to us as and when we sought.
I sincerely express my gratitude to Professor Dr. Shamsul Alam,
State Minister for the Ministry of Planning, Professor Tetsushi Sonobe,
Dean and CEO, Asian Development Bank Institute (ADBI), and Mr.
Habibullah N. Karim, former President of BASIS for writing endorse-
mentsforthisbook.Theirendorsementswillhelpreadersunderstandthe
importance of the book. I thank Afrin Mahbub for her excellent research
assistance.
My sincere appreciation goes to Sandeep Kaur, Managing Editor of
the book, and Hemapriya Eswarth, Project Coordinator, from Palgrave
Macmillan for their continuous support in the process of publishing the
book.
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