"A closed-order deals environment which is stable in nature can provide powerful expectations for the key actors and motivate them to innovate, invest and create industries that lift the economy and produce high rates of growth”, said experts in a webinar on Thursday.
They opined that over the last 20 years, Bangladesh has experienced consistent and stable growth despite the lack of rules and a high degree of reliance on a single export of readymade products.
The remarks were made in the opening session of the second edition of the SANEM International Development Conference (SIDC) 2021 with the theme "COVID-19 Recovery: Contexts and Priorities".
They said however, an instable deals environment can often create a massive shock in the economy which leads to extended periods of stagnation. Therefore, good institutions are key to ensure stability of the growth within an economy.
On the first day, the conference hosted two paper presentation sessions on "Trade and Macroeconomics I" and "COVID-19 and Public Health" and a keynote session.
Among the participants were present notable economists and scholars including Dr SelimRaihan, Professor, Department of Economics, University of Dhaka, and Executive Director, SANEM; Professor RehmanSobhan, Chairman, Centre for Policy Dialogue (CPD); Dr Posh Raj Pandey, Chairman, South Asia Watch on Trade, Economics and Environment (SAWTEE), Nepal; Dr Arpita Mukherjee, Professor, Indian Council for Research on International Economic Relations (ICRIER), India; made their presentations
During the conference, Professor Lant Pritchett, RISE Research Director, Blavatnik School of Government, University of Oxford, delivered the keynote presentation titled "Coping with Bad Shocks: Lessons from Growth Dynamics".
Professor Lant Pritchett opened his presentation by stating that the conventional wisdom in general, especially in terms of COVID-19, has been based on rich country growth dynamics.
Oftentimes, the paradigm within which people are talking about how to respond to issues is built on a model of developed countries such as Denmark, Germany or the United States.
Therefore, in the presentation, he outlined the ways in which growth dynamics for developing countries are fundamentally different, two key features in which growth dynamics are mismodelled by extrapolating from rich country to developing country dynamics and concludes with assessing different lessons about what should happen in response to a shock.
When observing the growth dynamics over a long period of time (e.g. since 1870 to the 2000s) of the rich, OECD countries, they all look fundamentally the same - they all grew at 2 percent per capita amazingly steadily, i.e. even massive negative shocks did not affect the long run level of GDP per capita due to very strong recovery.
The keynote presentation was followed by an open discussion which was moderated by Dr SelimRaihan.
"The OECD and non-OECD countries will probably see two different recovery trajectories because of the differences in deals environment and state capabilities within individual countries. The transition from deals to rules and development of state capabilities does not happen overnight and are determined by several underlying factors," said Dr Raihan.
According to Professor RehmanSobhan, dealing with a conventional shock coming from changes in the business cycle requires a different set of capabilities and responsibilities compared to a shock like COVID-19 where the country is partially influenced by the exogenous shocks coming from the loss of markets internationally.
Professor RehmanSobhan explained that the density and size of the Chinese economy has allowed it to internalize its response and take control of the situation which would not have been the case if it had a high degree of external dependence.