Trade liberalisation has cast a negative impact on the country’s employment, a study revealed yesterday. The finance adviser, however, disagreed with the findings saying it was due to ‘management inefficiency of firms’ and ‘technological changes’. “Export oriented sectors performed well in the liberalised regime. Other sectors failed to do well partly because of management inefficiency and technological changes,” Finance Adviser Mirza Azizul Islam told a function at the BRAC Cetre in Dhaka marking the release of the study.

Local research body Centre for Policy Dialogue and International Labour Organisation conducted the study on Impact of Trade Liberalisation on Employment in Bangladesh.

CPD Chairman Prof Rehman Sobhan chaired the function, also attended by ILO Special Adviser on Growth, Employment and Poverty Reduction Rizwanul Islam.

The study found that non-export oriented and non-labour intensive sectors witnessed lower tariff protection and employment growth.

“We have observed that trade openness has affected employment with varying degree of impact on different sectors. The sectors that were liberalised at a faster rate has had negative impact compared with the sectors with slow pace of liberalisation,” said CPD Executive Director Mustafizur Rahman.

Trade liberalization was adopted in Bangladesh in the 80s focusing on export oriented and private sector-led growth instead of import- substituting and public sector-led growth.

Such liberalization caused downsizing tariff rates. The duties in all commodity categories fell mostly in a period between 1991 and 1995.

The CPD said weighted average tariff dropped to 6.98 percent in 2006-07 from 24.1 percent in 1991-92 with the tariff coming down to 25 percent in 2006-07 from the highest 350 percent in 1991-92.

The result, the study said, is a negative growth of employment in two main sectorsagriculture and industry, especially during the 1991-95 period.

“In particular, agriculture and manufacturing sector experienced negative growth,” it said, adding that employment in manufacturing has remained stagnant over the entire period since 1980s.

“Employment in manufacturing sector continues to be low and has not shown any increasing trend indicating its failure to absorb the growing labour force,” the study said.

The CPD-ILO study, however, showed that protected sectors, especially export-oriented industries and labour intensive ones, saw relatively higher employment growth compared to that in non-protected sectors.

Prof Rehman Sobhan, referring to the sectors like garment and pharmaceuticals sectors, said, “None of these sectors would have come into existence unless protective regimes.”

“We have learnt from the history that a country which has made progress provided tariff protection and incentives. So, if we want a positive impact on employment, we should resort to supporting industrialisation,” CPD Executive Director Mustafizur Rahman said.

Referring to the Labour Force Survey (LFS) by the Bangladesh Bureau of Statistics, the study said unemployment rate stood at 4.2 percent in the fiscal year of 2005-06, up from 1.8 percent in 1983-84.

“Given the present employment scenario, it appears that achieving the PRSP (Poverty Reduction Strategy Paper) target of employment generation will not be attainable,” said Rahman.

The PRSP set the target of total employment at 58.08 million by fiscal year 2008, while the LFS showed that total employment stood at 47.4 million in the fiscal year 2005-06.

To meet the PRSP projection, Mustafizur said, employment has to be generated at a rate of 10.69 percent at national level with 8.59 percent in the rural areas and 17.16 percent in the urban areas over the next two years.