Blockchain in energizing the economy during and after Covid-19.
Covid-19, the ‘once-in-a-century’ health crisis has resulted in the worst economic crisis the world has faced in recent years. Bangladesh is no exception, with a projected decline of 3.0 percent GDP growth in the financial year 2020, which may result in a deficit of 7.7 percent of GDP.
As the virus ravaged the livelihoods of the country’s poor, restarting the economy became imperative for the Bangladesh government. Now, the question is–how to rebuild the economy while saving lives.
Technology can play a pivotal role in managing the health crisis while accelerating economic recovery. Blockchain is one such technology. Its ability to provide secure transactions globally–both in services and manufacturing sectors–highlights the opportunities for the Bangladesh government and companies to implement blockchain technology to energize the economy.
Blockchain applications in Bangladesh Economy
Before investigating the possible areas of application in the context of the Bangladesh economy, it’s worth explaining the blockchain technology itself.
Blockchain is a disruptive technology that has the potential to revolutionize the way transactions are recorded and stored on a decentralized network using cryptographic tokens. As the information is stored in multiple locations with no one holding ownership, all parties within the network have access to each transaction and associated data.
The use of cryptographic tokens eliminates intermediate central authorities that reduce associated transaction costs and prevents anyone from altering the recorded data. The smart contract feature of blockchain technology facilitates parties in the contract to follow the rules and trust each other even when they are not well known to each other.
Since the introduction of blockchain technology in 2009, it has evolved from a bitcoin technology to a technology with numerous applications. In Bangladesh, blockchain technology can be deployed in several industry sectors that have the potential to rejuvenate the economy and play a significant role in attaining the middle-income nation status.
Readymade Garment Industry
The readymade garment industry is Bangladesh’s principal export earner with a value of over $36.67 billion exports in the financial year 2018. During the pandemic, garment factories have experienced a decline in orders by 45.8 percent over the first quarter of 2020, with an 81 percent contraction in April alone.
It means that the system provides an opportunity to the workers to record and post their experiences, thus giving them a real voice. As this system will record the worker experiences on a blockchain that are timestamped, the results could never be manipulated.
In 2019, #remittance accounted for 5.8 percent of Bangladesh’s #GDP with expatriate Bangladeshis sending $18.3 billion. Legal channels such as banks and money transfer organizations and illegal channels through personal connections are the two means that ex-pats transfer money to Bangladesh.
Use of foreign currency exchange organizations such as #Western_Union, PayPal, Skrill, etc, and banks involve hefty transaction costs, while the second form of currency exchange is risky due to lack of trust among the members involved in currency exchange.
Meanwhile, the informal currency exchange also results in the government losing revenue and imposes challenges to track the remittance. For example, it’s been reported that in 2018, the Bangladesh government has lost $4.7 billion in revenues due to informal remittance.
Blockchain technology can eliminate the middleman and their associated costs in the remittance supply chain. Promoting the use of digital currency underlined by the blockchain technology will remove the risks associated with currency fluctuations.
Guidelines on digital currency and the use of blockchain for money transfers, a government facilitated remittance process would enable tracking the remittance which would assist in addressing broader issues related to tax aversion by ex-pats working in Bangladesh and capital flight by Bangladeshis.
Counterfeit medicines are a major concern for the $3 billion pharmaceutical markets in Bangladesh. Over the past five years, licenses of several pharmaceutical companies were canceled over the allegations of producing counterfeit medicines of substandard quality.
One such initiative that gained much attention is the use of blockchain technology in pharmaceutical supply chains. A blockchain-based platform that tracks pharmaceutical products throughout the supply chain from the point of origin of raw materials/ingredients across the manufacturing sites, and then to larger healthcare ecosystems ensures only authentic products reach the consumer.
The global halal product market was valued at $2.7 trillion in 2015 and forecasted to increase to $10.51 trillion by the year 2024.