THE GROWTH STORY OF BANGLADESH

 

Popularly called  a “bottomless basket” by Henry Kissinger in 1974, Bangladesh has shown unexpected economic development.  

It is now one of the world’s fastest-growing economies. Bangladesh has got a versatile geography. It has largest delta in the world. 

It is located on the foothills of the Himalayan range, the streams that carry the silt to Bangladesh from those mighty mountains eventually become the roaring rivers of Padma, Meghna and Jamuna.

The fresh water and the fertile land made this land attractive to human habitation from ancient times. 

Since the 1990s, the economic and other development indicators have steadily improved due to the growth of its manufacturing sector, exports of garments, and microfinance. 

In the last three decades, progressive and dynamic NGOs such Grameen Bank and Fazle Hasan Abid’s BRAC, which have put money for micro enterprises into the hands of women, have worked wonders with social, educational and economic development of the poorest of families. Bangladesh now stands on the foundation of a foreign exchange reserve of $46.4 billion. 

Bangladesh has one of the largest education systems in the world with 40 million pupils, more than a million teachers and 200,000 educational institutions according to Bangladesh Bureau of Educational Information and Statistics. 

The primary school completion rate is 82.10 per cent as per the Annual Primary School Census 2019, while electrification is at 99.75 per cent. Net enrollment rate at the primary school level increased from 80 percent in 2000 to above 90 percent in 2015, and at secondary school level increased from from 45 percent in 2000 to around 62 percent in 2015.

 With nearly 6.4 million girls in secondary school in 2015, Bangladesh is among the few countries to achieve gender parity in school enrollment, and has more girls than boys in secondary schools, including 55 percent of poor girls supported by a range of stipend programs. Bangladesh witnessed 40 percent reduction in maternal mortality, from 194 deaths per 100,000 live births in 2010 to 320 deaths in 2000. It also touched the fertility rate of 2.3 children per woman in 2014, from around 3.3 children per woman during the 1990s.

It had 13,006 functioning community clinics in 2014. Its 64 percent of pregnant women receiving Ante Natal Care (ANC) from a medically trained provider in 2014, up from 53 percent in 2007.The standard of living has improved, consumption pattern has evolved, and the economy has surged to levels that were not expected to be achieved in merely 50 years . The income levels and the purchasing power of the people of Bangladesh are reaching newer heights, boosted by the ever-growing middle class. 

In 2015, seven per cent of the population was attributed to this segment of middle class, which will hit around 34 million by 2025. 1974, the participation of women in the labour force stood at only 3.4 per cent. The country has put in extensive efforts over the years along with developing skill-sets, identifying and deploying women labour force in areas where they have expertise to perform well, such as ready-made garments and agro-food processing.  

As a result, the participation of women in the labour force reached 40 per cent in recent times.

In measuring the gaps between females and males when it comes to the access to opportunity and resource, World Economic Forum’s Gender Gap Report 2021 ranks Bangladesh 65th in the world, while all other South Asian countries rank above 100. 

With an independent nation’s passport in their hands, millions of Bangladeshi migrant workers are employed all over the world and are sending back home billions of dollars. Bangladesh is also among the world’s top 10 remittance-receiving countries

A large, young working-age population concentrated in a riverine nation networked by excellent communications both physically and digitally  is one of the fastest-growing economies in the world, clocking an average growth of over seven per cent consistently for more than a decade. 

A recent comment in a Dhaka daily, which while comparing Bangladesh to West Bengal, proudly said: “Unlike in Bangladesh, hardly any major capitalists in West Bengal are Bengalis, and their loyalty lies to north and west India, from where they come.” 

One of the major reasons for the success of Bangladesh has been social mobilization at the local level, such as through women’s self-help groups (SHG), which has led to increased public awareness and greater accountability in service delivery.A lot of this has been facilitated by robust and effective development NGOs that have achieved scale . In fact, Bangladesh is perhaps the best case study of NGO success anywhere in the world. 

There are lessons for India , effective grassroot institutions matter for service delivery  

The top five export commodities, account for more than 90% of total exports of Bangladesh since 2015  

These five commodities mainly pertain to textiles & apparels and footwear industry, which are highly labour-intensive and employs unskilled and semi-skilled labour Bangladesh’s Cabinet Secretary told reporters that GDP per capita had grown by 9% over the past year, rising to $2,227. Pakistan’s per capita income, meanwhile, is $1,543. 

In 1971, Pakistan was 70% richer than East Pakistan; today, Bangladesh is 45% richer than Pakistan.  

Bangladesh’s growth rests on three pillars: exports, social progress and fiscal prudence. Between 2011 and 2019, Bangladesh’s exports grew at 8.6% every year, compared to the world average of 0.4%. The success is largely due to the country’s relentless focus on products, such as apparel, in which it possesses a comparative advantage. Bangladesh has maintained a public debt-to-GDP ratio between 30% and 40%. India and Pakistan will both emerge from the pandemic with public debt close to 90% of GDP. Fiscal restraint has allowed Bangladesh’s private sector to borrow and invest. 

Bangladesh’s success brings its own set of problems. For one, its exports benefit from the country’s participation in various mechanisms that allow tariff-free access to developed economies, such as the U.S.’s Generalized System of Preferences. These groupings are only open to the world’s least developed countries. Thanks to its growth, Bangladesh will likely have to give up these privileges by 2026 or so. 

As its economy matures, its comparative advantages will also change. Like Vietnam and others, it will then have to shift emphasis away from garments to higher-value exports. The transition will test Bangladesh as it has those other nations.

The smartest thing to do would be to retain access to the developed world’s markets by signing free-trade agreements. 

The government needs a strategy for the next decade that focuses on new forms of global integration and on a continued transformation of the economy 

 Bangladesh should benchmark itself against Vietnam, which is not only part of the China-centric Regional Comprehensive Economic Partnership and the successor to the Trans-Pacific Partnership, but also signed an FTA with the European Union in 2019.Bangladeshis were found to be much happier than Indians during the pandemic. Yet, their happiness ranking, undeniably, was still poor. More importantly, Bangladesh’s happiness ranking over the years has never been as headline-grabbing as its GDP growth figures. 

Bangladesh has also made significant strides in poverty reduction as its economy has grown. Poverty declined from 44.2% in 1991 to 13.8% in 2016-’17. Life expectancy and literacy rates have increased markedly as well. 

In terms of social mobility , Bangladesh ranked near the bottom, 78th among 82 nations, in the social mobility report. India and Pakistan were placed in 76th and 79th spot respectively. Sri Lanka was named the most socially mobile country in South Asia.

The report mentioned five main determinants of social mobility – education, health, technology access, work opportunities, working conditions and fair wages and social protection and inclusive institutions. Bangladesh ranked poorly in all indicators. Let us assess some of them. 

Transparency International’s Corruption Perceptions Index is a sub-indicator that the social mobility report used to measure the inclusiveness of institutions. Corruption is rampant in Bangladesh that ranked 146th among 180 countries on the 2020 Corruption Perceptions Index.   

Bangladesh’s high adolescent birth rate per 1,000 women, which was 81 in 2019, pushed down its overall performance in the health indicator.In the technology access pillar, Bangladesh achieved very good scores in the population under the 3G mobile network coverage sub-indicator. In fact, 95% of the population came under 4G coverage in 2020.

 But the country fared very poorly in two other sub-indicators  internet users (as a percentage of the adult population) and fixed broadband internet subscriptions (per 100 people). 

This caused its overall performance in this pillar to fall. In 2019, only 12.9% of the population were internet users while only five people per 100 had fixed broadband subscriptions. 

Over half of the Bangladeshi labour force are engaged in vulnerable employment that earned Bangladesh poor scores in the work opportunities pillar. This figure has fallen gradually since 2000 but is still very high. In 2018, Bangladesh had the second highest proportion of workforce doing vulnerable jobs in Asia, preceded by India.

The Bangladesh microfinance has become famous all over the world. This great financial innovation has come from a country which had one of the least underdeveloped financial markets in the world. Mohammed Younis from Bangladesh pioneered the Grameen Bank. This bank would make extremely small loans to poor people 

 Bangladesh has become the factory for most garment brands across the world. Global brands like Zara and Nike outsource their production to companies in Bangladesh. 

There are multiple reasons behind this. Firstly, Bangladeshi labor is cheap and can be found in abundance.  

The IMF’s recent per capita GDP projections for South Asian countries show that the alleged ‘termite factory’ is shining — Bangladesh, which has been doing better than both India and Pakistan on social and human development indicators for several years now, is also beginning to march ahead on the economic front. Development economists Jean Drèze and Amartya Sen showed in their 2013 book, An Uncertain Glory: India and its Contradictions, that Bangladesh had been outshining its larger neighbours on indicators such as infant mortality, child immunisation, female literacy, access to improved sanitation, and total fertility rate. 

When the nation was born in 1971, the average Bangladeshi could expect to live for only 46.5 years, two years less than the average Indian. By 2018, life expectancy in Bangladesh had risen to 72 years, two years more than India’s.

 Bangladesh lagged behind India in only one major economic dimension — income per capita, which in 2015 was approximately 25% less than India’s. But if the IMF’s latest projections are accurate, the gap is set to disappear, and Bangladesh and India are expected to be neck and neck until 2025. Average GDP growth for Bangladesh has been higher than the world’s average GDP growth over the last three decades; it has been higher than the average growth rate of South Asia since 2010. Bangladesh’s average economic growth has steadily increased in each decade since 1980. 

In 2018, Bangladesh emerged as one of the fastest growing economies in the world. 

The contribution of agriculture in Bangladesh’s GDP has declined steadily, while that of manufacturing and services has increased. In 1980, agriculture accounted for almost a third of the GDP; industry for less than a fifth. 

In 2018, the contribution of agriculture to GDP had fallen to less than 15%, and industry now accounts for more than a third. The contribution of the manufacturing sector to GDP has doubled since 1980. 

Exports have been buoyant since the 1990s . They have risen from less than US $2 billion in FY92 to more than US $40 billion in FY19 – growth by a factor of (approximately) 20 in 37 years. Remittances have risen fast after FY91, from approximately US $764 million to more than US $16.4 billion in FY19. Bangladesh is among the world’s top 10 remittance receiving countries, even though the difference in remittance earnings of Bangladesh and countries with far smaller populations (such as Philippines) is very large — which underlines that Bangladeshi remittances come from low-wage labour. 

Bangladesh has seen both structural transformation and the rise of sectors capable of generating decent foreign exchange earnings, which has helped policymakers sustain comfortable macroeconomic fundamentals 

To sustain this economic progress over the long run, there is a need to improve core governance challenges — weak tax mobilisation capacity, an over-burdened judiciary, inadequate bureaucratic capacity — that have plagued almost all South Asian countries. Bangladesh, seen as a bridge between the South and south-east Asia, may not be making a big splash with its development story, but is certainly proving to be the proverbial "tortoise" that may eventually overtake many "hares" with its perseverance. 

A World Bank study on the country's growth for the period 2005-10 found that the average income of the poorest 40 percent households grew faster than for the rest of the country by 0.5 percent. During the same period, India's poorest 40 percent did far worse than the national average. Quite understandably, poverty rates in India are higher. The only explanation for Bangladesh's growth performance can be attributed to two major factors - both institutional. One is the long-standing garment industry and the second is the country's developed NGO network. 

The first aspect arose out of a historical accident when the United States imposed a textile quota system in the 1970s to protect the domestic industry from the burgeoning South Korean industry. To bypass the quota restrictions, Koreans moved the production to Bangladesh where labour was cheap and readily available. Bangladeshi businessmen quickly picked up on the required technical expertise and set up their own businesses. There are remain a few crucial insights from the growth experience of the country. First, it highlights the importance of working upon the strengths to build a competitive edge in the world market. Second, it shows the effectiveness of ensuring development at the grass root levels in reducing poverty and driving inclusive growth. India especially falters on both of these fronts.  

Bangladesh’s per capita income was up 40 per cent in three years against 14 per cent growth in India and 21 per cent growth in Pakistan. At this rate, Bangladesh’s per capita income would top India’s by the year 2020. 

Bangladesh’s economic success lies in its ability to plug itself into the gap created by the slowdown in the Chinese export engine as policymakers in Beijing shift their focus to pushing domestic demand and investment and away from exports. Total exports from China declined to $2.2 trillion in 2016 from a record high of $2.35 trillion three years ago, creating space for others in the global market for labour intensive consumer goods. Economic growth in Pakistan is largely driven by capital formation and consumption demand financed by a surge in foreign investments mostly from China as the latter invests close to $60 billion in upgrading Pakistan’s power and transport infrastructure.