Bangladesh: A development miracle at 50
The nation has come a long way in its prosperity, owing to the positive policies of the government
Bangladesh is today recommended for a developing country, following the fulfilment of the criteria introduced by the United Nations Committee for Development Policy.
It is one of the most glorious achievements Bangladesh has ever attained since her independence. It is an achievement that other least developed countries may follow to attain this status.
All the three criteria required for qualifying as a developing country have been met simultaneously by Bangladesh,thus stunning the rest of the world. The economic development of Bangladesh has become enviable to many countries in the region and beyond the region, mostly because of the pragmatic policy adopted and pursued by the Government of Bangladesh led by Prime Minister Sheikh Hasina over the last decade.
In terms of economic size and population, Bangladesh is the largest of all the least developed economies (47 economies) in the world. The concept of least developed economy was introduced by the United Nations in 1971 when Bangladesh emerged as a new country on the globe and there were only 25 least developed countries (LDCs) that time.
In 2015, Bangladesh was recognised as one of the lower middle income countries in the world because of the positive economic indicators and overall economic development in all sectors. In 2016, Bangladesh met one of the three criteria, which is Human Asset Index, for the qualification of a developing economy. Finally, only after two years in 2018, the country met its expectation i.e. ultimate target of becoming a developing economy (Vision 2021) fulfilling all the three criteria with comprehensive margin beyond any doubt. With this, Bangladesh would fulfill vision 2021 and it is also hoped that the country would fulfill vision 2041, meaning that it would become a prosperous, high income by the year 2041.
Since its independence, Bangladesh has come a long way in improving its economic conditions. In 1972-73, the country fetched only $348 million as export income from 25 products to 68 destinations. Basically, that time Bangladesh was an agrarian economy having contribution from the agricultural sector to the gross domestic product (GDP)at 78 per cent. Now the contribution of the same sector to the GDP has come down to 14 per cent marking a sign of development. Presently, Bangladesh has the third highest GDPin terms of purchasingpower parity (PPP) in South Asia, after India and Pakistan. The GDP increased tremendously manifold from $5.7 billion in 1972-73 to $330.2 billion in nominal terms in 2019-2020 and $831.588 billion in PPP terms in 2018-2019. As a result, there has been considerable increase in the per capita GDP which is now $2064 from around $70 in 1972-73, whereas the GDP per capita in PPP terms in 2019 was $5,028.
As a result of the enhancement of the per capita GDP, the poverty in general has declined to 20.5 per cent in 2019 from 57 per cent in 1990-1991, although the GINI coefficient is .458 (scale of measuring inequality of income). The sustained economic growth could be attributed to the broad economic sectors consisting of agriculture, industry and services. The contribution of the agricultural sector to the GDP now stands at 14 per cent, while that of the services and the industry sectors increased to 51 per cent and 35 per cent respectively.
The economic growth in Bangladesh has been largely assisted by three major drivers of growth: export income from ready-made garments, remittances sent by expatriate Bangladeshis, and growth in the agricultural sector. Bangladesh boasts of becoming the second largest exporter of ready-made garments (RMG) and apparels in the global market after China,capturing a market share of 6.4 per cent, although it was earlier 6.5 per cent. The Chinese share has been declining over the years which now stand at 31.3 per cent, still retaining the top position as supplier of ready-made garments and apparels. For Bangladesh, the export income from this sector stood at $34.13 billion in 2018-2019 fiscal year contributing 84.19per cent to the total income of the export basket(all products) and 15per cent to the GDP of the country. There are 6,150 garment factories in the country employing around 4.5 million people in the sector of which 80 per cent are women. The garment sector flourished rapidly because of the export quotas and preferential market access in the developed economies especially in the EU and other ten countries of the world.
The growth of the sector has been averaged at 11.66 per cent through to 2018-19 from 1972-73. The export income rose from $6.8 billion in 2005-2006 to $34.13 billion (products only) in 2018-2019.
The impressive growth of the garment sector has brought about structural transformation in the economy of Bangladesh: dependence on export and decline in foreign aid, dependence on manufactured goods rather than on primary goods, providing employment to female workers making them empowered specially among the poor and the uneducated. This sector is a contributor to the eradication of poverty where the extreme poverty is 10.5 per cent. The total number of labourers working abroad was 11.5 million in 2017, which is 4.5 per cent of the total population and 11 per cent of the total labour force, and the remittance figure from the expatriates stood at $18.21 billion registering all-time high in the last fiscal year. As a result, the country's foreign currency reserve was increased, which was $44.03 billion contributing to the economic development and reduction in the in the poverty level. During the first five months of the current fiscal year, remittance inflow has even increased by 22.67 per cent.
The flow of remittances into the country shows upward trend in the current fiscal year as the Government has taken measures, including two per cent cash incentives to streamline the legal channel for encouraging the Non-Resident Bangladeshis to send money to the country. The major factors contributing to higher remittances through the banking channels include depreciation of Taka against the US Dollar, higher rate offered by local banks, and the surveillance of Bangladesh Bank on Hundi.
The agricultural sector of the country contributed tremendously to its economy in terms of food security, employment generation and poverty alleviation. There has been a sharp increase in food grain production during the last four decades. Rice, the staple food of the country, was produced triple to 35 million metric tons as a result of the liberalised input market, expansion of irrigation and research of rice for innovation in yield. Furthermore, growth in small, medium and micro enterprises has also contributed to the economic development of the country. The foreign direct investment (FDI) is considered as an important motivator of economic development and a principal avenue for the development finance. Over the last ten years, FDI has been playing an essential role in maintaining the tempo of the current economic development of Bangladesh. It has also immensely contributed to reinforcing foreign currency reserve, creating new job opportunities and increasing labour skills. The Government has completed standard operating measures for providing smooth services to attract more foreign investors. The Government pursues the most liberal investment policy in South Asia which incorporates protection of FDI by law, duty free import of raw materials. Considering the country's investment-friendly atmosphere and overall development, foreign companies have continued showing their zeal to invest here. The banking sector has been playing an important role in the economic development of the country. They provide investible funds to both the public and private sectors, and thereby contribute to the process of overall economic growth. There are 66 scheduled and non-scheduled banks in the country with around 10,000 branches in the rural and urban areas.
With regard to the sustainability in the important sectors, the apparel sector has to develop its own brands, shift from basic products to fashion products, resort to original design or fashion manufacturing, and fill the gap left by China. The machine automation should also take place before the stage of introducing robotics. The over-dependence on the RMG for export income is not a problem. There is still a scope for diversification within the RMG itself. Apparel categories including lingerie, under garments for women, swimwear, formal wear, performance outerwear are not traditionally associated with the apparel sector of Bangladesh, but the categories offer a huge potential for business paving the way for diversification within the sector itself. The existing RMG should develop these non-familiar product categories to penetrate into new markets. The gap between the yarn production and the requirement of fabrics for the RMG industry has to be reduced for lead time benefit and cost-effectiveness. The gap is wider in the woven garment industry than in the knit industry. To support the investment in the establishment of the manufacturing capabilities for new product categories the sector needs more investment in the research and development (R&D) sector.
Product-specific policies for fulfilling compliance issues, boosting exports and attracting investment have to be developed with a sense of urgency with immediate effect - some of which are, of course, underway.
For enhancement of remittances, the human resources have to be trained up with technical skills to provide specialized services rather than working as unskilled or semiskilled workers abroad. With the improvement of services, the export basket would be enriched with services sector which is badly needed when the country becomes a developed one. The development of skills would fetch manifold the present foreign currency remittance from this sector. Agricultural sector has got surplus workers and the sector has to focus on agro-processing industries which the country is severely lacking in.
Further growth in small, medium and micro industries would contribute a lot in the industrial growth and manufacturing sector of the country, ultimately leading to entrepreneurial development for bigger industries. Special incentives should be provided to the sector through proper implementation of the SME credit policies and programs with the aim of helping SMEs in achieving sustainable inclusive growth. Priority should be given to the Bangladesh Small and Cottage Industries Corporation (BSCIC) industrial estates for various SMEs to develop.