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Fri, 03 Apr 2020

Northeast Today

Bangladesh: prospects underlying its booming economy

Bangladesh: prospects underlying its booming economy
January 18
11:27 2020

The Asian Development Bank ranked Bangladesh as the fastest-growing economy in the Asia-Pacific region, surpassing China, Vietnam and India. Better infrastructure, education, governance and industrial revolution are some of the underlying factors responsible for the booming economy. Of late Bangladesh has set a target of becoming a developed nation by 2041 which will coincide with the platinum jubilee of its independence. However, the probability and obscurity associated with the target cannot be ignored. Mumeninaz Zaman unravels the various factors in details.

The hostile political beginnings and its struggle for independence have left the country poverty stricken. Post independence in 1971, the country has gradually transformed to be a major industrial hub in Asia. The transition from a co-existing country to an established country has not been an easy ride. Throughout the transformation from an agrarian economy to industrialization, Bangladesh has shown remarkable growth in its economy.

According to the World Bank, Bangladesh aspires to be a middle-income country by its 50th birthday in 2021. Since Independence, the World Bank through its concessional lending arm—the International Development Association (IDA)—has committed more than $30 billion in grants, interest-free and concessional financing credits to Bangladesh. Supported by sustained economic growth its international poverty line has reduced from 44.2 percent in 1991 to 14.8 percent in 2016/17. Rapid growth enabled Bangladesh to reach the lower middle-income country status in 2015. The three eligibility criteria- Life expectancy, literacy rates and per capita food production have increased significantly. Hence, in 2018, Bangladesh graduated from the UN’s Least Developed Countries (LDC) list for the first time. If Bangladesh meets the graduation criteria for a second time, at the next triennial review in 2021, the country will be recommended for graduation from the LDC category in 2024.

Factors that triggered the economic growth                      

Landlocked between India on the north, east and west, Myanmar to the southeast and by the Bay of Bengal to the south, the strategic location of the country, between South, Southeast, and East Asia makes it an important promoter of cooperation and regional connectivity. Apart from remittances from migrant workers the country has pursued export oriented industrialization with its key export sectors which include- textiles, yarn, jute, leather, seafood, frozen fish and tea. While the main export destinations are the United States and the EU, Bangladesh mostly imports fuel, capital goods and foodstuff originating in China, India, the EU and Kuwait.

According to Bangladesh Investment Development Authority (BIDA) for the first time, Bangladesh has been recognized as the Top-20 improver and secured a ranking of 168th position in Doing Business (DB) 2020, an improvement of eight rankings from that of last year. Improvements were made in three of the DB indicators- starting a business, getting electricity and getting credit.

In a report published by BIDA in June 2019, Bangladesh registered a record level of foreign direct investment (FDI) inflow in 2018, topping the list in South Asia. In 2018, Bangladesh reached the highest ever level in the country’s history at $3.61 billion, according to the World Investment Report 2019 by United Nations Conference on Trade and Development (UNCTAD). The report said FDI in Bangladesh went up by 67.94% in 2018 compared to $2.15 billion in 2017.

Agriculture remains the most important sector of Bangladesh’s economy, contributing 19.6 percent to the national GDP and providing employment for 63 percent of the population. According to the World Bank, the total arable land in Bangladesh is 61.2 percent of the total land.

Education is one of the key elements of human resources in the process of economic transformation. The literacy rate in Bangladesh has risen remarkably over the past decade to an all-time high of 72.76% in 2016, according to data from the Unesco Institute for Statistics (UIS). This phenomenal rise in literacy rate is one of the major factors that the Committee for Development Policy (CDP) of the United Nations considered when declaring Bangladesh’s eligibility for graduating from Least Developed Country (LDC) status. UNESCO attributed the success to the Bangladesh government’s policies and fiscal support for the education sector.

Amongst others better rural infrastructure, social changes, including women empowerment, health and nutrition together contributed to the development of Bangladesh.

Sheikh Hasina’s government tried to introduce and implement various policies that have contributed immensely to the growth of the economy. Despite various obstacles, Hasina has opened up many sectors traditionally reserved for the public sector to the private sector, including- power, health, education, banking, even export processing and economic zones. The success of the country much depends upon the PMs pragmatic approach which is a blend of capitalistic and socialistic virtues.

Challenges and the way ahead

With achievements comes challenges, for starters, when the economy takes off, it becomes indispensable to sustain the growth. Bangladesh has its own share of challenges ahead of reaching the target of a developed nation by 2041. Sustained economic growth calls for increased demand for energy, transportation, rapid urbanization, climate change and progressive social reforms, insufficient planning and investment will lead to severe bottlenecks, congestion and pollution, hence long term planning is the need of the hour.

Another challenge faced by the country is the problem of underemployment. World Bank has identified job creation as the country’s top development priority. While critics also argue that, where it took 48 years to reach the current level, it would be difficult to meet the target in the next 24 years. However, experts also suggest to keep a tab on the target of becoming a mid-income country, provided certain measures are taken, including- accelerating GDP growth and controlling population growth, creating a stable macroeconomic structure, an efficient financial sector and a dynamic electricity market. The arrival of Rohingya refugees, however, will test the resilience of the country’s economy and its ability to maintain the social development momentum while providing humanitarian support.

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