Economic Barriers · Economy of Bangladesh

Evolution of Bangladesh Economy

Evolution of Bangladesh Economy

Md. Joynal Abdin*

 

The economy of newly emerged Bangladesh started its journey in 1971 with a negative growth (-5.5%). GDP per capita was USD 134 in 1971. More than 70% of the population were leaving below poverty line. War effected transportation system was completely damaged, rail, road, bridges etc. everything was out of order. As a result supply chain was disconnected and inflation increased up to 300 or 400 percent. Export earnings from Jute and other exportable items reduced into minimum level due to interruption of supply of goods during the liberation war. Secondly government nationalized all the industries of the country from a socialist mindset. It also caused into lack of efficient entrepreneurs, business executives, managers, marketers in the newly emerged country. As a result GDP growth rate of Bangladesh was 3.8% during 1973-1980. Population growth rate was 6.3% in 1975, whereas per capita income was about USD 100 only. Foreign investment was insignificant and over dependency on foreign aid introduced the country as “bottomless basket” to former US President Henry Kissinger.

Government shifted its mindset and open up different sectors for Private as well as foreign investment. The Foreign Private Investment Act of 1980 provided confidence to the investors especially foreign investors about security of their investment here in Bangladesh. Thus private sector development initiated and GDP growth was getting momentum. Inception of Bangladesh’s largest export earning sector of Bangladesh i.e. Readymade Garment (RMG) sector was in 1980. Other major sectors like Textiles, Pharmaceuticals, Leather, and Jute etc. also got energized at the same period. Government provided policy boost like Back to Back LC and Bonded Warehouse Facility to export oriented RMG sector and achieved a revolutionary boom in export earnings. Currently 84% of Bangladesh export earnings come from this sector. But we must remember that Bangladesh Garment sector boost is a shared result of low cost labor, effective backward sector support like textiles, spinning, banking sector support etc.

Besides RMG, Textiles and Spinning etc. Agriculture is another notable success story of Bangladesh. Not only foreign aid Bangladesh was also dependent on foreign / imported or donated food grain soon after the independence. It is success of Bangladeshi farmers and agriculturists made this land self-sufficient in food grain production. Bangladesh is producing about 35 million ton food grain per year to ensure food security of the citizens, as a result poverty rate reduced into 21.8% than that of more than 70% during our independence. Size of Bangladesh’s GDP increased into USD 302 billion with an annual growth rate 8.15%; as a result we are one of the fastest growth nations around the world.

Not only industry or agriculture, Bangladesh has too many achievements like Bangladesh attracted USD 3.89 billion of FDI last year and earned USD 16.42 billion remittance. As a result foreign currency reserve increased into USD 31.72 billion. Bangladesh’s involvement in foreign trade is another remarkable progress, for example last year Bangladesh imported USD 62.88% billion (product import growth was 5.9% and service import growth was 12.10%). At the same time Bangladesh export earnings was USD 46.87 billion (Product export growth was 10.55% and service export growth was 46.06%. From the trend analysis of Bangladesh’s import and export growth we can state that, Bangladesh’s export growth is much higher than that of the import. Thus Bangladesh is transforming into an export oriented nation from its previous identity as an import dependent economy.

Contribution of Agriculture sector was highest (51%) followed by the service sector (41.28%) to Bangladesh GDP in 1971. Contribution of the Industry was the lowest one i.e. 7.68% of Bangladesh GDP. Service sector maintained a slow but steady growth since the independence of Bangladesh. Contribution of the industrial sector is rising slowly but contribution of agriculture sector is going down in percentage of GDP. By maintaining this trend latest contribution of service, industry and agriculture sector in 2017 was 52.96%, 28.53% and 13.07 % respectively. Contribution of the agriculture sector in percentage of GDP in reducing it does not mean that agriculture sector is producing less in volume, but it is producing much more crops and products than that of the 1971, as size of Bangladesh economy is growing up therefore contribution of agricultureis reducing. At the same time it is giving another message that, Bangladesh economy is transforming from agriculture dependent economy into an industrialized economy.

Based on current performance of Bangladesh economy, world famous platforms are forecasting about us as “Bangladesh is one of the 5 fastest growing nations around the world (World Bank), “Bangladesh economy will be 28th largest economy of the world by 2030 and 23rd largest economy by 2050 (PwC)”, “Bangladesh will be the 12th Economic Power of the World by 2050 (UBS), “Bangladesh, the next China (McKinsey & Company) etc. so on and so forth. But I believe that we have more potentials than that of the above mentioned forecasting. But government and policy makers of Bangladesh has to be wise, patriot and patience to utilize those potentials and build a Sonar Bangla in near future. My recommendations to boost up Bangladesh economy are as follows:

  1. Ease of Doing Business: Bangladesh advanced 8 steps in Ease of Doing Business Index last year and reached into 168th out of 190 countries. We must have to improve our condition in Ease of doing business index to attract more FDIs. We should reach below 50 by the year 2030.

  1. Export Diversification: Bangladesh earns 84% of its export earnings comes from RMG sector. But every sector has a saturation point. Before saturation of Bangladesh’s RMG sector we must have to develop alternative export earnings sector through promotion of Leather Goods, Pharmaceuticals, Agro Processing, Light Engineering, Electrical & Electronics, and Plastic products etc. sectors.

  1. Energy Security: Industrialization needs uninterrupted energy supply. Therefore Bangladesh has to provide due significance to ensure electricity, gas and other forms of energy to boost up economic development. Renewable, solar, biomass, atomic and other innovative sources of energy should be explored and adopt to ensure energy security in upcoming future.

  1. Skills Development: Bangladesh has to adopt 4th IR technologies in its industrial sector. Therefore we need qualified 4th IR professionals to growth further. Especial emphasis could be given on skills development. Private sector could be encouraged to invest in respective employee’s skills development through offering tax benefits. Migration of skilled manpower could bring 100 times more remittance than ever.

  1. Economic Diplomacy: Bangladesh needs a paradigm shift from existing friendship diplomacy into economic diplomacy to ensure market access facilities in the export destination. Each of Bangladeshi missions should be a promotion center of Bangladeshi products with product display facilities.

  1. Research Expenditure: One country should sped 1% of its GDP in Research and Development to ensure product diversification and new product innovation. Therefore Bangladesh needs to establish product research centers for each of the sector. Private sector investment and expenditure in R&D could be encouraged through tax weaver facilities for R&D expenditure. It could bring diversification in our product basket as well as diversify our export earnings.

  1. Infrastructure Development: Bangladesh needs appropriate infrastructure like Padma Bridge, Metro Rail, Deep Sea Port, Special Economic Zone Development, Atomic Energy, Railway, Road and Water Ways Development etc. for sustainable economic development.

Finally; we would like to sum up with a positive note that Bangladesh has achieved remarkable economic progress in comparison with many countries of the world, but we have potentials to go even further, due to political crisis, absence of patriotic and visionary leadership, skilled manpower, decision at the right time towards right direction limited our expected progress. Now Bangladesh is a 50 years experienced country. Bureaucracy, politics, entrepreneurs, executives, scientists, managers everybody have 50 years of expertise in respective fields. Therefore; we want faster, inclusive, and sustainable progress in coming days. So that we can celebrate our development with US President Henry Kissinger alive and invite him as a respected guest in that celebration.

* Mr. Md. Joynal Abdin is a Development Researcher, Columnist and Author. He is serving at Dhaka Chamber of Commerce & Industry (DCCI) as Secretary. Could be reached through  mdjoynal@gmail.com

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