As a teenager, Prasenjit Pal saw trucks loaded with food drive into Bangladesh every night from the roof of his home in Agartala, capital of India’s northeastern state of Tripura.
“The smugglers would carry almost everything Bangladeshis needed,” said Pal.
The trucks still move but in the other direction now — driving into Agartala loaded with garments, electronic goods, and food like fish from the border. “My town totally depends on supplies from Bangladesh and when border guards get tough, we suffer,” says Pal, now 50.
The Bangladesh Pal knew when in school was Henry Kissinger’s “basket case.” Fifty years after its birth, Bangladesh is now called “South Asia’s economic bull case,” with some even comparing its export-driven growth to South Korea or Vietnam.
Its hard-fought independence from Pakistan in 1971 cost 3 million lives and devastated its infrastructure, leaving it at the bottom of the list of poor nations in the 1970s.
But now, Bangladesh’s estimated 2020 GDP per capita of $1,888 places the country far above many of the desperately poor African countries it was once compared with. Real economic growth exceeded 8 percent in 2019, and although the coronavirus crisis has slowed the pace, growth is expected to continue at a more modest pace. That puts Bangladesh exactly one spot above neighbor India in the latest International Monetary Fund (IMF) per capita GDP table.
The World Bank said in its 2020 Outlook that while India’s GDP is set to reduce by 10 percent in FY2020-21, Bangladesh’s was expected to grow by almost 4 percent — a sharp contrast.
“Isn’t that cause for celebration! Once a byword for disasters, the country is now an example of resilient turnaround,” Bangladesh watcher Sukhoranjan Dasgupta told The Diplomat.
Much credit for that, and also the economic turnaround, goes to Bangladesh’s Prime Minister Sheikh Hasina.
Bangladeshi newspaper editor Mahfuz Anam credits her for leading the country’s “Golden Decade of Development,” between 2010 and 2020. “She gave the country an infectious self-belief, the confidence that we can do it,” Anam wrote in his column in Dhaka’s Daily Star.
From Starvation to Food Security
Leaving behind memories of the horrific 1974 famine, the country has achieved near self-sufficiency in food production for its 166 million-plus population. In 2020, Bangladesh moved up 13 notches to the 75th place among 107 qualifying countries in the latest Global Hunger Index , well ahead of India.
Per capita income has risen nearly threefold since 2009, reaching $2,064 in 2019-20. And the number of people living in extreme poverty — classified as under $1.25 per day — has shrunk from about 19 percent of the population to less than 9 percent over the same period, according to the World Bank.
Bangladesh at 50 is now celebrating a pivotal moment as the United Nations has announced its elevation to the status of a “Developing Country” from a “Least Developed Country.”
“That is a huge boost to our self-image. In 1970s, nobody gave us a chance; many predicted we will fail as a state. Today Pakistan that we broke away from is a failed state and we feel vindicated for leaving a sinking ship,” Tarana Halim, an actor-lawyer-politician who served as Bangladesh’s junior information and telecom minister until a year ago told The Diplomat.
Hasina said recently that “exiting LDC status gives us some kind of strength and confidence.” Her predictions of Bangladesh touching a 10 percent GDP growth rate in 2021 may not materialize because of the adverse impact of COVID-19 pandemic, but on many fronts, Bangladesh’s economic performance has indeed exceeded even government targets.
With a national strategy focused on manufacturing — dominated by the garment industry, which provides 5 million jobs and accounts for 80 percent of the country’s merchandise exports — the country has seen exports soar by an average annual rate of 15-17 percent in recent years. It slumped 14.6 percent year-on-year to $33.6 billion in 2020 due to the pandemic’s impact but Hasina’s team is confident of regaining the growth path soon.
Garments and Remittances the Key
Garment exports posted a 17 percent drop in receipts to $27.5 billion in 2020 but migrant Bangladeshi workers abroad belied doomsday forecasts to send home $21.9 billion, 10 percent of that in December 2020 alone.
“Remittances have played a vital role in boosting the foreign exchange reserves amid the ongoing COVID-19 pandemic,” said former Bangladesh Bank governor Atiur Rahman.
Hasina, with her U.S.-educated son Sajeeb Joy as her adviser, launched “Digital Bangladesh” immediately after coming to power in 2009. In the last three years, Bangladesh’s IT industry has experienced a six-fold growth, from $800 million to $5 billion. Gung-ho young executives in capital Dhaka predict their country will “leapfrog” India in both infotech and pharmaceuticals.
“IT and Pharma, shipbuilding and ship-breaking industries have shown promise. We need to transition from a classic working-class economy to one that prioritizes innovations and diversification,” technocrat-politician Sufi Farooq told The Diplomat.
Christopher Wood of the Hong Kong-based brokerage CLSA believes that Bangladesh’s reliance on the garment sector has to go. “This sector on a 10-year view faces the risk of cheap wage alternatives such as Africa, automation, and the loss of duty-free market access if Bangladesh transitions from LDC status [as scheduled for 2024],” he said.
“For now, the challenge is to develop other sectors, with pharmaceuticals and business process outsourcing being two areas of promise. But this will require much more foreign investment,” Nikkei Asia quoted him as saying.
The government is now implementing an ambitious scheme to build a network of 100 Special Economic Zones to get over Bangladesh’s rather poor record of foreign direct investment (FDI) – from $961 million in 2008 before Hasina took charge to $ 3.8 billion in 2019.
Partly to blame is Bangladesh’s persistent low rankings in the World Bank’s annual “Ease of Doing Business” survey, which deters foreign investors. The latest survey put Bangladesh at 168th out of 190 countries, a jump from its 176th rank a year ago. The 2020 report projected a better-than-before scenario: “Bangladesh carried out three business reforms during the past year, the most in a decade, and would need to accelerate the reform pace to further improve its regional and global competitiveness.”
The government has moved to streamline the investment process with the creation of a “one-stop” investor service, BIDA, intended to replicate similar services in Singapore and Vietnam.
Bangladesh Bank’s chief economist Faisal Ahmed credits the country’s “density dividend” for the phenomenal economic turnaround. “The proximity of our population helped us design and spread social and economic ideas such as microfinance and low-cost health care. But we need to better manage our scarce land resources by developing industrial parks and SEZs,” he told The Diplomat.
Challenge of Corruption
Former central bank governor Atiur Rahman identifies three top priorities if Bangladesh has to do better — plugging leakages like fund siphoning through endemic corruption, curbing money laundering, and addressing bank defaults, which are a huge drain on national resources. “We could add 1 percent to our GDP if we tackled these effectively. We need a war on economic crimes,” Rahman told The Diplomat.
Apprehensions of difficulties ahead notwithstanding, the country has so much to celebrate now — 50 years of independence, the birth centenary of its founding father Sheikh Mujibur Rahman, and completion of the 6.15-kilometers railroad bridge on the Padma River (thereby linking 21 southern districts to capital Dhaka) with its own resources that may add 1 percent to the country’s GDP when operational.
“We have thrown out the brutal Pakistan army, we have tamed the mighty Padma, we will go a long way,” said Halim.
She argued that Bangladesh’s economic turnaround would never have happened without social modernization and human development, especially in key areas like gender empowerment.
Former World Bank chief economist Kaushik Basu agrees. “Bangladesh’s growth model is inclusive, focused on trickle-down and driven by grassroots-level human development in areas like education, health, women empowerment,” he told The Diplomat. Note that 34 percent of Bangladesh’s population is 15 years old or younger and nearly half are women.
“The rising women workforce and our liberal Bengali traditions are our best bet against Islamist radicalism that has ruined Pakistan. We can exploit the demographic dividend by tapping our youth power because they have not gone astray despite some stray cases of terrorism,” garment trade unionist Lovely Yasmin told The Diplomat.