Bangladesh has made significant progresses in its economic sector performance since independence in 1971. Now Bangladesh is one of the world's fastest growing economies. In the decade since 2004, Bangladesh averaged a GDP growth of 6.5%, that has been largely driven by its exports of ready made garments, remittances and the domestic agricultural sector.
Bangladesh has been classed by the United Nations as one of the world’s least developed countries (LDCs) since 1975, but its current trajectory means it is likely to shed that description by 2024. Graduating from LDC status is a sign that a country’s per capita gross national income, human assets, and resilience to economic and environmental shocks are robust enough to enable sustainable development.
Bangladesh was 105th in the The Global Competitiveness Report 2019 from the World Economic Forum. The more competitive a country is, the more likely it is that it will be able to improve living standards.
Bangladesh’s economic freedom score is 56.4, making its economy the 122nd freest in the 2020 Index. Its overall score has increased by 0.8 point, led by a higher score for property rights. Bangladesh is ranked 29th among 42 countries in the Asia–Pacific region, and its overall score is well below the regional and world averages.
The Index of Economic Freedom is an annual index and ranking created in 1995 by the Heritage Foundation and the Wall Street Journal to measure the degree of economic freedom in the world's nations. The creators of the index took an approach similar to Adam Smith's in the Wealth of Nations, that "basic institutions that protect the liberty of individuals to pursue their own economic interests result in greater prosperity for the larger society".
The Foundation explains that "Economic freedom is the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please. In economically free societies, governments allow labor, capital, and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself." By publishing yearly reports the foundation attempts to highlight where such freedoms do and don't exist.
Bangladesh has made steady albeit incremental progress toward greater economic freedom during the past five years. Although its economy has remained stuck in the mostly unfree category, its GDP growth during the same period has been robust. A welcoming attitude toward foreign investment and restraint on the growth of government may partially explain the discrepancy.
For Bangladesh finally to break into the ranks of the moderately free, the government would have to make a sustained, multiyear effort to improve the three rule-of-law indicators and permit the entry into the country of more international banks and the best practices they would bring with them.
The garment trade that began in Bangladesh in the 1970s is now a $30 billion industry. But the economy is diversifying. The services sector – including microfinance and computing – makes up 53% of the country’s GDP. The success of the IT industry is central to the digital transformation and ongoing economic growth of Bangladesh. It exports nearly $1 billion of technology products every year – a figure that the government expects to increase to $5 billion by 2021. The country also has 600,000 IT freelancers.
Bangladesh has become one of Asia’s most remarkable and unexpected success
stories in recent years. Once one of the poorest regions of Pakistan, Bangladesh remained an economic basket case—wracked by poverty and famine—for many years after independence in 1971. In fact, by 2006, conditions seemed so hopeless that when Bangladesh registered faster growth than Pakistan, it was dismissed as a fluke.
Since then, Bangladesh’s annual GDP growth has exceeded Pakistan’s by roughly 2.5 percentage points per year. And this year, its growth rate is likely to surpass India’s (though this primarily reflects India’s economic slowdown, which should be reversed barring gross policy mismanagement).
Moreover, at 1.1 percent per year, Bangladesh’s population growth is well below Pakistan’s 2 percent rate, which means that its per capita income is growing faster than Pakistan’s by approximately 3.3 percentage points per year. By extrapolation, Bangladesh will overtake Pakistan in terms of per capita GDP in 2020, even with a correction for purchasing power parity.
Bangladesh has seen wide improvements in health, education, infant mortality and life expectancy, according to Daniel Gay of the United Nations Department of Economic and Social Affairs. This has driven growth and reduced economic vulnerability. It is really a success story.
A decline in population growth is also helping an increase in per capita income. The number of employed workers living below the poverty line dropped from 73.5% in 2010 to 10.4% in 2018.
Bangladesh has made remarkable progress in reducing poverty, supported by sustained economic growth. Based on the international poverty line of $1.90 (using 2011 Purchasing Power Parity exchange rate) a day, it reduced poverty from 43.8 percent in 1991 to 14.8 percent by 2016.
Life expectancy, literacy rates and per capita food production have increased significantly. Progress has been underpinned by steady growth in GDP. Bangladesh reached the lower middle-income country status in 2015. In 2018, Bangladesh fulfilled all three eligibility criteria for graduation from the UN’s Least Developed Countries (LDC) list for the first time and is on track for graduation in 2024.
Sustained economic growth has created an increased demand for energy, transport and urbanization. Insufficient planning and investment have resulted in severe infrastructure bottlenecks, congestion and pollution. To become an upper-middle income economy, continued sound macroeconomic management, financial sector stability, structural reforms, investment in human capital, higher female labor force participation, and global integration will be important. Improving infrastructure as well as the business climate would allow new productive sectors to develop and generate quality employment.
Bangladesh is both an inspiration and a challenge for policymakers and practitioners of development. While the country recorded strong performance in income growth and human development, Bangladesh faces daunting challenges with an increased level of vulnerability with about 39 million people still living below the national poverty line.
The COVID-19 pandemic will deepen the challenges including a decline in exports, lower private investment, and job losses. Investment and exports are likely to continue to suffer amid uncertainty about the recovery of global demand. The poor and vulnerable are more impacted with income loss and poverty may rise. The implementation of the government’s COVID-19 response program will remain a paramount priority.
With the right policies and timely action, Bangladesh can accelerate its recovery from the economic downturn and continue to progress towards upper-middle income status.
Md. Zillur Rahaman ,banker and freelance contributor
Latest News