The Unique Paradigm Shift of Bangladesh's Economy

 

The notable American historian Thomas Kuhn in his critically acclaimed book “The Structure of Scientific Revolutions”, published in 1962, coined the term ‘paradigm shift’. Kuhn argued scientific revolutions go through certain paradigm shifts over decades depending on the time-space contiguity of particular scientific discipline. As enormous and distinctive the shift is, the transformation cannot be explained by contending perspectives. Now after 60 years of Kuhn’s thesis, the term is also widely used in business, economics and political science disciplines.

The close illustration of such a paradigm shift could be observed in South Asia, a region full of surprise and anomalies. Bangladesh’s economy from the 1980s to 2020s has gone through such remarkable shifts and phases that neither economists nor crystal-persons can aptly comprehend. From a below 5% GDP growth before independence, the country has managed to achieve a robust growth 271 times higher in this 50 years period. No surprise, the economists are puzzled by the rise of the emerging Asian tiger in South Asia, the similar perplexity they experienced in the 1990s East Asian miracle. The puzzle is even confounding when Bangladesh showed strong resilience in the COVID-19 observed unlikely in other South Asian countries.  

Not surprisingly, IMF DMD Antoinette Monsio Sayeh in their recent visit has lauded Bangladesh for the country’s proactive management in the COVID-19 pandemic. Especially, in the current context of global recession, inflation, debt-crisis and Eurasian regional turmoil, the country seems to be coping well with its development program. Rostow’s classic modernization program, however much criticized, now seems to be a perfect fit for Bangladesh’s economic growth example. Now, the question comes: what is so unique about Bangladesh's rising development case?

Traditional unidirectional development pattern does not explain Bangladesh’s unique model of development. In the last two decades, after the introduction of privatization in the 1990s, the country has experienced a surge of micro-enterprises, service-oriented commercial activities and high-rate of young enterprises. The results have not always been positive but more importantly the growth rate was consistent as equal for the consistent performance of the country. The high-level engagement of NGOs, the unique social-development approach of BRAC and problem-driven orientation towards SDG fulfillment have provided the base of the economic spring-board. For example, BRAC’s annual expenditure on Bangladesh’s development programmes is approximately 150 million USD. The sheer investment has accelerated the rural-urban development process where a farmer owning only three cows can actively participate in BRAC’s agro-farming project.

Remittances of migrant workers and the RMG sector have been two key strength points for Bangladesh’s economy. Bangladesh is currently the 7th highest recipient of remittance in the world, according to a World Bank estimate. Bangladesh is only third in South Asia acquiring an economy worth around USD 22 billion. This high amount of remittances of migrant workers have provided the country with ample economic input for its government expenditure leading to higher incentives in this sector. Similarly, high-degree of entrepreneurship and strategic management has enabled Bangladesh’s RMG sector to gain its potency as one of the top global sourcing hotspots in the world. Factory greening, factory safety and value-chain responsibility have been key reform issues for Bangladesh RMG industry after the Rana Plaza disaster which helped it regain its reliable partner image. In the FY 2021-2022, the RMG sector also has yielded around USD 35.36 billion export income to the country proving the fact that more incentives to the right sector do beget high income.

However, the formal economy does not represent the whole picture of Bangladesh’s economic growth. The unrestrained urban population growth has led to the inclusion of urban-migrated workforce into the informal economy sector. According to research, around 88% of Bangladeshi workforce is employed in the informal economy which contributes around 49% to 64% of the country’s GDP. Notably, numerous SMEs and micro-firms consist of the majority of the  informal economic workforce. The high level of informal economic engagement was one of the key factors that Bangladesh continued its economic journey smoothly amidst the COVID-19 pandemic.

However, it would be a blatant lie to deny the negative impact that the pandemic had on Bangladesh’s economy from multiple angles. The ADB estimated that around 5 million full-time jobs were lost due to the pandemic which had a detrimental effect on graduate employability in the pandemic. To mitigate this effect, the government has adopted a stimulus package worth USD 22 billion in the FY 2021 to protect the lost jobs and expand social safety nets. The government also provided substantial agricultural and remittances incentives with interest to run the crop and dollar unhindered even in such a pandemic blow. Such proactive measures enabled Bangladesh to advance its journey and recover setbacks unexpected to many economists.

Bangladesh’s resilience in the COVID-19 pandemic has been a good example of the country’s economic strength in the face of global uncertainties. In the current global inflation, recession and regional war-time, similar strength is again visible for the country where it is determined to advance its step forward. Perhaps, it is also the determination of the people of Bangladesh, with their long history of rebellious nature, that they are not to be pushed back in any adverse circumstances.

 
Aziz Patwary is a
columnist.