Forty-two years after independence, Bangladesh has been identified as one of the next 11 emerging economies. In this financial year alone, its economy is expected to grow by six percent. Farooq Sobhan explains the success story.
On independence in 1971, few would have imagined that, 41 years later, Bangladesh would be a US$130 billion economy, producing 35 million tons of food, sufficient to feed 160 million people. Or that it would have 18 million self-employed women in rural areas, with a further four million women working in the ready-made garment sector. Bangladesh has, indeed, made considerable progress during the past four decades – overcoming floods, cyclones and drought.
Yet the challenges confronting the Awami League-led government remain formidable. It needs to improve the efficiency of the bureaucracy, curb inflation, address infrastructure issues and improve the prevailing investment climate. But its biggest challenge is a clash of identities. Is the bed-rock of Bangladesh’s identity, as demanded by the millions who recently demonstrated in Shahbagh square in Dhaka and elsewhere, based on a secular democracy rooted in the spirit of the 1971 Liberation War and the 1952 language movement? Or is that identity now defined by religious-based politics, exemplified by the largest Islamic party, the Jamaat-e-Islami, and its supporters?
In the current financial year, the economy will grow by six percent instead of the 7.2 percent target. The outlook for foreign direct investment (FDI) remains bleak, because of red tape, law and order problems, poor infrastructure and worsening traffic jams – but above all because of the political situation. The Bangladesh Nationalist Party (BNP), the Jamaat-e-Islami and other Islamist parties have already begun large-scale violent protests and strikes that could damage the economy.
The government has made tackling the chronic power and energy shortages plaguing the country a high priority. In the long run, it will not only invest in short-term, expensive oil-based rental power plants but will explore other means of generating power. The prospects for FDI in the power sector and oil and gas exploration are excellent. Bangladesh can also exploit huge coal deposits.
The telecom sector, with nearly 100 million cell phone subscribers, has attracted FDI. In June, a 3G auction will be held. But disputes between the operators and the Bangladesh Telecom Regulatory Authority need to be resolved. The government has $35 billion of planned infrastructure projects that will welcome FDI. However, the current political situation may deter foreign investors.
Despite these challenges, Bangladesh has achieved considerable success in socioeconomic development. It has been praised by the international community for increasing life expectancy, reducing the population growth rate, achieving gender parity in education, and improving maternal and child health. In many areas, Bangladesh is well ahead of India and Pakistan.
Bangladesh is also the birthplace of microcredit, pioneered by the Nobel Peace Prize recipient, Professor Muhammad Yunus – the founder of Grameen Bank. The Bank’s approach has been replicated in more than 100 countries. In Bangladesh, the majority of borrowers are women, able to invest in small businesses and provide financial support to their families. Brac, established by Sir Fazle Hasan Abed in 1972, is the world’s largest NGO, continuing to improve the lives of millions of poor Bangladeshis.
There are about 8 million Bangladeshis working overseas, in 155 countries. They remitted more than $14 billion in 2012. Bangladesh is also a leading global exporter of ready-made garments, second only to China. In 2011-12, sales accounted for 80 percent of exports, totalling $19 billion. McKinsey recently predicted that apparel exports could gross $36 billion by 2020. Goldman Sachs highlighted Bangladesh as one of the next 11 emerging economies and JP Morgan identified it as a ‘Frontier Five’ economy. Standard & Poor’s and Moody’s have rated Bangladesh second only to India for creditworthiness in south Asia.
Bangladesh has taken a leading role in the UN, and elsewhere, to enhance peace, promote dialogue and encourage cooperation. It recognises UN peacekeeping to be an indispensable and cost-effective tool in the maintenance of international peace and security. Based on this principle, Bangladesh has played an important part in UN peacekeeping, participating in 33 Missions involving 75,000 peacekeepers since 1988. Today, Bangladesh is the second largest contributor to UN peace-keeping, with nearly 9,000 peacekeepers deployed globally.
Bangladesh aims to be a middle-income country by 2021. This target is certainly achievable if its strategic location as a neighbour of India, China and ASEAN – the three fastest growing economies in the world – can be successfully leveraged. During the next eight years, Bangladesh needs to integrate its economy with its neighbours, build a deep sea port, improve its railway and road infrastructure, increase its power production, and make further progress in health care, education and skills training. A growth rate of 8-10 percent is achievable. Much, however, will depend on the quality of governance and leadership – and, most of all, on political stability.
About the author:
Farooq Sobhan was Foreign Secretary of Bangladesh (1995-97) and has served as an Ambassador/High Commissioner to several countries. He is now president and CEO of the Bangladesh Enterprise Institute