Five decades of meteoric rise to growth

Asjadul Kibria |
Posted:
Dec. 11, 2021 10:08:07 p.m.

Bangladesh is celebrating 50 years of independence and there are many events taking place in Victory Month, December to be precise, to mark the celebration. An important aspect of the celebration is to revisit and examine the economic transformation of Bangladesh over the past 50 years. On the world stage, Bangladesh’s successes over the past five decades are commendable thanks to many socio-economic achievements. At the same time, the list of failures is also not small. Thus, overall development is a mixed bag where it is quite difficult to accurately determine the proportion of successes and failures. Those who are enthusiastic will find that the achievements have more than made up for the failures. Those who are cautious optimists would observe that socio-economic areas that lack progress are mostly examples of missed opportunities and that these have weakened successes on many other fronts.

Fifty years ago, a vulnerable, poverty stricken and resource-constrained country with a largely unskilled and illiterate population was a dire case for many. Some of them even predicted that Bangladesh would not survive as an independent and sovereign country in the long run. Calling the country a “basket” was a vivid example of such a negative projection that had started even before Bangladesh’s final victory in the war of independence against the Pakistani army. It was December 6, 1971, at a meeting chaired by United States (US) National Security Advisor Henry Kissinger, the Washington Special Action Group discussed the situation in South Asia. At the meeting, Bangladesh was labeled as an “international hopeless case,” indicating that it was a dysfunctional or dilapidated country. The United States was quite disappointed with its inability to stop the collapse of Pakistan and come to terms with the defeat of the Pakistani army in the bloody nine month war in which three million Bengalis were killed and two hundred thousand women violated.

Natural and man-made disasters in Bangladesh’s early years also provided “basket” supporters with tools to carry out their propaganda. During the 1972-75 period of the Bangabandhu regime, three years and eight months to be precise, the country’s economy faced a series of external and internal shocks. These include rising inflation, the global oil shock, declining trade, foreign and food aid, drought, cyclone, floods, a famine epidemic and an increase in smuggling. Then there was administrative mismanagement, inefficiency and corruption. The propagandists of the “basket” did not take into account the shocks.

Some international friends and supporters of Bangladesh, however, still saw a silver lining during the same period. Austin Robinson, professor emeritus at the University of Cambridge, prepared a report titled Bangladesh Economic Outlook, which was published by the London-based Overseas Development Institute (ODI) in 1973. In the report, he wrote: ” The constant question is, “Is Bangladesh viable?” To this question, an economist has no answer. What is the alternative to sustainability? The death ? Is a country already dead? He may be poor. It can be static. But can’t a country be viable?

Whatever projections and predictions made by experts and economists in Bangladesh’s early years, the country progressed gradually by readjusting and revising economic policies from time to time and also adopting new policies. Policy formulation and implementation have not always yielded positive or optimal results. But economic progress has never stalled even though it has slowed down on different occasions.

In the early years, high tariff regimes and protection coupled with import substitution and state-centered development policies existed. This resulted in the domination of the public sector with a limited role of the private sector and a low level of investment. Economic reconstruction in a war-torn country was also a priority. A change in policy began to occur from the middle of the first decade by gradually opening up the economy, liberalizing imports and the tariff regime, encouraging privatization and market orientation. The change has contributed to the rise of the national entrepreneurial class, the emergence of an export-oriented ready-to-wear industry (RMG), as well as the slow rise of the middle class. Thus, Bangladesh’s first two decades were the years of determining and establishing the basis and platforms for economic growth. During the period, it became clear that the country will follow the market economy. In addition, achieving food self-sufficiency was the major objective of the first decade which drove agricultural production in the following decades.

During the third decade, more specifically the 1990s, Bangladesh entered the era of parliamentary democracy when market-oriented macroeconomic reforms began. The introduction of value added tax (VAT), partial currency convertibility and a further reduction in import tariffs were critical steps during this period. There were also initiatives for institution building, banking regulation and extended privatization. During this decade, the country achieved an economic growth rate of 4.70% on average. Non-governmental organizations (NGOs) have emerged as a key driver of development alongside the state and the private sector.

A big reform push was visible in the fourth decade to achieve higher economic growth through measures such as deepening import liberalization, floating exchange rates, financial sector reforms, including including lower interest rates. The result was a moderately higher GDP growth rate of 5.60 percent on average, further poverty reduction, increased business activities and new employment opportunities.

Bangladesh’s fifth decade was the “take-off phase” of Rostow’s fast-paced economic growth. Average GDP growth reached 6.50 percent and the country transitioned to a lower middle-income country in the middle of the decade. The exit from Least Developed Country (LDC) status was also confirmed in the latter part of the decade, thanks to a significant improvement in human development indicators coupled with poverty reduction and persistent economic growth that ultimately resulted in crossed the 7.0% mark. Improved telecommunications and digitization have emerged as an essential tool for overall development during this decade.

With the economic advancement of Bangladesh comes political development and changes in political regulations. Although the country has taken a market-driven approach, state-sponsored capitalism has opened the door to rent-seeking that has continued in various forms over the decades. It also consolidated cronyism, crony capitalism to be precise. Thus, the link between politics and business has been strengthened. The result is an increase in income, but with the resulting socio-economic inequalities. It has become the biggest challenge for Bangladesh to sustain five decades of achievements by circumventing setbacks. It is not unlikely that the Bangladeshi economy will enter the ‘drive to maturity’ or the next stage of Rostow’s growth model by the end of its sixth decade of existence. The high level of optimism is conditional on the appropriate treatment of inequalities, the guarantee of social justice and the establishment of good governance.

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