Bangladesh's economic growth faster than India: How?
From a 'hopeless' case to the world's seventh-fastest growing economy. How did Bangladesh do it?
This may be my last message, from today, Bangladesh is independent. I call upon the people of Bangladesh wherever you might be and with whatever you have, to resist the army of occupation to the last. Your fight must go on until the last soldier of the Pakistan occupation army is expelled from the soil of Bangladesh, and final victory is achieved.
This was the message given out by Bangabandhu Sheikh Mujibur Rahman, the First President of Bangladesh on 26th March 1971, when the freedom struggle of Bangladesh against Pakistan was at its peak.
On 16th December 1971, 9 months after declaring Independence, the Bangladeshi army, with the help of Indian Forces, finally defeated the West Pakistani army and won the Liberation War of Bangladesh.
As the leaders and citizens celebrated their Independence and were filled with hope and desire to witness their nation prosper, the foreign media outlets had a different opinion.
Henry Kissinger, the United States National Security Advisor under President Nixon, said that Bangladesh will be an international basket case (refined way of calling someone useless), which will be dependent on foreign aid for its survival. And why not?
Bangladesh had just lost millions of people in the war, some also fled to India as refugees, while others were dealing with the famine and destruction caused by the war.
But, the nation has proved everyone wrong and has now emerged as the Asian Tiger! So much so, that it became the world’s 7th fastest growing economy in 2019!
So, how did Bangladesh pull it off?
After winning the Liberation War, Bangladesh followed a socialist economy. The economy was entirely in the hands of the government and prosperity of all was the topmost priority. However, this resulted in slow growth of the country which was already suffering from shortages of essential food grains due to the war. They had a large workforce but they were undertrained and underpaid.
After 1975, the leaders realized that this economic model was very inefficient. So they allowed the private sector to participate and that is when things started to change.
Aviation, banking, media, jute, and telecommunication were converted from state-owned enterprises to private enterprises. They turned their disadvantage of having a large population into an advantage.
The government realized the potential they possessed in low-skill manufacturing and then there was no looking back. Bangladesh introduced duty-free import machinery, raw materials and offered cash incentives for this ready-made garment manufacturing industry.
As a result of this effort, Bangladesh became the second-largest exporter (now it has slipped to third-largest) of clothing in the world! The textile industry contributes up to 12% of the GDP of Bangladesh.
These factories almost employ 4 million people, out of which 80% are women. The growth of the Garment industry has opened economic opportunities for villagers across Bangladesh and this also pushes families to educate their sons and daughters in order to get better returns in the labour market.
Education and job opportunities have helped fix another problem in Bangladesh: population density.
Till now, it is one of the most densely populated countries, with a population density of 1265 per km², while India has a population density of 424 per km² and Pakistan with 287 per km².
But, the situation is much better than what it used to be back in the days. Thanks to the efforts made by the government to empower girls with education and jobs, the situation has improved a lot since then. In terms of life expectancy at birth, reduction in infant mortality rate, and reduction of fertility rate, Bangladesh has outshone India and Pakistan.
Apart from the textile industry, foreign remittances have also helped Bangladesh succeed.
Approximately, 10 million Bangladeshis work abroad as low-skilled labourers in the Arabian Gulf. These workers live there and work to feed their families at home. They send as much as $15 billion to their homes in Bangladesh, which helps the country’s economy flourish.
The fruits of the efforts made by Bangladesh can be noticed when we look at economic indicators like GDP per capita. 10 years back, Bangladesh was way behind Pakistan and India, and now it has almost come close to India, beating Pakistan by a huge margin.
During Covid, while India recorded a GDP growth of -10%, Bangladesh registered a growth of 3.8%!
But it's no time for celebration. There are a lot of challenges in Bangladesh’s way to sustain this progress in the coming years. To keep up with changing times, their garment-dependent exports will have to shift to higher-value exports. This transition will decide how Bangladesh progresses to successfully retain the title of Asian Tiger.
Until next time…
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