Invincible Bangladesh

This year, we are celebrating our victory day at a moment when the world is heading toward a recession. Bangladesh is also not immune from the heat of that economic meltdown. The developing countries, including Bangladesh, were caught up in the fallouts of the Russia-Ukraine war when they were just trying to recover from the impacts of the unprecedented pandemic. The pandemic-induced broken supply chains have been further disrupted by the Ukraine war leading to rising prices of fuel and food. The aggressive tightening of monetary policy by the Fed has been destabilizing the exchange rates of most currencies against the US dollar, with severe consequences on imported inflation following the significant depreciation of the same. Bangladesh’s Taka lost nearly a quarter of its value against the USD fueling imported inflation. Although inflation in Bangladesh has been easing during the last few months it remains much higher than the targeted rate set by the Monetary Policy. Thanks to a bumper harvest of Aman rice, food inflation remains tolerable to some extent, particularly in rural areas. It is, however, biting the low and lower-middle-income people in urban areas. This social protection provided by the government for struggling urban consumers has been welcomed by most observers. This reflects the compassion of the leadership, which cares for the disadvantaged in an otherwise thriving market-based economy.

Of course, the rural economy has been sustaining better even in this challenging time of global economic slowdown as Bangladesh has remained focused on bolstering domestic demand. The agriculture sector and small entrepreneurs have benefited from the vast government subsidies, despite ongoing austerity in public spending in many areas. As a result, the income of the rural population, particularly from the lower segments, remained stable. The stable rural consumption level also helped maintain the inclusive growth momentum of the country. Both Bangladesh Bank and the government have been keen on providing low-cost finance for the farmers and micro, small and medium enterprises (MSMEs) to bolster their productive capacities. This fits in exceedingly well with the vision of Bangabandhu.

It may be noted here that the world went through a similar economic crisis even during the 1970s when Bangabandhu started rebuilding the newly independent Bangladesh. Fuel and food prices were also then much higher in the international market. Inflation was skyrocketing. So, he took policies to invest in agriculture and the people. He created an act of stubborn courage among the population to fight against all odds and go forward relentlessly. He said:

“What do I want?

I want my people, the people of Bengal to have their bellies full

What do I want?

I want the unemployed in my country to get an opportunity to work.

What do I want?

I want the people of Bengal to find happiness.”

(Bangabandhu Sheikh Mujibur Rahman, 9 May 1972 (At a speech at Rajshahi Madrasa Math)

Therefore, Bangabandhu created the slogan ‘The country will survive only if the farmers survive’ and called for a green revolution. He saw agriculture as both a way to enhance employment and reduce poverty and work as the engine for industrial growth by supplying raw materials and creating demand for manufactured goods. During his term as the head of government, he ensured the rehabilitation of 2.2 million farmer families and withdrew 1 million certificate cases to help them come out of indebtedness. He also provided agricultural loans amounting to four million US dollars. This was not a mean amount during the early 1970s. He ensured fair prices for the farmers and launched rations for them. He prioritized agricultural research and founded BARC, BINA, BARI, and BRRI. He is the one who gave first-class status to agriculture graduates in the civil service. He arranged the distribution of 43,000 pieces of irrigation equipment to farmers in a short period. Due to these initiatives, by 1975, the area receiving irrigation increased by 33 per cent, chemical-based fertilizer by 70 per cent, and high-quality seed by 25 per cent.

Bangabandhu undertook strategies to promote industrialization through the public sector with a scope of development of the private sector gradually to lessen the state-dependence. In the national budget of 1974-75, the ceiling for private sector investment was increased from Tk 2.5 million to Tk 30 million. Also, in this fiscal year, 133 abandoned factories were privatized. In his short tenure of four years, per capita income almost tripled from 93 USD. This path of growth lost its trajectory when we lost him physically. It took another thirteen years to reach the per capita growth level of 1975.

Sheikh Hasina, the daughter of Bangabandhu, has brought the country back to the path which Bangabandhu envisioned. After losing Bangabandhu, it took twenty-one years and much struggle and sacrifice before his daughter could run the country. And she took Bangladesh back to the trajectory of growth as envisioned by Bangabandhu. This journey of economic advancement was again disrupted in 2001 as she was not allowed to come back to power by various conspiracies. But, by risking her own life, she again became the Prime Minister after winning the 2008 election. Since then, her relentless journey toward inclusive growth and sustainable development continues defying many local and global challenges. is being pursued relentlessly. Today, Bangladesh’s per capita income is more than 2,856 USD. In fact, Bangladesh has become a role model for poverty reduction due to this balanced economic strategy pursued by her. Many positive structural changes have taken place in the economy. Reduced rate of poverty and overall reduction of the number of ultra-poor people has proved that the inclusive development approach is working well to bring welfare to the population. But in recent times, some challenges have been observed, mainly due to the global pandemic and economic crisis.

In the past two decades, the manufacturing sector’s contribution to overall GDP has grown from 18 per cent to 35 per cent. Though the share of agriculture declined, production increased by a large margin in this sector. Investment is growing, and alongside it, loan distribution is also growing. In the past decade, the investment-GDP ratio grew from 26.3 per cent to 31.57 per cent. Apart from these, life expectancy is now more than 73 years, which was only 47 years in 1972. The literacy rate increased to 75 per cent from 56 per cent in 2008. Per capita income is now more than 2800 USD, which was just 759 USD earlier in 2008-09. There have been phenomenal growths in major indicators of the external economy during the last 12-13 years. Export earnings reached 52 billion USD in 2021-22 from 15.6 billion USD in 2008-09. In terms of foreign direct investment, the amount increased to 2507 million USD from 961 million USD during the same period.

The observers believe that although Bangladesh faces many challenges, its future looks bright, and many opportunities await. Bangladesh can follow the path of Southeast Asian nations in terms of growth trajectory, and per capita income can reach 4,000 USD by 2026. Currently, 73 per cent of the country’s GDP originates from consumption. By 2026, another 12 per cent can be added up to the number. And by 2030, Bangladesh will become the ninth-largest consumer market in the world. This tells about the strength of Bangladesh’s inclusive development strategy. In 2026, around one-third of the population will join the middle-income group. Around 11 per cent will move up from the low-income group. About 36 per cent of the population will have higher education, and as a result, they will have a higher income.

However, one must also keep in mind that, like many of its peers, Bangladesh faces many challenges thrown out by the pandemic and the Ukraine war. It, therefore, should stick to its sustainable recovery plan. As part of the process, the lifeline of the economy of Bangladesh, agriculture must be sustained. Adequate finance must be provided to the innovative farmers. More support should be given to agricultural research. To ensure the participation of the private sector in research and innovation, more incentives can be given to them. The Bangladesh Bank and the universities can work together to enhance growth in agriculture-based start-ups. For irrigation, the use of fossil fuels can be reduced by using solar irrigation pumps. To encourage e-commerce, nano-loan programs can be implemented through MFS and agent banking. And it is a must to provide technical assistance and finance to women entrepreneurs who are doing business in agriculture-related sectors.

Infrastructural development must be continued. Currently, it takes 28 days on average to reach an export shipment from Bangladesh (the average for Asian countries is 18 days). Import shipment requires 34 days to reach (the average for Asian countries is 20 days). Import and export expenditures can be hugely reduced by developing proper infrastructures. (currently, we have the highest import-export expenditure in South Asia). Private sector participation in developing infrastructure must be increased (currently, it is only 1.1 per cent of the GDP). We must effectively face the challenges and maintain our growth-enhancing exports to use the opportunities present in front of us. However, as a middle-income country, we can no longer rely solely on cheap labor to survive the export competition. Advanced technologies must be used. We can gain a stronger position in competition if we can improve our regulatory standards. At the same time, productiveness must be increased with the use of machinery. (A 25 per cent increase in the use of machinery can increase production per labor by 3 per cent). New export markets must be sought and explored. Diplomatic initiatives must be taken to ensure trade agreements and increase foreign direct investment.

Bangladesh can also benefit from geo-political polarization. Bangladesh is already getting the benefits of the US retailers opting for more of the Bangladesh apparel products as the US-China trade tensions, and China’s zero-Covid policies get intensified.

A survey by the USFIA showed that in 2022, Bangladesh could attract a higher number of US consumers than China and Vietnam. This may augur well for Bangladesh’s export sector, which is recovering so fast.

Bangladesh can hugely benefit from its ‘open regionalism’ in international diplomacy. In the fiscal year 2021-22, bilateral trade between Bangladesh and India amounted to 11 billion USD, of which 1.27 billion USD was Bangladesh’s export to India. Currently, only 1 per cent of India’s international investment destination is in South Asian countries. However, India’s investment in Bangladesh is increasing, but there are opportunities to attract much more such investment. If only 1 per cent of India’s aggregate import is exported from Bangladesh, it can increase Bangladesh’s export to India fourfold.

Another source of strength of our external economy is the remittance sector. We can benefit greatly more from this sector by properly providing incentives to our expatriate workers. Suppose an opportunity is provided to the higher-income group of remitters to invest in treasury and other bonds digitally, and expatriate workers are included in the universal pension scheme. In that case, they can undoubtedly bring additional foreign exchanges to the country. Bangladesh Bank’s startup fund can provide loans or assistance to expatriate workers who come back to Bangladesh to encourage them to become entrepreneurs. Special scholarships must be provided to the children of the expatriate workers, and other benefits must be provided to their families.

In terms of energy, a blended approach is the correct way forward. As part of this approach, the use of fossil fuels must be reduced for irrigation. Solar irrigation pumps can be an effective alternative. A smooth policy path must be laid out for a gradual transition to the use of green energy. Bangladesh Petroleum Corporation must continue to search for new gas fields alongside importing fuel. Regional cooperation for energy, especially with India and Nepal, can help reduce the pressure largely. The pipeline for the import of diesel from India has indeed been a strategic move for Bangladesh.

Like many other countries, Bangladesh’s macroeconomy also faces several challenges. However, we also have many lessons from past experiences regarding how to face crises. It is high time we stop being panicked and jointly face the global economic crisis capitalizing on those lessons. Finally, our development strategy needs to be greener, more inclusive, and more participatory. Only then will we be able to create a Bangladesh as our Father of the Nation envisioned while leading in our liberation war.