Bangladesh's Economy

September 10, 2017

 

Here I provide my personal economic outlook for Bangladesh after a three-week visit.

 

Over the course of my three-week stay in Bangladesh, one fact stood out to me the most – it felt almost identical to the place it was on a similar visit of mine ten years ago. The visible stagnation, and in some places deterioration, was evident, a viewpoint less aligned with more positive sounding World Bank and IMF reports. Numbers and statistics hold these things to a different standard. So what does economic progress in Bangladesh look like?

 

This year’s IMF outlook on Bangladesh speaks of an economy that is likely to grow between 6.4 to 6.8% in the next year. Indicators such as tax revenue growth, which is at 19.6%, and growth in import of construction materials at 13.6% imply the economy is on course to maintain robust growth. Export markets are expected to improve, as well as private investments. For Bangladesh to accelerate its journey on the middle-income path, it will need higher growth rates of over 7%.

 

Progress is a measure that wholly depends on your timescale. If one were to track the progress of Bangladesh since 18th Century Mughal Bengal, when real wages and living standards were comparable to the highest living standards in Europe of Britain, our projections would be very different. The Bengal of the past could be described as a center of trade, which also had a large shipbuilding industry, one that was advanced compared to European shipbuilding of the time.

 

In modern times, it was independence from Pakistan, which enabled the socialist economy of Bangladesh. This was a move that rendered the end of East Bengal prosperity. It meant slow growth in terms of producing skilled workers amongst the otherwise large work force. The large-scale nationalisation of industry strangled Bangladeshi entrepreneurship in its infancy. It was private entrepreneurial initiatives in the 1980s that caused Bangladesh’s emergence as a major producer of seafood for export. Then the enforced use of the Bangla language as a replacement for English, hindered integration into the world economy.

 

Today Bangladesh feels like a relic of its past, with traditional agriculture techniques still in place, an optimistic shipbuilding industry that could have the potential to compete with the primary shipbuilders of today (being China, Japan, and South Korea), and poor maintenance of modern transportation and communications. This is alongside present day problems of increased flooding and falling remittances.  With development comparable to India, and a BB long-term credit rating, above those of Pakistan and Sri Lanka, efforts towards development and moving into the future seem scattered and shy. 

 

While trade and the resulting living standards of the old Bengal is not the same now, Bangladesh remains a country with major industry - including textiles, pharmaceuticals, steels, electronics, energy, construction materials, chemicals, and more, with garment-manufacturing scales second only to China. An interesting side note is that the vast majority of billboards are cement advertisements, if from that we can grasp any reflection on consumer culture. Major setbacks to economic development include an insufficient power supply, political instability and corruption.

 

During my trip, I had spent the majority of my time in the city of Sylhet. Sylhet’s economy is closely linked with the British Bangladeshi community and the city also receives a significant portion of the country’s overall remittances, driving growth in construction and real estate. Additionally, its Metropolitan Area is one of Bangladesh’s main business centres. Visibly, this growth is not long-term improvement. Ten years on from my last trip, we have over-development and over-crowding, poor traffic-management and the construction of buildings with no clear consideration towards their surroundings. It goes as saying that these days the businessman in Sylhet builds hotels, and hotels spring up in the most peculiar places, say as part of a hospital complex. The sentiment from students in the city’s top schools is a lack of opportunity. It seems Bangladesh has no need or space for academics, scientists, engineers, and the like.

 

Political uncertainty and corruption are two major obstacles. A prime example of corruption is the case of state-owned Probashi Kallyan Bank, intended to provide financial services for non-resident Bangladeshis. The specialised bank for migrants could not provide services matching their requirements – for instance, most job seeker loans were too small. This is alongside widespread nepotism.; people in senior positions would not have the required qualifications and bribery is common. Another example of widespread corruption is the 2011 manipulation of the Bangla stock market which caused the bankruptcy of millions of investors.

 

Elementary suggestions for improvement for Bangladesh include political stability, tackling the inefficiency of state-owned enterprises, improving access to education, and expanding the country’s electricity supply. Wages are also shockingly low and infrastructure is poor. Improving measures against the rampant flooding would also boost livelihoods and benefit the economy. Rising wages would mimic China’s approach.

 

I am conscious of the conclusions one can draw from the accounts of travellers. The bleak perspective on say Indian silk labourers held by Europeans in the 18th Century came from such accounts that did not realise the different requirements of different lifestyles. Real positive change is not evolving towards the image of The West, but can only come about from shaking the ills of the status quo. Already we have seen innovative ideas such as those of Bangladeshi Nobel Peace Prize winner, Muhammad Yunus, who pioneered the concepts of microcredit and microfinance thus making progress in alleviating poverty. Such change is not in general welcomed. With politically motivated attacks on Yunus as an example, and the overall profitability for the few of a powerless population, makes change difficult. Changing attitudes of the overall population, for the well educated amongst the population to recognise their need and to be able to facilitate their skills, and making the country a safe place can harken change. Perhaps what Bangladesh needs is a space, that is both ideologically welcoming and sustained by effective investment for bright ideas, to fill the void of entrepreneurship.

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