BANGLADESH RISING: FIVE YEARS OF ECONOMIC SUCCESS
It is now widely accepted that Bangladesh has made significant strides in social progress and human development indicators. However, Bangladesh has also been a success story in economic terms.
The World Development Report 2013 commented on Bangladesh’s social and economic progress thus: “Some countries have done well in human development indicators, and others have done well in economic indicators, but Bangladesh belongs to a rather small group of countries thathave done well on both fronts”. In this Special Report, we look at Bangladesh’s economy in recent years, especially since the current Awami League led government assumed responsibility of the country’s economic management in 2009 under the visionary and astute leadership of Prime Minister Sheikh Hasina and her equally capable Finance Minister AMA Muhith.
Visions and Policies
One of the principal economic aims of the current government has been to implement Vision 2021 (which envisages turning Bangladesh into a middle-income nation by the year 2021) and Vision 2041 (turning Bangladesh into a developed country by the year 2041). To that end, the government formulated the Perspective Plan (2010-2021) and Sixth Five Year Plan (2010-2015) with the goal of elevating Bangladesh into a technology driven middle-income country by stipulated timeframes. This was the first time in the history of Bangladesh that such an elaborate and long-term plan was adopted for developing the country. Since then, every year the national budget has been formulated and implemented keeping those underlying objectives in mind.
Consistent Growth Despite Global Recession
When the Awami League came to power in 2009, the Gross Domestic Product (GDP) growth of the country stood at 5.74%.GDP Since then for the last five years, the country has seen growth of 6.2% on an average, with the highest growth of 6.71% achieved in 2011. The size of the GDP itself has also increased over the preceding 5 years, from US$ 89.36 billion in 2009 to US$ 129.86 in 2014.The growth potential of the economy has led to Bangladesh’s inclusion in the Next Eleven (N-11) of Goldman Sachs, Frontier 5 of JP Morgan and the Global Growth Generators (3G) countries. Due to maintaining this high growth rate despite the global economic recession, Dr. Rob Vos, Director of UN’s Department of Economic and Social Affairs has commented in 2012 that Bangladesh is a ‘rising star’ of economic growth and fiscal discipline.
Rising Per Capita Income and Elevated Living Standards
Due to the government’s adoption of such measures as introducing new pay scalesand dearness allowance for government employees, income generating activities, increase in minimum wages, expansion of social safety programs and other interventions, the real income and purchasing power of the people have increased substantially. According to Bangladesh Bureau of Statistics (BBS), halfway through 2014, the per capita income of Bangladesh stands at US$1,190. This was an increase from US$1,044 in 2012/13 fiscal year, which itself grew from US$923 in 2005/06. The current government has targeted to elevate the per capita income to US$ 2000 by 2021.
Soaring Foreign Exchange Reserves
Since the Awami League led government came to power, Bangladesh’s foreign exchange reserves have seenForeign Exchange consistent growth year on year. Over the last three fiscal years, the reserves increased from US$ 15.3 billion in June 2012 to US$ 21.5 billion in June 2013 to more than US$ 22 billion in August 2014, marking a more than 37% rise and an all time high.The country’s reserves increased primarily as a result of higher exports and continuous flow of inward remittances from Bangladeshi expatriates. This is one of the indicators showing how strong the country has grown on the economic and financial fronts.
Steady Increase in Remittance EarningsRemittances
Bangladesh is currently 7th in the list of countries receiving highest remittance income from migrant workers abroad. Under the Awami League led government, remittance earnings from Bangladeshi migrant workers abroad have been consistently seeing steady and substantial growth. In 2009/10 fiscal year, Bangladesh earned US$ 10.9 billion in remittances. This increased to US$ 11.6 billion in 2010/11, US$ 12.8 billion in 2011/12, and more than US$ 14 billion in 2012/13 and 2013/14 fiscal years respectively. The growth in remittance is principally due to the various steps taken by the current government to send Bangladesh workers to new destinations abroad.
Enhanced Growth in Export Earnings
Exports Bangladesh’s export earnings crossed the US$ 30 billion for the first time since independence in the recently concluded 2013/14 fiscal year. According to data by the Export Promotion Bureau (EPB), Bangladesh earned $30.18 billion from sale of its products overseas in 2013-14 FY ending on June 13, 2014. The figure is 11.65% higher than the previous fiscal year’s earnings. However, this was not a one off incident as export earnings have been consistently growing for the last few years under the AL led government’s various fiscal and other incentives offered to exporters. In 2010-11 fiscal year, the earnings were US$ 20.3 billion, which rose to US$ 22.8 billion in 2011/12 and more than US$ 23.7 billion in 2012/13 fiscal year.
Growing Foreign Direct Investment (FDI)
According to data released by United Nations Conference on Trade and Development (UNCTAD), inflowsFDI of foreign direct investment (FDI) into Bangladesh rose consistently without default throughout the six years the AL led government has been in power.
FDI rose 24% year-on-year to US$1.6 billion in 2013/2014 fiscal year compared to the year before. In 2012/13, FDI inflows increased 13.75% to $1.29 billion, compared to the previous year’s US$ 1.14 billion. Bangladesh is placed as the second favored investment destination in South Asia after India. The consistent growth in FDI shows the confidence the international investors have on the country’s potential and government’s ability. Lately, Bangladesh has seen a surge in investor interest, both in the manufacturing and service sectors as well as for power, energy and infrastructural development. It has also become a major hub for IT outsourcing.
Inclusive Economic Growth: Plans for Making Policies Pro-Poor
The government has recently adopted a US$ 4.7 million scheme to make economic plans pro-poor. Called the Support to Inclusive and Sustainable Planning (SSIP) Project, the scheme, financed by UN bodies, is meant for implementation between June 2013 and December 2016. With the underlying objective of enhancing the economic growth of the country, the project envisages enhancing the capacity of the national planners at the General Economics Division (GED) of the planning commission, the finance ministry, Bangladesh Bank and Bangladesh Bureau of Statistics. The project will provide technical assistance in the formulation of the background papers for the Seventh Five Year Plan as well. It should be noted that Bangladesh’s economic gains has not been restricted to a certain class. Ithas made remarkable strides in reducing poverty in recent years too. According to BBS, between 2010 and 2014, Bangladesh has managed to reduce poverty by 5.9% and extreme poverty by 4.2%.
Majority of Bangladeshis Happy with Country’s Economic Health
According to a recent report published by the Washington based research organization, Pew Research Center, 71% of Bangladeshis are happy with the economic health of the country, in a show of confidence on the current Awami League led government’s economic management. Demonstrating a mood of optimism, contrary to the global trend as revealed by similar surveys on other countries, 66% of Bangladeshis expected the economic situation in their country to further improve over the course of the next 12 months.
Trade Confidence on Bangladesh One of the Highest Globally
According to HSBC’s latest Trade Confidence Index, global trade confidence on Bangladesh has risen sharply, by 38 points in 6 months, which is the second highest among 23 countries globally. The Index reveals that Bangladesh’s score increased to 141 in the first half of 2014, from 103 in the second half of 2013. Bangladesh outpaced several countries including India, Turkey, China, UK, Brazil, Canada, Malaysia, USA, Singapore, Germany, Hong Kong, Australia and France. The report also forecasts stead growth for Bangladesh’s share of garments & textiles exports, rising from 2.8% in 2010 to 3.8% in 2020, boosted by recent initiatives to further strengthen its health and safety standards. The Report predicts that Bangladesh will continue to grow rapidly over the remainder of the current decade, and investment, particularly in infrastructure, will continue to rise strongly to support this.
Indicators of Sound Financial Management
Over the past 5 years, revenue collection has increased from 10.7% to 13.3% of GDP. The government has targeted to increase this domestic resource mobilization to 17% over the next 5 years. At the same time, the size of public spending has increased from 15.7% to 18.3% of the GDP. The government plans to increase this to 22% of the GDP in the next 5 years. The government has also been successful in holding down the reins of inflation. In June 2012/13, point-to-point inflation was 8%, which was brought down to 7.4% at the end of 2013/14 fiscal year. The government is expecting to further bring this rate down to 7% by the end of the current year.
Growth Target for 2014/15 Fiscal year & Plans for Achieving It
In his annual budget speech, the Finance Minister AMA Muhith has outlined the government’s target of achieving 7.3% growth in the 2014/15 fiscal year and 10% growth by the year 2021.
While it may seem ambitious, the government has also outlined its policies and strategies to achieve this target, including: a) Attaching priority to power, gas and port development; b) Increasing share of industrial sector in the overall national growth from 25% to 40%; c) Increasing private investment for infrastructure development through Public-Private Partnership (PPP); d) creating investment friendly environment and continuing institutional reforms to bring down the cost of doing business; e) Special allocation for acquiring land for large projects; f) Providing stimulus packages for such sectors as IT, ship building, leather, RMG, pharmaceuticals to add further momentum to exports; f) Providing incentives for agricultural sector; g) Skills development for generating employment; h) Developing rural infrastructure; i) Developing wetlands and coastal belts.
Bright Future Prospects
Bangladesh achieved phenomenal growth in the last few years under the Awami League led government of Prime Minister Sheikh Hasina. All this was achieved despite the countrywide violence perpetrated by the opposition party Bangladesh Nationalist Party (BNP) and their fundamentalist allyJamaat E Islamithroughout 2013.
The resilience of the nation and the determination of the government have been demonstrated by the strong economic indicatorsoutlined above despite the difficult circumstances. If the current political stability continues, then the Awami League led government will definitely be able to achieve its vision to see Bangladesh transformed into a technologically advanced middle-income country by the year 2021. Bangladesh, the tiger economy, rises.
JANUARY 01, 2015