How? Bangladesh's economy is booming.

Sunday, July 4, 2021

/ by mansuralisaha


The News Cover: This is a graph of the GDP per capita of India, Pakistan, and Bangladesh. In 2000, Bangladesh's GDP per capita was nearly half of that of Pakistan and 75% of that of India. After 20 years, Bangladesh has surpassed Pakistan and stands at 80% of that of India. This has been achieved by consistent economic growth. And the gap with India may even reduce. In 2020, India’s GDP fell by 8%. Meanwhile, Bangladesh’s GDP grew by 3.8%. Along with economic indicators, Bangladesh’s progress in social indicators has been impressive too. On life expectancy, infant mortality rate, and fertility rate, Bangladesh is doing better than India and Pakistan. In the past three decades, Bangladesh’s poverty rate shrunk to 14% from the previous 40%. Since 1975, Bangladesh has been classified as a Least Developed Country by the United Nations, the lowest category in its classification. However, Bangladesh will graduate from this classification by 2024. Nobody had expected such progress when Bangladesh gained independence. 

Soon after Bangladesh's independence, the United States’ Under Secretary of State, Alexis Johnson, infamously said that Bangladesh was an “international basket case.” It means a country that will struggle economically. The New York Times even reported that Bangladesh was a failure. Many experts were skeptical about Bangladesh’s growth, which was overcrowded, possessed limited natural resources, and suffered from famine. But Bangladesh proved them wrong. How? Bangladesh was liberated from Pakistan in 1971 with the help of Mukti Bahini, an armed military group. It was made possible with support from India. Because of the violence that created Bangladesh, it was a challenge for the government to meet even the basic needs of the citizens. In 1974, a famine struck that, according to some estimates, killed 1.5 million people. Moreover, around 10 million Bangladeshis fled to India due to violence. In addition, political instability and military coups worsened Bangladesh’s economic growth. And poverty rose. Thus, Bangladesh had to rely mostly on foreign aid. 

During the 1980s, the foreign aid it received was 5% of its total income. However, Bangladesh’s situation started to change. That was due to a combination of 4 factors. The first factor is…. Bangladesh used the same formula that many Asian countries have used. That is low-skill manufacturing, especially the manufacturing of garments. If you visit the world’s best shopping places to buy garments, you’ll surely get your hands on a ‘Made in Bangladesh’ garment. Bangladesh is the 2nd biggest exporter of clothing in the world. According to Bangladesh Garment Association, more than 10% of Bangladesh's GDP comes from this industry. The sector was virtually non-existent in the 1980s. But in nearly 30 years, the number of garment factories in the country has increased from 384 to more than 4000. The industry directly employs around 4 million workers and indirectly around 10 million people. Nearly 80% of the workers in this industry are women. And that has made a great impact. The industry employed women in a country where they’re rarely allowed to work outside. This changed the future of Bangladesh along with the lives of its women. 

A paper by Rachel Heath and Ahmed Mushfiq Mobarak showed that women working in the garment industry produced fewer kids, married at a later age, and became educated. For example, they found that women's education increased by 50% for those who lived near a garment factory relative to those who didn't. How did this happen? Heath and Mobarak suggest two ways. First, researchers say that you need to have a little education and knowledge of math to work in a factory. When people learned about the job opportunities at newly-built factories, they were more likely to get their young girls educated and delay their marriage. Second, those girls who were already working in factories were sending home money. Hence, the families’ wealth increased and parents spent that money on educating other girls. And the garment industry didn't only help women working in that industry but all women in Bangladesh. For example, World Bank has shown that the garment industry decreased the female-male wage gap i.e. the difference in wages of male and female workers for the same job. 

Financial freedom was the major way by which Bangladesh promoted women’s empowerment. It means that women have completed control over investments. They used various traditional sources for investment. And a major asset class, an asset class that is relevant to date, is gold. The government shouldn’t be credited solely for the social and economic development of the country. The NGOs of the country played a major role too. BRAC and other such popular NGOs fulfilled the medical and financial needs of people, built schools, and led several public-health campaigns. Arvind Subramanian, India's ex-Chief Economic Advisor, calls this model for development unique. He says that, normally, democratic states aim to remain popular by providing the services that citizens need. If the government hands this responsibility to other organizations, it will likely lose elections and a mode of corruption too. For example, in India, research has shown that road construction is a popular way of taking bribes for politicians. The politicians give the contract to a contractor who offers a bribe in return. He suggests that as other organizations become more effective at providing education and healthcare, the government becomes more fearful.

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