Although Bangladesh has got recognition as a lower-middle income country, a lot of work needs to be done to improve the standard of living of the people. In fact, massive improvement in every sphere of the economy is essential if Bangladesh is to benefit from such recognition.
In order to attain the status of a middle-income country, everybody needs to work hard in order to come to a respectable position among the lower-middle income nations and make sure that governance, education, service delivery, infrastructure, etc., are all upgraded to meet the commensurate quality.
Bangladesh has just transitioned from a low-income country to a lower-middle income country, as per the recent declaration made by the World Bank (WB). While the new status will make the country more confident and help attain global credibility, it is not wise to be overly optimistic about it.
Many analysts have expressed their scepticism over the fact that Bangladesh is barely in the bottom sphere of the lower-middle income nations. In 2014, the country scraped through the $1045-mark with a per capita income of $1080. The lower-middle income bracket ranges from $1046 to $4125 (countries like India, Indonesia and Pakistan belong to this category). Although Bangladesh has crossed this milestone, it is in the midst of growth stagnation, as the 6.0 per cent growth rate is a 'glass ceiling' that we can't seem to break through.
The side effects of growth stagnation are what really matters - growing inequality, a silent crisis of remunerative jobs deficit, 40 million still in poverty, unliveable cities and significant quality deficits in human development sectors.
Ill-governance has been blamed for the growth stagnation. Growth stagnation stems from investment stagnation. Reversing this goes much beyond the very nature of the political and economic governance which is currently practised in Bangladesh.
However, many are optimistic about the latest achievement of the country. They say the new status will bring prestige to Bangladesh in the international arena. Whenever the government needs apply for aid, the development partners will offer aid without any question. This will also give the country a good credit rating and define it as a low-risk country.
In this context, Finance minister AMA Muhith recently observed that the nation would have to wait for three or four more years to join the group of middle-income countries after the WB announced that Bangladesh has become a lower-middle income country.
Bangladesh belongs to the category of LDC (least developed country) since 1973. It has been enjoying exemption of duties in exporting goods to Europe and other countries for the last three decades. It is a leader of 48 LDC countries. The present government led by the Awami League hopes that Bangladesh would attain the status of a middle-income country by 2021. But some economists have ruled out such a possibility. They say the country will have to wait until 2024 to get recognition as a middle-income country.
According to the procedure, a country must be enlisted with the relevant UN committee before six years for getting recognition as a middle-income country. Although Bangladesh is the most fancied for becoming a middle-income country, it has not yet been enlisted with the UN committee.
Meantime, Prime Minister Sheikh Hasina has recently affirmed that Bangladesh would become a middle-income country within the next three years before the targeted 2021.
Bangladesh will continue to enjoy a zero-duty benefit on exports to the European Union (EU) even when the country graduates to a middle-income country. As a least developed country (LDC), Bangladesh has been enjoying the zero-duty export benefit to the EU since 1971 under the Everything but Arms programme of GSP.
The EU provides the zero-duty export benefit to all LDCs under the GSP (generalised system of preferences). If Bangladesh gains the middle-income status, it will not be able to enjoy the duty-benefit under the same scheme. The country will, however, enjoy the benefit under the 'GSP Plus' scheme. For that matter, it will have to sign four international conventions on human rights, labour rights, environment and governance to enjoy the GSP Plus benefit.
In the decade ending 2013, Bangladesh's growth appears to have been stuck at 6.0 per cent. Now, 6.0 per cent growth sustained over a decade is by no means a low growth rate. It is far above the average growth for developing countries and even middle-income countries over the past decade. But it is not as fast as growth in East Asia, Sri Lanka, or India during their formative growth periods. And this raises the question on whether Bangladesh is caught in sub-optimal growth equilibrium -- a sort of 'middle-income growth rate trap'.
The 6.0 growth rate is significantly below what is needed for Bangladesh to graduate to a middle-income country, with GNI per capita exceeding $2,000, by 2021. To achieve that target, the average annual GDP growth needs to exceed 8.0 per cent per annum. This is why it is critical for Bangladesh to lift itself out of this middle growth rate trap.
Increasing investment will certainly address the challenge of providing employment to an additional 2.5 million workforce every year.
It is otherwise true that the country is forging ahead in the direction of economic progress; yet the rich-poor gap has actually widened, which, if not significantly reduced, will hinder sustainable development. Income inequalities must be reduced in the country's endeavour to be more economically robust. Only then getting the status of a middle-income country will have a real meaning.
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Lifting Bangladesh out of middle growth rate trap
Shahiduzzaman Khan | Published: July 12, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
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