No scope for complacency

A question haunts many minds now as to whether Bangladesh's future is bright or not. A common perception is that the economy of the country will only go ahead with some variations in growth rates. This idea of continuous growth has been strengthened by the recent classification by the World Bank of the Bangladesh economy as a lower middle-income one. Now hopes are on a rise all around that the economy will do better in the coming days.

Bangladesh could solve, at least to some extent, its power and electricity problems, fixing up, though slowly, its infrastructural problems, make available education to almost all and send more and more people as workers abroad every year. It has increased export earnings which, together with remittances from its workers abroad, have helped build a foreign exchange reserve of more than $25 billion which exceeds the need for three months' import payment bill.

The economy, though it did not grow as expected by the people and stakeholders, did record a 6.0 per cent average growth rate annually over a period of more than a decade. Bangladesh could have extended its export market beyond its traditional markets of the European countries and the United States had it become a member of any big trade bloc.

At home, it is visible that people's consumption has gone up, though the rise is mostly confined as yet to a growing middle class. With a fair distribution of national income, the consumption level would have gone up also among the lower segment of the people. The wonder of our time is that nobody in Bangladesh goes hungry these days and the poor and ultra poor haved better food supply than in the past. Every year, hundreds of students are going abroad for higher education.

A middle class is solidly in place working as the driving force both in investment and consumption. From a burgeoning middle class, an entrepreneurial class has come up which is taking risk and investing in new areas of the economy. The economy is no more dependent on foreign capital and the government now does not rely on foreign aid and grants for its own development works. As the size of Bangladesh's GDP (gross domestic product) now stands at around $190 billion per annum, the government is raising increasingly more revenue from within. Big capital investments are being undertaken by the government from the tax-payers' money. Bangladesh's banking and financial sector services are penetrating previously un-monetised areas very fast, and the financial sector is better regulated now than before. A capital market is there for the entrepreneurs, and supplying capital to those who want to use this route for capital financing. Overall reforms in the economy have already been done, though in some cases there were failures because of lack of the government's  attention and also due to hesitation.

There are enterprises under the public sector which act as huge revenue guzzlers. For example, Biman, the national airline, and many jute and textile mills under the public sector since the days of independence have had huge accumulated losses. The losses are financed every year by the government through budgetary provisions.

With a 6.0 per cent GDP growth rate per annum, Bangladesh would have many bright points on its side. But by many other standards, the economy is still fragile. It may not go back from the level where it is now, but it may slowly go to a position of standstill or for a slower growth rate. The economy has many limitations. It is not solidly entrenched into the global economy as yet. Already, there has been a fall in the export growth. New markets like those of Japan and Australia that were cultivated by Bangladesh in the last few years are not yet responding as expected.

Bangladesh could not become an effective member of any global trade bloc. Instead, the country's competitors are becoming members of such blocs. For example, Vietnam, which exports readymade garments to the same markets as Bangladesh does, is becoming a member of the Trans-Pacific Partnership (TPP) under the leadership of the USA. Naturally, countries like Vietnam will enjoy more economic benefits in investment and exports than Bangladesh. An isolated Bangladesh cannot do any better than what it is doing now in respect of receiving investment and in marketing its exports.

If Bangladesh fails to become an effective member of any global trade bloc, the country will be facing more discriminatory regimes from the other global markets. Its future is not that rosy when its social problems are taken into consideration. With a huge population burden, its land-man ratio is increasing, going against the interest of the economy. Already availability of land for industrial purpose has become a real problem. Social problems such as fighting among local people over petty issues and political tussle among activists will remain or even may rise on a regular basis. It is true that the people who may remain engaged in fight will leave that behind once they see and feel the benefits of economic growth. But for that, Bangladesh needs to do two things: one is to raise its economic growth beyond 7.0 per cent per annum and go for an equitable distribution of the national income.

The country's graduation to a lower middle-income class is marginal. The World Bank's threshold per capita income for belonging to the group is $1,045 and Bangladesh has already attained $1,080. It is a long way to go for Bangladesh to  reach the middle-income  level with $4,125 per capita income.

Bangladesh should make faster progress. Otherwise, its social problems will overtake its economic gains.

The writer is Professor of Economics, University of Dhaka.

abuahmedecon@yahoo.com