Independence & industry—a profile

Never a lame question, but how has our industrial base changed over 45 years of independence?
Brush-stroking across those 45 years, we find that whereas more than three-quarters of the 75 million people at the time of independence lived on farms and drew their income from farm-related activities, of the 160 million living today, less than half live in the countryside and earn an income from agriculture. The shrinking of the farming sector as a GDP (gross domestic product) contributor is remarkable: from about one-third when the 20th Century ended to less than 18 per cent today, the trend roughly inverts the growth of the industrial sector from 17 per cent in the early 1980s to one-third today. These statistics, all available in the 2014 volume, Recent Trends of Growth in Agriculture, Industry and Power, clearly show the fate of farm-based industries has been hanging by a thread for far too long, a dilemma the World Bank is urgently hoping to resolve by investigating non-farm rural income presently.
Even as the 1990s began, for example, jute accounted for a larger value-added share of the industrial sector than the emergent ready-made-garments (11.51 per cent for the former and 10.98 for the latter), as well as employment (19.91 per cent versus 16.78, respectively). Yet, today, it is not even in the top-10 of our industries on either count: ready-made-garments (RMG) and apparel production account for one-third of the industrial value-added share and more than half of all employment in the manufacturing sector.
Equally important as the farm-to-factory transition have been the consequences for trade, private sector, and equality ratio. In the early 1980s, for example, one-third of our major export items were primary commodities, but today less than 5.0 per cent; and similarly for our manufactured exports climbing from 65 per cent then to more than 95 per cent today.
The combination of jute and jute products that accounted for two-thirds of our exports then, barely constitutes 2.0 per cent today, in another inverse relationship with our RMG exports of under 2.0 per cent then but a whopping 80 per cent today.
Concomitant with the transforming trade-structures has been the Bangladeshi shift from protectionism towards openness. This entailed drastically cutting the maximum tariff rate of 350 per cent in the early years of independence to 25 per cent 35 years later.
Before our industrial journey began, by the 1990s, the average tariff of 70 per cent plunged to less than 13 per cent today. Exports as a proportion of GDP climbed from 5.0 per cent in the early 1980s to almost 20 per cent today, as Nazeen Ahmed, Zaid Bakht, and Md. Yunus point out in Size structure of manufacturing industry, while the imports share doubled from 21 per cent to 42 per cent.
How this transformation hugs the growth of the private sector is all too conspicuous: from wholesale nationalisation at the time of independence, we note how the share of the public sector fell from 50-odd per cent in the early 1980s to about 25 per cent in the early 1990s, then falling more drastically to 7.0 per cent by the turn of the century to under 1.0 per cent today.
Public sector employment also fell, from almost 80 per cent on the heels of independence to slightly more than 50 per cent by the early 1980s, then just above 20 per cent by the 1990s to less than 2.0 per cent today.
Abandoning agriculture does not necessarily mean industrialisation: the degree of conversion varies for different countries for very idiosyncratic reasons, but common to them all is the role of the service sector, which, for Bangladesh has traditionally accounted for slightly less than half of any GDP share, yet increasingly marginal over time.
These include not just the staple government jobs that dominate traditional society, but also the rapid expansion of private-sector services as banking, finance, insurance, and so forth, once the industrial spark began.
Energy dependence exposes a broader problem that was hinted by the private sector expansion: it could be called greed, but its economic manifestation is through all kinds of inefficiencies that, over time, have become institutionalised. One type is inequality (and not only related to energy dependence).
With the emergence of a bustling private sector, our historically low-level of inequality (of 36 in 1973 on the Gini coefficient scale, as measured by Khan A. Matin in his 2014 presentation at the Institute of Statistical Training and Research, Dhaka University for the Bangladesh Economic Association), plunged to 46 by 2010, on top of which even the National Board of Revenue admits how the persistent shortfalls in tax-revenue collection may be more deliberate than reflect tax-payer ignorance, both individually and institutionally. A Gini score of more than 50 represents more inequality than equality increasingly, just as any score below represents more equality than inequality increasingly.
If we add to these both workplace complacency and a sheer reluctance to repair mistakes and recuperate from illness, then we really see how even well-intentioned efforts to boost the independence spirit and strengthen the country's resources have been going astray.
For example, for the first half of this century so far (eight years), the Power Development Board reports that, though the energy annually generated  has matched the maximum possible from all installations, from 2008-9, we began to see a discrepancy that has only increased over time: only 4,162 megawatts (MWs) of electricity could be generated from the 5,106 installed in that fiscal year, a shortfall of 1,004 MWs that has steadily climbed since to 1,850 during 2012-3 amid a huge installation expansion streak that led to 8,525MW but produced 6,675MWs.
Though but a minor exemplification of growing inequality, we at least get a sense of how every policy-making nook and crevice experiences the corruptive symptoms and consequences of inequality.
Of course, any economic expansion, such as entering the lower rungs of the industrial ladder, entails a spike in energy consumption. Bangladesh's meant more than a dramatic increase: an entire structure was modified. Our natural gas supplies fuelled our industrial entrance, but since they could not sustain the industrial "take-off," our dependence on oil imports entered the economic ledger.
Gas provides us over two-thirds of our energy needs today, a retreat from the almost 90 per cent it supplied previously. Since the Great Recession (2007-10), our petroleum imports have spiralled from about 5.0 per cent of total energy sources to almost 30 per cent. If this decline rate continues, environmentally hazardous coal-based energy may become staple, especially if we take into account how the ECNEC-approved key priority infrastructural projects make coal a prominent component. New windows of corruption also open up.
Any profile such as just described informs us a lot about the changing structure of the economy, and thereby sheds useful light on society itself.
For a start, we get exposed to declining, emergent, and stable industries, and the shift from exporting some commodities  to importing them (tea, for example) in addition to the population expansion boosting our imports of sugar and energy-fuels; similarly was the phenomenal growth of the textiles industry, with the RMG sector transforming our export structure, but only at the cost of increasing import of cotton, thus impacting the import structure (we are globally 2nd ranked in both RMG exports and cotton imports); and, of course, a small segment of the industrial sector not making waves, consisting of pharmaceuticals, fishing, leather, and the like, but seething to let loose to fatten and diversify our industries, if given the right opportunities.
Examining these industries in the next nine articles in the Scopus series helps draw some lessons in the final piece. Jute was once a dominant economic propellant, cotton was not; but assessing their flip-flop roles helps begin the industry-specific discussion in the next piece.
Dr Imtiaz A Hussain is Professor, International Relations, formerly Universidad Iberoamericana, Mexico City.
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