Underdog to the Star Performer – Decoding Bangladesh’s Economic Rise

Based on Marvel Comics’ superhero character, Spider-man is a story of Peter Parker who is a nerdy
high-schooler. He is bullied by jocks, and isn’t considered the strongest kid in the class. To say his life
is “miserable” is an understatement. But one day while on an excursion to a laboratory a runaway
radioactive spider bites him, only to change his life in a way that no one could have imagined. Peter
resurges and acquires multiple powers – muscle-bound physique, clear vision, and an ability to cling
to surfaces and crawl over walls, shooting webs from his wrist, shocking everyone around him.

The riveting account of the success story of Bangladesh in the last five decades has struck a chord
with every other economy across the world. Like Peter, Bangladesh, was struggling, and at the time
of independence in 1971, had its economy in tatters, a result of the bloody liberation war. Over 80%
of the population were living in extreme poverty. But fast forward to today, the situation has
dramatically changed for the better, surprising everyone around. Bangladesh achieved an economic
landmark in March’2021, when the United Nations’ Committee for Development Policy
recommended that the country graduate from the least-developed-country categorization that it has
held for most of the 50 years since it became independent. It is notable in South Asia for being the
closest proxy for the successful development models seen at various stages in South Korea, China
and Vietnam.
From providing India with Covid relief materials to extending financial help recently to the deeply troubled Sri Lanka in the form of currency swap in its hour of crisis, Bangladesh has started to
showcase its economic rise and use it to forge deeper ties with neighbors. As the world grapples
with the challenges presented by the pandemic, Bangladesh continues to clock impressive growth
and is in fact an outlier in the global economic scenario. Its gross domestic product (GDP) grew an
estimated 5.2% in 2020 and is likely to grow 6.8% this year. In comparison, the global economy
shrank 3.5%. Among Bangladesh’s neighbors, Pakistan, Sri Lanka and India are facing GDP
contractions. What radioactive spiders bit the country, of course metaphorically, that brought about
such a humongous improvement in the prevailing state of the economy? Though weak tax
mobilization capacity and an inadequate bureaucratic capacity may slow the rapid growth of
economy, there is a growing body of research that says three major reasons have been contributing
to the macroeconomic stability of the Bangladeshi economy. Here’s how the country has been
outperforming its former self and the other developing economies:

a. Continuous reaping of benefits from European Union’s Generalised Scheme of Preferences
(GSP) programme and other trade preference & remittances from abroad
Bangladesh’s exports have risen by around 80% in dollar terms in the past decade, driven by the
booming garment industry, while India and Pakistan’s exports have actually declined marginally.
With Bangladesh’s foreign reserves reaching $45 billion in 2021 from around $9 billion in 2010, it is
no surprise that Bangladesh is the world’s second largest apparels exporter, following China. It also
helps that the structure of Bangladesh’s economy is such that its GDP is led by the industrial sector,
followed by the services sector. Both these sectors create a lot of jobs and are more remunerative
than agriculture. Remittances also play a major role in the economy, with Bangladeshi workers
employed abroad transferring nearly $22 billion in 2020. Since exports have had double-digit
growth, on average, for the last 30 years & remittances from abroad have done very well, working as
a countercyclical factor, the economy has been on both accounts. Even during this pandemic, the
remittance is about 20% more compared with last year, same time. So, it acts as very much of a solid
shock absorber for the economic system and for the rural economy.

b. Strong geo-political integration
Bangladesh continues to help its neighbours and other countries while it is also looking at having
trade pacts with some of the ASEAN countries and joining connectivity projects. Prudently following
the plan of focusing on international policies and not people, one of the Prime Minister’s most
significant achievements has been to successfully balance the competing interests of India, China,
Japan, Russia and the US, which has allowed Bangladesh to protect its national interest and develop
a win-win political and economic rapport with major global powers.

c. Improving gender parity
The economic policies of Bangladesh have proven the power of encouraging higher female Labor
force participation rates and lesser gender inequality across education, sanitation and health. The
Government, non-governmental organizations, and other key stakeholders, deliberately developed
innovative programs such as conditional cash transfers and financial inclusion, stipend programs for
girl students, family planning, and micro-finance created opportunities for millions of girls and
women from all walks of life. These programs contributed to the decline in fertility rates from 6.1
births per woman in 1971, to 2.05 births in 2019 – almost at the population replacement level. In
fact, between 2003 to 2016, Bangladesh increased the female labor participation rate by 10
percent to 36 percent, thanks to the readymade garments (RMG) and livestock sectors. The
Government’s successive Five Year Plans emphasized gender equality and sought to promote
women’s entrepreneurship and participation in regional and international trade. As a result of this
long walk towards equality, many women are benefiting from an environment that enables business
start-ups and greater access to a digital economy.

With a GDP of over $305 billion (€259 billion), Bangladesh currently has the world’s 41st largest
economy and forecasts suggest that the size of the economy could double by 2030. While it was
primarily an agricultural economy in 1971, the composition has changed over the decades, with
industry and services now accounting for the lion’s share of the economic output. Bangladesh has
seen both structural transformation and the rise of sectors capable of generating decent foreign
exchange earnings, which has helped policymakers sustain comfortable macroeconomic
fundamentals. It’s only onwards and upwards from here for the people, businesses and the economy
of Bangladesh.