Bangladesh economic development since 1971 to 2022

Deepak Kumar Adhya: Bangladesh economic development since 1971 to 2022- Bangladesh got Independence in 1971 against fight the Pakistan military for a price of nine lac mass people and so many women and it’s prestige In 16 December 1971 Bangladesh got a sovereign sate and a constitution under the leadership of Bangobodhu Seikh Mujibur Rahman. After liberation war Bangladesh was as like a bottomless basket. But in 2022 Bangladesh is now a digital and smart Bangladesh and emerging economic development country of the world.

After 1975, Bangladeshi leaders began to promote private industry and turned their attention to developing new industrial capacity and rehabilitating the economy. The socialist economic model adopted by early leaders had resulted in inefficiency and economic stagnation. Beginning in late 1975, the government gradually gave greater scope to private sector participation in the economy, a pattern that has continued. The Dhaka Stock Exchange was re-opened in 1976. The government established special economic zones called Export Processing Zones (EPZs) to attract investors and promote export industries. These zones have played a key role in Bangladesh’s export economy. The government also de-nationalized and privatized state-owned industries by either returning them to their original owners or selling them to private buyers.

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Bangladesh became the pioneer of the modern microcredit industry, with leading players like Grameen Bank, BRAC and Proshika. Assa and so many many small microcredit NGOs. In the industrial sector, two policy innovations in the mid-1980s helped exporters. The reforms introduced the back-to-back letter of credit and duty-drawback facilities through bonded warehouses. These reforms removed major constraints for the country’s fledgling garment industry. The reforms allowed a garment manufacturer to obtain letters of credit from domestic banks to finance its import of inputs, by showing letters of credit from foreign buyers of garments. The reforms also reimbursed manufacturers the duty paid on imported inputs on proof that the inputs, stored in bonded warehouses, had been used to manufacture the exports.

These reforms spurred the growth of industry into the world’s second largest textile exporting sector. In the mid-1980s, there were encouraging signs of progress. Economic policies aimed at encouraging private enterprise and investment, privatizing public industries, reinstating budgetary discipline, and liberalizing the import regime were accelerated. The International Finance Investment and Commerce Bank was set up as a multinational bank for Bangladesh, Nepal and the Maldives.

From 1991 to 1993, the government engaged in an enhanced structural adjustment facility (ESAF) with the International Monetary Fund (IMF) opening up sectors like telecom to foreign investment. The Chittagong Stock Exchange was also set up. The 1990s was a boon for the private sector. Banking, telecommunications, aviation and tertiary education saw new private players and increased competition. The pharmaceutical industry in Bangladesh grew to meet 98% of domestic demand. The ceramics industry in Bangladesh developed to meet local demand for 96% of tableware ceramics, 77% of tiles and 89% of sanitary ceramics. The Chittagong-based steel industry in Bangladesh exploited scrap steel from ship-breaking yards and started contributing to shipbuilding in Bangladesh.

But the government failed to sustain reforms in large part because of preoccupation with the government’s domestic political troubles, including tensions between the Awami League, the Bangladesh Nationalist Party (BNP) and Jatiya Party. Frequent hartals and strikes disrupted the economy. In the late 1990s the government’s economic policies became more entrenched, and some gains were lost, which was highlighted by a precipitous drop in foreign direct investment in 2000 and 2001. Many new private commercial banks were given licenses to operate. Between 2001 and 2006, annual GDP growth touched an average of 5-6%. In June 2003 the IMF approved 3-year, $490-million plan as part of the Poverty Reduction and Growth Facility (PRGF) for Bangladesh that aimed to support the government’s economic reform program up to 2006. Seventy million dollars was made available immediately. In the same vein the World Bank approved $536 million in interest-free loans. The economy saw continuous real GDP growth of at least 6% since 2009. Bangladesh emerged as one of the fastest growing economies.

According to economist Syed Akhtar Mahmood, the Bangladeshi government is often seen as the villain in the country’s economic story. But government has played an important role in stimulating the economy through building infrastructure, liberalizing regulations, and promoting high yielding crops in agriculture. According to Mahmood, “most roads linking the villages with one another, and with the cities, were not paved and not accessible throughout the year. This situation was remarkably transformed within a span of 10 years, from 1988 to 1997, with the construction of the so-called feeder roads. In 1988, Bangladesh had about 3,000 kilometers of feeder roads. By 1997, this network expanded to 15,500 kilometers. These “last-mile” all-weather roads helped connect the villages of Bangladesh to the rest of the country”.

As a result of export-led growth, Bangladesh has enjoyed a trade surplus in recent years. Bangladesh historically has run a large trade deficit, financed largely through aid receipts and remittances from workers overseas. Foreign reserves dropped markedly in 2001 but stabilized in the US$3 to US$4 billion range (or about 3 months’ import cover). In January 2007, reserves stood at $3.74 billion, and then increased to $5.8 billion by January 2008, in November 2009 it surpassed $10.0 billion, and as of April 2011 it surpassed the US$12 billion according to the Bank of Bangladesh, the central bank. The dependence on foreign aid and imports has also decreased gradually since the early 1990s. Foreign aid now accounts for only 2% of GDP.

In the last decade, poverty dropped by around one third with significant improvements in the human development index, literacy, life expectancy and per capita food consumption. With the economy growing annually at an average rate of 6% over a prolonged period, more than 15 million people have moved out of poverty since 1992. The poverty rate went down from 80% in 1971 to 44.2% in 1991 to 12.9% in 2021. In recent years, Bangladesh has focused on promoting regional trade and transport links. The Bangladesh Bhutan India Nepal Motor Vehicles Agreement seeks to create hassle free road transport across international borders. Bangladesh also signed a coastal shipping agreement with India. While prioritizing food security in the domestic market, Bangladesh exports more than US$1 billion worth of processed food products.

As the result of a robust agricultural supply chain, supermarkets have sprung up in cities and towns across the country.
Bangladesh became the second largest textile exporter in the world. An estimated 4.4 million workers are employed in the garments industry, with the majority being women. The sector contributes 11% of Bangladesh’s GDP. The 2013 Rana Plaza factory collapse caused global concern on industrial safety in Bangladesh, leading to the formation of the Accord on Fire and Building Safety in Bangladesh and the Alliance for Bangladesh Worker Safety. The local clothing industry has seen fiercely competitive brands vying for the market, including Aarong, Westecs, Ecstasy, and Yellow among many others.

The World Bank notes the economic progress of the country by stating that “[w]hen the newly independent country of Bangladesh was born on December 16, 1971, it was the second poorest country in the world—making the country’s transformation over the next 50 years one of the great development stories. Since then, poverty has been cut in half at record speed. Enrollment in primary school is now nearly universal. Hundreds of thousands of women have entered the workforce. Steady progress has been made on maternal and child health. And the country is better buttressed against the destructive forces posed by climate change and natural disasters. Bangladesh’s success comprises many moving parts—from investing in human capital to establishing macroeconomic stability. Building on this success, the country is now setting the stage for further economic growth and job creation by ramping up investments in energy, inland connectivity, urban projects, and transport infrastructure, as well as prioritizing climate change adaptation and disaster preparedness on its path toward sustainable growth”.

As of 2022, Bangladesh had the second largest foreign-exchange reserves in South Asia. In 2021, Bangladesh surpassed both India and Pakistan in terms of per capita income. The country achieved 100% electricity coverage for households in 2022. Mega projects like the Padma Bridge, Dhaka Metro, Matarbari Port, and Karnaphuli Tunnel have been planned to stimulate economic activity. The completion of Padma Bridge was expected to boost Bangladeshi GDP by 1.23%. During the Russia-Ukraine War, Bangladesh experienced pressure on its foreign exchange reserves due to rising import costs; this affected the country’s electricity sector which relies on imported fuel; rising import prices also contributed to inflation.

As a hole we can say that Bangladesh is now going to be a developing country and a new economic giant of Asia. It is possible only the great leadership of prime minister Seikh Hasina. Today we expect that if this trend of development is continuing during 2041 Bangladesh will turn into a developed country. Today we pray to almighty may our prime minister live long and have to continue her journey the dream of sonar bangla and smart Bangladesh.

Writer: Deepak Kumar Adhya, a prominent banker of Janata Bank PLC