Bangladesh’s journey as South Asia’s new economic star
Bangladesh gained independence barely 50 years ago, so if you give the title a double look, you are not alone. But it seems the country shines better than its Asian neighbors, India and Pakistan, in terms of per capita income. Not so long ago, US backers in the Pakistani military said the country was doomed, and yet here we are. Before delving deep into the accomplishment and its repercussions, take a moment to recognize how huge this is, especially for a country like Bangladesh, which gained independence from the richer and much more powerful Pakistan in March 1971 in the amid famines and wars, with millions of its people fleeing to India or being killed by the Pakistani army. However, this story of higher per capita income and its economic significance goes way beyond what it seems, which we will discuss as we go along. But before we do that, let’s shed some light on the country’s journey so far.
In 1971, Pakistan was 70% richer than Bangladesh. Fast forward to 2021, Bangladesh is said to be 45% richer than Pakistan, a laudable achievement in itself, given the 9% improvement in GDP per capita over the past year. Pakistan has still failed to perform better over the past few years in terms of economic development and is falling into debt traps after another. If Pakistan continues to walk the path it is following today, it won’t be too surprising to see it ask Bangladesh for help by 2030, as the former World Bank adviser dissuaded. , Abid Hasan. And in case you were wondering why we talk so much about Pakistan, well, the Bangladesh of today was then East Pakistan, so imagining a GDP per capita almost twice that of his country-turned-enemy is for the less shocking.
Story Behind GDP Per Capita-
A report released by the secretary of Bangladesh said that Bangladesh’s per capita income in 2020 was USD 2,227, which is higher than the per capita income of India ($ 1,947) and Pakistan (1,543 $). As hard to accept as it may be, it is true that India and Pakistan are poorer in terms of GDP per capita than Bangladesh. So as India has grown a bit too comfortable in its seat as one of South Asia’s strongest economies, Bangladesh is definitely signaling a shift in perspective and likely competition. And while the Indian government has struggled to recognize this, it is imperative for you to note that while the country’s performance continues to be dismal as it has been for some time now, we can look back on this article from ‘a lens of remorse. Ignorance is the key feature of the NDA government led by Narendra Modi and we have all witnessed its consequences, but a glimpse of Bangladesh’s success would leave only important lessons for the Indian economy, which are important to us at repeat.
Their success rests mainly on three pillars: exports, social progress and fiscal prudence. As of 2011, the country’s exports have grown steadily at a whopping 8.6% per year. Attribute this success to the constant focus on products, such as clothing, in which Bangladesh has a comparative advantage. It should also be noted that 80% of Bangladesh’s exports are clothing. You must be wondering how Bangladesh has a comparative advantage in exports. Well, thanks to trade policies. A country’s trade policies must be defined by its ability to produce the exported good, not in absolute terms but through a trade theory of comparative advantage and that is exactly what Bangladesh has. made. Just in case you need a refresher on the proper use of economic theory, let’s get started.
Another aspect that has led to the continued growth of exports, and therefore the per capita income of the country, is the increased participation of women. Reports released by official sources show that the share of women in Bangladesh’s labor force is steadily increasing, which, disapprovingly, has declined in India and Pakistan, especially after the COVID-19 pandemic. . Bangladesh’s public debt-to-GDP ratio has also attracted attention in recent years for its proportional amount. However, in India the ratio is very high. All of these factors directly explain the growth in per capita income in Bangladesh.
But is GDP per capita the only basis for this increased confidence in Bangladesh?
GDP per capita is a tenuous measure on which to base our entire assessment because, again, it is an average measure, which is obviously largely influenced by outliers. The case of India is one of the best examples of the aforementioned statement. As a result, there is a lot behind the economic star statement.
Here are the other factors which clearly show the success of Bangladesh economy. The population of East Pakistan (now Bangladesh) was 42 million and the population of West Pakistan was 33.7 million in 1951. But currently, the population of Bangladesh is much smaller than that of Pakistan. How, you ask? A sustained planning campaign has reduced the fertility rate in Bangladesh while the fertility rate in Pakistan is still very high. The mention here is important because the population definitely plays a negative role in the movement of a developing country towards its point of stability according to its resources, with prominent macroeconomic models serving as evidence. The success of Bangladesh’s health sector also cannot be overlooked, followed by remarkable progress in poverty reduction and sustained economic growth. All this led to a better allocation of resources which therefore contributed to the eventual increase in the per capita income of Bangladesh and therefore to the improvement of the main economic indicators.
However, as with any growing economy, Bangladesh’s success has also brought some challenges. One of them is the expected loss of duty-free access to developed countries, enjoyed by all least developed countries, by 2026 due to the rapid growth of the economy. However, the government could try not to lose duty-free access to developed economies by signing free trade agreements. Another important problem that Bangladesh may face in the coming years is the loss of its comparative advantage, as currently the country’s exports are limited to certain areas only. With the rise of the economy, the need to diversify its export strategies will also arise. There should be specific plans to transform the current export scenario in order to keep the economy growing strongly. And as we all know, the complete transformation of a growing economy is a task in itself, and would require a lot of time and capital.
Nonetheless, the progress that Bangladesh has made is absolutely commendable given the challenges it has faced. Bangladesh faced a number of significant challenges. Like India and Pakistan, it is also overcrowded and most of its population is illiterate and poor. It is frequently affected by calamities and also suffers from terrorism and its failed democracy in the 2018 elections. However, the country has still managed to show signs of growth thanks to the determination shown by the government for its goal of achieve excellence in human development and economic growth. According to reports, the country’s main objective is to increase exports, reduce unemployment, improve the health of its population and reduce dependence on loans and financial aid. The steady increase in exports and the current per capita income, which is higher than that of India and Pakistan, has shown that if the government of Bangladesh works towards this efficiency, the day is not far off when Bangladesh will become the star of Southeast Asia. .