Key Economic Indicators and Changes over time in Bangladesh

The ancient region that in 1000 B.C. was called the Vanga, or Banga, Kingdom is considered to be #8 among the poorest and most densely populated countries today. Bangladesh, an independent country with parliamentary democratic government at the head of the state, remains dependent on foreign investors, grant aids and loans from the World Bank, the Asian Development Bank, the U.S., Japan and some Western countries, and suffers from corruption, lack of reforms, weak infrastructure and unstable financial system.

The economic exploitation of the East Bengal (contemporary Bangladesh) by the West Pakistan, contemporary Pakistan, has turned out to be the complete deficit for the first player and the surplus for the other one. Yet, the advantageous climate, fertile soil, abundance of water and population growth are still playing the essential role and bringing the balance in economic indicators: income and employment rates, productivity, import and export prices, inflation, balance of trade, balance of payments, etc.

Till the 10th century the East Bengal was ruled by Buddhists. Since that time the power had been handing over to Hindu, then Islamic converts in 1576 and British India from 1757 till 1947. However, the foreign dominance has shifted to domestic one and for 24 years the historic region of Bengal was a part of Pakistan. Though, the most of Pakistani population were the residents of East Pakistan (contemporary Bangladesh), the West Pakistan was holding the control over politics and economics.

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Grace to Sheik Mujibur Rahman and other Bengali nationalists, the independent state of Bangladesh with the capital of the state - Dhaka, and Sheikh Mujibur, as its head, was proclaimed on March 26, 1971. However, 1 million Bengalis had to pay the price during the four-year civil war that followed the independence of Bengali nation. On February, 1974, Pakistan finally accepted their autonomy attempt and a slaughter of brave soldiers was compensated in an unexpected way.

The greatest problem, which has affected the devastated economy in 1980s, was the population growth. According to the facts, provided by Heitzman, J., and Worden, R., the population of East Bengal in 1901 numbered 29 million people, of East Pakistan – 44 million in 1951, of Bangladesh – 71 million in 1974, 87 million in 1981 and 110 million in 1988 (1989). It was expected that Bangladesh will reach the mark of 140 million by 2000 and today it numbers 150 million people. Today, Bangladesh takes the first place in population among Asian countries, the third one in national debt and the lowest GDP growth – 4.5 percent (Vital Statistics, 2006).

Though Bangladesh had such natural resources as natural gas, timber, coal and agricultural land, they could not cover the demand of the growing population, along with natural disasters, such as cyclones, tropical monsoons, droughts, tornadoes, tidal bores and floods; therefore, agriculture – the key economic factor – was rising from ashes over and over again.

So, the newly proclaimed government had to seek answers to the following issues:

1) environmental - degradation and erosion of soil, deforestation, lack of lands for cultivation, shortages of water and its pollution, natural disasters;

2) national – overpopulation, illiteracy, technological regress and diseases.

The independence has also brought some economic concerns, which have to be solved with the help of brand new economic policies and planning. The government of Bangladesh had to manage over 300 industrial enterprises (90 percent out of all enterprises such like), which West Pakistani owners left after 1971. The grant aid and loan commitments to the developing economy at that time numbered $15 billion disbursed out of $22 billion planned. The UN Development Program, along with the World Bank, the Asian Development Bank and developed countries gave a hand to strengthen the new nation.

In order to manage the economy, the government of Bangladesh had to develop new industrial capacities and rehabilitate the economy itself. The West Pakistani economic model turned out to be inefficient and has led to economic stagnation. In 1975, the government resolved to organize public corporations and gave a greater scope to private sector, which is still working on. The state-owned enterprises that were targeted at: sugar, cotton textiles, steel, fertilizer, chemicals, minerals, pharmaceuticals, food, forest, paper newsprint, cement, garments, tea processing, engineering and shipbuilding products have been privatized; while banking sector, jute, oil and gas production remained under the governmental control.

Bangladeshi government endeavored to encourage private sector and investments, denationalize public industries, ease up the import system and reinstate budgetary regulation. Yet, the reforms, expected from an enhanced structural adjustment facility (ESAF), along with the International Monetary Fund (IMF), were affected by political confrontation in 1991-1993. That very year, Bangladesh received $3.3 billion in food and development assistance from the United States and was forgiven $293 million of national debt. The corruption level and political troubles cut the foreign investments in 2000-2001 and led to the economic regress.

In 2003, after liberalization reform, the Poverty Reduction and Growth Facility (PRGF) $490-million plan for 3 years was approved by the IMF. Also, the World Bank has approved $536 million in interest-free loans. Other economic policies originated from the West Pakistani model and estimated the Annual Development Program, Poverty Reduction Strategies (PRSs) and the five-year plans for the economy.

The first two waves of the Five-Year Plan failed to meet the objectives; but the last one, which lasted from 1985 to 1990: reduced poverty, “[brought] down the rate of population growth to 1.8 percent annually (present rate is 2.2 percent (Vital Statistics, 2006)), increase[d] exports by 5.9 percent and domestic savings by 10 percent, attain[ed] self- sufficiency in food production, [stated] GDP of 5.4 percent” (Heitzman, 1989). In its turn, the government of Bangladesh maintained institutions, responsible for implementation of economic policies and planning. The Planning Commission, the National Economic Council, the Executive Committee and the Project Evaluation Committee were and are still monitoring the reforms and progresses of economic policies and plans.

According to the “Bangladesh” fact sheet, the key economic indicators between 2001 and 2006 are as follows: GDP showed a stable increase from $47.2 billion in 2001 to 63.0 billion in 2006, therefore, real GDP growth varied from 4.8 to 6.2 accordingly; GDP per capita have increased from $335 to $407; goods exports varied from 14.5 percent of GDP to 16.1 percent. The Central Bank of Bangladesh in its publication “Major Economic Indicators” provided the ample data on other economic indicators. Hereby, the Bangladeshi inflation rate increased from 1.5 % in 2001 to 6.94 % in 2007; balance of trade, 2007, amounts $-2,551 million, exports increased by $1519.05 to $9036.45 million (20.21 %) and import payments increased by $2172.8 to $12743.5 million (20.55%) in 2007.

These promising facts show that foreign investments and loans, along with domestic policies, improved infrastructure and financial system, made economic reforms, and strengthened Bangladeshi positions on the global market. Yet, the growing number of labor force earns its livings from agriculture, while undeveloped industrial sector, inefficient power supplies and underdeveloped energy and gas resources hide the potential for economic growth, developed market, and the way out of poverty. The government of Bangladesh had turned its blind eye towards the economic perspectives of technological progress, the interrelationship between transportation and communication, and the core economic factor – industrialization in the very beginning of the new nation, so today it remains underdeveloped and holds the place of one of the poorest countries in the world.

References:

Central Bank of Bangladesh. (2007, May). Major Economic Indicators: Monthly Update.

Department of Foreign Affairs and Trade. (2006, July). Bangladesh: The Economy Fact

Heitzman, J., Worden, R. (1989). Bangladesh: A Country Study. Washington: GPO for the

Library of Congress.

Virtual Bangladesh. (2006, August). Economy: Vital Statistics. Retrieved June 5, 2007, from

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