As Bangladesh reaches its 43rd Independence day, it stands on the threshold of a new era of growth, which will lift its economy towards middle income status.
Bangladesh has a population larger than Russia in a space similar to England and Wales. It has the 57th biggest GDP in the world with a $127bn economy on an upward trend, averaging c. 6% growth in recent years. As home to the world’s eighth largest population, it has plenty of potential for growth.
Nominal GDP per head is above the $1000 per year level and in purchasing power parity terms, the economy is already ranked in the global top 50 by the World Bank.
There are sound reasons then to expect growth to continue. The combination of the strides the country has made on improving social indicators, meeting Millennium Development Goals and achieving self-sufficiency in key areas such as rice production and pharmaceuticals, together with the demographic dividend of a large number of people entering the workforce, with more than half the population aged under 25, all provide cause for optimism.
For these reasons, forecasters at Goldman Sachs named Bangladesh as a Next-11 emerging economy in its follow up to its famous BRICS report, and JP Morgan ranked the country fourth in growth for economically active population, as one of its “Frontier Five” states.
Recent analysis by HSBC’s October 2013 Global Connections report forecasts that, with the help of continued infrastructure improvements, the country’s competitive advantages will assert themselves to keep export growth very positive and to generally lift the economy overall. This section notes some of Bangladesh’s leading export industries and emerging industries. It is headed by the garment industry, where Bangladesh is of course well known as a major production base for global brands in textiles and ready-made garments, and is the world’s second largest exporter of garments after China. The RMG sector is presently the focus of worldwide attention for initiatives to improve safety and working conditions.
Like environmental standards, labour conditions are a global issue of concern affecting all countries and industries in some manner. It is interesting for observers of globalisation to note how Bangladesh is on the frontline of many of the key challenges facing the world, from climate change and corporate responsibility to debates about secularism and democracy.
As the country urbanises and industrialises, its economy and environment will doubtless face many challenges. How Bangladesh will meet the challenge of tackling these issues and raising living standards for all of its 160m people, will be watched with great interest in coming years. The spread of improvements to communications and technological innovations can all be expected to play their part in helping to lift standards.
Export sectors are of particular interest as they are key to economic growth and will be the means by which Bangladeshi businesses become known as brands around the world. For the millions of Bangladeshis who are still underemployed or on low incomes, their importance should not be underestimated.
These industries are not the only means by which Bangladesh interacts with the world economy. Over 8million Bangladeshi expatriates provide the country’s second largest source of foreign exchange, with officially recorded remittances totalling around $14bn in 2013.
Remittance flows have been a key factor in enabling the country to build up foreign exchange reserves and to vastly reduce the significance of aid to the national economy, further helping it to shed the “basketcase” tag of the 1970s. As remittances have largely grown through both good economic times and bad, they can be expected to stay important as the country’s biggest single net inflow of foreign exchange. Finding ways to utilise remittances more effectively, and to tap the reservoir of commitment to Bangladesh shown by its diaspora, has the potential to provide new sources of inward investment, as has been shown in countries like China and India.
It is not all just about cold hard cash however, as people to people contacts can be just as invaluable. The spread of Bangladeshi communities around the world has built much cultural exchange and interaction, which can only be expected to grow further.
Bangladesh is also an exporter of ideas. Perhaps the most familiar is the popularisation of microcredit by the Grameen Bank. It is worth noting also that BRAC’s retail arm, Aarong, was as much a pioneer of what is now known globally as Fair Trade as any Western organisation, with Aarong starting to sell co-operatively produced handicrafts to Bangladeshi consumers as early as 1978.
Although it is well appreciated how Bangladesh contributes to the global economy via the clothes it provides to people around the world through its garment industry, the contribution of its ship breaking industry to globalisation largely goes unnoticed. Most public debate about the country’s ship breaking and recycling industry, focuses on either safety and environmental impacts, or on its economic benefits for Bangladesh as a supplier of raw materials and steel for the national economy. What is often overlooked however, as the former BBC correspondent, Roland Buerk, pointed out in his book on “Breaking Ships in Bangladesh,” is that the industry forms a key link in the global logistics chain; as goods in shops all around the world are shipped in container vessels, the ship breaking industry here directly benefits all global consumers, by keeping the costs of scrapping ships down for global ship-owners.
Bangladesh is hence already a key and important part of the global economy. With its large untapped potential, its economy and exports can all be expected to grow much more in the years ahead.