Over the years, the economic triumph of Bangladesh has been applauded by its development partners and global institutions. On one side, as per the UN General Assembly's decision, Bangladesh will graduate from the group of least developed nations (LDC) in 2026, on the other side, IMF, a worldwide financial organization that closely monitors global macroeconomic conditions, has expressed that Bangladesh's economic growth has the potential to overtake that of China's and India's.
These declarations show that Bangladesh is making progress toward realizing its "Vision 2041" -- alleviating severe poverty, achieving the upper-middle-class status by 2030, and having a high economic standing by 2041. However, to overcome unwelcome obstacles and make progress, it is important to analyze where the country stands right now and how it should move forward.
Undebatable issue
At the very outset, to what extent the country has developed economically needs to be identified. Bangladesh's economy was valued at $6.2 billion in 1971, and for a long time after gaining independence, Bangladesh was associated with “poverty and less development.” Yet, the country is currently moving towards wealth and economic brilliance.
Boston Consulting Group and HSBC Global Research projected that Bangladesh is on path to become a trillion-dollar economy and to become the 9th largest consumer market by 2030 with a growth rate of 10%. Even at a 6% growth rate, according to another study by the Planning Ministry, Bangladesh is predicted to have a trillion-dollar GDP by 2040. There is no denying that the nation has advanced significantly as seen by the change from an economy worth only $6.2 billion to one that has the potential to reach the trillion-dollar mark.
Bangladesh is gradually advancing towards competing with other allied nations. Everyone who was present at the LDC-5 conference in March 2023 saw Bangladesh's development and agreed that it is the only country to have effectively navigated Covid-19's challenges and behave prudently when dealing with the fallout from the ongoing Russia-Ukraine war. It is anticipated that the nation will be able to graduate from the LDC category as well as emerge as a leader for the other LDCs because it has been making every effort to protect its economy from a collapse.
Without doubt, Bangladesh's economy has developed into a sizable emerging market economy. Bangladesh is the second-largest economy in South Asia, ranking 24th in terms of purchasing power parity and 35th overall in nominal terms. Numerous financial institutions consider Bangladesh to be one of the “Next Eleven” -- it has been evolving from a frontier economy to an emerging market. Since it is now obvious that the nation is undergoing a developmental phase, it is necessary to determine what stage it is currently at.
Theory v/s reality
Bangladesh's development process is closely related with the East Asian model. The East Asian model was pioneered by Japan. This model focuses on the investment of the government in certain sectors of the economy to stimulate the growth of specific industries in the private sector. Japan used this model where it was able to achieve a high growth that ultimately led its way of development.
This model was later pursued in East Asian economies such as South Korea, Taiwan, and China. The tendency to follow a tested model is known as the “flying geese paradigm.” Once Japan followed the East Asian model and was able to succeed, other nations also walked on the same path. Currently Vietnam is also following the model and has joined the flying geese paradigm.
Bangladesh appears to be joining the paradigm by using the East Asian model. Rather than limiting the nation to only one specific sector, however, the country is focusing on achieving a high growth rate through government intervention and investments.
The country's economy today is not solely based on the agriculture sector. In a recent estimate from the World Bank, industry and services contributed to 33.32% and 51.3% of the GDP, respectively, while agriculture barely contributed 11.63%.
RMG has been a key source of foreign currency for Bangladesh. According to the most recent Eurostat data, Bangladesh has surpassed China as the leading supplier of apparel to the EU. Alongside the development of its other industries, the nation continues to grow. Bangladesh has reportedly advanced 12 notches in the World Bank's Logistics Performance Index-2023.
The competent and high-quality logistics services, timely shipments, and effective customs and border management deserved to take full credit for that. Furthermore, the attention Bangladesh is receiving from super powers have made Bangladesh look beyond its regional border. The progress of Bangladesh in other areas is notable too.
Even the numbers hint towards a better living standard than before. Compared to $876.82 in 2012, Bangladesh's GDP per capita was measured at $2687 in June 2022. The country tripled its per capita income within only a 10-year span. Now, the country can maintain its pace of growth as well.
For instance, other countries' economies were seen to contract after being hit by the global epidemic, whereas Bangladesh's economy had positive growth. This expansion is fueled by a sizable domestic consumer market, a fast-growing middle and affluent class, and an impressive rate of digital adoption.
Currently, there are over 2,500 startups in the nation, with 200 more popping up every year. These businesses are centered on a variety of markets, including financial technology (fintech), logistics and mobility, and e-commerce. However, it is difficult to provide opportunities to every sector unless the nation is putting effort into the right areas. Even though Bangladesh is following the East Asian model, it has its own strengths and limitations. So, it will follow the model in its own way just like the other East Asian countries did.
Future ahead
Bangladesh, as a developing country, has been performing well so far. However, the country needs to think about sustainability for not just 10 or 20 years, but for 100 years. To establish itself as a developed country, the untapped resources and new potential in Bangladesh must be used immediately.
One of the underutilized resources with a tremendous potential is the blue economy. The nation has recently taken action in that area. Bangladesh aims to boost the blue economy's share of GDP by 9% in 2025 and by 10% in 2030. Bangladesh may ensure rapid growth thanks to its estimated $120 trillion worth of maritime resources.
However, the unpleasant truth is that Bangladesh hardly has any natural resources that it can use to stabilize its economy for at least a century. Therefore, developing the nation's soft power should be a top priority.
The country needs to train its intellectuals. It has to understand that in order to become self-sufficient, it must support its intellectuals in a way that fosters the growth of local talent. Research should be fostered by businesses, NGOs, academics, faculties, and students alike. The development of such cognition, however, takes time. The nation needs to guarantee that research-related data are accessible from the outset in a usable format and at a less cost.
Another hindrance to progress is the absence of a social contract between the state and business. Starting from a project approval to finally inaugurating, it takes a lot of time and the inhabitants are inconvenienced for longer periods. The inconvenience makes the populace distrust growth. If transparency is maintained, this can be readily avoided. The state can eliminate any questions and inspire its people to work together for a better society by creating a transparent society.
The country will ultimately get the LDC graduation in 2026 and achieve the Vision 2041. However, because of the change in global dynamics, the journey will have a lot of hurdles. So, what the nation needs right now is to evaluate the present condition.
The country must be prepared for any adversaries and move ahead after forming alternative plans to safely reach the target. Without a doubt, the nation is still headed in the right direction. But moving forward, the nation must keep an eye on all of its compartments and handle every problem prudently in order to complete the journey.
Dr Ashraful Alam Chowdhury is an Independent Researcher and Columnist. He completed his MSS in economics from Dhaka University. Then, he pursued post-graduation and PhD in economics from Emory University, Georgia, USA. He has experience of working in the USA, Bangladesh, Myanmar and India.
