Bangladesh on the Move, Part 2: Future Prospects

Bangladesh on the Move, Part 2: Future Prospects
Women employees working at a factory in Bangladesh.Courtesy of Bangladeshi Embassy

Read Part 1 of this article here.

London-based research organization BMI has listed Bangladesh as one of six countries that will be growth performers in the period 2016–2025. Three major factors are identified as boosters of this growth. An exogenous boost is expected from lowering global commodity prices from which major commodity importing countries, such as Bangladesh, will gain.

Endogenous boosts to productivity are also expected. As a country with positive demographic trends, Bangladesh has a very large percentage of young people with the potential to strengthen the labour force, and ultimately heighten the country’s productivity.

Implementation of the Bangladesh government’s planned political and economic reforms — especially measures to improve the business environment and growth — will serve as a growth momentum, in the longer term, by unlocking economic productivity.

The country, however, also faces formidable future challenges.

Despite a large reduction in the percentage of people living in extreme poverty, pockets of intense poverty still exist. The absolute number of poor living under the poverty line is high at 47 million.

Despite ground-breaking advances in primary education, several areas in the education sector remain unattended. In spite of very high primary school enrollment and graduation rates — 80% — the percentage of children reaching grade 10 and graduating from high school is low, so the country’s workforce remains under-educated. The overall quality of the country’s human capital is low as well because of the poor quality of education delivered at the primary and secondary levels. At the level of tertiary education and skills training, the education provided does not necessarily respond to market demands.

Access to education is not equitable above the primary school level, with five million children aged 6–13, mostly from urban slums and remote areas, out of school. Enrollment of women and of those from poorer families is consistently and considerably lower at the secondary and tertiary levels.

Despite remarkable advances made in the health sector in reducing infant and maternal mortality and disease control, widespread malnutrition of children under five remains a challenge.

Overcoming the weaknesses in the education and health sectors requires higher levels of public investment. Currently the public allocation to these sectors is below average, even for low income countries. The contribution of Bangladeshi NGOs has been a redeeming feature in these areas. But to sustain these advances and make further improvements, higher levels of public financing will be required.

Revenue mobilization and tax collection will be key in meeting these financial demands. Increasing the tax to GDP ratio, which remains in the single digits, is a challenge.  Earnings from custom duty are on the decline, the corporate tax system is complex, and income tax evasion is common. The government of Bangladesh must undertake policy reforms to boost revenue mobilization, introduce a Value Added Tax (VAT), and simplify the corporate tax system to ease the collection process.

Another major challenge is the heightened demand for employment arising from the rapid urbanization process, the growth spurt of recent years, and the demographic dividend — the rapid entry of youth into the job market. Unlocking the country’s potential productivity requires a massive generation of   employment opportunities in the domestic economy. Here we circle back to the problems of the education sector, for the productive capacity of youth must be promoted through delivery of better quality education and skills training.

Rapid urbanization also generates stress in the heightened demand for infrastructure and the consequent environmental deterioration. Bangladesh must tread carefully in these areas.

The outlook for growth is improving. Sustained growth requires expanded export earnings. Bangladesh’s export sector is marked by an over-dependence on the garment industry and shows little effort to diversify its export products. According to World Bank analysis, regional co-operation in labour-intensive manufacturing (pharmaceutical, leather, and agricultural products) for trade and export will make Bangladesh a growth powerhouse.

The vision 2021 plan — the seventh five-year plan of the government of Bangladesh — has set solid targets in many of these areas of challenge. If achieved, these targets will help transform the socioeconomic environment.

But a not-so-positive political scenario poses serious impediments to effective governance and implementing the needed reforms. Politics has been messy over the last several years with episodes of military rule, autocratic governance, periods of democracy, and political infights between the two major political parties. Democracy has not been institutionalized. Corruption is endemic. Lack of accountability and transparency, weak rule of law, and a weak justice system pose severe challenges.

The discussion about Bangladesh’s challenges remains incomplete without an analysis of the new problem of security. Since its birth, Bangladesh has embraced a secular path that has brought rapid progress to the country. However, the country’s moderate Islamic tradition is being challenged, raising concerns about a possible wave of fundamentalism, especially in urban areas. Although the government was in a state of denial, it has taken some stern steps to address these security challenges.

On the positive side, according to an assessment by Anvil Security Group, the incidents in Bangladesh that have drawn a high degree of attention globally, have had little or no impact on day-to-day operations of Bangladeshi citizens, on the business operations of foreign companies, or on the work of NGOs.

The challenges are serious but the signs of progress are clear, and a spirit of optimism pervades as people’s quality of life improves. The happiest development story coming from South Asia comes not from India, but from Bangladesh, which has development lessons to deliver to the world.

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