The economy of Bangladesh: Not yet out of the woods

Books on Bangladesh's economy written in the Bangla language are exceptionally rare. The available ones are alleged to be fraught with factual inadequacies and lack of requisite empirical evidence and analytical rigour.

However, a few exceptions stand up to communicate complex issues in Bangla. Three eminent researchers – Rushidan Islam Rahman, Rizwanul Islam and Quazi Shahabuddin – seem to have succeeded in producing a book worth the bucks.

They have brought out a book of capital importance relating to Bangladesh's economy titled "Bangladesher Orthonoitik Unnoyoner Gotidhara: Suborno Joyontyte Fire Dekha" (The trends in the economic development of Bangladesh: Looking back at the golden jubilee, UPL, 2022)

It marks a stark departure from other publications in the sense that many puzzles were attempted to be resolved through rigorous econometric analysis using the most recent available data set. One might consider it to be the only book of note on Bangladesh's economy to mark our golden jubilee of independence.

The book provides an important account of the trends of economic development since Bangladesh's birth in 1971. The authors delve deep into the dynamics of the growth achieved over the last 50 years and the challenges that loom large on the horizon in the coming years.  

Starting from almost scratch with limited land availability and pervasive poverty at the very outset of the journey, the authors further discussed how Bangladesh fared in meeting the unfolding development challenges, what lies ahead and, more importantly, what the outcome is in terms of comparison with other successful cases of similar standing.

The book's most important attraction is that almost every issue, including the impacts of the Coronavirus pandemic that swept through the world and is adversely impacting lives and livelihoods, is discussed. However, a separate chapter on the pandemic could add additional mileage to the book.

The book alo seeks to answer some of the prevailing predicaments. For example, why has unemployment been rising despite production increases? The authors argue that it is mainly because of increased productivity and then suggest ways and means of ameliorating unemployment.

From 2005-06 to 2010, about three-fourths of the increase in production originated from the labour force (employment), while roughly one-fourth came from increased productivity. But from 2010 to 2016-17, the scenario reversed, with the labour force contributing a 26% increase in production.

To graduate to high middle-income status by 2031 and high-income status by 2041 – the two future milestones set for Bangladesh – the authors foresee challenges that would warrant a few transformations such as an increase in investment, especially private investment, and ensuring efficiency and cost-effectiveness of public investment that has been rising but allegedly failed to generate expected levels of 'crowding in effect' (increased government borrowing and spending increasing private spending).

The solace derived from a comparison of Bangladesh's growth and development with a few South Asian countries should be taken with some grain of salt as it is not that exhilarating compared to East and Southeast Asian countries. Likewise, although progress in primary education appears to be praiseworthy, higher and technical education have miles to go before a good sleep.

Glancing at the observations running through the book and looking back on the occasion of our golden jubilee, we observe that Bangladesh progressed well in her journey to economic growth and development and thus warrants a celebration.

But casting our eyes to the future, we need to be cautious so that we do not get overwhelmed. Like Robert Frost, in 'Stopping by Woods on a Snowy Evening', says:

"The woods are lovely, dark and deep,   

But I have promises to keep,   

And miles to go before I sleep,   

And miles to go before I sleep."

Let us pick up a few pertinent points. It is generally believed that urban poverty is lower than rural poverty. But the truth is that only two cities – Dhaka and Chittagong – have the lowest poverty incidence indicating that only these cities could draw attention while others languished. The spatial divergence in reducing poverty continues to be a significant concern.

Agriculture, especially crop production, primarily leans on weather, while our export sector primarily depends on one industry, thus creating vulnerability. The risks before developing countries like Bangladesh include non-conventional hazards like the Covid-19 pandemic. New arrangements of resources and technology are needed to deal with such crises.

The decline in the demand for wage labour both in agriculture and industry owes a lot to the growing mechanisation in agriculture and rising capital intensity in food processing and readymade garments. While there seems to be little option to raise wages other than by increasing the demand for labour in various sectors, the government must keep an eye on minimum wages.

Sustainable agricultural and rural development would require coordinated efforts where SMEs would be given access to agrarian processing activities, especially in the face of migration from rural to urban areas.

In 1990-91, with the prevailing daily wage, an agricultural worker could buy 3.5 kg of rice, which rose to 5.9 kg in 2006-07 – implying a 1.7 times increase in real wages during that period. But a price hike pushed that down to 5 kg between 2007-08 and 2008-09. However, it shot up to 10 kg in 2014-15 with a fall in rice prices.

In fact, an increase in prices also increases the proportion of expenditure on food, thus forcing a reduction in consumption of other commodities such as fish, lentils, etc. This substitution effect imposes a considerable cost in terms of child nutrition.

The book should be included in the reference list of texts prescribed in colleges and universities. The academic community, as well as the policy-makers and researchers, would immensely benefit from the book as it incorporates the most recent data, provides rigorous analysis and foreshadows the future.

The author is a former Professor of the Economics Department and Former Vice-Chancellor of Jahangirnagar University. Currently, he is a part-time Professor at East-West University.