Following the lead of its hugely successful garments industry, the Bangladesh economy is on course for continued growth, although there is an urgent need for investment in modern and efficient infrastructure
Once newsworthy for its military coups, frequent natural disasters, food scarcity and corrupt politicians, Bangladesh has recently been making the headlines for far more positive reasons. The South Asian nation has been witnessing steady economic growth and performing remarkably well in areas like the reduction of child mortality levels and the creation of job opportunities for millions of its people.
After a decade of significant economic growth, Bangladesh is now widely considered to be among the ‘next eleven’ economies – a term used to describe those following in the footsteps of the BRICs (Brazil, Russia, India and China). Its export earnings are steadily increasing and the average annual GDP growth rate of 6 percent, achieved in recent years, seems set to continue or improve, despite risks that growth could be threatened by excessive population increases, leading to greater instability, or by further rounds of global economic crisis.
Bangladesh is one of the most densely populated countries in the world and its population of more than 150 million is still growing rapidly. Agriculture is the major source of employment, with 60 percent of people depending on farming for their livelihood. As the world’s fourth largest rice producer, output of the crop has tripled in the last 40 years. Last year’s bumper harvest of more than 35 million tonnes of rice may have allayed fears of a food shortage, but the government is taking no risks; it plans to buy more than 1 million tonnes of grains this year, both to boost stocks and to cool escalating domestic prices. Bangladesh was among the countries hit hard by the global food crisis in 2008, when thousands of workers took to the streets protesting against rising costs.
Even if global food prices start to come down, Bangladesh will need to produce more to keep up with domestic demands, and there are concerns that the agriculture sector is not geared up to meet the emerging difficulties. “Feeding such a rapidly growing population, especially given dwindling land and water resources and rising climate threats, requires new strategies, technologies and innovation,” said a recent report by the Food and Agricultural Organization.
“Ensuring food security is the greatest challenge for Bangladesh,” says Dr Fahmida Khatun, a director of the Centre for Policy Dialogue (CPD) in Dhaka. “The experience of 2008 tells us that if you are not prepared well in advance then you will face problems in importing food. Even if you have money you can’t import as all the countries may want to keep their stocks to ensure their food security.”
While the traditional agriculture sector may be lagging behind in terms of modernisation, the country’s private sector has cleverly used the available labour, the country’s most abundant resource, to its advantage. In the last two decades or so, thousands of garment factories have sprung up in the suburbs of Dhaka and in the southern port city of Chittagong, churning out clothes for famous Western high-street retailers like Walmart, H&M and Marks and Spencer.
Clothing exports have more than doubled in value in the last six years to over $12 billion per annum, constituting about 80 percent of the country’s total exports. Bangladesh has become the third-largest producer of clothes worldwide. Today, the sector employs more than 3.5 million people, most of them women. Although the salaries paid to these workers may be very low by international standards, the clothing industry’s growth has helped millions to overcome poverty and improve their standard of living.
Bangladesh’s garment sector is now the backbone of the economy, but the industry has come a long way from its inception in the 1980s. There were quite a few hurdles to overcome, not least the country’s image. “When we first went with some sample clothes, very few Western buyers believed that Bangladeshi companies can [sic] actually manufacture clothes and export to the West,” says Faruque Hassan, vice-president of the Bangladesh Garment Manufacturers and Exporters Association.
In the initial years, many factories were situated inside Dhaka and in buildings not designed for industrial purposes. Gradually, they were moved out of the city and many of them are now located in proper industrial zones. Minimum wages came into force and it became mandatory for factory premises to have acceptable safety standards.
Today, the industry uses high-tech machinery from Japan and China to produce clothes aimed at high-end fashion stores in Western countries. A fashion design school has been set up to promote young talent in the sector. Marketing has become sophisticated and many factory owners realise that quality control is the key to their survival given the competition from countries like Sri Lanka, Vietnam and China. Several major Western clothes retailers have set up offices in Bangladesh, showing their intent to engage with the industry over the longer term.
The year ahead promises continuing strong demand for clothing, and the Central Bank of Bangladesh is confident that economic growth will again exceed 6 percent. But several analysts feel that the growth rate may not be sustainable in the long run because of the country’s inadequate infrastructure and the economy’s vulnerability to global economic trends.
Over the past two years the government has begun to address the country’s chronic infrastructure problems, especially the energy shortage that is seen to be impeding foreign investment. To overcome the acute power generation shortfall, new plants are being built with private and foreign financial assistance, and electricity may even be bought from India. The World Bank and other international partners are funding a six-kilometre bridge over the mighty Padma River at a cost of nearly $3 billion, with a view to transforming the economy of south-western Bangladesh. There are also plans for a new deep-sea port at Chittagong, for which China is expected to offer financial support.
Incomes from its expatriate workers are the second-biggest source of foreign revenue for Bangladesh after clothing, and it is estimated that more than 6 million Bangladeshis work overseas. However, the global financial crisis of 2008 saw thousands of these workers losing their jobs in the Middle East and elsewhere. And the recent political crisis in North African and other parts of the Arab world, has once again exposed the vulnerability of migrant workers, with thousands forced to return home.
“Bangladesh’s growth challenges are two-fold,” says the CPD’s Dr Khatun. “Internally, we need to overcome our infrastructure problems like electricity shortage, poor roads and the impact of climate change. At the same time, our policy-makers should realise that Bangladesh is not immune to global events as the country takes steps to integrate its economy with the global economy. We need to be prepared for those challenges.”
