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Keynote paper:

“Bangladesh’s Economic Prospect”

Published : Thursday, 12 March, 2020 at 12:00 AM  Count : 424
The purpose of this article is to offer a context for evaluating the prospects of Bangladesh's economy, so that we can articulate a constructive discourse on the current state of economic management. This should ideally help fine tune existing macroeconomic, sectoral and institutional policies and help us achieve long-run growth. Consequently, in this writeup, I highlight three important issues: {i} what Bangladesh has economically attained between 2009 and 2020 & why?; {ii} what is our aspiration for 2041; and {iii} what are the major economic challenges that we face if we want to achieve our economic aspiration as envisioned in Vision 2041.      
Our key achievements:
One of the most noticeable achievements of Bangladesh over the last one decade was that it was able to raise its per capita income from less than $900 in 2009 to more than $ 2000 in 2020. This means that our objective - as laid out in Vision 2021 - to transform Bangladesh into a middle-income country by its 50th anniversary has been attained. This remarkable achievement was only possible because Bangladesh was able to enter a high growth regime of above 7.5% over the last 5 years. The high growth regime also meant that Bangladesh saw a steep decline in both moderate and extreme poverty between 2010 and 2016. Numerically speaking - between 2010 and 2016, more than 8 million Bangladeshi were lifted out of poverty. And if this trend in poverty alleviation is prudently extrapolated till 2020 - we can expect at least 12 million people were lifted out of poverty between 2010 and 2020. This is a noteworthy economic accomplishment.
This steady decline in poverty reduction was also accompanied with sustained drops in fertility and child mortality, improvements in nutrition and life expectancy, enhanced access to electricity, clean water and sanitation, broad based expansions in education, and other improvements in non-monetary dimensions of well-being. In other words, Bangladesh experienced what could be called: "development with a human face".
Pro-poor economic transformation?
Few factors played a dominant role in facilitating the economic transformation that we witnessed between 2009 and 2020. First, we saw a notable increase in exports and remittances that stimulated aggregate demand in the economy. Exports, which were approximately $16 Billion in 2009 reached $40 Billion in 2019. Moreover, remittances, which were less than $10 in 2009 is likely to cross the $20 billion threshold in 2020 - in response to some critical policy measures that Government of Bangladesh has adopted between 2009 and 2020. Especially, one primary area of success has been a concentrated focus on mega infrastructure - including an expansion of our energy generation capacity from 5200 MW in 2009 to more than 18000 MW in 2020.  Such an exponential improvement in power generation capacity has meant that our private sector was able to critical overcome bottlenecks to efficiency gains. The Government of Bangladesh has also expanded its social safety net programs and invested dominantly in rural infrastructure, which in spite of some leakages - has reached the rural communities and has allowed people to cope with income shocks. Collectively, this has brought an essential change in the structure of the overall economy and reduced our historic dependence on farm income and agriculture.
What we aspire to achieve by 2041?
The Government of Bangladesh has recently approved the "Perspective Plan of Bangladesh 2020 - 2041" - categorized as Vision 2041 - which seeks to reach Upper Middle-Income Country (UMIC) status by 2031 and High-Income Country (HIC) status by 2041. Furthermore, it aims to reduce extreme poverty to less than 1% and moderate poverty to less than 3% by 2041; and push life expectancy to nearly 80 years by 2041. This is a challenging, but bold aspiration - as it necessitates that Bangladesh maintains an average 9% growth rate from 2020 to 2041. Moreover, to attain this inspirational economic transformation, policymakers must seriously navigate some powerful structural and institutional challenges, that could help Bangladesh replicate the economic transformation that was experienced by East Asian Tigers such as South Korea and Taiwan after the Second World War or the economic transformation that China has been experiencing since 1978. These challenges are as follows:   
Key Challenges Going Forward?
A. Maintaining competitiveness in the international market will be critical
Bangladesh has witnessed a secular decline in the average growth rate of our export between 1990 and 2020 and policymakers need to seriously identify the combination of factors that have influenced this outcome. One particular area of challenge is our excessive dependence on one item - RMG - which has increased its concentration in our export basket and makes our export sector vulnerable to any RMG sector specific shock. Additionally, both RMG and remittances rely on cheap labour as a source of our comparative advantage, which will be increasingly threatened as the advents of the Fourth Industrial Revolution mature and integrates into our production process. Consequently, there is an urgent need for policymakers to adopt policies that will help both product and geographic diversification of our exports - and help identify new sources of comparative advantage for our exports.   
B. Maintaining macroeconomic stability:
Bangladesh has a traditionally been a prudent and effective manager of macroeconomic stability - and we have demonstrated effective management skills in maintaining inflation, import coverage of foreign reserve and our international debt obligation. Moreover, maintaining sound macroeconomic stability is critical as it helps countries avoid what is popularly known as the "middle income trap" previously experienced by countries like Argentina and other Latin American countries. Against that context, existing policymakers need to address the current governance challenges in the banking sector has it has become an achilleas heal for the economy and it demands a serious response from the policymakers. A vulnerable financial sector can not only be a source of widespread economic downturn, as we have witnessed during the global financial crisis of 2008, but it can bring substantial hardship to people with limited skills and income, whose employment prospects during an economic slowdown are often strongly challenged.     
C. Addressing Human Capital Deficiencies
In a comparative sense, Bangladesh has systematically underinvested in health and education, which has created strong constraint for long-term development. To anecdotally highlight our weakness, Bangladesh fails to have one single university in the Top 500 rankings of global universities, while China has two in the top 25. There is also a noticeable skill deficit and it is a paradox why despite having more than 100 universities in the private sector - we have failed to created a skilled work force for the private sector, since one should expect private sector universities will understand the private sector employment needs more accurately, but that has not been the case.
D. Institutional Capacity Needs Focus for Long-Term Development
Multiple studies have shown that institutional status have been much below par and institutional improvements - especially in state capacity - is fundamental for long run growth. For instance, the total backlog of cases between 2010 and 2019 has almost doubled and it is approximately 3.6 million. This is indicative of limited change in the case disposal rate, which was a priority area of improvement in both the 6th Five Year Plan and the 7th Five Year Plan. Likewise, the trend in Tax-to-GDP ratio has also been dismal as we experience one of the weakest revenue mobilization capacity in the world. These area needs serious policy attention if we want to become a developed nation by 2041 - as no nation has attained that milestone without investing in such critical institutional improvements.   
Final Thought
On the whole, Bangladesh has attained tremendous pro-poor economic transformation over the last one decade, but to attain the bold aspirations as envisaged in Vision 2041, policymakers must prioritize effective structural and institutional reforms so that we can navigate the multidimensional challenges that can hinder our long-run economic prospects. Nonetheless, if the necessary policy alterations and institutional reforms are backed by strong political commitment, then there is every prospect for Bangladesh to replicate the economic success of East Asian Tigers that allowed developing countries to become developed nations in one single life time.


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