Challenges galore despite laudable economic progress

The country has made laudable economic progress in the last 50 years but still faces a lot of
challenges to carry forward the success, economists said. They said that the economic progress
of the country could have been much higher if successive governments had not failed to curb
income inequality, corruption, loan-theft and capital flight. The country joined the group of
lower middle income countries in 2015 as per World Bank criteria and would leave the list of
least develop countries in 2026 thanks to average 6 per cent annual growth in its gross domestic
product in the last one decade.

It also overtook its next-door neighbour India in per capita income in 2020. The country left
Pakistan behind on the same indicator five years ago or 45 years since Bangladesh’s
independence from Pakistan through a nine-month bloody war in 1971. According to a recent
projection of the International Monetary Fund, Bangladesh’s per capita income stood at $1,888
compared with that of India’s $1,877 in 2020. But 40 million people or one fourth of the
population of Bangladesh are still poor and live on less than $2 dollar in income. Moreover, the
condition of poor people has aggravated due to the COVID-19 pandemic and lack of access to
state-sponsored credit programmes.

Freeing the huge population out of poverty, speeding industrialisation and curbing income
inequality have remained major challenges for the country to match with the economic progress
of many Asian countries, including Vietnam, Malaysia and South Korea, said former Bangladesh
Bank governor Salehuddin Ahmed. He noted that all these countries were in a similar economic
condition 50 years ago. Former interim government adviser Mirza Azizul Islam noted that the
county’s track record on checking income inequality was not satisfactory. The Gini coefficient
that measures the income inequality of a country increased in Bangladesh to 0.48 in 2016 from
0.46 in 2010.
With smaller Gini values indicating lower income inequalities, Vietnam’s Gini coefficient stood
at 0.42 in 2018 and South Korea’s at 0.34 in 2019. The government needs fresh efforts and
renewed commitment to reverse the pattern of long-term increase in the income inequality in the
country, according to the 8th Five-Year plan adopted in December 2020. But the country has so
far overcome the infamous label of ‘a basket case’ by the then United States secretary of state
Henry Kissinger and also a famine in 1974 and also attained success in literacy, life expectancy
and infant, child, and maternal mortality rates.

About 6 million expatriate Bangladeshis send remittance to the country, pushing up the country’s
foreign currency reserve to more than $44 billion, which is more than double the reserve of
Pakistan of $20.5 billion. It is expected that operations of the special economic zones under the
Bangladesh Economic Zones Authority would bring about much needed diversification in the
manufacturing sector, now confined mainly to the readymade garment sector. Former caretaker
government adviser M Hafizuddin Khan noted that the capital flight and corruption, especially in
the financial sector, were worsening day by day.

The country slipped two notches to rank 12th among the most corrupt countries, according to the
Global Corruption Perception Index 2020 released by the Berlin-based Transparency
International on January 28, 2021. Besides, the bureaucratic procrastination has hindered the
expected development of the country in the last 50 years, said Hafizuddin. According to the
WB’s ‘Doing Business 2020 Report’, Bangladesh ranked 168th among the 190 economies
considered in the overall ranking by the ease of doing business.

In the ranking by tax rate structure for foreign direct investment, Bangladesh’s position was
151th in the year, much behind its competitors such as India, Vietnam, Thailand, Malaysia and
Indonesia which are attracting greater foreign direct investment. Policy Research Institute
executive director Ahsan H Mansur pointed out that the country’s tax-GDP ratio was one of the
lowest in South Asia. Without improving revenue generation, the country’s economic progress
will be at stake because of the shortage of resources in carrying out development programmes.
Economists said that there was no room for complacency over the progress the country had so far
made in gross domestic product. East Asian country South Korea has already joined the list of
developed countries and Southeast Asian country Malaysia is about to enter the group although
both countries were in a similar socio-economic situation in the 1970s. ‘Vietnam was behind us,’
Salehuddin noted, adding that Bangladesh has to go a long way to make its economic progress
sustainable. According to a World Bank assessment, both Vietnam and Bangladesh which
became independent in the 1970s were economically vulnerable after their independence.
Vietnam’s per capita income of $231 was slightly ahead of Bangladesh’s $213 in 1985 before
the Southeast Asian nation’s figure dropped below $100 in 1989.

But Vietnam managed to raise its per capita income to $1,190 in 2009 and became a ‘middle-
income country’ five years before Bangladesh achieved the feat in 2015 with $1,195 per capita
income. Malaysia’s $384 per capita income was almost three times Bangladesh’s $134 in 1971
but the gap widened to nearly six times in 2019 after the Southeast Asian nation pushed up its
per capita income to $11, 230 compared with Bangladesh’s $1,929 in the year. South Korea,
whose per capita income went up to $28,678 in 2019, had, meanwhile, transformed itself from
one of the world’s poorest agrarian nation into an advanced industrialised economy joining the
Organisation for Economic Cooperation and Development in 1996. But most of the South
Koreans suffered malnutrition and starvation during its post-war era from the late 1950s through
the early 1970s with the per capita income of $310 in 1971, compared with Bangladesh’s $130
the same year. South Korea’s purchasing power parity, an indicator used to compare economic
productivity and the standard of living between countries, stood at $44,292 in 2019, some 20
times $2,170 in 1980. Malaysia’s PPP, $29,613 in 2019, was $6,818.40 in 1990 while the PPP of
Vietnam climbed to $8,397.02 in 2019 from $3,952 in 2010. Bangladesh’s PPP in 2019 was
$4,964.69, trailing India whose PPP was $6,754 in the year. Economists said that ensuring good
governance and expanding credit facilities were also crucial for the country to make stride on the
economic front in the current decade.