Bangladesh, a brilliant model of development in South Asia, has become everyone’s economic darling in the midst of Covid-19. Bangladesh’s per capita income in fiscal year 2020-2021 is higher than that of many neighboring countries, including India and Pakistan. Recently, Bangladesh agreed to lend $ 200 million to debt-ridden Sri Lanka to bail out itself through a currency swap. Bangladesh, once one of the most vulnerable economies, has now established itself as the most prosperous economy in South Asia. How did Bangladesh manage to manage Covid-19 and become the best performing economy in South Asia?
In March 1971, Sheikh Mujibur Rahman declared his independence from the richer and more powerful Pakistan. The country was born out of war and famine. Shortly after Bangladesh’s independence, Henry Kissinger, then the United States’ national security adviser, called the country a “basket of poverty”. But after fifty years, recently the Cabinet Secretary of Bangladesh reported that per capita income has increased to $ 2,227. Pakistan’s per capita income is $ 1,543. In 1971, Pakistan was 70% richer than Bangladesh; today Bangladesh is 45% richer than Pakistan. Pakistani economist Abid Hasan, former World Bank adviser, declared that “if Pakistan continues to perform poorly, we may turn to Bangladesh for help in 2030”. On the other hand, India, the economic superpower of South Asia, also lags behind Bangladesh in terms of per capita income worth $ 1,947. It also shows that Bangladesh’s economic decisions are better than those of any other South Asian country.
Bangladesh’s economic growth rests on three pillars: export competitiveness, social progress and fiscal prudence. Between 2011 and 2019, Bangladesh’s exports grew up at 8.6% each year, compared to 0.4% on the global average. This windfall is largely due to the country’s insistence on products, such as clothing, in which it has a comparative advantage.
The varied investment plans pursued by the government of Bangladesh are contributing to the escalation of the country’s per capita income. The government has attracted investment in education, health, connectivity and infrastructure both at home and abroad. As a long-term implication, investing in these sectors has helped Bangladesh facilitate space for businesses and create a skilled workforce to run them quickly. At the same time, the share of Bangladeshi women in the labor force has steadily increased, unlike India and Pakistan, where it has increased. decreases. And Bangladesh has maintained a public debt-to-GDP ratio report between 30% and 40%. India and Pakistan will both emerge from the pandemic with public debt close to 90% of GDP.
The strategy of managing Bangladesh’s economy and industry during Covid-19 is also worth mentioning here, as the country has so far successfully protected its economy from the impact of the pandemic. At the onset of the pandemic, lockdowns and restrictions hampered the country’s overall productivity for some time. To combat the pandemic effect, Bangladesh introduced improvised monetary policy and fiscal stimuli to put them under the safety net, which kept the situation from worsening. The government has introduced a stimulus package which is equivalent to 4.3% of total GDP and covers all necessary sectors such as industry, SMEs and agriculture.
These packages are not only a one-time offer, new packages are also announced over time. For example, in January 2021, the government announced two new programs for small and medium entrepreneurs and grassroots populations. In addition to economic interventions, the government has also chosen the path of targeted interventions. The government, after the first wave, abandoned the widespread lockdown and adopted the policy of targeted intervention which is proving to be effective as it allows socio-economic activities to continue under certain protocols and helps industries to fight against it. pandemic effect.
Another critical key to success was managing the migrant workforce and keeping national production active in the midst of the pandemic. According to the KNOMAD report, in the midst of Covid-19, remittances from Bangladesh increased by 18.4%, exceeding 21 billion inflows per year, where many remittance-dependent countries experienced a rate negative growth. Due to the massive influx of remittances, Bangladesh’s Forex reserve reached US $ 45.1 billion.
Bangladesh’s success in managing COVID19 and its economy reflected in recent report “Bangladesh Development Update – Moving Forward: Connectivity and Logistics to Strengthen Competitiveness”, published by the World Bank. Bangladesh’s economy is showing signs of recovery, supported by a rebound in exports, strong remittances and the ongoing immunization program. With financial aid to Sri Lanka and Covid relief aid to India, Bangladesh is showing its rise as an emerging superpower in South Asia.
That’s why Mihir Sharma, director of the Center for Economy and Growth Program at the Observer Research Foundation, wrote in a Bloomberg article: “Today, more than 160 million people across the country, clustered in a fertile delta more Vatican City, seem destined to be Southeast Asian success story ”. In 2017, the PwC (PricewaterhouseCoopers) report also predicted the same that Bangladesh would become the largest economy by 2030 and an economic powerhouse in South Asia. And this is how Bangladesh, a paragon of development, offers lessons to other struggling countries around the world after 50 years of independence.
* Shazzad Hussain is a strategic affairs and foreign policy analyst. He can be contacted at [email protected].