Home Global Economy The Upward Movement of Bangladesh’s Economy

The Upward Movement of Bangladesh’s Economy

This article was published in D&B’s monthly edition for June 2018.

Bangladesh, once one of the poorest economies in India’s neighborhood, is on the way of changing its old narrative where it remained an economic basket case – dealing with poverty, famine, and unemployment. The condition in the country was so wretched that when Bangladesh registered faster growth than Pakistan in the year 2006, no one believed them and it was disregarded as a lucky fluke.
Since then Bangladesh has covered a long path. In recent years, Bangladesh’s economy has grown at a consistent, impressive rate of more than 6%, making it one of the fastest growing economies in the world.
Over the past nine months, that pace accelerated to 7%. This is the third consecutive year that Bangladesh has experienced such economic growth. According to Bangladesh Bureau of Statistics, GDP growth in the fiscal year 2017-18, is expected to be 7.65%, which means its growth rate is likely to surpass India’s.

Manufacturing & Construction: The Backbone of Bangladesh’s GDP

It is widely acknowledged that accelerated economic growth and poverty alleviation, which are the vital goals for any country, require ensuring a radical structural shift in the economy that favors the manufacturing sector.

Thus, for a country like Bangladesh, from its very establishment, the question has not been whether to but how to develop the manufacturing sector in order to satisfy the basic needs of its people like provision of food and goods, generation of employment for those who do not indulge in the agriculture sector, bringing in investment, and earning foreign exchange. To counter all these hurdles, Bangladesh in its ‘Perspective Plan 2010-2021’ emphasized the need for industrialization. Bangladesh’s ‘Industrial Policy’ of 2010 recognized the importance of manufacturing for an economy.

The provisional statics show how two sectors – manufacturing and construction are playing a crucial role in achieving high GDP. Both the sectors are performing at a growth rate of 13.68% and 10.11% respectively. “The rise in construction is attributable to progress in the implementation of mega projects and increased growth in housing construction, stimulated, among others, by a recovery in remittance,” said Zahid Hussain, a lead economist at the World Bank’s Dhaka office.

“The final figures may be higher, these are estimated provisional figures of past 9 months,” said Planning Minister AHM Mustafa Kamal while unveiling the provisional estimates at a press conference held in April 2018 after the meeting of the Executive Committee of the National Economic Council.

India-Bangladesh Moving Forward, Together and Stronger

Over the last three decades, South Asia has grown twice as fast as rest of the world. India and Bangladesh, two neighbors have had striking trade profits. Gradual changes in Bangladesh’s trade policies and liberalization of the Indian market provided an opportunity for enhanced Indo–Bangla trade. Apart from changes in economic policies, geographical connectivity was another key to the region’s development. Connectivity provided the transmission channels through which development impulses spread across the region and added to the dynamism of economic and social progress of both India and Bangladesh.

India and Bangladesh share a border of some 4,096 km, of which almost 1,880 km is within India’s North-East (1,434 km is land border; 446 km is riverine tract). Land connectivity with India’s North-East and its access to South-East Asia through that region, has helped Bangladesh achieve its ambition of reaching lower-middle income level by 2021.

Connectivity through roads and railways are the major forms of physical connectivity between the two countries. Road networks and railways form an essential means of communication and vital for the operation of trade and commerce. At present, rail links between the two countries are not central in terms of their use. They require substantial enhancement in order to link the region more successfully.

Measures towards establishing increasing connectivity links through railways, roads, inland waterways and ports were officially discussed in 2010 and 2011 when joint communiqués were signed by the respective heads of government. It was at this time that both countries expressed their interest in reviving former rail routes as well as establishing and upgrading existing ones. India offered Bangladesh a line of credit of $1 billion for the development of rail network, a supply of broad gauge locomotives and passenger coaches, and helped strengthen the Bangladesh Standards and Testing Institution (BSTI).

Implementing the joint MoU (Memorandum of Understanding) signed in the year 2011 and boosting bilateral trade, India and Bangladesh introduced their first joint container train service in April 2018. It is a major move and will surely strengthen trade connectivity between the two nations. Container trains are usually used to ferry machine parts, chemicals, automobiles and consumer durables that involve a shorter transit time. While passenger and goods trains have been running between the two nations as far back as one can remember, this is the first time that a container service has been started. Export forums had long been lobbying for container trains service as they could help save time and reduce transportation costs significantly apart from giving an organized structure to transportation and making trade safer.

The train will run through Naihati, Ranaghat and, Gede in India and Darsana and Ishurdi in Bangladesh before reaching Bangabandhu Bridge West, about 117 km from Dhaka.

Replacing Sri Lanka, Bangladesh has now become India’s biggest trade partner in South Asia. The new train service came at a time when trading and economic cooperation between the two neighbors is reaching new levels every year.

Now, New Delhi and Dhaka can be hopeful that this trial run of container trains will initiate regular services between the two friendly neighbors.