Monday, August 26th 2019

Bangladesh’s dichotomy of development and deprivation

December 29, 2018

Bangladesh’s dichotomy of development and deprivation

The Sheikh Hasina regime’s performance in Bangladesh will be put to test as the upcoming elections will show who is going to form the government at the Centre. The incumbent Prime Minister under her tenure has pushed for economic growth and policy changes that aim towards eradicating poverty by 2021, exactly 50 years after the country’s independence.

The World Bank analysed the 2016-17 Household Income and Expenditure Survey in Bangladesh and found that between 2010 and 2016, poverty in Bangladesh fell significantly, especially faster in rural areas. Urban poverty rates declined from 21.3% to 18.9%, while rural poverty decreased from 35.2% to 26.4%.

However, the pace at which poverty is reducing is slow. The national poverty rate seems to have fallen from 1.7 percentage points annually between 2005 to 2010 to 1.2 between 2010 to 2016. The Asian Development Bank data show that as of 2016, the share of the population below the poverty line was 24.3%.

Average consumption growth did not keep up with GDP growth and the pattern of growth became less favourable to the sectors where poor households are engaged. Agricultural growth has become less equal and poverty-reducing. More than half of the population is vulnerable to falling back into extreme poverty.

“Bangladesh has a better poverty reduction rate in the rural areas as the country has been able to provide better microeconomic finance services and poverty alleviation programmes and has implemented them effectively,” said Dr Ajitabh Roy Chaudhury, an economics professor who has been teaching at the Jadavpur University in Kolkata for the past 37 years.

He further added that the Bangladesh economy is largely dependent on its readymade garment industry, which is now facing more competition from competitors in South and South-East Asia. “Strong economic development has increased migration from the rural to the urban areas. However, real wages of urban workers did not keep pace with the growth,” he said.

The garment workers in Bangladesh are the lowest paid as per global standards, found the Japan External Trade Organization in a survey conducted between December 2017 and March 2018. The government of Bangladesh decided to raise the minimum wages of the workers by 51% from Tk5,300 ($63) to Tk8,000 ($95) starting December this year. However, dissatisfied garment workers took to the streets on September 14, rejecting this increment and demanding a higher raise.

A World Bank report, ‘The Bangladesh Development Update April 2018’, states that Bangladesh is both an inspiration and a challenge for policymakers and practitioners of development.

“The country is at an important juncture: with the right policies and timely action, it can move up within the middle-income bracket. The World Bank has identified job creation as the country’s top development priority. Bangladesh needs to create more and better jobs for the 2 million youth entering the job market every year,” said the report.

Over the last 25 years, the readymade garment industry–the largest exporting industry in Bangladesh—played a key role in employment generation, says Dr Mahfuz Kabir, economist and research director at the Dhaka-based Bangladesh Institute of International and Strategic Studies.

He pointed out various government initiatives that have improved the living condition of the poor in Bangladesh. “There are a number of major factors for poverty reduction in the rural areas, including the Hasina government’s social protection programme. More than 85% of people in the rural areas have benefited from the programme. Besides, there are a number of other projects like the financial inclusion,” he said.

Govt initiatives
The Bangladesh Bank has launched various schemes to improve financial inclusion. The National Financial Inclusion Strategy for Bangladesh is being drafted by Business Finance for the Poor in Bangladesh (BFP-B) programme. The BFP-B programme, chaired by the Governor of the Bangladesh Bank, is a facility that promotes small businesses by improving their credit-worthiness.

The government of Bangladesh has the Access to Information programme, which focuses on digital inclusion by working in the financial sector while also promoting e-governance. The Hasina government in 2009 introduced the ‘Digital Bangladesh’ strategy to use the internet as a tool to achieve development goals. Kabir also spoke about how banks have opened multiple branches in remote areas and appointed agents to incorporate people into the banking system.

“The government has given huge thrust on mobile financial inclusion for money transfers. Village shopkeepers and buyers are increasing their use of mobile transfers. More than 400 crore taka is transferred through mobile transfers every day. This has a huge impact and the rural economy is very vibrant,” said Kabir.

In the fiscal year 2017-18, the GDP of Bangladesh reached its highest at 7.86% while in 2010, the GDP was 5.57%, states the Bangladesh Bureau of Statistics. Kabir said this number will grow even further and can reach 8.25-8.3%.

The challenges ahead
While the income growth, human development and vulnerability reduction efforts to date have improved, Bangladesh faces daunting challenges with more than 2.2 crore people still living below the poverty line and almost 12.9% experience extreme poverty, noted the World Bank report.

World Bank estimates that almost 77% of Bangladesh’s working population lives in rural areas. Out of these, about 87% of the population is dependent on agriculture for at least some portion of their earnings and poorer households derived most of their income from the sector. Therefore, a more developed agriculture sector can be a huge driver for economic progress in the country.

But agricultural growth has slowed down after 2010. The agriculture output grew at 3.4% annually between 2011 and 2016 while it was 4.5% between 2000 to 2010. While in the same time period, industrial growth was 9.5% (2011-2016), almost 2% higher than the figure for 2000-2010 (7.4%).

An Oxfam report highlighted how financial inequality was prevalent in Bangladesh and the country ranked 148th out of the 157 countries surveyed. The report pointed out that inequality can hamper economic growth and hinder the fight against poverty in addition to increasing social tensions.

The Rohingya crisis is another factor that has given rise to economic challenges within the country. Almost 6.9 lakh Rohingya refugees arrived in Cox’s Bazar and have immediate needs like shelter, food, sanitation, water among others, which need to be attended to.

Despite various steps towards progress, there is still a plethora of challenges that lie ahead. As Bangladesh goes to polls, it would be interesting to see how the government that comes to power would tackle these challenges and pave the road towards development leaving no one behind.