NATIONAL UNIVERSITY OF MODERN LANGUAGES

FINAL PROJECT

TOPIC: Economic Development in Bangladesh

SUBJECT: INTERNATIONAL BUSINESS

CLASS/SHIFT: BBA-VII-B-AFTERNOON

ROLL NO: LCM-4053

SUBMITTED BY: SAJEEL AHMED

SUBMITTED TO: SIR MUBASHAR QURESHI

0
 Table of Contents
Background History:...............................................................................................................................2

From ‘Basket Case’ to ‘Asian Tiger’:....................................................................................................2

Garment Industry:..............................................................................................................................3

Remittances:........................................................................................................................................3

Agriculture:.........................................................................................................................................3

Microfinance and Small and Medium Enterprises (SMEs):............................................................3

Infrastructure Development:..............................................................................................................3

Social Development:............................................................................................................................4

Regional Connectivity:........................................................................................................................4

First,.....................................................................................................................................................5

Second,.................................................................................................................................................5

Third,....................................................................................................................................................5

Social Indicators:.....................................................................................................................................5

Conclusion:..............................................................................................................................................6

1
Background History:

Around 50 years ago, in March 1971, with the help of India, the founders of Bangladesh
declared their independence from their own rich and more powerful country, Pakistan. The birth
of this country was accompanied by famine and war, during which lakhs of people were either
killed by the Pakistan army or migrated to India. At that time, America was supporting
Pakistan, who believed that Bangladesh would never be a successful nation. Henry Kissinger,
who was the Secretary of State at the time, called Bangladesh a basket case. Some time ago, the
Cabinet Secretary of Bangladesh told reporters that his GDP per capita has grown in the past
few years and has reached $2,227. During 1971, Pakistan was 70% richer than Bangladesh.
Today, Bangladesh is 45% richer than Pakistan. On this change, a Pakistani economist said that
if we look at the realities, it is possible that we will see financial aid from Bangladesh in 2030.
If this is seen in comparison with India, then today India's per capita GDP is $ 2,191, less than
Bangladesh. During Covid, the world's organizations praised Bangladesh's economic
performance. In April 2021, the World Bank also issued a report saying that despite Covid
uncertainties, the economic outlook of Covid is positive. The report also mentioned that during
the pandemic, Bangladesh performed in the best way and launched such stimulus packages that
people remained employed even after the economic impact of Covid.

From ‘Basket Case’ to ‘Asian Tiger’:

A drastic change can be seen in Bangladesh's global image in the past few years. At one time,
the country which was considered the piton of poverty and hunger, today due to its steady
success in GDP growth, it is being considered a symbol of a hardworking enterprise. The prime
reason behind these changes in Bangladesh is its prudent economic governance. Bangladesh's
economy has increased 271 times in the last 50 years while making macroeconomic stability its
base. Bangladesh's economic performance also reflects its efficient fiscal management. This
country has also reduced its budget deficit by 5% of GDP. Bangladesh has given private sector
an opportunity to invest in borrowing and public sector through financial system while limiting
public spending. Fiscal prudence and export performance have also played an important role in
reducing Bangladesh's poverty.

2
Bangladesh has made significant progress in terms of economic development in recent years.
The country has experienced steady economic growth, reduced poverty levels, and improved
human development indicators. Several key factors have contributed to Bangladesh's economic
development:

1. Garment Industry

2. Remittances

3. Agriculture

4. Microfinance and Small and Medium Enterprises (SMEs)

5. Infrastructure Development

6. Social Development

7. Regional Connectivity

Garment Industry: The garment industry is a crucial driver of Bangladesh's economy,

accounting for a significant portion of its exports. The country is one of the largest exporters of
readymade garments globally, with its low labor costs and competitive production capabilities
attracting international buyers.

Remittances: Bangladesh receives a substantial number of remittances from its citizens

working abroad, particularly in the Middle East and Southeast Asia. These remittances
contribute significantly to the country's foreign exchange reserves and help improve the living
standards of many households.

Agriculture: Agriculture plays a vital role in the country's economy, employing a large portion
of the population. The government has implemented various programs to modernize
agriculture, enhance productivity, and ensure food security. Additionally, the cultivation of
high-value crops like vegetables, fruits, and fisheries has gained prominence.

Microfinance and Small and Medium Enterprises (SMEs): Bangladesh has been successful
in promoting microfinance initiatives, empowering women and small entrepreneurs to access
credit and start their own businesses. This has led to the growth of small and medium-sized
enterprises, contributing to employment generation and economic diversification.

3
Infrastructure Development: Bangladesh has been investing significantly in infrastructure
development, including transportation networks, power generation, and telecommunication
systems. These investments aim to improve connectivity within the country and attract foreign
direct investment (FDI).

Social Development: Bangladesh has made remarkable progress in reducing poverty and
improving social indicators such as education and healthcare. The government has implemented
various social safety net programs to address the needs of vulnerable populations and enhance
human development outcomes.

Regional Connectivity: Bangladesh has actively pursued regional cooperation and

connectivity initiatives, such as the Bangladesh-China-India-Myanmar Economic Corridor
(BCIM-EC) and the South Asian Association for Regional Cooperation (SAARC). These
initiatives aim to enhance trade and economic integration with neighbouring countries.

Despite these achievements, Bangladesh still faces several challenges in its pursuit of economic
development. These challenges include addressing infrastructure gaps, ensuring sustainable and
inclusive growth, reducing income inequality, improving governance and transparency, and
diversifying the economy beyond the garment sector.

The government of Bangladesh has been working on various policy measures and reforms to
tackle these challenges and sustain its economic development trajectory. International support
and investment, coupled with continued domestic efforts, are essential for Bangladesh to
achieve its long-term economic development goals.

In addition, declining population growth rate has also helped to boost Bangladesh's economy. In
1971, Bangladesh's GDP contribution to agriculture sector was 50%. While, 13% of industry
sector and 37% of services sector contributed. In 2020, this structure changed to 13.3% of
agriculture, 51.3% of industry, and 37% of services sector. Bangladesh has achieved this
shift by liberalization and irrigation expansion of input market. With this, new seed fertilizer
technology has also been adopted by encouraging farmers. In last 35 years, Bangladesh has also
explored itself in fish product export. During its independence, Bangladesh's industrial base
was remarkably low. But in 1970s and 1980s, Bangladesh witnessed considerable growth in
industrial sector. By following market policy by government, we saw appreciable industrial
growth in 1990s. If left for few years, Bangladesh is still successful in maintaining its industrial
growth. Major growth driver of industrial sector is Bangladesh's RMG sector i.e., ready-made

4
garment sector. Bangladesh's ready-made garment manufacturing sector provides employment
to 4.5 million people. Pharmaceuticals, leather goods, ship building, breaking, food processing,
ceramics, fertilizer industries etc. have also boosted the manufacturing sector. In Bangladesh's
economic growth, poverty reduction, and employment generation, cottage, minor, small and
medium enterprises have also played an important role. In addition, ship building sector has
seen major boost in Bangladesh. In ship construction domain, Chittagong region of Bangladesh
is one of the top locations in Asia. 12% share of Bangladesh's economy is generated in this
region only. Companies like Western Shipyard in Chittagong have exported ships to Denmark,
Netherlands, New Zealand, Germany, Kenya, and India. Ship building industries of Chittagong
generate $400 million every year. In ship manufacturing sector, Bangladesh's export target is $4
billion in the coming years. To support this growth, Bangladesh has introduced a wide range of
policy reforms. Under these reforms, many steps have been taken to promote trade policy,
industrial policy, monetary policy, fiscal policy, and FDI. Liberalization of services sector,
particularly telecommunication and financial sectors, has been crucial for Bangladesh. From
1972 to 1973, Bangladesh's export was $380 million. In 2018-19, it has increased 10 times and
reached $40.5 billion. Bangladesh's total export is 82% contribution of readymade garment
sector.

RMG sector has made three important structural changes in Bangladesh's economy.

First, Bangladesh has started relying on earnings while reducing its dependency on foreign aid.

Second, manufactured goods are dominating export sector instead of primary goods.

Third, Bangladesh has played an important role in women empowerment by providing wage
employment to female workforce.

Due to being a labor surplus country, a large number of Bangladeshis are living in other
countries. By February 2021, about 13 million workers were working in other countries. Due to
these migrants, remittances have also been a huge blow in Bangladesh. In 1980, remittances
have increased from $339 million to $21.7 billion. Along with export, remittances have also
helped to increase foreign currency reserves. With this growth, Bangladesh has also achieved
success in poverty reduction. In 1971, the poverty rate in the country was 80%. Today,
Bangladesh has reduced it to 22%.

5
Social Indicators:

If we look at social indicators, we can see a significant decline in the annual population growth
rate of Bangladesh. Today, the population growth rate is 1.1% compared to the previous 3%.
Bangladesh's life expectancy was 46 years in 1971, which has now reached 73 years. Along
with this, there has been a decline in fertility and mortality rates. Bangladesh has also achieved
considerable success in health and nutrition. Bangladesh has focused on drinking water, better
use and access of toilets, primary and secondary education, and many other basic necessities
that support growth and development. Bangladesh's Human Development Index, which used
to be 0.394 in 1990, has now reached 0.632. Bangladesh has matured during the COVID
pandemic. If we look at Bangladesh's stimulus package, its GDP was much higher than India's
package. The Sheikh Hasina government understood the need and gave the agricultural
sector the most importance in the stimulus package. SMEs, heavy industries, the RMG sector,
and other industries were given COVID incentives in a phased manner. Digital Bangladesh,
whose aim is to create a digital ecosystem, is now including new entrepreneurs in support and
digital finance management. Bangladesh has launched about 2 dozen COVID stimulus
packages, under which 1.24 trillion taka was released. This is 4.4% of Bangladesh's GDP. There
were many steps under this, such as 50 billion takas for paying the wage bill to export-oriented
industries, 2% loan for 2 years for factory owners, 200 billion takas for banks to provide
working capital loan to the CMSMEs, which will be given at 9% interest, 5% for borrowers,
and 4% subsidy for the government. The success of these stimulus packages is also due to its
effective management, which has addressed the food security problem along with the affected
industries. The opposite, poor investment GDP ratio, inadequate coordination among various
agencies is included. Despite its stimulus packages, there has been a significant rise in
Bangladesh's poverty and unemployment after COVID.

Conclusion:

To maintain its growth trajectory, it is important for Bangladesh to focus on these issues.
Bangladesh needs to prove itself a benchmark against countries like Vietnam, which is not only
a part of China-centric regional comprehensive economic partnership, but is also a signatory of
the FTA from the European Union. Still, looking at the story of the past 50 years, it can be
assumed that this country, which has a population of more than 160 million, which is densely
populated more than the Vatican City, will play an important role in South Asia's economic
success in the coming time.