Bangladesh is categorised as a lower middle income country in the World Bank's country list. Economists now classify the country as a developing nation. In the past, we were defined as a third world country – a notion which no longer exists. Despite being defined from various angles, Bangladesh is distinctly a different country among its peers from a macro point of view.
In 1971, Bangladesh became independent defeating a mighty Pakistani army. But our economic power in comparison to Pakistan seemed much weaker after independence. No macro statistics ever showed any superiority of Bangladesh over Pakistan in the 1970s and 1980s, lending credence to the claim of the anti-liberation forces that abandoning Pakistan was a blunder. Bangladesh's economic fate began to change since the early 1990s when the country embarked on liberalisation. Although its South Asian neighbours including Pakistan started opening its economy at the same time, Bangladesh's performance began to outshine Pakistan's in most economic fronts, something our founding fathers dreamed long ago.
Liberalisation empowered Bangladesh to outperform Pakistan in terms of economic trends in investment, trade, and growth while more foreign aids flowed into the latter without strengthening its economic base. While Pakistan is struggling hard to remove its name from the list of “failed states”, Bangladesh has carved out a model of a vibrant economy. No one in the mid 1970s and early 1980s anticipated that Bangladesh would demonstrate a stable growth rate of more than 6 percent for more than a decade. That's exactly why Bangladesh is different.
If we can further liberalise our trade by reducing tariffs and non-tariff barriers and by removing age-old regulations, our growth will exceed even 7 percent. We have already outperformed India in many socio-economic indicators like life expectancy, infant mortality, and participation of women in the labour force. Our stability in growth and inflation is better than India's and actually the best in the region. That's also why Bangladesh is an example to many other countries.
Our geographic location provides us with a strategic advantage over our peers. Sri Lanka has a central position in the Indian Ocean, but it is an island state. In contrast, Bangladesh has a balanced sharing of land and sea so the country can take advantage of land transport with India, Nepal, Bhutan, and Myanmar. The open south side meeting the Bay of Bengal gives the nation the opportunity to navigate across the world and explore the benefits of the vastly-untapped blue economy. Thus Bangladesh can build its future as a hub of regional connectivity, attracting huge investments in infrastructure and communications. Only a few nations on earth enjoy such connectivity with thriving nations of Asia that include two emerging giants of the world: China and India. Our demographic dividend will be short-lived (another 40 years), but this geographic advantage will always be there. And that creates the difference for Bangladesh.
Bangladesh is also special among its peers in regards to the debt-GDP ratio. Its debt ratio, being 30 percent, is one of the lowest among countries of equal status. Only one or two other nations could achieve a persistent growth rate over 6 percent over a decade with such a low debt ratio. Both India's and Pakistan's debt ratio is close to 70 percent. While India successfully cultivated foreign loan to add value to its GDP, Pakistan failed, registering almost 4 percent growth over the last two decades. This distinction of Bangladesh also conveys a message of opportunity to borrow from outside to undertake mega projects that enhance growth potentials.
Participation of Bangladeshi women in the labour force is one of the highest in the region although there is room for improvement in the quality of employment. But the social mindset has already changed towards working women. Bangladesh will take advantage of this advancement in the future when more jobs will be created in the services sector now occupying 55 percent of GDP. Only a few countries on earth treasure that advantage.
Bangladesh has done very well in popularising the concept of financial inclusion - a much needed paradigm to ensure sustainable growth. While private sector credit occupies 40 percent of GDP, almost 30 percent of outstanding loans are now serving small and medium enterprises - an essential step to expand employment without concentration in the capital city. The banking industry is revolutionising their services and outreach. The central bank is tirelessly and passionately digitising the entire banking sector day by day.
The country is energy-hungry with inadequate infrastructure. Manpower still suffers from inefficiency. Higher education lacks quality. But Bangladesh has a track record of overcoming terrible odds in a reasonably short period of time. History will back me up on this. “A basket case” has now turned into a vibrant economy.
Bangladesh commands respect in the global stage for that.
The writer is chief economist of Bangladesh Bank.