An average Indian is not used to being compared, that too, negatively, with a small neighbour. It is considered infra dig (prathsitha se pratikul). In Bangladesh, it has a neighbour whose freedom it had aided. As it races to celebrate 50 years of its freedom next year, it is being favourably compared, not just with India, but also with Pakistan from which it separated.
Infamously called “international basket case” by Henry Kissinger, the American statesman who had opposed the liberation but was later forced to change his views, Bangladesh has come a long way. Categorized as “least developed”, it hopes to be recognised as a ‘developing’ nation in 2024. Rated as 39th major economy already, it is an emerging “Asian Tiger”.
Once one of the poorest regions of Pakistan, Bangladesh, was wracked by poverty and famine for many years after independence in 1971. In fact, by 2006, conditions seemed so hopeless that when Bangladesh registered faster growth than Pakistan, it was dismissed as a fluke. But now, by extrapolation, Bangladesh will overtake Pakistan in terms of per capita GDP this year, even with a correction for purchasing power parity. At 1.1 percent per year, Bangladesh’s population growth is well below Pakistan’s 2 percent rate, which means that its per capita income is growing faster than Pakistan’s by approximately 3.3 percentage points per year. Imagine the heart-burns that this will cause among former compatriots!
Earlier, in 1991, although emerging from political turmoil that ended a decade of military-led rule by General H M Ershad, Bangladesh had scored a higher GDP than India. But that was thanks to India experiencing severe economic distress that had compelled Narasimha Rao Government to launch reforms. The sick Indian elephant was being compared, essentially in statistical terms, to an eight times smaller Bangladesh with a smaller population.
To what does Bangladesh owe its quiet transformation? As with all large-scale historical phenomena, there can be no certain answers, only clues. Still, Bangladesh’s economic transformation is driven in large part by social changes, starting with the empowerment of women. That it has enjoyed relative political stability under a democratic rule by Prime Minister Sheikh Hasina, howsoever flawed, which it is, has also significantly helped.
Bangladesh has had pioneering NGOs like Grameen Bank and BRAC. Along with more recent work by the government, Bangladesh has made significant strides toward educating girls and giving women a greater voice, both in the household and the public sphere. These efforts have translated into improvements in children’s health and education, such that Bangladeshis’ average life expectancy is now 72 years, compared to 68 years for Indians and 66 years for Pakistanis.
It also helps that the structure of Bangladesh’s economy is such that its GDP is led by the industrial sector, followed by the services sector. Both these sectors create a lot of jobs and are more remunerative than agriculture. India, on the other hand, has struggled to boost its industrial sector and has far too many people still dependent on agriculture.
The Bangladesh government also deserves credit for supporting grassroots initiatives in economic inclusion, the positive effects of which are visible in recently released data from the World Bank. Among Bangladeshi adults with bank accounts, 34.1 percent made digital transactions in 2017, compared to an average rate of 27.8 percent for South Asia. Moreover, only 10.4 percent of Bangladeshi bank accounts are “dormant” (meaning there were no deposits or withdrawals in the previous year), compared to 48 percent of Indian bank accounts.
Relative gender equality has been the best in South Asia, and this is reflected in all sectors. Bangladesh’s progress is the success of its garment manufacturing industry that has over 70 percent women in the labour force. Thus social and economic factors have converged positively.
Both India and Pakistan are government by the restrictive Industrial Disputes Act, 1947. It places restrictions on contract workers and on expanding labour force. Being born without that law, Bangladesh offers a better environment for manufacturing firms to achieve economies of scale and create a large number of jobs. And though Bangladesh still needs much stronger regulation to protect workers from occupational hazards and improve working conditions that are dismal, the absence of a law that explicitly curtails labour-market flexibility has been a boon for job creation and manufacturing success.
When a country’s economy takes off, corruption, cronyism, and inequality tend to increase, and Bangladesh is notorious for them, in most spheres. This has impeded its growth.
Next is political corruption. A vibrant polity is also impeded by visceral rivalry between two women who represent two opposing political legacies. There is no meeting ground between Hasina, prime minister since 2009 and Begum Khaleda Zia, who was premier for two terms. Politics is zero-sum game between the two. The result is there is no second line of leadership that would succeed the two ageing ladies.
While the spirit of freedom has endured for close to half-a-century, allowing for a relatively liberal democracy, there is a deeper threat posed by orthodox groups and religious fundamentalists who oppose Bangladesh’s early investments in progressive social reforms. A reversal of those investments would cause a severe and prolonged economic setback. This is not merely a passing concern: vibrant economies have been derailed by zealotry many times throughout history.
Bangladesh needs to be vigilant about the risks posed by fundamentalism. Given Hasina’s deep commitment to addressing these risks, there is reason to hope for success. In that case, Bangladesh will be on a path that would have been unimaginable just two decades ago: toward becoming an Asian success story.
One recalls how Begum Zia’s government, and later, a military-led government that ruled before Hasina, thwarted investment offer by Tata group worth USD three billion. Ratan Tata had himself tried his best, but the offer was considered “politically sensitive.” Perhaps, Bangladesh would have leaped to economic recovery and prosperity earlier had that offer been accepted.
To be fair, India has given generously to a friendly Hasina government when both Manmohan Singh and Pranab Mukherjee and later Narendra Modi have ensured that India’s largest single-country assistance to the tune of USD four billion has gone to Bangladesh.
Yet another opportunity has come before Bangladesh in the shape of China’s BRI. If Dhaka plays its cards well, with its political stability and positive economic indicators, it can benefit from China that is even now the biggest trading partner and supplier of defence equipment.
It remains to be seen how India, that has kept away from BRI and has tense relations with China will look upon Bangladesh’s cooperation – like that of all other South Asian nations – with China. Here, again, Bangladesh will have to be vary of not falling into debt trap that has confronted other South Asians including Nepal and Sri Lanka and Myanmar.