Bangladesh Is Everyone’s Economic Darling. It Might Not Last.

BY SUMIT GANGULY

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Shortly after Bangladesh became independent in 1971, Henry Kissinger, then the U.S. national security advisor, derisively referred to the country as a “basket case.” Bangladesh became associated with poverty, and for decades was seen as an economic laggard in South Asia, making woeful progress in alleviating mass poverty or promoting sustained economic growth. Many scholars and analysts feared that the country would remain a ward of the global community, acutely dependent on foreign aid. Some went as far to predict a Malthusian nightmare in the country, with its population outgrowing the availability of food.

Despite the dire expectations, military coups in 1975, 1982, and 2007, and a series of natural disasters, Bangladesh has in fact made significant progress in reducing poverty and in promoting economic growth. Last month, the International Monetary Fund forecast that Bangladesh’s gross domestic product per capita would exceed that of India’s in 2020.

The particulars of the IMF’s prediction are quite stark; it suggests that India’s GDP per capita, mostly as a consequence of the effects of the coronavirus pandemic, is likely to shrink by 10.3 percent. Bangladesh’s GDP per capita, on the other hand, is expected to grow by as much as 4 percent.

How did a country that was widely seen as teetering on the brink of economic disaster manage to so dramatically improve its prospects and even threaten to overtake India’s economic standing, at least on a per capita basis? The immediate answer lies in how Bangladesh sustained fast economic growth over the past five years while India’s performance over the same time span significantly lagged. But Dhaka’s success in promoting rapid growth (and thereby also reducing poverty) begs the question: How exactly did it perform such an economic miracle?For Bangladesh’s economic success to continue, it needs to return to one of its founding principles: democracy.

The answers are complex. At one level, Bangladesh’s success stems from a substantial inflow of funds from expatriate Bangladeshi workers, most of whom live in the Persian Gulf states. More than 10 million Bangladeshis remit $15 billion on an annual basis. Apart from their substantial financial contributions, these expatriate workers have also helped ease unemployment at home, where there are more than 160 million people packed into a country about the size of Illinois. Furthermore, this mostly steady infusion of funds has gone a long way toward easing poverty across the country.

But foreign remittances alone do not explain Bangladesh’s success story. Another important contributor to the country’s recent march toward some prosperity must be attributed to the extraordinary success of its garment industry, which employs nearly 4 million workers and generates more than 80 percent of the country’s export income. This industry, which Bangladesh carefully nurtured as China and Vietnam started to focus on other areas, has proved to be both a vital source of employment for Bangladeshi women and a critical source of income for the country. Employment in this sector has been an important source of women’s empowerment both in terms of their social as well as their economic status.

Beyond these two factors, the country’s economic success can also be attributed to another source. Unlike India, which has made mostly piecemeal interventions in its social sector, several Bangladeshi governments, regardless of their ideological underpinnings, have made vast strides in boosting maternal health and providing rudimentary health care. These interventions have helped reduce infant mortality, alleviated widespread malnutrition, and fended off a range of diseases.

But despite Dhaka’s smart economic planning, political trends in the country remain a cause for considerable concern. Unbridled political power concentrated in the hands of the ruling party could, over time, contribute to cronyism and corruption—a development that would damage the country’s economic progress.Despite Dhaka’s smart economic planning, political trends in the country remain a cause for considerable concern. 

Like several other countries, Bangladesh has been increasingly lurching toward authoritarianism. Prime Minister Sheikh Hasina, the daughter of the founder of the country, Sheikh Mujibur Rahman, is in her fourth term in office with her party, the Awami League, whose coalition controls 288 out of 300 directly elected seats in Parliament. The 2018 elections which saw her reelection were marked by allegations of widespread electoral irregularities. Earlier that year, the leader of the principal opposition party, the Bangladesh Nationalist Party, was given a 17-year prison term on charges of corruption. The opposition, quite unsurprisingly, has alleged that these charges are baseless and politically motivated.

Hasina has shown no interest in tolerating any legitimate challenge to her government. Her government has used existing and new legislation to harass, intimidate, and silence dissidents and critics. One of the most striking examples of these practices was the 2018 detention of a noted photographer and activist, Shahidul Alam, for his support for schoolchildren who were protesting the poor quality of traffic safety in Dhaka. Alam, who was ultimately released after an international outcry, was forced to spend more than 100 days in custody, during which time he was tortured. Beyond the dubious grounds for his confinement, the government has also used a draconian law, the Digital Security Act of 2018, to suppress dissent. With its sweeping provisions on speech on the Internet, Dhaka can now impose on its critics a sentence of up to 10 years in prison.

This suppression of dissent in inherently undesirable, as it corrodes democratic norms. Worse still, it can give leeway to corruption and cronyism, as electronic news outlets will be chary of investigating dubious practices. In the end, those willing to cozy up to the government but willing to cut corners could end up counting on its protection. Others could easily run afoul under the sweeping provisions of the act.

Bangladesh’s economic progress is certainly worth celebrating. However, a couple of caveats are in order. A reliance on a single sector—the garment industry—does not bode well for its economic future. For example, an economic downturn in any of the countries that import its garments can exact significant costs on this industry. Nor, for that matter, can it indefinitely count on the receipt of remittances. As the coronavirus pandemic has demonstrated, migrant workers can be shed at a moment’s notice.

Finally, if at least part of the gains came from empowering the country’s poorest, those advances could easily be reversed by a turn toward authoritarianism, which would lead to policies designed for an elite class focused on preserving its political and economic capital. For Bangladesh’s economic success to continue, it needs to return to one of its founding principles, back when it was Kissinger’s basket case: democracy.