Summary of Macroeconomic Performance of Bangladesh: through the four decades of Independence

Author: Mahtab Uddin

(Executive Member, ESC)

Department of Economics,

University of Dhaka

Co-author: Nabila Hasan

(General Member, ESC)

Department of Economics,

University of Dhaka

Out line

1. Introduction2. Growth Performance2.1 GDP growth rate2.2 Per capita GDP growth2.3 Savings Investment performance2.4 Inflation3. Trends in External sectors3.1 Export Performance3.2 Import Performance3.3 Workers remittance4. Performance in terms of HDI and poverty reduction4.1 Poverty reduction4.2 Inequality4.3 HDI performance 5. General analysis6. Conclusion

1. Introduction:40 years has gone away, and Bangladesh, the darling daughter of the nature is just going to observe the 41st year of independence from the tyranny of Pakistani obsessions. Yet, standing at the edge of fourth decade we still have our question in our mind “Have we achieved the goals those we determined to be achieved at the time of Independence? If not, then why?” Our search is for seeking out the answers from the view of its macroeconomic performances. The papers are prepared in the search of the question that, four decades has gone away but what was our economic performance throughout this four decades? Obstacles in the path of economic development in this course of time are tried to be found out. Hence, the purpose of the papers is to highlight the past macroeconomic performances, its obstacles and to derive the conclusion about our ultimate strategies.

Overall Macroeconomic Performance:Bangladesh emerged from its war of independence desperately poor, overpopulated, and reeling from overwhelming war damage to its institutional and physical capital. It was not until 1978/79 that per capita income had recovered to its pre-independence level. The economy was ravaged by acute food shortages and famines during the early years. According to some authors, Bangladesh was designated as a “test case” for development, and Henry Kissinger called it “an international basket case.”

More than 40 years later, doubts and doubters have been proven wrong. With sustained growth in food production and a good record of disaster management, famines have become a phenomenon of the past. Bangladesh’s per capita GDP has more than doubled since 1975. Life expectancy has risen from 50 to 63 years; population growth rates of 3 percent a year have been halved, child mortality rates of 240 per 1,000 births have been cut by 70 percent, literacy has more than doubled, and the country has achieved gender parity in primary and secondary schools. However, most of these gains have taken place since the early 1990s, when the introduction of wide-ranging economic reforms coincided with transition to democracy. Bangladesh had struggled with its economic performance throughout the first two decades of Independence. Its only 1990s since when we were finally able to achieve better economic performances. In post 2000 Bangladesh became capable of earning a moderate growth rate of above 6% per annum; the dependency on foreign aid has decreased sharply; earnings from exports and foreign remittances has been a major component of GDP since the millennium.

2. Growth Performance:

In terms of growth of GDP, Bangladesh economy did not have much to boast about during the 1970s and the 1980s, but achieved acceleration in growth during the 1990s and the 2000s. While the annual average growth during the 1980s was less than 4 per cent, it exceeded 4 per cent in the early 1990s and crossed the 5 percent mark during the second half of that decade. Since 2004, annual rate of GDP growth has been over 6 per cent. But that trend got reversed in 2008-09 and 2009-10 - first due to a series of natural calamities and then due to the adverse effects of the global economic crisis of 2008-09. However, the potential of the economy of Bangladesh to achieve GDP growth of over 7 per cent is widely recognized.

Table: Annual trend growth rates:

Year Real GDP growth rate1972 – 75 6.5%1976 – 80 3.76%1981 – 85 3.72%1986 – 90 3.74%1991 – 95 4.49%1996 – 00 5.29%

2001 – 05 5.4%2006 – 11 6.21%Source: BBS, WB, IMF

1972 – 75 1976 – 80 1981 – 85 1986 – 90 1991 – 95 1996 – 00 2001 – 05 2006 – 110.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Avg. Trend GDP Growth rate

Avg. Trend GDP Growth rate

Bangladesh was entrapped at a very low level of growth rate by less than 4% throughout the first two decades of independence. The average trend growth of 1972-75 was high enough like 6.5% due to a very low economic base.

In the decades of 90’s, Bangladesh crossed the barrier of low rate of growth below 4% for the first time and within the mid 90’s it crossed 5% annual GDP growth rate.

Since 1995, the GDP growth rate has never been gone very low like the first two decades of Independence.

From 2004, Bangladesh has been enjoying a growth rate above 6% annually. In FY 2010-2011 the growth rate was 6.7% and the government is expecting a growth rate around 7% in the current fiscal year.

Constraints:

Commonly held belief is that Bangladesh could reach even a higher growth trajectory provided the growth constraints be kept to a minimum. The major constraints include:

poor governance

rampant corruption

infrastructural bottlenecks (electricity, energy shortage, poor sea and airport management, crowded roads)

underdeveloped financial markets,

inefficient bureaucracy

failure to attract FDI

2.1 Per capita GDP:

Bangladesh’s per capita GDP has more than doubled since 1975. The growth of per capita GDP had been slow in the 1980s, at an annual average of 1.6 percent a year, but it accelerated to 3 percent in the 1990s, and to about 4 percent more recently. The acceleration resulted partly from a slowdown in population growth but also from a sustained increase in GDP growth, which averaged 3.7 percent annually during the 1980s, 4.8 percent during the 1990s, and 5.7 percent in the post 2000. However, the present GDP growth rate is vibrating around more than 6% which has incorporated the recent growth in per-capita GDP significantly.

Table: Per Capita GDP Growth rate at constant prices

Year Annual growth rate of GDP Annual Per capita GDP growth rate

1972-73 7.6 4.11973-80 3.9 1.31980-85 3.8 1.41985-90 4.0 2.11990-91 3.4 1.51991-92 4.2 2.31992-93 4.5 2.61993-94 4.2 2.61994-95 4.4 2.61995-96 5.4 3.61996-97 5.9 4.11997-98 5.7 3.91998-99 5.2 3.41999-00 5.94 4.52000-01 5.27 3.862001-02 4.42 2.922002-03 5.26 3.762003-04 6.27 4.772004-05 5.96 4.472005-06 6.63 5.142006-07 6.43 4.952007-08 6.19 4.71

2008-09 5.88 4.42009-10 5.83 4.35

Source: Akbar Ali Khan. Friendly fires, Humpty Dumpty Disorder and other Essays.

Figure: GDP per capita (Constant prices, National Currency)

Source: BBS, IMF, Economy watch, CIA world fact book.

It is clear from the above table and the figure that, the per capita GDP had an insignificant increment during the first two decades of independence.

However, it started upward moving since the 1990s with the beginning of democratic government in Bangladesh. Along with a decline in the country's population growth, the acceleration of GDP growth resulted in a substantial increase in the growth of the country's per capita income.

While the annual per capita GDP growth was less than 3 per cent per annum till the mid-1990s, it crossed 4 per cent during 2000-09. For a country that was once dubbed as an international basket case, this is no mean achievement.

2.2 Sectoral GDP growth rates:

Despite satisfactory rates of economic growth and macroeconomic performance achieved by the economy of Bangladesh over a period of time, a few points of concern remain. Growth in agriculture has suffered from instability in the past. It is only in recent years that growth in this sector appears to have stabilized and has become satisfactory. Growth in manufacturing picked up in the early part of 2000s and achieved a peak of nearly 10 per cent per annum in 2006. But

after that it has declined and settled to a little over 6 per cent per annum. This trend is disconcerting because high growth of manufacturing is essential from the point of view of achieving a transformation in the structure of economy that would enable transfer of labor from low productivity agriculture to sectors with higher productivity and earnings. In countries of East and South East Asia (e.g., South Korea and Malaysia) that succeeded in this regard, manufacturing industries grew at approximately double the growth of GDP. In order to achieve that pattern of growth, manufacturing industries in Bangladesh would need to grow at annual rates of about 12 per cent per annum. Although Bangladesh has witnessed the emergence of some new industries other than ready- made garments (e.g., ceramics and shipbuilding), the size of these sectors are still too little to make a real difference. Currently, structural change in Bangladesh appears to be driven more by the service sector.

Table: Sectoral Growth rates:

(Annual average in percentage; in constant 1995/96 producer prices)

Sector 1980/81 – 1984/85

1985/86 – 1989/90

1990/91 – 1994/95

1995/96 – 1999/00

2000/01 – 2005/06

2006/07 – 2010/11

Agriculture Crop

production Fisheries Others

2.68

2.69 3.06 2.40

2.40

2.69 1.64 2.21

1.55

-0.43 7.86 2.53

4.89

3.86 8.56 3.30

3.3

2.71.33.9

4.4

4.454.43.8

Industry(Manufacturing)

5.70 5.80 7.47 6.44 7.8 7.92

Services 3.83 3.58 4.14 4.81 5.7 6.5

GDP 3.72 3.74 4.15 5.23 5.4 6.21Source: BBS

Sectoral shares in GDP:

Fig: Sectoral compositions of GDP

Fig: Trend of Structural Transformation of Broad sectoral shares in Real GDP

Source: BBS, Ministry of Finance

In the early beginning of the nation, Agriculture was the Dominant and prominent sector comprising the major share in the GDP. However, that trend gets reversed from the 1990s.

Throughout the 1970s and 80s, agriculture comprised more than 40% of the GDP. In the early 90s (1989/90) Agricultural sector comprised only 29.50% of total GDP which later

on downed to 24.50% in 1999/00. In 2011 Agriculture has a share in GDP of less than 16%.

In the contrary, the share of Industrial sector has not risen significantly. It comprises less than 30% of total GDP. Within this sector, manufacturing sector constitutes 18% of total GDP.

However, the growth of tertiary sector, i.e. service sector has been remarkable during the whole period. The largest sector of the economy is the service sector, representing about half of GDP. Its share has remained relatively stable over time, representing about 46% of GDP in the early seventies and has remained within the range of 48% to 50% since 2011.

2.3 Savings Investment Performance:

Acceleration in economic growth in Bangladesh was possible due to acceleration in the rate of investment as well as domestic savings. During the entire decades of the 1970s and 1980s, domestic savings and investment stagnated at low levels. During 1995-96 to 2009, domestic savings increased from 14.9 per cent of GDP to 20.1 per cent. Investment rate (as percentage of GDP) increased from nearly 20 per cent to 24 per cent. Despite this increase, investment rate remains lower than in other South Asian countries except Pakistan.

19801981

19821983

19841985

19861987

19881989

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20100

5

10

15

20

25

30

35

Total investment (as percentage of GDP) Gross national savings (as percentage of GDP)

Source: BBS, IMF, see appendix Table 1.

Bangladesh had a low level of savings and investment rate as percentage of GDP throughout the 1980s. During the decades of 80s, these rates were always around 16 – 17 per cent of GDP.

Investment remained stagnated until the 1980s but started picking up since early 1990s, mainly attributable to the openness of economy and the introduction of a liberal policy environment; creating increased opportunities for private investment.

However, both savings and investment have consistently increased in the 1990s. Gross national savings increased from 18% in 1989/90 to about 23% of GDP in 1999/00. Further within the next decade, Gross national savings has reached to 30% of total GDP in 2010.

Meanwhile, the investment GDP ratio on the other hand increased from 17% in 1989/90 to 22% in 1999/00. The investment-to-GDP ratio during 2006-2008 periods stood at around 24% of GDP, but it should in the neighborhood of 30% in order for the economy to reach two-digit growth trajectory.

Pattern of components of Investment:

Figure: Investment components(1980-2008).

Source: BBS, Ministry of Finance

The above Figure shows that:

Investment remained stagnated during the eighties. It started picking up from the early nineties backed by private investment while there was a declining trend in public investment.

While the shift in investment is conducive for a private sector-led growth, public sector investment for infrastructure and human capital is critical for sustaining economic growth and putting Bangladesh economy on a higher growth path. To achieve double-digit growth, the investment-to- GDP ratio needs to be increased to about 30% of GDP.

2.4 Inflation:

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

0

5

10

15

20

25

Inflation (end of period consumer prices) Percent change

Inflation (end of period consumer prices) Percent change

Source: BBS. Bangladesh Bank. IMF. See appendix 9 for details.

During the 80s, inflation rate was almost always in the region of double digits. Inflation rate fell sharply in the early 90s. Although there were fluctuations in the rate of inflation, it never touched the double digit

except the years of flood in 1998 and SIDR in 2007. The inflation of 2007 was mainly due to the adverse supply shock.

Most recently, the inflation rate has climbed up to the double digit region due to the huge increase in the domestic demand of fuels for generating electricity in quick rental plants.

3. Trends in External Sector:External sector comprises of all the sectors those are related to foreign transactions. Hence, it includes Imports, Exports, Foreign aid, FDI, overseas wage earners’ remittance etc. There has been a significant change in the pattern and components of this sector.

Share of foreign trade in the GDP :

During the first two decades of Independence, the share of foreign trade (exports and imports) in GDP was always within the bracket of 20%. In 1977-78 the share of foreign trade in GDP was around 18% which a decade after remained almost the same (1989/90 – 17.4% of GDP).

However, during the 1990s economic reforms and associated policies significantly affected the external sector in Bangladesh. The share of foreign trade in GDP increased from 17% in 1989/90 to 30% in 1999/00. The economy became more integrated with the global economy and the trend continued till the post 2000.

Since 2005 the share of foreign trade in GDP always remains over 40 per cent. In 2010/11 the share was 44% of the GDP.

Trade deficit:

1972-75*

1978-79

1980-81

1982-83

1984-85

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2008-09

2010-11

-15

-10

-5

0

5

10

15

20

25

30

35

Export (as % of GDP)Import (as % of GDP)Trade Deficit (as % of GDP)

In the decades of 70s and 80s, the trade deficit always remained above 8 to 10 % of the GDP.

The trade deficit in the 1990s was lower than the previous decade which was on and around 6%.

In post 2000 period, the trade deficit has been always around 5% of the GDP.

Current Account Balance:

1980-81

1982-83

1984-85

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2008-09

2010-11

-6

-4

-2

0

2

4

6

Figure: Current Account Balance (as % of GDP)

Current account Balance (as % of GDP)

In the pre 2000 era of Bangladesh, it always had a negative current account balance. In the first two decades of Independence the deficit in current account balance remained

around 5% of the GDP. In the decades of 90s it was brought down to below 2% per year. However, it is post 2000 period from when Bangladesh was able to enjoy a positive

current account balance. In 2009/10 current account balance stood 4% surplus of the total GDP.

The major backbone behind this achievement was the higher high growth rate of foreign remittance of overseas Bangladeshi expatriates.

See appendix, Table 3 for details.

3.1 Export Performance:

1981-82

1983-84

1985-86

1987-88

1989-90

1991-92

1993-94

1995-96

1997-98

1999-00

2001-02

2003-04

2005-06

2007-08

2009-10

-20

-10

0

10

20

30

40

50

Annual Growth of Export Earnings

Annual percentage change of Export Earnings

1981-85 1985-90 1991-95 1996-00 2000-05 2005-08 2008-110

2

4

6

8

10

12

14

16

18

20

7

10.2

17.9

10.6

8.5

17.7 18.24

Average Growth of Export

Compound change

Figure: Average Growth of Export (5 years average)

Source: EPB

The growth in exports has fluctuated considerably from an average low of 7% in 1981-85 periods to an average high of in excess of 17% in 1991-1995 and 2006-2008 periods.

Before 90s the average growth rate was below 10% per annum. In 1991-95 periods the average growth rate was high enough like 17% per annum on an average which slowed down to 8-15% per year in the periods of 1995-05.

In the post 2005 period the average growth rate of export has gone above 17% per year on average.

See appendix Table 4 for details.

Sectoral change in Export:

The major exported products of Bangladesh are mainly of two broad categories namely:

a) Primary Commodities: It includes-

1. Raw Jute. 2. Tea. 3. Frozen food. 4. Agricultural products. 5. Other primary commodities.

b) Manufactured goods: It includes-

6. Jute goods. 7. Leather. 8. Naphtha, furnace oil and bitumen. 9. Readymade garments. 10. Knitwear. 11. Chemical products. 12. Shoe. 13. Handicrafts. 14. Engineering products. 15. Other mfg. products

However, there has been a valiant change in the pattern of Export components.

1972-75

1980-84

1985-86

1987-88

1989-90

1991-92

1993-94

1995-96

1997-98

1999-00

2001-02

2003-04

2005-06

2007-08

2009-100

102030405060708090

100

Figure: Change in sectoral shares of Export from 1972 – 2011

Share of Primary commodities Share of Manufactured commodities

Source: M Hossain & A. R Khan, The Strategy of Development in Bangladesh. EPB.

At the beginning, around 40% of the total exported goods and commodities were primary goods. The trend in export did not change much until the mid 80s.

At the end of 80s, the share of primary goods in export started to fall and it fall below 10% at the end of 90s. Since then it never crept outside a share of 5 to 8% of total export.

Since, 1998, the share of manufactured goods has been more than 90% of total export.

See Appendix Table 5 for more details.

Product wise structural change:

Raw Jute32%

Jute Goods54%

Leather5%

Frozen Foods2%

Tea4%

Others2%

Figure: Export by Major Products During 1972-73

Jute Goods0%

Raw Jute1%

Frozen Foods3%

Woven Garments36%

knitwear39%

Leather1%

Tea0%

Others19%

Figure: Export by major products During 2009-10

From the above two charts, we can conclude that:

In 1970s, raw jute and jute goods comprise 89% of the total export. In 2009-10, it dropped to less than 2% of the total export.

Woven Garments (52%) and Knitwear (9%) became the main export item during 1992-93. This constitutes 61% of the total export.

In 2009-10, Woven Garments and Knitwear comprise 75% of the total export. Of which Woven Garments accounted for 36% and Knitwear 39% of the total export.

Bangladesh has used exchange rate depreciation as an export promotion tool actively in the 1990s. With reforms taking the country from an ‘administered’ to a more ‘market determined’ exchange rate regime, a policy of creeping devaluation has been pursued to maintain exchange rate flexibility and export competitiveness.

3.3 Import Performance:There has been significant change in the trends and patterns of imports.

Trends in import:

1983/84-89/90 1990/91-94/95 1995/96-99/00 2000/01-04/05 2005/06-09/100

2

4

6

8

10

12

14

7.279.19

7.5

9.44

11.53

Figure: Compound Growth Rates (5 years average)

Compound Growth Rates (5 years average)

Source: Bangladesh Bank, Ministry of Finance

From the above figure, it is seen that:

Over the 80s and 90s the average growth rate of Imports was always on and around of 7% per annum.

However, in the post 2000 period, the average growth rate of imports tends to increase than the previous three decades.

In 2004/05 the average annual growth rate reaches 9.5% while in 2009/10 it reaches at 11.5% per annum.

See appendix Table 6 for details.

Change in the Pattern of Imported Goods:

Over the period of time, there has been a significant change in the composition of imported goods. The Imported goods of Bangladesh are classified in five major categories, namely:

1) Major Primary Goods: Rice, Wheat, Oil Seeds ,Crude Petroleum, Cotton. 2) Major Industrial Goods: Edible Oil, Petroleum Products (Refined), Fertilizer, Clinker,

Staple Fiber, Cotton Yarn3) Capital Machinery 4) Other Products (Excluding EPZ)

1974-75

1976-77

1978-79

1980-81

1982-83

1984-85

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2008-090

1020304050607080

Figure: Change in Import composition from 1974 - 2010

Major Primary Goods (% share) Major Industrial Goods (% share)Capital Machinery (% share) Other products (as % share)

Source: Bangladesh Bank, MoF

Share of imports of capital machinery to total imports has fallen significant over the 1984-85 to 2007-08 periods from a high of 35.6% in 1991-92 to 3.7% in 1999-00. Since then it has not been over 10% of total imports.

The share of major primary goods constituted more than 40% in the early decades of 70s. It remained high enough (around 30%) till the mid of 80s. After then it started to fall and till now it is below 15% of total imports. The main cause behind it is the Bangladesh’s achievement of food security since 1990s.

The share of major industrial goods has been consistent throughout the decades. It was always within 15% to 20% contribution bracket.

In contrast, the share of other products (mainly textile fabrics, pharmaceutical raw materials, machinery for miscellaneous industry) in total import was 29% in 1973-74 and 25.9% in 1984-85. However, the share of other products started to climb up from the decades of 90s. In 1989/90 it accounted for 35% of total imports while a decade later it reached to 70% in 1999-00. In 2009-10, this accounted for 63.29% of total import. In fact, in post 2000 period, the share of other products has an average share of more than 60% of the total imports.

See Appendix Table 7 for details.

3.3 Workers remittance:

1. Manpower export by Bangladesh:

1976-77

1978-79

1980-81

1982-83

1984-85

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2008-090

200

400

600

800

1000

1200

Figure: Manpower Export by BangladeshNumber of expatriates (in '000')

Before 1990s, the average rate of manpower export was less than .80 lakh per year. Since 1990s, the average rate of manpower export has climbed to more than 2 lakh

expatriates per year which is near about three fold than the previous decade. There was a dramatic increase in the number of expatriate workers since 2005, rising

from about 2.50 lakh to 8.75 lakh. However, the impact of the global financial crisis led

to a decline in the huge jump of the manpower export. But, it is still more than 4 lakh per year which is 5 fold than the decades of 80s and 2 fold than the decades of 90s.

The close down of the outsourcing industries in Singapore and the outburst of real estate boom in United Arab Emirates may lead to shrink the manpower export from Bangladesh.

The non-inclusion of Bangladesh in the list of 12 outsourcing countries of Malaysia and fixing the ceiling of manpower import from Bangladesh up to 5.3 lacs has been acting as a barrier to the enhancement of manpower export over there.

To counter this, Bangladesh should explore the new opportunities in different countries like Libya, Korea, Russia and East European Countries to continue the momentum of its manpower export growth.

Since 2009 the export of manpower in the Middle East has declined remarkably. The reasons behind it are Global recession, anarchy in many Arab countries, war in Libya etc. Hence, Bangladesh has to look for new markets in other regions as well as she will have to negotiate with the man power importing countries regarding it.

2. Trend of Foreign remittance:

1975-76

1977-78

1979-80

1981-82

1983-84

1985-86

1987-88

1989-90

1991-92

1993-94

1995-96

1997-98

1999-00

2001-02

2003-04

2005-06

2007-08

2009-100

2000

4000

6000

8000

10000

12000

Figure: Foreign Remittance (in Million US $)

Remittance (in Million US $)

In the pre 90s decades the annually received foreign remittance was lower than US$ 800 million a year.

From 1993 Bangladesh has been enjoying a inward foreign remittance of an amount over US $1000 million each year.

In the post 2000 period, foreign remittance became more vibrant than any time before. In 2001/02 Bangladesh received US $2501 million which was 32% higher than the previous

year (2000/01 US$ 1882 million). However, the pace of did not rest there. Inward foreign remittance crossed US$ 3062 million in the next year achieving a growth rate of more than 18%.

In 2009/10 the annual received foreign remittance passed over US$ 10987 million which is 129% higher than the foreign remittance received in 2005/06 (US$ 4802 million).

See appendix Table 8 for details.

4. Poverty reduction and human development:

Economic growth and per capita income provide only part of the story about success on the economic front. High rate of economic growth is only a means to the important goals of reducing poverty, improving conditions of living of the people in general and achieving shared prosperity. In that context, it would be important to examine the degree of success in reducing poverty and achieving other Millennium Development Goals. Some relevant data are presented in the Tables.

4.1 Poverty Reduction:

1983-84 1985-86 1988-89 1991-92 1995-96 2000 2005 20110

10

20

30

40

50

60

70

Figure: Trend of Upper Poverty Line From1983 - 2010

National Rural Urban

Source: HIES, BBS. Bangladesh Poverty Assessment, WB. See Appendix Table 1

Trends in poverty reduction:

As for the fight against poverty in Bangladesh, 1970s and 1980s may be regarded as lost decades because the incidence of poverty (the proportion of people living below a poverty line that is defined in terms of a level of income needed to meet certain basic needs of life) actually increased during the first decade and fluctuated in the second*.

The reason behind the increase in the level of poverty in the early 70s is Bangladesh was just independent at that time which cost not only a huge bloodshed but also a huge destruction in the economy.

Only in the 1990s, poverty started to decline on a sustained basis and came down from nearly 59 per cent in 1991-92 to 49 per cent in 2000 and 40 per cent in 2005.

Poverty has declined further from 40 per cent in 2005 to 31.5 per cent in 2010

The rural poverty rate has been always higher than the national or urban poverty rates throughout the decades.

Reasons behind the decrease of rate of poverty: The primary contributing factor was robust and stable economic growth along with no

worsening of inequality. Respectable GDP growth that started at the beginning of the 1990s continued into the new millennium and averaged above 5 percent annually between 2000 and 2005.

The safety net programs, the food for work programs during the lean seasons and the micro credits played a valiant role in reducing hardcore poverty level.

Growth in consumption, fueled by robust GDP growth, was the dominant force in reducing poverty. Real per capita consumption expenditure from HIES increased at an average annual rate of 2.3 percent, with a higher increase for rural than urban areas.

The reduction in consumption poverty was also accompanied by impressive gains in other indicators of wellbeing. For example, Bangladesh is on course to meet the year 2015 Millennium Development Goals (MDGs) for infant and child mortality and has already met the MDG of gender parity in primary and secondary schooling. Impressive improvements in access sanitation and the quality of housing since 2000, particularly in rural areas, reflect broad-based gains in standard of living for the poor.

However, given the sharp increases in prices of food grains during 2007-08 and the adverse effect of the global economic crisis during 2008-09, the relationship between economic growth and poverty reduction may not have remained unchanged. One exercise by the World Bank suggested that the shocks mentioned above could have reduced the decline in the incidence of poverty by two percentage points.

4.2 Inequality:

Table: Gini Coefficient of Income inequality (1963 - 2010)

Year National Rural Urban1963-64 .41 .33 .361973-74 .38 .36 .361981-82 .41 .36 .391983-84 .37 .35 .351995-96 .44 .36 .502000 .451 .393 .4972005 .467 .428 .4972010 .458 .431 .452

Source: HIES, BBS, Banglapedia.

An important area of concern is the rise in inequality in the distribution of income. While this issue is important from the point of view of achieving shared and inclusive growth, it needs to be remembered that a rise in income inequality reduces the effectiveness of economic growth in reducing poverty. In Bangladesh, there has been an increase in the degree of inequality in income distribution from the mid-1980s. While the rise was gradual till the early 1990s, it has become faster since then.

In 2010, the gini coefficient of income inequality was .458 at the national level.

The income inequality is more severe in the urban areas than in the rural areas ever since 1990s.

In 2010 the gini coefficient of income inequality was .431 for rural areas where as it was .452 for urban areas.

4.3 Human Development Index:Using HDI we can find out the significant change in the development of Human resource throughout the last three decades.

Table 12: Bangladesh’s HDI trends based on consistent time series data, new component indicators and new methodology

Year Life expectancy at birth

Expected years of schooling

Means years of schooling

GNI per capita(2005 PPP $)

HDI value

1980 55.2 4.4 2.0 584 .303

1985 56.9 4.5 2.4 646 .3241990 59.5 5.0 2.9 690 .3521995 62.1 6.0 3.3 784 .3882000 64.7 7.0 3.7 905 .4222005 66.9 8.0 4.2 1,120 .4622010 68.6 8.1 4.8 1,459 .4962011 68.9 8.1 4.8 1,529 .500

The major Features from the table are: Bangladesh’s HDI value for 2011 is 0.500—in the low human development category—

positioning the country at 146 out of 187 countries and territories. Between 1980 and 2011, Bangladesh’s HDI value increased from 0.303 to 0.500, an

increase of 65.0 per cent or average annual increase of about 1.6 per cent. Between 1980 and 2011, Bangladesh’s life expectancy at birth increased by 13.7 years. Mean years of schooling increased by 2.8 years and expected years of schooling

increased by 3.7 years. Bangladesh’s GNI per capita increased by about 162.0 per cent between 1980 and 2011.

Figure: HDI of Bangladesh in comparison. Source: UNDP

In the decades of 80s, the HDI performance of Bangladesh was poorer than low human development rate.

After 1990s, Bangladesh’s performance started picking up over the low human development rate. However, after the 90s the gap between human development rate of South Asia and the world has been decreasing continuously.

The rank of Bangladesh’s HDI for 2010 based on data available in 2011 and methods used in 2011 is 146 out of 187 countries. In the 2010 HDR, Bangladesh was ranked 129 out of 169 countries. However, it is misleading to compare values and rankings with those of previously published reports, because the underlying data and methods have changed, as well as the number of countries included in the HDI. Table 12 reviews Bangladesh’s progress in each of the HDI indicators.

5. Generalizations: Having explained the major macroeconomic indicators above, we can draw the following generalized conclusions:

1. Performances of 1972 – 90 VS Performances of 1990 – 2010:In all the sectors, the performances were stagnant during the decades of 80s. The performances in the later two decades of independence were much better than the performance in the first two decades. However, it should be remind in mind that in the 70s we had a devastated economy to begin with.

2. Autocracy VS Democracy:If we search the political regimes behind the decades, then we will find that most of the years of first two decades were in fact under autocracy. From 1990, Bangladesh has started walking in the path of democracy again. Hence, the question comes to us “does not Democracy ensure higher performance than Autocracy in the perspective of Bangladesh?” In fact one of the major reasons behind the war of Independence was Democratic government.

3. Sustainable growth VS constraints:In the paved path of development, Bangladesh has to ensure its viability confronting the constraints. For achieving a sustainable and higher growth rate she has to address the political, infrastructural and socio-economic constraints strongly. Power and energy crisis should have to be removed through appropriate policies as soon as possible.

4. MDG, Poverty reduction and Human development:Bangladesh has already achieved many of the goals of MDG. However, to ensure the continuity growth must have to be kept sustainable. As exports of manpower, unaffected high growth rate of inward foreign remittance, social safety nets and microcredit helps directly in poverty reduction, these are should be handled with priorities in the upcoming future. Inflation rate must have to keep down to help the poverty reduction process.

6. Conclusion:Bangladesh economy has the potential to achieve higher growth than has been achieved in the recent past; and effort needs to be made to attain and sustain such growth. That, in turn, would require serious efforts at removing the constraints on investment - domestic as well as foreign. Mobilization of domestic resources (especially raising revenue/GDP ratio) should be a priority. However, single-minded pursuit of a growth agenda would not be sufficient from the point of view of achieving the ultimate goal of development, viz., reduction (and eventual elimination) of poverty and achievement of other Millennium Development Goals through a wider sharing of the benefits of growth. Higher rate of growth of productive employment, a faster transfer of workers to sectors/activities with higher levels of productivity, reversal of the trend of rising income inequality, and greater attention to social aspects of development would have to be important elements in a “growth plus” development agenda.

Appendix:

Table 1: Investment and Savings (as % of GDP)

YearTotal investment (as percentage of GDP)

Gross national savings (as percentage of GDP)

1980 14.695 9.6861981 17.726 17.8281982 17.37 17.571983 16.398 16.6961984 16.133 16.461985 16.521 16.8151986 16.335 16.4891987 16.172 16.2561988 16.529 16.7671989 16.899 17.3651990 16.971 18.6781991 17.109 19.4731992 17.634 18.6151993 18.183 18.3921994 18.782 19.9791995 19.575 20.5841996 20.373 20.9041997 21.201 21.681998 21.926 22.0541999 22.624 22.7192000 23.057 22.742001 23.118 22.9422002 23.283 24.1892003 23.73 25.1712004 24.289 25.6542005 24.592 26.812006 24.552 28.1982007 24.327 29.4942008 24.295 29.8742009 24.394 29.8082010 24.584 29.157

Source: BBS, IMF.

Table 2: Percentage change in the volume of Imports and exports of goods and services

UnitsVolume of imports of goods and services (% change)

Volume of exports of goods and services (% change)

1980 23.605 21.1271981 10.042 26.9041982 -1.765 12.2971983 -4.78 5.2981984 4.845 -8.7391985 -1.913 -1.1451986 -0.08 32.0551987 7.84 19.7981988 22.619 2.0851989 12.58 20.8711990 -3.037 7.8451991 2.473 13.7541992 11.165 15.9441993 11.645 14.7421994 16.519 15.5561995 14.248 5.1661996 -0.353 12.921997 3.813 23.5041998 17.729 13.6951999 6.682 9.4832000 1.92 11.8332001 5.542 4.4772002 0.914 3.7112003 0.678 -0.6562004 5.434 8.6922005 8.058 15.3632006 4.113 13.4122007 10.261 9.42008 -0.964 5.2122009 21.434 16.5512010 9.655 16.6552011 9.141 14.0372012 19.08 13.959

Source: EPB. IMF, World Economic outlook September,2011.

Table 3: Export Import Performance of Bangladesh

Year Exports Imports Trade Deficit Current

(as % of GDP) (as % of GDP) Account Balance

1972-75* 5.0 11 -6.01977-78 5.2 13.10 -7.91978-79 5.9 13.50 -7.61979-80 5.9 16.30 -10.41980-81 5.2 16.90 -11.7 -1.2751981-82 4.9 15.40 -10.5 -3.6191982-83 6.6 16.60 -10 -3.81983-84 6.1 15.70 -9.3 -2.2

1984-85 6.6 17.20 -10.6 -3.01985-86 5.6 16.30 -10.7 -3.51986-87 6.21 15.21 -9 -2.61987-88 4.8 11.7 -6.9 -2.01988-89 5.0 12.3 -7.3 -4.41989-90 5 12.4 -7.4 -5.21990-91 5.5 11.3 -5.8 -3.11991-92 6.4 11.3 -4.9 -1.81992-93 7.4 12.7 -5.3 -1.91993-94 7.5 12.4 -4.9 -0.31994-95 9.2 15.4 -6.2 -1.81995-96 9.5 16.9 -6.4 -2.31996-97 10.5 16.9 -6.4 -1.31997-98 11.7 17.1 -5.4 -0.61998-99 11.6 17.5 -5.9 -0.91999-00 12.2 17.8 -5.6 0.02000-01 13.7 19.9 -6.1 -2.22001-02 12.6 18 -5.4 0.52002-03 12.6 18.6 -4.3 0.62003-04 13.5 19.3 -4.1 0.32004-05 14.4 21.8 -7.5 -0.92005-06 16.8 21.5 -4.7 1.32006-07 20.4 28.5 -8.1 1.42007-08 17.5 24.5 -7.0 .82008-09 17.4 22.7 -5.3 2.82009-10 16.2 21.3 -5.1 3.72010-11 14.5 19.5 -5 0.6Source: The Strategy of Development in Bangladesh, M Hossain & A. R. Khan, 1987, BBS, Bangladesh Economic review 2009, 2011, IMF *estimated by Selim Jahan

Table 4: Growth of Export (1980-2011)

Year Annual percentage change of Compound change

Export Earnings 1981-82 -12.31982-83 8.81983-84 19.11984-85 15.4 7.01985-86 -12.51986-87 31.11987-88 14.61988-89 5.01989-90 18.0 10.21990-91 12.7 1991-92 16.11992-93 19.51993-94 6.31994-95 37.1 17.91995-96 11.81996-97 141997-98 16.81998-99 2.91999-00 8.03 10.62000-01 12.432001-02 -7.442002-03 9.392003-04 16.12004-05 13.83 8.52005-06 21.622006-07 15.692007-08 15.86 17.72008-09 10.312009-10 4.112010-11 40.30 18.24Source: EPB, Bangladesh Economic review 2009, 2011, mof.gov.bd

Table 5: Change in sectoral share of Export from 1972 – 2011

Year Share of Primary commodities Share of Manufactured

(as % of total exports) commodities (% of total exports)

1972-75 38.9 61.11975-80 35.25 65.751980-84 34.8 65.21984-85 34.0 66.01985-86 36.5 63.51986-87 27.7 72.31987-88 23.2 76.81988-89 23.3 76.71989-90 21.2 78.81990-91 17.9 82.11991-92 13.4 86.61992-93 13.2 86.81993-94 13.7 86.31994-95 13 87.01995-96 12.3 87.71996-97 11.9 88.11997-98 9.7 90.31998-99 7.9 92.11999-00 8.2 91.82000-01 7.5 92.52001-02 6.5 93.52002-03 7.1 92.92003-04 7.3 92.72004-05 7.5 92.52005-06 7.3 92.72006-07 6.8 93.22007-08 7.0 93.02008-09 5.58 94.412009-10 5.33 94.672010-11 6.0 94.0Source: Mahbub Hossain & AR Khan, The Strategy of Development in Bangladesh. EPB

Table 6: Growth of Import:

Year Annual Growth of Import (% change)

Compound Growth of Import(5 year average)

1983-84 -1984-85 12.401985-86 -10.501986-87 10.081987-88 13.931988-89 13.031989-90 11.38 7.271990-91 -7.641991-92 4.151992-93 12.581993-94 2.951994-95 39.20 9.191995-96 19.081996-97 3.091997-98 5.051998-99 6.501999-00 4.60 7.502000-01 11.502001-02 -8.502002-03 13.102003-04 12.902004-05 20.60 9.442005-06 12.202006-07 8.302007-08 27.562008-09 4.102009-10 5.50 11.53Source: Bangladesh Bank. Ministry of Finance

Table 7: Import Pattern 1972-2011

Year Major Primary Goods (% share)

Major Industrial Goods (% share)

Capital Machinery(% share)

Other products (% share)

1973-74 49 8 14 291974-75 48 9 11 321975-76 33 13 14 401976-77 21 24 17 381977-78 31 15 16 381978-79 21 11 21 471979-80 33 16 17 341980-81 18 22 21 391981-82 23 21 19 371982-83 29 20 19 321983-84 32.21 15.68 26.18 25.921984-85 31.58 16.36 26.11 25.951985-86 18.86 22.39 42.13 16.631986-87 17.89 13.62 32.66 35.831987-88 25.18 15.94 36.50 22.371988-89 18.07 16.68 31.70 33.541989-90 15.56 15.08 34.48 34.881990-91 18.35 19.87 35.46 26.321991-92 14.71 21.54 35.65 28.101992-93 11.42 15.67 33.06 39.841993-94 11.00 17.01 31.02 40.971994-95 14.88 15.84 28.93 40.351995-96 14.77 15.49 28.33 41.411996-97 8.59 18.19 27.05 46.171997-98 10.75 15.23 27.54 46.481998-99 18.09 12.95 3.67 65.291999-00 11.70 14.38 3.75 70.172000-01 11.21 14.78 5.16 64.562001-02 9.51 15.35 6.49 68.652002-03 11.73 16.03 5.67 66.572003-04 12.28 17.52 6.69 63.512004-05 12.75 20.25 8.48 58.522005-06 12.57 20.36 10.44 56.632006-07 12.25 19.13 9.67 58.942007-08 16.72 19.48 6.95 56.852008-09 12.95 22.37 6.3 58.362009-10 13.06 22.02 7.1 63.29Source: Bangladesh Bank. Ministry of Finance.

Table 8: Remittance and number of expatriates from 1975 to 2010

Year Number of expatriates (in ‘000’)

Remittance (in Million US $)

1975-76 - 101976-77 14 491977-78 18 1011978-79 25 1221979-80 27 2371980-81 38 3811981-82 66 4181982-83 64 6191983-84 52 5911984-85 69 442 1985-86 78 6491986-87 61 6971987-88 74 7371988-89 87 7711989-90 110 7581990-91 97 7641991-92 185 848 1992-93 238 9471993-94 192 10891994-95 200 11981995-96 181 12171996-97 228 14751997-98 243 15251998-99 270 17061999-00 248 19492000-01 213 18822001-02 195 25012002-03 251 30622003-04 277 33722004-05 250 38482005-06 291 48022006-07 564 59782007-08 981 79152008-09 650 96892009-10 427 10987Source: Bangladesh Bank. Bangladesh Economic Review 2009.

Table 9: Annual Inflation (end of period consumer prices) from 1980 - 2011

Year Inflation (end of period consumer prices)

Percent change1980 12.7621981 19.4811982 6.2111983 10.6731984 10.4361985 12.7991986 10.6041987 10.1631988 7.4851989 8.5831990 11.7821991 1.9351992 1.5051993 5.4441994 8.7771995 7.7271996 0.7331997 5.9571998 12.6751999 3.0732000 1.5542001 2.4792002 3.8332003 6.4982004 5.5052005 7.0642006 6.1362007 11.5892008 6.0312009 8.5052010 8.2852011 12.1

Table 10: Rural poverty rate (1963/64 – 1989/90):

Year Rural people below poverty line (%)

1963-64 43.61973-73 71.31981-82 65.41983-84 50.01985-86 41.31988-89 43.81989-90 37.5

Source: Task Force report, Volume 1, 1991

Trend in Poverty Scenario (1983 - 2010)

Table 11: Upper Poverty Line:

Year National Rural Urban1983-84 58.50 59.61 50.151985-86 51.73 53.14 42.921988-89 57.13 59.18 43.881991-92 58.84 61.19 44.871995-96 53.08 56.65 35.042000 48.90 52.30 35.202005 40.00 43.80 28.402010 31.5 35.20 21.30

Source: HIES, BBS

Table 12: Trend in Poverty scenario (1983 - 2010)

Lower Poverty Line

Year National Rural Urban1983-84 40.91 42.62 28.031985-86 33.77 36.01 19.901988-89 41.32 44.30 21.991991-92 42.69 45.95 23.291995-96 35.55 39.76 14.322000 34.30 37.90 20.002005 25.10 28.60 14.602010 17.6 21.1 7.7

Source: HIES, BBS

1983-84 1985-86 1988-89 1991-92 1995-96 2000 2005 201005

101520253035404550

Figure: Trend of Lower Poverty line 1983 to 2010

National Rural Urban

Figure: Trend in Lower Poverty Line From 1983 – 2010.

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