Bangladesh’s dichotomy of development and deprivation

Bangladesh’s dichotomy of development and deprivation

Bangladesh’s dichotomy of development and deprivation

The Sheikh Hasina regime’s performance will be put to test as the upcoming elections will show who is going to form the government at the centre. The incumbent Prime Minister under her tenure has pushed for economic growth and policy changes that aim towards eradicating poverty by 2021, exactly 50 years after the country’s independence.

The World Bank analyzed the 2016-17 Household Income and Expenditure Survey (HIES) in Bangladesh. It stated that between 2010 and 2016, poverty in Bangladesh fell significantly, especially faster in rural areas. Urban poverty rates declined from 21.3 per cent to 18.9 per cent, while rural poverty decreased from 35.2 per cent to 26.4 per cent. 

Despite this fall in the poverty rates, the pace at which poverty is reducing is slow. The national poverty rate seems to have fallen from 1.7 percentage points in annually between 2005 to 2010 to 1.2 between 2010 to 2016. The Asian Development Bank (ADB) data shows that as of 2016, the share of the population below the poverty line was 24.3 per cent.

Average consumption growth did not keep up with GDP growth, and the pattern of growth became less favourable to the sectors where poor households are engaged. Agricultural growth has become less equal and poverty reducing. More than half of the population is vulnerable to falling back into extreme poverty.

“Bangladesh have a better poverty reduction rate in the rural areas as the country has been able to provide better microeconomic finance services and poverty alleviation programmes and have implemented them effectively, says Dr Ajitabh Roy Chaudhury, professor of Economics who has been teaching at the Jadavpur University in Kolkata for the past 37 years. 

He further added that added that the Bangladesh economy is largely dependent on its readymade garment industry, which is now facing more competition from competitors in South and Southeast Asia. “Strong economic development has increased migration from the rural to the urban areas, however, real wages of urban workers, did not keep pace with the growth,” said Roy Chaudhury.

The garment workers in Bangladesh are the lowest paid as per global standards said the Japan External Trade Organization (JETRO) in a survey which was conducted between December, 2017 to March, 2018. The government of Bangladesh decided to raise the minimum wages of the workers by 51 per cent from Tk5,300 ($63) to Tk8,000 ($95) starting December this year. However, dissatisfied garment workers took to the streets on September 14 this year rejecting this increment and demanding a raise.

A World Bank report, ‘The Bangladesh Development Update April 2018’, states that Bangladesh is both an inspiration and a challenge for policymakers and practitioners of development.

“The country is at an important juncture: with the right policies and timely action, it can move up within the middle-income bracket. The World Bank has identified job creation as the country’s top development priority. Bangladesh needs to create more and better jobs for the 2 million youth entering the job market every year,” said the report. 

Over the last 25 years, the readymade garment industry--which the largest exporting industry in Bangladesh—played a key role in employment generation, says Dr Mahfuz Kabir, economist and research director at the Dhaka-based Bangladesh Institute of International and Strategic Studies (BIISS)

He points out several government initiatives that have improved the conditions of the poor in Bangladesh. “There are a number of major factors for poverty reduction in the rural areas, including the Hasina government’s social protection programme. More than 85 per cent of people in the rural areas have benefited from the programme. Besides, there are a number of other projects like the financial inclusion,” he says.

The Bangladesh Bank has launched several schemes to improve financial inclusion. The National Financial Inclusion Strategy for Bangladesh (NFIS-B) is being drafted by Business Finance for the Poor in Bangladesh (BFP-B) programme. The BFP-B programme, chaired by the Governor of the Bangladesh Bank, is a facility which promotes small businesses by improving their credit-worthiness.

The government of Bangladesh has the Access to Information (a2i) programme which focuses on digital inclusion by working in the financial sector while also promoting e-governance. The Hasina government in 2009 introduced the ‘Digital Bangladesh’ strategy to use the internet as a tool to achieve development goals. Kabir also speaks about how banks have opened several branches in remote areas and appointed agents to incorporate people into the banking system. 

“The government has given huge thrust on mobile financial inclusion for money transfers. Village shopkeepers and buyers are increasing their use of mobile transfers. More than 400 crore taka is transferred through mobile transfers every day. This has a huge impact and the rural economy is very vibrant,” says Kabir.

In the fiscal year 2017-18, the GDP of Bangladesh reached its highest at 7.86 per cent while in 2010, the GDP was 5.57 per cent, reveals the Bangladesh Bureau of Statistics (BBS). Kabir says that this number will grow even further and expects it to reach 8.25 per cent to 8.3 per cent.

While the income growth, human development and vulnerability reduction efforts to date have improved, Bangladesh faces daunting challenges with more than 22 million people still living below the poverty line and almost 12.9 per cent experience extreme poverty, states the World Bank report.

World Bank estimates that almost 77 per cent of Bangladesh’s working population lives in rural areas. Out of these, about 87 per cent of the population is dependent on agriculture for at least some portion of their earnings and poorer households derived most of their income from the sector. Therefore, a more developed agriculture sector can be a huge driver for economic progress in the country.

But, agricultural growth has slowed down after 2010. The agriculture output grew at 3.4 per cent annually between 2011 and 2016 while it was 4.5 per cent between 2000 to 2010. While in the same time period, industrial growth was 9.5 per cent (2011-2016), almost two per cent higher than 7.4 per cent (2000-2010).

An Oxfam report highlighted how financial inequality was prevalent in Bangladesh and the country ranked 148th out of the 157 countries surveyed. The report pointed out that inequality can hamper economic growth and hinder the fight against poverty in addition to increasing social tensions.

The Rohingya crisis is another factor which has given rise to economic challenges within the country. Almost 688,000 Rohingya refugees arrived in Cox’s Bazar and have immediate needs like shelter, food, sanitation, water among others, which need to be attended to.

Despite several steps towards progress, there is still a plethora of challenges that lay ahead. As Bangladesh goes for polls, it would be interesting to see how the government that comes to power would tackle these challenges and pave the road towards development leaving no one behind.

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