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Wednesday, April 14, 2021

With positive growth rate even during the pandemic, what Bangladesh can teach India

Increasing women’s participation in workforce, liberalising internal and external trade, and making micro lending accessible can help boost growth.

Written by Manjeet Kripalani , Rajiv Bhatia , Sagnik Chakraborty |
Updated: March 25, 2021 8:59:10 am
It is a proud moment for Bangladesh, and the Indian subcontinent. Just as Vietnam amazed the world with its fast-paced growth, so too has Bangladesh, which has displayed a will to grow despite odds.

This month marks the beginning of triple celebrations in Bangladesh. It is the birth centenary of the father of the nation, Bangabandhu Sheikh Mujibur Rahman; it is the 50th anniversary of Bangladesh’s independence; and it celebrates 50 years of diplomatic relations between Bangladesh and India.

A country that began as a case study for development is now on top of the global GDP charts. Bangladesh’s GDP growth in 2019 was an enviable 8.4 per cent — twice that of India’s during that year — and it is one of the few countries to have maintained a positive growth rate during the COVID-19 pandemic. Its GDP per capita is just under $2,000 — almost the same as India’s. In five years, by 2026, Bangladesh will drop its least developed country tag, and move into the league of developing countries — on a par with India.

It is a proud moment for Bangladesh, and the Indian subcontinent. Just as Vietnam amazed the world with its fast-paced growth, so too has Bangladesh, which has displayed a will to grow despite odds.

Vietnam instituted market and economic reforms, known as Doi Moi, in 1986, which enabled it to achieve rapid economic growth and industrialisation. It began with the manufacturing of textiles and garments, in which it is now a prominent global player, and moved into making mobiles and electronics. As supply chains diversify from China, Vietnam is a beneficiary. It is now the “+1” in the “China +1” strategy of multinationals and has seen investment rise steadily, especially from Asian countries like Japan and Thailand.

Vietnam has been smart in signing trade agreements and inserting itself into global supply chains. It joined ASEAN and that free trade region in 1995. It has free trade agreements with the US and with India, Japan, and China through ASEAN. This enabled Vietnam to skill-up its population for labour-intensive manufacturing produced at scale, thereby bringing down costs and expanding exports.

Bangladesh has followed a similar strategy. Its rise is directly connected with the textiles and garments industry, which accounts for 80 per cent of the country’s exports. Bangladesh also enjoys preferential trade treatments with the European Union, Canada, Australia, and Japan with negligible or zero tax. With India too, Dhaka has a zero-export duty on key products like readymade garments. Over the years, Bangladesh has enhanced its agricultural production, power generation, natural gas exploration and production, pharmaceuticals, and foreign remittances.

Like Vietnam, its foreign investment regime is investor-friendly. For instance, Bangladesh’s liberal FDI policy allows 100 per cent equity in local companies and no limits on repatriation of profits in most sectors. Indian companies are increasingly present in Bangladesh, and Indian products are popular — an outcome of a strong cultural affinity.

Bangladesh scores over almost all other developing countries in microfinance — a model it has exported. The world’s most successful and pioneering microfinance organisations like Grameen and BRAC have aided small businesses in the country, and regionally. Many of these schemes, over the years, were directed at women. This has paid dividends not just in financial independence, but also in encouraging them to work outside the home. Consequently, Bangladesh’s workforce in its textiles sector is almost all women — 95 per cent women in an industry which is 80 per cent of Bangladesh’s exports. Having a woman Prime Minister like Sheikh Hasina as their champion, helps.

This, along with government schemes like Pushti Apas (Nutrition Sisters) and community health clinics has helped Bangladesh in the development indices: Bangladesh fares better on infant mortality, sanitation, hunger and gender equality than many countries including India.

What can India, South Asia and the world learn from Bangladesh’s successful development trajectory?

Certainly, increasing women in the workforce, liberalising internal and external trade, and making micro lending accessible, are some of the lessons. But so is the goal of being a global hub for the sub region, building special economic zones which requires infrastructure, connectivity and a welcoming environment for investors both domestic and foreign. Domestic entrepreneurs create the base for a nation’s small and medium business strength, and the jobs and innovation that go with it.

On March 26, when Prime Minister Narendra Modi visits Dhaka as the guest of honour for Bangladesh’s 50th anniversary, he will push the button on the long-delayed bilateral connectivity projects, and launch new ones. He can do more. Ahsan Mansur, chairman of BRAC Bank, said at a seminar last week organised by Gateway House and the Konrad Adenauer Stiftung, that “both countries have suffered since 1947, without connectivity, at huge cost. Now is the time to integrate our power systems, think about free trade, liberalise the visa regime.”

India need not always carry the burden of South Asia’s development alone. It now has a partner with whom to collaborate effectively towards achieving that goal.

This column first appeared in the print edition on March 25, 2021 under the title ‘Learning from Bangladesh’. The writers are with Gateway House: Indian Council on Global Relations, Mumbai

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