Md. Joynal Abdin
The Financial Express on March 10, 2012
Bangladesh has been identified as one of the Next Eleven (N-11) countries by the Goldman Sachs investment bank. The country has enormous potentials to grow further. It does not have a large territory, a long list of minerals or top mountains, but has a growing manpower and built-in resilience to fight against any uncomfortable situation. We have many achievements during last few decades like substantial progress in mass literacy, public health, reducing infant mortality and reduction of population growth. The increased participation of women in poverty alleviation programmes as well as in ready-made garments (RMG) sector, which provides jobs for more than one million women, has helped create an awareness of women’s issues at all levels.
The export sector has been the engine of industrial growth, with RMG leading the way, having grown at an average of 30 per cent over the last five years. Primary products constitute less than 10 per cent of the country’s exports; the bulk of exports are manufactured/processed products, RMG and knitwears in particular.
The Bangladesh economy has grown at an average rate of 4.0 to 6.0 per cent per year since 1996. However, this growth is not steady it has experienced three downturns during the last 10 years. Gross domestic products (GDP) growth of Bangladesh in 1999-2000 and 2000-01 financial years (FY) was 5.94 and 5.27 per cent respectively; but it fell down to 4.42 per cent in 2001-02 FY. Similarly other two downturns were in 2005-06 and 2008-09 FY. Why are we not able to avoid these downturns? Some economists suggest it as a natural thumb rule of economy to observe ups and down. It is the sign of a physically fit economy. But the point is that, why are we not able to prolong the duration of the ups? The answer may again be, the longer the ups the deeper the down turns. But we have seen so many economies around the globe that they grow with a steady GDP growth during their growing stage. Why we cannot?
Secondly, only a steady positive economic growth is not enough for sustainable economic development of a country, because the country’s wealthy families may be the beneficiaries of economic growth. Without a mechanism for balanced distribution of this growth real social development is not possible. Dr Dinesh N Awasthi, a renowned Indian economist and Director General of Entrepreneurship Development Institute of India (EDI), observed that the world economy made a huge progress in the last century, but only 385 families own about 40 per cent of the total budget of the poor nations of the world. On the other hand, about a billion people can hardly manage a meal a day. This is why only a positive GDP growth is not enough to determine the health of an economy.
Currently, stock market in Bangladesh witnessed collapses destroying many small investors. Providing electricity and gas connections to new industries remain suspended since long while the existing industries are facing rationing of gas and electricity. This is resulting in the underperforming of the economy during the last few years. It may be the cause of an economic depression in the country. We saw US initiated economic recession in 2007-08; currently European Union is fighting to reinstall Greek economy with a financial support equal or more than total value of our GDP. In the eyes of many economists the Bangladesh economy is in a good shape. However, in the eyes of the opposition there is a great black hole in it. Now is the time to be cautious about the recent performance of the following indicators of our economy:
Domestic credit: Domestic credit in private sector increased by Tk 305.30 billion or 8.96 per cent in July-December, 2011 while domestic credit in public sector increased by Tk 174.83 billion or 18.84 per cent.
Inflation: The government projected 7.5 per cent inflation in the current fiscal, but if the current inflationary situation holds further, this projection will remain in the oblivion. Practically, the general inflation rate might be 12.27 per cent in FY 2011-12.
Savings: In FY 2010-11 the growth rate of domestic savings declined by 2.4 per cent and the growth rate of national savings declined by 7.3 per cent compared to FY 2009-10.
Investment: In FY 2010-11, the public investment was Tk 415.8 billion that was an increase by 30.4 per cent; and private investment was Tk 1532.1 billion that was a decrease by 12.4 per cent than that of previous fiscal year.
Agricultural credit: Disbursement of agricultural credit during July-December, 2011 is Tk 57.30 billion which was 7.19 per cent lower than that of FY 2010-11.
Exchange rate: The exchange rate of the US dollar has dropped and the USD stands at 1:84.50 against taka on February 08, 2012. In recent months, the nominal exchange rate is Tk 83.55 in January 2012 whereas it was Tk 71.04 in January, 2011 and Tk 69.17 in January 2010.
Foreign trade: Export rose in FY 2010-11 to $22,928.2 million which was $16236 million in FY 2009-10. However, import rose to $11010.2 million.
Remittance: Remittances are falling since FY 2008-09. Yearly incremental growth rate of remittance in FY 2010-11 and FY 2011-12 is 6.0 and 4.4 per cent respectively.
Foreign exchange reserve: In January 2012, foreign exchange reserve has reached $9386.46 million which was $10381.7 million in January, 2011.
Employment: There are a total of 56.6 million labour forces in Bangladesh. Among them 54.1 million are employed. This indicates that a huge population of 2.6 million is unemployed.
Most of the above indicators belie the claim that Bangladesh economy is performing well. These rather show deviation from the ideal of steady economic growth and sustainable development. Therefore, now is the right time for our decision makers to rethink the issues like, why GDP growth rate is not rising steadily?
Why Bangladesh economy is experiencing negative performance in most of the indicators? Who are responsible for this failure? How this downturn may be avoided? What is the way forward to turn back from this crisis? Today is the time for taking necessary measures from respective agencies to ensure quicker return into the right track.