Lessons from the Bangladesh’s Growth story

Synopsis: India and other South Asian countries can learn from the growth story of Bangladesh.

Background

• March 2021 marks 50 years of diplomatic relations between Bangladesh and India and 50 years of Bangladesh independence.
• Prime Minister Narendra Modi is set to visit Dhaka as the guest of honour in Bangladesh’s 50^th Independence Day celebration.

Growth Story of Bangladesh

• Bangladesh’s GDP growth in 2019 was 8.4% (2 times that of India). It was one of the few countries that maintained a positive growth rate during the COVID-19 pandemic.
• Its GDP per capita is around $2,000 which is almost equal to India.
• Further, in the next 5 years, Bangladesh will move from the least developed country status to developing country status.

The Vietnam Growth Model

• Economic reforms (Doi moi) in 1986, enabled Vietnam to achieve rapid economic growth and industrialisation.
• Growth story of Vietnam started with the manufacturing of textiles and garments and later diversified to mobiles and electronics. Also, it has largely benefitted from China’s supply chain.
• It also remains the biggest beneficiary of the China+1 strategy leading to rising investment from Asian countries like Japan and Thailand.
• Further, the signing of the smart trade agreements such as ASEAN FTA and free trade agreements with the US and with India, Japan, and China through ASEAN has immensely benefitted the country.
• It provided a scope for Vietnam to skill-up its population for labor-intensive manufacturing at a large scale. Thereby, it brought down costs and increased exports.

What aided the success of Bangladesh?

1. Focus on the intensive manufacturing sector: Bangladesh has followed the same strategy as Vietnam. Its GDP growth is directly connected with the growth in the textiles and garments industry. It accounts for 80 percent of the country’s exports.
2. Signing of beneficial Free trade agreements: It also got benefitted from 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 ready-made garments.
3. Liberalised FDI regime: it has helped to attract more investments. For example, Bangladesh allows 100 percent equity in local companies and no limits on repatriation of profits in most sectors.
4. Innovative microfinance models: For example, successful and pioneering microfinance organisations like Grameen and BRAC have aided small businesses in the country. It also helped in empowering women by supporting them with financial independence and encouraging them to work outside the home. Consequently, Bangladesh’s workforce in its textiles sector is almost all women (95%).
5. Effective public health schemes: For example, government schemes like Pushti Apas (Nutrition Sisters) and community health clinics. It has helped Bangladesh to perform better in development indices such as infant mortality, sanitation, hunger, and gender equality better than India.

What India can learn from Bangladesh’s successful development trajectory?

Some of the key lessons that could be learned from Bangladesh are,

• Increasing women in the workforce,
• Liberalising internal and external trade,
• Making micro lending accessible,
• Building special economic zones with adequate infrastructure, connectivity and environment friendly design.
• Supporting Domestic entrepreneurs

Source: Indian Express