Opportunities, Challenges, and Reforms
Bangladesh’s Economic Overview
Bangladesh has emerged as a significant player in the global economy, renowned for its garment manufacturing sector, energy imports, and extensive infrastructure investments, particularly from countries like China and Japan. In 2023, Bangladesh imported goods worth $73 billion, including refined petroleum, cotton, fabric, and fertilisers, highlighting its robust trade activity. In the same year, Bangladesh exported $55.79 billion in goods, with key exports including readymade garments, jute products, seafood, leather, home textiles, agro-products, pharmaceuticals, plastics, and bicycles. As a result, the country’s foreign reserves reached an all-time high of $48,060 million in August 2021.
Over the past two decades, Bangladesh’s economy has grown at an impressive average rate of 6.25% annually, significantly reducing poverty levels from 11.8% in 2010 to 5% in 2022. The country’s per capita GDP has even surpassed that of its larger neighbour, India, with human development indicators improving markedly. These achievements have set Bangladesh on the path to graduating from the United Nations’ list of Least Developed Countries by 2026.
However, despite these achievements, Bangladesh’s potential for prosperity remains unfulfilled. Given its demographic advantages, natural resources, and strategic location, Bangladesh could have become as prosperous and peaceful as countries like Sweden or the Netherlands. Instead, the distribution of wealth and resources has been manipulated under the long rule of Sheikh Hasina, leading to widespread economic and social challenges.
Corruption and Economic Mismanagement
During Sheikh Hasina’s over 20 years of rule, Bangladesh has witnessed unprecedented infrastructural development, including several mega projects that have undoubtedly contributed to the economy. However, this development has also provided opportunities for corruption, undermining the country’s economic potential.
Investigations have revealed that under Sheikh Hasina’s leadership, state resources were diverted for personal gain, and cronies were appointed to key positions in government and financial institutions. These actions have severely compromised the integrity of Bangladesh’s institutions and exacerbated the country’s economic challenges.
One striking example is the nuclear power plant project, where Sheikh Hasina and her family allegedly embezzled more than $5 billion in kickbacks for purchasing nuclear reactors from Russia, according to reports from the USA-based organization Global Defence Corp. Additionally, the corruption surrounding electricity purchases from the Adani Group and the “Quick Rental” scandal are textbook examples of the last regime’s embezzlement practices.
The combined illegal earnings from bank loans, stock market manipulation, and other corrupt activities have resulted in enormous wealth accumulation by key figures like Salman F Rahman, the former Prime Minister’s private industry and investment adviser, and S Alam, a trusted business associate. These individuals have reportedly amassed Tk 86,302 crore through these illicit activities.
The cost of corruption, coupled with the original cost of these projects, has burdened the population with intolerable expenses, leading to widespread economic distress.
Inflation and Policy Challenges
In September 2023, Bangladesh’s inflation rate surged to a 12-year high of 9.92%, with food inflation peaking at 12.54%. The rising prices of essentials like rice, vegetables, and eggs have placed substantial financial pressure on low and middle-income families. This situation necessitates targeted fiscal policies, such as better management of subsidies and improved tax collection, to stabilize the economy. Additionally, budget cuts in vital sectors like health and education are likely to exacerbate social inequality and hinder long-term development.
Regulatory Environment and Business Challenges
Despite efforts to improve the ease of doing business, Bangladesh’s regulatory environment remains cumbersome. Entrepreneurs face challenges such as lengthy bureaucratic procedures, corruption, and inadequate infrastructure, which stifle economic growth and deter investment. Streamlining regulations, enhancing governance, and improving services are essential to creating a business-friendly environment that fosters economic development.
Sustainable Supply Chains and Export Vulnerabilities
The garment industry, a cornerstone of Bangladesh’s economy, significantly contributed to the country’s $52 billion export earnings in FY 2022-23. However, global crises have exposed vulnerabilities in the supply chain, emphasizing the need for sustainable practices. Adopting better resource management and reducing environmental impacts are crucial for ensuring long-term resilience and competitiveness in the global market.
Banking Sector Reforms
Bangladesh’s banking sector faces critical challenges, with non-performing loans (NPLs) reaching 8.9% of total loans by September 2023. This high level of NPLs threatens financial stability and underscores the urgent need for reforms. Stronger regulatory oversight, improved governance, and greater accountability are essential to addressing systemic issues like corruption and inefficiency. Without these reforms, the banking sector risks further destabilization, with potentially severe repercussions for the broader economy.
Economic Diversification and Infrastructure Development
Bangladesh’s recent development trajectory includes significant strides in infrastructure, particularly in the power sector. The country has added 15,000 megawatts of electricity generation capacity in the past decade, leading to improved access to electricity across the nation. However, challenges remain, including the need for economic diversification beyond the garment sector.
Investments in technology, manufacturing, and services are essential to building a more resilient economy capable of withstanding global shocks.
Role of Students and the Interim Government in Combating Price Hikes and Inflation
In response to the country’s economic challenges, Bangladesh’s interim government and its youth, particularly students, have taken an active role in combating price hikes and inflation. Students have begun monitoring markets to ensure that prices of essential goods are kept in check, breaking the grip of syndicates that often manipulate prices for profit. This grassroots effort has garnered significant attention and has been crucial in curbing inflationary pressures that disproportionately affect low and middle-income families.
The interim government, recognizing the severity of the economic situation, has initiated a series of reforms aimed at stabilizing the economy and addressing the root causes of inflation. These efforts include cracking down on corrupt practices in the banking sector, improving fiscal discipline, and introducing measures to make essential goods more affordable. The government has also emphasized transparency and accountability in all sectors, setting a new standard for governance in Bangladesh.
Moreover, the interim government is focused on long-term economic reforms that go beyond immediate relief measures. These include efforts to diversify the economy, reduce dependency on imports, and invest in sectors like technology, agriculture, and renewable energy. By fostering innovation and entrepreneurship, the government aims to create new job opportunities, particularly for the youth, and build a more resilient economy.
Conclusion
Bangladesh’s demographic advantage is significant, with 67% of its 170 million people aged between 15 and 64. However, despite this potential, challenges persist. In 2022, about 40% of those aged 15-24 were not engaged in work, education, or training, highlighting the need for enhanced job creation and skills development to capitalize on the country’s young workforce. The job market, already competitive, has become even more challenging due to a 56% quota for specific communities, sparking widespread unrest during the quota reform movement.
Bangladesh’s economic journey has been marked by impressive growth and development, yet significant challenges remain. The country’s future success hinges on addressing these challenges through targeted reforms, sustainable practices, and economic diversification. The active involvement of students and the interim government in combating inflation and price hikes is a promising step towards a more stable and prosperous Bangladesh. Additionally, tackling corruption and ensuring transparent governance will be crucial for restoring public trust and securing a prosperous future for the nation.