Towards growth a’ la Bangladesh?

Going by his pre- and post-entry utterances, it is abundantly clear that the new steward of the economic team is trying to build a narrative of growth in an economy that has gone astray. The positive numbers he has to work with are the upsurge in textile production and exports, and workers’ remittances. Remittances are breaking all records, with an annualised rise of 56% in April and 29% in the 10 months of 2020-21. Textiles, with the largest weight of 20.9% in the large-scale manufacturing, grew by 40.4% in March and 5.9% in the nine months. These highs, it must be remembered, are due to negative growth in the comparable periods. Textile exports in March rose by 29% and in nine months by 2%. Export of readymade garments increased by 10.9% in March, but declined by 1.6% in nine months. A hybrid regime and prospects of Chinese relocations are seen to provide the desired mix for a take-off.

These very drivers — remittances and readymade garments exports — spearheaded growth in Bangladesh that many of us have come to marvel at. Palgrave Macmillan has recently published a book, Numbers and Narratives in Bangladesh’s Economic Development, by friend Rashed Al Mahmud Titumir, a professor at Dhaka University. His analysis of the country’s transition from a proverbial basket case to a high growth achiever presents insights that late comers can only ignore at their peril. According to him, greater utilisation of labour and the resulting increase in consumption spurred growth.

“Two events were particularly important in shifting the labour dynamics in the country. First, the readymade garments sector sprung up in the 1980s and was built upon the abundance of labour. The sector did not require high level of skills and hence tapped into the unskilled and semi-skilled labour force. Second, overseas employment opportunities in the Middle Eastern countries opened at the same time. This sector also relied on unskilled and semi-skilled workers. This worked in favour of the large number of unskilled workers in the agricultural sector in rural areas who migrated to urban areas and abroad for employment. The structural transformation in the economy began at that stage and only accelerated in the following decades. Readymade garments sector also had a long-lasting impact on female employment.

This sector also caused migration of unemployed females from rural areas to cities. The shift from the low waged agricultural sector to the higher waged industries and the overseas employment resulted in an increase of private consumption. The outcome of this increased consumption was a sharp reduction in poverty, especially in rural parts of the country.” High economic growth has been accompanied by significant improvement in social indicators. Interestingly, the outcome is due more to out of pocket expenditure than public investment.

The country had its share of military and hybrid regimes during 1975-1990. Authoritarian clientelism bred a rentier class. This class exploited the relocation opportunities created by the international Multi Fibre Agreement. “To take advantage of the transferred technology alongside the abundance of labour, investors built new factories and invited or poached outside workers and managers with the expertise to operate them.” Most of the owners were retired bureaucrats and military officers. Under the democratic regimes in 1990-2007, competitive clientelism replaced the authoritarian clientelism. As the government deregulated, subsidised and allowed tax holidays, the sector really took off to be next only to China. By 2017, exports touched $28 billion, absorbing four million workers, mostly women.

Are these conditions sufficient to reach Bangladesh’s vision of a developed economy by 2041? The author thinks not.

Published in The Express Tribune, May 21^st, 2021.

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