Analysis of Development in Bangladesh

Country Report: Bangladesh

Course Name: Development Economics

Course Instuctor: Mehwish Ghulam Ali

Group Members:

• Hina Naz Nagi
• Hina Jawed Palwala
• Abdul Ahad
• Aishah Siddiqui
• Saad Khan

Contents

Millennium Development Goals:

Development Indicators:

Industrial Analysis

Economic Analysis

Employment and Dependence on Formal and Informal Sector

Urban Informal Sector

Population Growth and its Implications

Population Control Policies

Urbanization and Rural-Urban Migration

Poverty in Bangladesh

Poverty Trap

Women and Poverty in Bangladesh

Poverty Alleviation

Bibliography

Appendix

Millennium Development Goals:

Bangladesh was founded in 1971 and it has made tremendous progress reducing and eradicating factors which were pulling down the country from developing. Bangladesh’s first goal is to eliminate poverty and hunger, it’s poverty line has dropped down to 31.5% in 2010 from 56.6% in 1992 and the poverty gap ratio has been pulled down to 6.5 against the target of 8.0 in 2015 (World Bank, 2013). The South Asian state’s second goal is to attain universal education, the net enrolment ratio has reached 98.7% from 60.5% which is very close to its target of 100% by 2015 (UNDP, 2013).The next goal is to promote feminism and empower women, student enrolment has reached close to 50% and participation of women in politics has reached to 20% (World Bank, 2013). The fourth goal is to reduce child mortality rates in which Bangladesh has shown massive improvement, dropping from 14.6% to 4.4% in under five mortality rate whereas the target was 4.8% till 2015, 9.2% to 3.5 % in infant mortality births and increasing the proportion of 1 year old’s immunization from 5.4 % to 8.6% (UNDP, 2013). The Bangladeshi government aimed to reach 50% in improved maternal health by 2015; it has reached 37% in 2011 from 5% in 1991 (UNDP, 2013). Contagious diseases like malaria, HIV/Aids are harder to halt in a country which is no educated as much about STDs. Although only 0.1% of the population was infected with these diseases, 7500 more people have been infected with such diseases according to a survey in 2005 (UNAIDS, 2013).

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The next goal of this state is to ensure environmental stability; Bangladesh has managed to increase its forests to 19.42% whereas the target is 20% by 2015. The percentage of terrestrial and marine areas to be protected is 2.3% which is a lot lesser than the aim of 5%. 98.2% of the population is able to reach safe drinking water (target 100%) but only 63.6% of them have access to improved sanitation. The last goal of Bangladesh is to establish global partnership for development. The tariffs imposed in Bangladeshi agriculture products, textiles and clothing was 12% in 1990-1 which has increased to 15.3% in 2009 (World Bank, 2013).

Bangladesh has developed immensely over the past years and will develop more with its expert polies.

Development Indicators:

The development indicators are used to demonstrate a state’s economic, social and environmental goals. Bangladesh’s GNI, 840, is quite low compared to the GNIs of other countries which range more than 1000 (World Bank, 2013). Life expectancy rate is although getting better but according to the indicators it still hasn’t reached the mark. The upward trend in the literacy rate is a positive sign for the state of Bangladesh that it is headed towards development. The decreasing poverty ratio shows that the policies in application in this development program are working. The GINI coefficient is another progressive indicator which illustrates less inequality compared to the other countries in the region. These indicators point towards development of The People’s Republic of Bangladesh (World Bank, 2013).

Industrial Analysis

As shown in Table 1, the service sector of Bangladesh contributes a little over half of the country’s gross domestic product, where as agriculture sector contributes only 17 percent which is lesser than manufacturing sector as well.

The contribution by each sector has been changing over the years. Since 1980s the agricultural sector is showing a decreasing trend whereas the contribution by manufacturing and agricultural sector has been increasing steadily as shown in Figure 1. During these years the increase in GDP has also shown similar progress, reflecting increase and decrease in the service and manufacturing sector. This can possibly be explained through Lewis two sector model of development, that these structural changes shifting economy towards manufacturing and service sector are the reason for growth and development.

Similarly as shown in Figure 3, the decreasing percentage of workforce in agriculture sector in contrast to increasing percentage of workforce in the other two sectors further indicate the validity of the Lewis model. This can be attributed to wide rural-urban wage differences existing due to prevalent poverty in rural areas. The 45 percent of the population in Bangladesh lives below the poverty level of which approximately 85% lives in rural areas (Jalil & Islam, 2010).

Also, the shift of labor over the years can be attributed to high amount of surplus labor in the rural agricultural sector as observed by Alauddin and Tisdell which could not absorb the ever growing rural population. (Alauddin & Tisdell, 1991) The growing manufacturing and services sector therefore have been benefitting from the surplus labor, providing employment opportunities and driving the economic growth as claimed by the Lewis two sector model of development. The increasing trend of urban population of Bangladesh which has almost doubled since 1980 further strengthens the possibility of the Lewis model explaining the growth over the years.

Bangladesh has shown positive current account balance throughout the last decade except for 2011 compared to negative current account balance of other south-east Asian countries. The expanding manufacturing sector might be the reason for increase in exports of value added products countering the petroleum imports of the country.

Economic Analysis

Employment and Dependence on Formal and Informal Sector

As seen in table 4, most of the employed population depends on agriculture. This has almost always been the case in the history of Bangladesh, with the agriculture sector contributing to up to 35% of the GDP in the 1970’s. There are three main crops that Bangladesh produces:

• Rice: Over 11.7 million hectares of land are dedicated to rice production in Bangladesh, where 13 million farm families grow a variety of rice, including traditional, modern and hybrid variety. (Institute., 2012) The figure below shows trends for growth in rice production for Bangladesh over the years.
• Wheat: Takes up 4% of the total crop area (11% in Rabi season) and contributes 7% to the total output of cereals in the country. (Hossein) See Figure below for the 50-year trend in Bangladesh for wheat production.
• Jute: Bangladesh is the second largest producer and holds more than 80% of the global market share for jute. (bangladesh, 2013)

Urban Informal Sector

On the other hand, according to the Bangladesh Labor Market Profile (2012), in 2010 estimates showed 87% of the total workforce was absorbed or employed in informal sector. Table 2 hows that total participation of labor workforce decreased in the formal sector whereas, the informal sector participation shows an increase of 12.2% from 2003 to 2010. In 2010, Bangladesh was generating 54 million jobs within country. 42 million of these jobs were in informal sector. This statistics shows that informal sector in Bangladesh is significant in contributing towards GDP. Table 3 shows the contribution of each sector to the GDP: Foreign Aid and External Dependence As a developing country, Bangladesh’s economic growth depends substantially on external trade. The key elements of external dependence of Bangladesh is mainly on compliance of WTO rules and regulations, its benefits and problems, Free Trade Agreement (FTA), multilateral trading system and Multi-Fiber Agreement. (Islam, 2009)

Countries like USA, UK and the EU are a huge market for Bangladeshi finished products. According to a World Bank report, the exports of goods and services (% of GDP) in Bangladesh were last reported at 22.70 in 2011. Therefore in case of falling exports or a trade regulation, the affect on GDP will be detrimental.

Population Growth and its Implications

Bangladesh is considered an over populated country and the country is near the exploding stage which means that it’s a problem for Bangladesh and many issues stem from their rapid population growth. A census conducted in 1947 showed that the population of Bangladesh was 71 million. In 1980 it increased by a little less than 20 million and stood at 90.4 million (CIA World Fact Book, 2013). The latest figures show that currently Bangladesh is at 166 million (July 2014). The latest demographic measures for Bangladesh are given in table 2.

Developing nations generally have birth rates ranging from 15 to 40 per 1000 and the fertility rate ranges between 2 and 4. Looking at the population pyramid for Bangladesh, we can see that approximately 50% of its population is under 25 years of age (CIA World Fact Book, 2013). This high proportion of youth in the country is a characteristic of developing nation. This combined with its demographic measures which lie in the range of most developing nations, indicate that Bangladesh can be categorized as a developing country.

Population Control Policies

Bangladesh is actively trying to control is population. Their efforts have paid off to a certain extent and they have seen their population growth rate has fall from 2.06 in 2003 to 1.58 in 2012 (IndexMundi, 2013). There are many Family Planning Programs which includes workers going door to door and educating the poor masses about contraceptives. There has also been an emphasis on increased literacy and awareness over the negative effects of a population explosion. Government sponsored programs along with local NGOS have helped control the growth rate. There are popular marketing campaigns and awareness programs which have led to improve the population issue of Bangladesh since the contraceptive prevalence rate was 61.2% in 2011 (CIA World Fact Book, 2013).

Urbanization and Rural-Urban Migration

Bangladesh has become a lot more urbanized in the recent years. As of 2011, the urban population consists of 28.4% of the total population and the rate of urbanization has been 2.96% (CIA World Fact Book, 2013). The rate of growth of urban population is likely to fall in the near future but it will still be quite high. These figures can cause a lot of challenges for a country the size of Bangladesh.

The total urban population has risen from 1.83 million in 1951 to 2.64 million in 1961. The large scale migration of Muslims from India after 1947 is reason behind this increase. This growth also took place during the 1961 to 1974 period (Islam, 2012). This rapid urban growth is due to the migration of people from rural to urban areas. The push factors in rural areas included the lack of opportunities and other economic and natural factors.

This rural to urban migration has negative and positive effects on the economy. The migration is causing rabid urbanization and it will require Bangladesh to transform into an urbanized country. This means it would have to be a megalopolis of 250 million with a huge mega city surrounded by hundreds of cities and towns spread around (Islam, 2012). The sheer size of the mega city means that urban governance indicators would need to be carefully monitored, revamped and implemented. These indicators include authority, rule of law, democratic participation, transparency and accountability.

Poverty in Bangladesh

The 2011 figures from the World Bank regarding the percentage of population living under $1.25 a day state that approximately 43.3% of the population lives under $1.25 a day (Unicef, 2013). One key reason behind this is poverty trap. This poverty trap does not allow socioeconomic revival of the masses.

Poverty Trap

Majority of the population’s occupation is agriculture and since Bangladesh is very prone to floods and landslides, this makes agriculture a difficult business to indulge in. These natural calamities ruin the farm lands and also have a negative impact for fishermen as well. The lands in these flood prone areas is cheap which means that more poor people buy them and live in them and once the natural calamity strikes; they lose all their crop and hence must turn to money lenders who charge astronomical interest rates. The poor then get stuck in this cycle and are unable to return their debt or get out of their situation.

In the urban areas, there is a problem of overpopulation due to high rural to urban migration. This high population density means that the standard of living in these areas is not high (World Bank, 2013). The uneducated labor that shifts from the rural to urban live in these slum areas and their productivity is really low. The bad living conditions combined with illiteracy means that the labor market is unskilled and not efficient. Such a market is not able to attract a foreign investment and therefore people are unable to find the right opportunities for themselves.

Women and Poverty in Bangladesh

Bangladesh has progressed when it comes to a few basic development indicators such as per capital income and economic growth. The government promotes public sector investment and micro credit financing programs to develop and enhance the standard of living. However, there is still inequality when it comes to the rural urban disparity since the Gini coefficient was 32.1 in 2010 (The World Bank, 2014). However, Bangladesh has made efforts to alleviate poverty, especially for women. The long standing gender bias in the allocation of good and other resources in the house hold has resulted in malnutrioned females (Eng, 2011). Development programs have now started targeting women since studies show that building community support for women’s group may enhance the success of future anti poverty interventions.

Poverty Alleviation

The Bangladesh government runs many poverty alleviation programs with the UN and other NGOS and community based organizations (CBOs) (UN Habitat, 2013). These programs aim to find partner communities and improve their infrastructure, skills training and group businesses. The aim is to make healthier and more socially integrated societies. These programs reach out to various people in different cities and towns and help set up tube wells, drains, street lights, community halls and other basic facilities for the under developed rural areas. These programs also create job opportunities and involve the government through ward level project committees and town level coordination committees (UN Habitat, 2013). In this manner, the government collaborates to develop the rural areas and help alleviate poverty in Bangladesh.

Bibliography

Alauddin, M., & Tisdell, C. (1991). The Green Revolution and the Labour Absorption in Bangladesh Agriculture: The Relevance of the East Asian Experience. The Pakistan Development Review.

Bangladesh | Data | value added % of GDP. (n.d.). Retrieved from World Bank: http://data.worldbank.org/indicator/NV.SRV.TETC.ZS/countries

bangladesh, E. B. (2013, May 7). Retrieved from Experience Bangladesh. (2013, May 7). Jute industry http://www.experiencebangladesh.com/bangladesh-business-jute.php

CIA World Fact Book. (2013). The World Factbook. Retrieved from CIA Fact book: https://www.cia.gov/library/publications/the-world-factbook/geos/bg.html

Data | % of labor force. (n.d.). Retrieved from Gapminder: http://www.gapminder.org/data/

Data | Total GDP (PPP$, inflation-adjusted). (n.d.). Retrieved from Gapminder: http://www.gapminder.org/data/

Data | value added % of GDP. (n.d.). Retrieved from Gapminder: http://www.gapminder.org/data/

Eng, S. (2011, Aug 5). Women and Anti Poverty Programs in Bangladesh. Retrieved from International of Food Policy research institute: http://www.ifpri.org/blog/women-and-anti-poverty-programs-bangladesh

Hossein, A. &. (n.d.). Retrieved from http://aobpla.oxfordjournals.org/content/5/pls042.full

IndexMundi. (2013). Population Growth. Retrieved from IndexMundi: http://www.indexmundi.com/facts/indicators/SP.POP.GROW

Institute., I. R. (2012, Sept 19). Rice In Bangladesh. Retrieved from International Rice Research Institute. (2012, September http://irri.org/index.php?option=com_k2&view=item&id=10824:rice-in-bangladesh

Islam. (2009).

Islam, N. (2012). Urbanization and Urban Governance in Bangladesh. Annual Global Development Conference. Budapest.

Jalil, M. A., & Islam, M. S. (2010). Towards a Long Term Development Vision for Bangladesh:. Asian Culture and History.

The World Bank. (2014). GINI Index. Retrieved from The World Bank: http://data.worldbank.org/indicator/SI.POV.GINI

UN Habitat. (2013). Local Partnerships for Poverty Alleviation. Retrieved from UN Habitat: http://www.fukuoka.unhabitat.org/projects/bangladesh/detail01_en.html

UNAIDS. (2013). Bangladesh. Retrieved 9 28, 2014, from http://www.unaids.org/en/regionscountries/countries/bangladesh/

UNDP. (2013). The Rise of the South: Human Progress in a Diverse World. UNDP.

Unicef. (2013). Bangladesh Statistics. Retrieved from Unicef : http://www.unicef.org/infobycountry/bangladesh_bangladesh_statistics.html

Urban population – % of total. (n.d.). Retrieved from Gapminder: http://www.gapminder.org/data/

World Bank. (2013). Bangladesh| Data. Retrieved 09 28, 2014, from http://data.worldbank.org/country/bangladesh

World Bank. (2013). WorldBank: poplation Density. Retrieved from The World Bank: http://data.worldbank.org/indicator/EN.POP.DNST

Appendix

Table 1

Source: World Bank (Bangladesh | Data | value added % of GDP)

Figure 1

Source: Gapminder (Data | value added % of GDP)

Figure 2

Source: Gapminder (Data | Total GDP (PPP$, inflation-adjusted))

Figure 3

Source: Gapminder (Data | % of labor force)

Figure 4

Source: Gapminder (Urban population – % of total)

Table 2

Source: CIA World Fact book 2014

Figure 5

Source: CIA World Fact Book 2014

Figure 6

Source: IRRI, 2012

Figure 7

Source: Souce: IRRI, 2012

Table 2

Source: Key Findings of Labor Force Survey 2010, Bangladesh Bureau of Statistics

Table 3

Table 4

Table 1 Percentage of population employed in each sector according to World Bank statistics (2005)