The Bangladesh Paradox

The Bangladesh Paradox: Bangladesh has achieved strong growth since the early 1990s. The World Bank estimates that it could join the ranks of middle-income countries (MICs) by 2016 or soon after. This will require increasing and sustaining the GDP growth to 7.5%. However, in order to sustain this high growth, Bangladesh needs to diversify the economy, increase production efficiencies and improve the environment for foreign direct investment.

The Bangladesh paradox has been one of surprising economic resilience despite of natural disasters, poor infrastructure, weak governance and political turbulences. Even if growth has lagged a number of other economies in Asia, most notably China, India and Vietnam, the volatility of Bangladesh’s growth has been lower. In effect, an entrepreneurial private sector base has compensated for a less supportive macro political environment.

Growth: Economy of Bangladesh grew at a healthy rate of 5.8% in fiscal year 2010 (FY10) despite the slow global recovery, continued severe power shortages and poor infrastructure. Much of this growth originated from the services and industrial sectors, driven by growth in consumption fuelled by strong remittance inflows, especially in the first part of FY10.

For the fiscal year 2011 (FY11) GDP growth is forecasted to be 6.3 percent. This estimate is largely based on proposed higher public and private investment. However, there are several downside risks. A weak global recovery could dampen the recovery in exports and further slow down remittances.

But the key issues are energy shortages, poor infrastructure, lack of long-term vision for skill development, increase production efficiencies, reduce cost of doing business and good governance.