The economy of Bangladesh is at present going through a transformational phase from that of a least developed country (LDC) towards a developing one. The country is expected to graduate from the LDC bracket by 2024. To achieve the desired status, it has already qualified in all three criteria - GNI (gross national income, which is $1272 and above), Human Asset Index (72.8 and above) and Economic Vulnerability Index (25 and below) of the UN Committee for Development Policy (CDP). Poverty rate has declined from 31.5 per cent in 2010 to 23.2 per cent in 2016.
At the same time, the economy has been transforming from agricultural to an industrial one over the last few years. The economy's transformation is shown in Table-1:
From the table, it can be observed that the contribution of agriculture sector to GDP (gross domestic product) in 1971 was the highest (51 per cent), followed by service sector (41.28 per cent). Industry's contribution was the lowest - only 7.68 per cent of the GDP. Service sector maintained a slow but steady growth since independence. The contribution of industrial sector is rising slowly, but that of agriculture is going down as a percentage of GDP. The latest GDP contribution of service, industry and agriculture sector in 2017 was found to be 53.48, 27.25 and 13.42 per cent respectively.
Agriculture sector's declining contribution does not mean it is producing less. In fact, it is producing much more crops and products compared to the same in 1971. As the size of Bangladesh economy is growing, agriculture's contribution is becoming less competitive. Major manufacturing industry here is readymade garment (RMG), of which knitwear and woven garment is the topmost export earner. RMG sector last year earned $30.6 billion, which was 83.49 per cent of the country's total $36.66 billion exports.
Besides RMG, other major contributory industrial sectors are leather and leather goods, pharmaceuticals, textiles, light engineering, plastic products, electrical and electronics, software development etc. Agriculture sector is dominated by agro-crops contributing about 72 per cent of total production. Fisheries, livestock and forestry sub-sectors are contributing about 10.33 per cent, 10.11 per cent and 7.33 per cent of agriculture production respectively. Crops having significant contribution are rice, jute, sugarcane, potato, pulses, wheat, tea, tobacco etc.
Significant service sub sectors are transportation, IT-based services, outsourcing, telecom, tourism and hospitality management, business consultancy/intermediaries, consultancy services, amusement, entertainment, testing laboratories, infrastructure development, filling stations, distribution channels, aviation service, automobile service, technical and vocational institutes, advertising and TV commercials etc. Other than the above sub sectors, the country has many more sectors like agro-processing, infrastructure development, power generation, tourism and hospitality management, blue economy etc. to contribute further.
The country in the short run is going to graduate as a developing country by 2024 and set to become a developed economy in the long run by the year 2041. With all these prospects in mind, we must get ourselves prepared to fix a few challenges, like;
- POOR PERFORMANCE IN EASE OF DOING BUSINESS: The country is performing the worst in the Ease of Doing Business Index. Bangladesh is standing behind all the South Asian countries at 176 (2019) whereas countries like war-torn Afghanistan and military-controlled Myanmar are much ahead of us.
- SHORTAGE OF INDUSTRIAL INFRASTRUCTURE: Bangladesh is facing shortage of port facilities. Congestion at the country's premier port has branded us as a slower nation. Traffic jam, unavailability of electricity, gas and other utility connection etc. along with industrial infrastructure shortage is threatening the country's growth prospects.
- POOR PRODUCT STANDARD: Many sectors here are suffering from poor quality of products, absence of international quality certification, absence of modern laboratory facilities etc., which are major challenges to expand country's export basket.
- UNDIVERSIFICATION OF EXPORT BASKET: This is a key area where the country is struggling. With undiversified products and few traditional markets, it is extremely difficult to sustain the growth momentum in exports on the one hand and increase productivity to a desired level. Besides, there is the challenge of preference erosion in the post-LDC stage.
- SHORTAGE OF SKILLED MANPOWER: Bangladesh has a shortage of skilled labour as well as skilled mid-level managers. Therefore, it is losing a significant sum of foreign currencies by recruiting foreign professionals here.
Graduation will not only offer challenges, but also offer some positives like increased chances of getting low-cost investment credit from international sources, getting more foreign direct investment (FDI) and other forms of investments. Losses will occur soon after its graduation in 2024, but we should be prepared to explore the prospects of graduation. The period 2019-2024 is very important to take actions for ensuring a sustainable graduation and beyond.
The government alone cannot run the economy if the private sector does not uphold the development visions. Therefore, the government should accept the private sector as its development partner. Business community has a great role in capacity building, product diversification, attracting FDI, availing foreign investment credit, achieving international standard certification, establishing laboratories, building infrastructure, exploring newer avenues of business etc. Concerted efforts of the government and private sector, thus, can ensure a balanced, equitable and sustainable development of the economy.
Md. Joynal Abdin is Executive Director (Additional Secretary) of DCCI Business Institute (DBI).