Bangladesh is now at fifty. Judging by the contour of history, it is not a very long time. In this short time, Bangladesh's development journey is, in short, awe-some. When Bangladesh began its development journey under Bangabandhu's leadership in 1972, its path was very narrow. It was a 'Methopath' (rural road). And today that trivial trail has merged with the broad highway of development. The then economy of $8 billion now stands at $355 billion. The per capita income has increased from $93 to $2,228. Starting with a growth rate of minus 12 per cent the country has been growing around 7 per cent now. Bangladesh economy withstood bravely the challenges of pandemic with its inner strength. While the global economy shrunk by 3.5 per cent, Bangladesh grew by more than 4 per cent during last fiscal year. This would have been even higher if the world leaders were responsible enough to deliver the COVID-19 vaccine on time. Given all indications, Bangladesh economy will grow more than 7 per cent in this fiscal year. This also proves that leadership matters.
On his way home from captivity Bangabandhu had short stopover on January 10, 1972 in New Delhi. At the airport, in reply to a question of a journalist, Bangabandhu reassured that Bangladesh will be a land of 'Peace, Progress and Prosperity'. He always dreamed of a 'Golden Bengal'. He led an outstanding war of economic freedom to build a hunger and poverty-free Bangladesh defying the ruins of the war. He was desperate to take the country out of ashes to prosperity. In just three and a half years, he was able to raise the per capita GDP to $273 from a meagre $93. Unfortunately, that journey towards prosperity came to a sudden halt on August 15, 1975. The nation lost its greatest son. The economic progress became disoriented. As a result, in the two following years, Bangladesh's per capita GDP plummeted to a meagre sum of $138 and $128 respectively. It took 13 long years to bring our per capita GDP back to the level of 1975.
After many ups and downs, Bangladesh has now been moving forward quickly under the leadership of Bangabandhu's eldest daughter, overcoming various adversities. News of Bangladesh's rapid progress has been pouring from reputed global research and development institutes. At once, all the new feathers of achievements are being added to our Prime Minister's hat. The latest feather was added to the cap of our premier by Professor Jeffrey Sachs, the SDG Adviser to the UN Secretary General and Director of the Earth Institute at Columbia University, when he stated that Bangladesh made the fastest progress in achieving SDGs so far. So, he called her 'Jewel in Crown'.
Not only the United Nations but also other international organisations are frequently applauding Bangladesh's sustainable development. According to a research report of the Standard Chartered Bank Bangladesh will achieve 7 per cent to 7.2 per cent growth in the current fiscal year. They have made this prediction at the back of rising exports, imports, opening of letters of credit and placement of RMGs export orders. However, due to the sudden reopening of the world economy after many days, the price of oil and the cost of shipping have increased manifold. As a result, the prices of imported goods are also rising. The demand for dollars is rising as many people are now going abroad for medical treatments, higher education, visiting relatives and for businesses. As a result, the dollar has been appreciating against Taka. In addition, the volume of remittances has also been declining compared to last fiscal year. However, its growth rate is still more than 20 per cent. The oil price adjustment has already pushed up the transport price. So, inflation has started showing its ugly head. However, Bangladesh has a good record of keeping inflation stable. I only hope this spurt in inflation would be transitory. The central bank and those who manage supply chains must remain watchful to this unfolding of inflation scenario and take appropriate actions to contain it. Indeed, the foreign exchange management could be quite challenging in the changed context.
Despite all the adversities, Bangladesh has been doing exceedingly well in maintaining its robust growth rate. According to Stan Chart, this nominal rate in the 2019-20 fiscal year was 7.8 per cent as against the same of China and India at 6.9 per cent and 3.1 per cent respectively. The nominal growth rate of Bangladesh per capita GDP during 2011-18 was 9.4 per cent compared to China's 7 per cent and India's 3.9 per cent. Recently, the IMF stated that Bangladesh's growth rate in this fiscal year will be 6.5 per cent. Also, the World Bank and the ADB predict it to be 6.4 per cent and 6.8 per cent respectively. Since the population growth rate of Bangladesh has been very low, the per capita economic growth rate will continue to grow in the coming days. Fortunately, 63 per cent of our growth originates from the consumption. The income of migrants working in the city and abroad is reaching their family members seamlessly through mobile and agent banking. Moreover, as many people leave the village in search of work, the village labour market has become quite tight.
The daily income of an agricultural worker is not less than Tk. 500. They can now afford nutritious food, education, and healthcare for their children with this wage income. Garment workers are also sending money to their families regularly. As a result, the nutritional value, height, and weight of five-year-old children have been increasing along with decline in infant mortality. All in all, Bangladesh has achieved a satisfactory score in the Global Hunger Index this year. It is 19.5 compared to 28.5 in 2011. The lesser means better in this score.
According to the Centre for Economics and Business Research (CEBR), a British research institute the Bangladesh economy will be ranked 34th in the world by 2034. In 2020, its position was 40th. Therefore, the Standard Chartered bank thinks Bangladesh economy will be more than USD 500 billion as early as 2026. At that point, its per capita income will exceed three thousand US dollars. According to the IMF's World Economic Outlook, the size of Bangladesh's economy in 2026 will be 517 billion US dollars.
Keeping this in mind, Bangladesh aspires to become a developed country by 2041, according to its latest Perspective Plan. By then its per capita income will be 12 thousand US dollars plus. Its average growth rate will be 9 per cent during this period. Inflation will be slightly below 5 per cent. The population growth rate will be 1.03 per cent; the savings ratio 37.75 per cent of GDP; investment ratio 40.87 per cent; private sector investment 31.23 per cent; foreign direct investment 2.82 per cent; export growth rate of 11.2 per cent ; imports 10.7 per cent, and expatriate income 4.67 per cent. Bangladesh will have foreign exchange reserves to cover 6.34 months of import costs.
However, we still need to do a lot more if we want to reach those goals. On average, we need to increase the growth by another 2 per cent. With this in mind, the government has undertaken many mega infrastructure projects. Padma bridge alone will add more than 1 per cent growth. The mega projects can be gamechangers for Bangladesh economy as these are both growth and employment multipliers. Special economic zones, including Bangabandhu Industrial City, will take Bangladesh to new heights. However, the biggest challenge is to implement these planned infrastructure projects on time. Recently, the Planning Commission's IMED identified 12 projects that could not be even initiated in the last five to six years. So, there is no alternative to modernising our monitoring system into digital dashboard for tracking progress in implementation. Good governance is still a substantial challenge for our institutions. Therefore, the need for improving transparency in our implementing organisations is a must. Bangladesh has shown sufficient capacities in ensuring electricity and fuel supplies. This sector now needs to be made greener. Shedding many coal-fired power projects, the target of 30 per cent renewable power and energy generation by 2030 under the 'Mujib Climate Prosperity Plan' is quite a bold move towards greener Bangladesh. Moreover, allocating 8 per cent of its budget to address the climate change challenge has also been a smart move.
To keep up this trend of green growth, we need to increase, on the one hand, the use of such green technologies, and on the other, take up the challenge of building skilled human resources. None of this can be done by the government alone. The private sector also needs to contribute to research and development, of course, with greater policy support. This will certainly require more resources. Not only we must collect revenue from within the country, but also need to raise international financial support from abroad. And in this case, smart economic diplomacy is an imperative. If we can tell the success stories of Bangladesh's development smartly it will be much easier to attract foreign direct investment which remains quite low.
Let me, therefore, indicate ways forward to build a developed and sustainable Bangladesh keeping in mind the above context:
01) Continuation of the Heritage: Bangabandhu built a strong base for our subsequent successful turnaround of the economy which was initially in shambles. His farsighted focus on agriculture, industry, education, and population control is now paying us well. Later, Bangabandhu's daughter also continued to support these policies. The challenge now is to maintain that policy consistency with participation of all the stakeholders, particularly the private sector. The support for modernisation and mechanisation of agriculture must continue.
02) Investment in People: To build a developed country, as envisaged by Bangabandhu, at least 4 per cent of GDP should be invested in the education sector. That education must be linked with the industry by promoting productivity of the skilled human capital. Also, this must be humane, climate-friendly, and broad based. As demonstrated by COVID-19, we must develop the emergency health system and increase the number of suitable doctors, nurses, health partners and research opportunities for the future of Bangladesh. The National Social Security Strategy (NSSS) is already in place. Focusing on the implementation and financing of this policy is also a crucial part of humane investment.
03) Emphasis on Increasing Productivity: Skill development is the most vital tool to increase the productivity of our workforce. In this era of the Fourth Industrial Revolution, the government and the private sector need to take apt initiatives to strengthen the training of workers to make the education system technology supportive to take advantage of artificial intelligence, robotics, internet of things, biotechnology and big data management in industries and businesses. Most importantly, more R&D support for universities and research institutes is a must. Also, the central bank continues to be 'innovative hubs' to provide inclusion and efficient banking services in the financial sector.
04) Export Growth: In addition to the apparel sector, other sectors need to increase export diversification and dynamism with equal policies and financial incentives. It is imperative to better integrate the products that already excel at manufacturing (e.g., pharmaceuticals, clothing, leather, IT, agriculture, processed products etc.) with the regional and global supply chains.
05) Aiding the Tourism Industry: Demand for both domestic and international tourism has been increasing in the post-COVID world. There is a lot of potential for 'V-shaped' recovery in this sector. That is why the nature and heritage of the country should be represented in an attractive way to the tourists with services like e-Booking, Passenger Grievance Redressal System and adequate security arrangements.
06) Emphasis on the Food Processing Industry: Not withstanding food production, the development of the food processing industry and digital marketing of food products are crucial for food security. Within the country, many new e-commerce entrepreneurs have sprung up around food products. These small and medium entrepreneurs need easy access to small loans and incentives, including start-up capital. If needed, policy reforms can be undertaken to make this sector FDI-friendly to connect it with the global value chain.
07) Expansion of the Software Industry: Bangladesh, realising that the future will be all about digitisation, has been providing ample incentives to the information and communication technology (ICT) sector. Several high-tech parks have been already built. Fiscal incentives including tax holidays and skill development support are being given to the sector. A huge potential for the growth of the ICT sector is there if funding and branding can be further strengthened.
08) Urbanisation: Two-thirds of our industry and trade have been developed in the vicinity of Dhaka and Chittagong. As a result, there remains a continuous crisis in workers' accommodation, waste management, housing, and transportation. Our urbanisation will be sustainable if special industrial zones are fast developed and green divisional and district cities like Rajshahi are developed.
09) Regional Connectivity Hub: The potential for Bangladesh emerging as a regional trade and aviation hub to connect South and South East Asia must be fully realised.
10) Fiscal Reforms: Tax-GDP ratio must be raised to 20 per cent by further digitisation and institutional pruning with incentivisation for the private sector to promote 'Made in Bangladesh' campaign a success.
To conclude, Bangladesh must continue to promote transformative policy regime to make its inclusive development journey sustainable. Therefore, it should continue to focus on a) high growth and inclusiveness; b) prioritising domestic consumption and demand along with global collaboration to promote exports and c) Respecting our own culture and openness and promoting innovation. Certainly, the post-COVID world will not be the same as our previous world. So, our institutions will have to adjust to the ever-changing new normal. This pandemic has brought to us not only many challenges, but also various opportunities. By seizing these opportunities, our entrepreneurs and the government must move forward in unison. Only then it would be possible for us to realise a developed and sustainable Bangladesh.
Dr. Atiur Rahman is Bangabandhu Chair Professor, Dhaka University and former Governor, Bangladesh Bank.