BANGLADESH: TOWARDS ACCELERATED, INCLUSIVE, AND SUSTAINABLE GROWTH OPPORTUNITIES AND CHALLENGES

Presented by GROUP No.-26S. M. Belal Uddin ShuvoMd. Zahidul AlamKaniz Fatima

CONTENTS OF OUR DISCUSSION TODAY

Bangladesh has set its sights on becoming a middle-income country by 2021 to mark its 50th

year of independence.

Can it get there? What would it take to reach this goal? What were the primary constraints to

economic development in the country? Justify with relevant examples? Should it focus on

domestic trade or foreign markets?

QUESTION 02. What were the primary constraints to economic development in the country?

Limited Access to Physical Infrastructure

• Lack of supply of gas and electricity :The demand for gas rose by 12.3% but the table indicating an average growth of 7.4 %

• Demand for power : At present it is around 6,500 megawatt but the supply is 4,699 megawatt

• Recently export processing zones (EPZ) pass in little or no gas and electricity supply constraint like the domestic area. Year Supply

December 2008 1,606

December 2011 1,960

Culture of Confrontational Politics

• Foreign and local private investment are decreasing for our political problems.

For political instability and uncertainty investors return on their investment who are even willing to spend on infrastructure to facilitate their investment in other sectors.

Practice of Corruption

• Lack of good governance and prevalence of corruption have put a scar on the reputation of the country at the global level.

• Having advantages (competitive prices for labor and other services) investors may find Bangladesh a lucrative investment destination. But, predicaments such as delay and a lack of transparency in decision making process bring them back

QUESTION 04. Should we focus more on domestic market for economic growth or should we take initiative to explore foreign market?

We Should Focus on Foreign Markets- Why??

1 2 3 4

Operating onmultiple markets means Increasing the total turnover of the business

Establishing a new market allows acquiring specific knowledge and different know how

Cooperating with int’l partners implies strengthening the image and the position within the market

Facing international competition helps improving products/services

In today's competitive world, we cannot think of sticking to domestic market for growth. We have to explore new ideas, new markets and new ventures.

• New export markets are beginning to open, which should attract FDI as investors relocate to take advantage of Bangladesh's expanded market access.

Why Foreign Markets??

Per capita GDP (Atlas $)FYOO-05390

FY06447

FY07487

FY08559

FY09620

FY10687

FYI1755

Trade GDP ratio 32.1 37.9 40.3 42.3 40.7 37.6 48.2

Export growth (%) 8.8 21.6 15.7 15.9 10.3

4.1 41.5

Import growth (%) 9.0 12.2 16.3 26.1 4.1 5.5

41.8

Remittance growth (%) 15.1 24.8 24.5 32.4 22.4 13.4

6.0

Current account balance (% of GDP)

-0.4 1.3 1.4 0.9 2.7

3.7

0.9

Real effective exchange rate

109.2 98.6 96.5 95.8 105.5

108.3

108.9

Why Foreign Markets??• Bangladesh became the second-largest garments

exporter, with an increase in market share from 2.6 to 4.3 percent from 2000-2009.

• Even in the recent global economic crisis, Bangladesh’s growth continued to go high because of the toughness of its exports and remittances.

• So to boost growth at the current level of high consumption, low exports, low investment and high import dependence, Bangladesh has little option other than to pursue an export-oriented growth strategy.

QUESTION 05. Bangladesh will become a middle-income country (MIC) by 2021. Do you agree or disagree with the statement.

Why Possible??• Yes, Bangladesh will become a middle income country by

2021.• It is important to be clear about how middle-income status

is defined. It is based on nominal Gross National Income (GNI) measured in Atlas dollars, not real Gross Domestic Product (GDP). Economies are divided according to 2012 GNI per capita, calculated using the World Bank Atlas method. The income thresholds are: low income-$1,025 or less; lower middle income-$1,026 to $4035; upper middle income-$4036 to $12,475; and high income-$12,476 or more.

• To achieve the rank of MIC Bangladesh's nominal Atlas GNI per capita, currently $851, will need to grow at a sustained 2.1% and nominal Atlas total GDP will need to grow at 3.5%.

Why Possible??• However there is a twist:

• The income thresholds are revised from time to time to allow for international inflation. The minimum MIC threshold is likely to rise to US$1,310 Atlas GNI per capita by 2021. The required GDP growth rate would have rise from current 6.0 percent to 7.5-8.0 if the minimum MIC threshold is higher than this predicted amount.

• Faster growth in turn will depend on four main factors:

i. Increased investment,

ii. Faster human capital accumulation,

iii. Enhanced productivity growth, and

iv. Increased outward orientation.

Bangladesh Needs to Overcome Challenges:

Poor infrastructure, business environment constraining investment Weaknesses in education management and finance Unskilled labor reducing productivity Global economic crisis. Limited success in attracting FDI in manufacturing Vulnerability to natural disaster and climate change

Bangladesh could become a MIC by 2021 by only with concentrated effort on several fronts.

Steps to Improve Infrastructure

i. Bangladesh plans to set up the 1,000 MW power plant, the Ruppur Nuclear Power Plant at Rooppur, Pabna district 200 km (120 mi) northwest of the capital Dhaka, by 2018.

ii. The Ministry of Power and Energy has been mobilizing tk 40,000 crore ($5.88 billion) to generate 5,000 MW of electricity to reduce load shedding into a tolerable level within next four and half years during the term of the present government.

iii. Government has built many new bridges and flyovers to reduce traffic jam and improve transportation.

iv. Two projects will change Bangladesh's economy: Padma Bridge and Dhaka-Chittagong highway the proposed six-lane expressway (with elevated provision).

Overcoming Challenges:• Bangladesh has geographical advantage of placed between two of

the world’s fastest growing and potentially largest economy which are now changing from competitors to markets for Bangladeshi exporters.

• China has decided to provide support especially in infrastructure, trade, investment and information technology sectors to turn Bangladesh into a middle income country by 2021.

• The world market for the garments industry is growing. Currently Bangladesh is now second largest ready made garments manufacturer after China, by the next five years Bangladesh will become largest ready made garments manufacturer.

• To improve educational quality government provides free schooling and books up to S.S.C examination.

Overcoming Challenges:• The share of remittance in national income has grown rapidly.

Non-resident Bangladeshis have set a new annual record for remittance, sending home a staggering $ 14.2 billion in 2012.

• RnD Bangladesh, a private public partnership initiative to create a suitable platform to discuss policies and strategies, has been endorsed as one of the vehicles to reduce dependence on foreign technologies and thus help enhance adaptation capacities to ensure technology transfer.

• Dhaka Chamber of Commerce of Industry (DCCI) has introduced Young Visionaries Competition for the first time in the country.

• Bangladesh has proven to be somewhat immune to global economic crisis.

WE BELIEVE

In a conference recently held in Dhaka policy planners have made a projection that the country will reach MIC (middle income country) status by 2021 and even earlier and can become the 30th largest economy in the world by 2030. It is possible for the country to become a powerful economy of US$1.0 trillion GDP at PPP basis by this time if all its potentials indicated by different international organizations are utilized effectively.

By 2021 our country will change from the so called “Developing Countries” and turn to a Middle Income Country which means reaching per capita GDP level of US $ 2000 based on an average GDP growth rate of 10 per cent. The economy will be supported by introduction of pro-industrialization and investment-friendly economic policies which will create additional employment opportunities in the country.

SOURCES OF OUR DATAExport Promotion Bureau

http://data.worldbank.org/about/country-classifications

http://blogs.worldbank.org/endpovertyinsouthasia/numbers-behind-bangladesh%E2%80%99s-goal-middle-income-status-2021

http://www.thefinancialexpress-bd.com/index.php?ref=MjBfMTBfMjJfMTJfMV84OF8xNDc4MDk=

http://www.defence.pk/forums/bangladesh-defence/85830-bangladesh-best-kept-secret-asia.html#ixzz2MasEB0vW

http://my24bd.com/2013/01/02/all-time-record-in-remittance-bangladesh/

http://en.wikipedia.org/wiki/Electricity_sector_in_Bangladesh

http://www.thefinancialexpress-bd.com/index.php?ref=MjBfMDJfMjZfMTNfMV8xXzE2MTM0OQ==

http://en.wikipedia.org/wiki/Bangladesh_textile_industry

http://blogs.worldbank.org/endpovertyinsouthasia/what-will-it-take-bangladesh-become-middle-income-country