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Bangladesh: Economic Progress in 2016

09 Feb 2017

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The year 2016 ushered in a dawn of progress and prosperity in Bangladesh.

 A marked increase has been gained by the country in all scale of international indicators and indices – from economic, to employment and human resource development. On the count of economic progress, all the development organizations, global multi-leaders and well-framed credit rating agencies including the World Bank have showered all praises and lent out high optimism on the economic fortunes of Bangladesh and its people.

 

A report prepared by Asian Development Bank in last September, revised upward the growth forecast at 7.1% for fiscal 2015-16 which was higher than even the Government’s estimate. Surprisingly, the economy braved that forecast too. It was not until 2016 that Bangladesh could go that far in breaking the 6% national growth trap, as in last December the rate of national growth soared to an all-time high at 7.11%, much higher than any projection.

 

Bangladesh has set out on this voyage of national renaissance under dynamic leadership of Prime Minister Sheikh Hasina in 2009 when people of the country overwhelmingly banked on her ‘Charter of Change – Vision 2021’, the election manifesto of Awami League that promised to turn Bangladesh in to a middle income country by 2021. Such growing prospects have been bolstered further with the Awami League under Sheikh Hasina’s leadership assuming power for the second straight term in January 2014.
With its emergence as one of the developing world’s biggest success stories in achieving Millennium Development Goals, Bangladesh has drawn the spotlight to emerge as a key global player in achieving the challenges that lie ahead to cross the threshold towards Sustainable Development Goals.

 

Bangladesh has set out on this voyage of national renaissance under dynamic leadership of Prime Minister Sheikh Hasina in 2009 when people of the country overwhelmingly banked on her ‘Charter of Change – Vision 2021’, the election manifesto of Awami League that promised to turn Bangladesh in to a middle income country by 2021. Such growing prospects have been bolstered further with the Awami League under Sheikh Hasina’s leadership assuming power for the second straight term in January 2014.

 

This time Sheikh Hasina promised to introduce landmark reforms such as inclusive monetary policy and lure massive foreign investment in a country that has suffered from weak infrastructure and institutional inertia. Prime Minister Sheikh Hasina’s reform blitz has been dubbed as highly important for the unleashing of growth potential that Bangladesh has to offer.

 

Listed below are some of the key events that shaped Bangladesh’s economic expansion and growth:

 

Budgetary allocation for 2016-17

 

With a focus laid out to fast-track the giant projects, the size of the national budget went up by 30% at 43.2 billion, marking around a three-fold rise in comparison with that of 2006. Rising to this height has accounted for a strong economic management and prudent policies, envisaged and put in practice by Sheikh Hasina. In fiscal 2016-17 the country got the first ever allocation worth $2.3 billion for speedy implementation of a raft of mega projects.

 

In between 2001 and 2006, a lack of transparency, let alone an array of hasty and indiscreet policies adopted by Bangladesh Nationalist Party (BNP)-led Four Party Alliance government, stripped a whole lot of people of their economic fortunes while the country’s economy was plunged down at 5% growth bracket. Thanks to Prime Minister Sheikh Hasina’s astute leadership and strong determination, Bangladesh has now witnessed miraculous development.

 

To fight against poverty and provide all assistance to the poor, a rice distribution scheme at lower than ever cost has been inaugurated by the Prime Minister in late 2016. As part of a state-run initiative as many as 5 million poor and ultra-poor people can get rice at Tk 10 kilogram in different parts of the country. Every year this target group will get 30 kilogram rice a month.  5.5 lakh ton rice has already been allocated for this purpose in this year’s budget.

 

The highest allocation worth US $ 6 billion has been proposed for the education sector while social safety schemes received around US $ 5 billion, up by nearly 16% year-on-year. For climate fund US $ 12 million has been allocated while the allocation for women and children went up by US $ 49 million.

 

Women’s economic footprints growing

 

According to a survey released last year by Bangladesh Bureau of Statistics, the total number of women-owned economic households stood at 3 million in contrast to 62,255 in 2003, testifying that women-owned households increased six-fold in the last one decade as women push to break out from their traditional role as home-makers. Poor women with little or no education, who previously stayed at home or were engaged in cooking and cleaning utensils, are now taking up management of the household, thanks to the various finances from the government which resulted in their involvement in different economic activities. In 2013, women-owned permanent establishments stood at 59,793, up 38% from 2003. This implies that average annual increase was 3.8%. Of the 4.52 million women engaged in economic activities, 2.5 million are in manufacturing, largely garment sector. Full time female workers stood at 3 million in 2013, a four-fold increase from 2003.

 

FDI rises record high

 

The flow of Foreign Direct Investment (FDI) in to Bangladesh posted a promising 7.78% growth in the first quarter of the fiscal year 2016-17. Net FDI inflow during the first quarter (July-September) stood at $ 642 million which is $ 50 million or 7.78% higher than the $ 592 million fetched during the same period last fiscal, according to Bangladesh Bank data. As per the rankings of the World Trade Organization, Bangladesh moved two notches ahead from 178 to 176 in respect to improving the business climate.

 

Record Forex Reserve

 

In 2001 the country had to defer its payment to the Asian Clearing Union (ACU) for imports to avoid compromising the $ 1 billion foreign exchange reserve as that would undermine the country’s global image. But last year, the reserve hit all-time high at $ 32 billion for the third time. The reserve was enough to cover the country’s imports for approximately eight months. Lower import of raw materials due to improved backward linkages and less import of food for better local production also helped cut import bills to boost forex reserve.

In 2001 the country had to defer its payment to the Asian Clearing Union (ACU) for imports to avoid compromising the $ 1 billion foreign exchange reserve as that would undermine the country’s global image. But last year, the reserve hit all-time high at $ 32 billion for the third time. The reserve was enough to cover the country’s imports for approximately eight months. Lower import of raw materials due to improved backward linkages and less import of food for better local production also helped cut import bills to boost forex reserve.

 

Inflation

 

Replicating 2015, the trend of inflation throughout last year, continued to make a downward trend infusing a sense of relief among the people and vindicating a raft of monetary policies implemented by the government. In last February the downturn hit a 41-month low registering 5.62% propelled by decline in food and non-food inflation. In May, inflation decelerated 16 basis points month-on-month to 5.45%, the lowest in 43 months. Biggest milestone was set in last December when the general inflation marked a 6-year low decline at 5.3%. The food and non-food inflation slipped to 5.38% and 4.49% respectively which were 5.4% and 5.33% a month earlier.

 

Rising per capita income

 

With all economic indicators yielding positive outlook, fresh optimism and perception run high that the per capita income in Bangladesh was increased by 11.39% to $ 1,466 by the end of this fiscal year, up from $ 1,316 in last fiscal year. After nearly a decade long  6% growth trap, the economy expanded more than 7% in last fiscal year. According to Bangladesh Bureau of Statistics survey gross domestic product grew 7.11% last year. On the whole, last year saw the size of the economy grow larger, the garment industry expanded at a rapid pace, expansion in the export industry and the foreign exchange reserves mark record increase.

 

Rise in export earnings

 

Export registered 7.11% growth in 2016 to $ 34.93 billion on the back of higher shipment of garment items. Garment shipments, which typically account for 80% of export earnings brought home $ 28.61 billion last year, up 7.89% year-on-year, according to data released by Export Promotion Bureau. According to a World Bank report, Bangladesh can become an export powerhouse at the level of its East Asian neighbors by improving its business competitiveness and trade regime which will help firms compete globally. During July-September of last fiscal year, the country saw rise in export earnings by around 9%, over 2.35% more than the target, as the total exported products exceeded a whopping $ 22.12 billion.

 

New Industrial Policy

 

The draft Industrial Policy 2016 has been endorsed by the cabinet to speed up the nation’s march towards graduation to the middle-income status through rapid industrialization. As per the new policy the industrial sector has been divided in to five categories – high priority, priority, creative-based service, reserved and controlled industries. Provisions were incorporated to make this policy investment friendly for the international businesses. Two new sectors – high priority industry and creative industry – are included in the new industrial policy for which the government will provide financial and policy support. The facilities extended to foreign investors have been increased manifold in a bid to bump up the flow of investment from abroad. Foreign investors who take up green, high-tech or transformative projects will get a special financial incentive package. An integrated one-stop service will be set up, in addition to country-specific economic zones or industrial parks for foreign investors. Other than economic zones, foreign investors will also enjoy tax holidays.

 

7th Five Year Plan

 

Envisaged, introduced and implemented by Prime Minister Sheikh Hasina,the 7th Five Year Plan has turned out to be an instrumental one for reducing disparity of wealth and uplifting the lives of people from the clutches of poverty and hunger. Considered as a bold and visionary step by the experts, this Plan has been helping women gain economic freedom and avail employment opportunities. In light of this Plan, a monetary policy and national budget have been developed keeping in view of lowering income inequality over the longer term so that several distributive fiscal policies can be put in practice to finance critical programmes for the poor and the under-privileged.

 

PPP to facilitate higher FDI inflow

 

Over the last six years a complete overhaul has been made in the gambit of Public Private Participation (PPP) in Bangladesh to transform the climate in to ever more conducive towards foreign businesses, opening up the prospect to secure around $ 1.5 billion in the form of FDI per year. Currently, contracts on seven PPP projects have been signed which started investment worth $ 1.33 billion, along with a number of PPP projects being on the cards. Once they become operational all the projects will take the inflow of FDI at $ 6 billion in the next five years, a direct fruition of the time bound investment policies under the Awami League-led government.

 

Bright prospects for 2017

 

According to a report released recently by the UN Economic and Social Commission for Asia and the Pacific (UNESCAP), the economic health of Bangladesh will take on another surge, ushering in a new era of change and progress. Banking giant HSBC has termed Bangladesh as a growth market, as the country with a booming economy is offering huge business opportunities. UN Conference on Trade and Development (UNCTAD) in its latest report has placed Bangladesh in a league of six countries around the world that holds high prospects of graduating out of Least Developed Country (LDC) status by 2024.

 

Popularity and acceptance of Prime Minister Sheikh Hasina continue to remain on upward spiral all along for her role in leading the country forward, ensuring socio-economic development amid political unrest, trying war criminals and curbing violence and militancy. World leaders have praised her for playing a major role in attaining economic growth amid global recession, gaining millennium development goals, reducing poverty and curbing militancy with an iron fist.




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