Economic success under Hasina
Recent Bangladesh elections signify the people’s choice for economic and social stability
The biggest attribute to the latest thumping election victory of Bangladesh Prime Minister Sheikh Hasina Wazed's Awami League and its alliance may be her government's contribution to the south Asian country's most impressive economic growth over the last 10 years. In 2018, the Bangladesh economy has grown roughly at eight per cent. With the global oil prices down and average inflation rate ruling below six per cent, the country's GDP may continue to grow at eight per cent during the current year, as well. The government's bold decision to temporarily shelter some 700,000 Rohingya refugees from neighbouring Myanmar and its remarkable management of the social, economic and diplomatic consequences of the act are receiving admiration across the world.
It is to the credit of the Sheikh Hasina government that the refugees from Rohingya province in Myanmar found the country more safe and acceptable. Thanks to Bangladesh, forcibly uprooted Rohingyas did not have to take the recourse of those millions of refugees from some of the war-torn West Asian and West African countries who took big risks of travelling to distant EU countries for safety instead of barging into rich unwilling Arab countries in the neighbourhood. Democracy does not need to be always about the change, political and government. The people will vote for stability if that meets their social and economic expectations. The latest Bangladesh election result expounded the people's choice for economic and social stability.
Less than 50-year-old democratic Bangladesh had witnessed many political upheavals. It had as many as nine prime ministers before Sheikh Hasina was reinstalled as the country's head of the government since January 2009. The political career of Sheikh Hasina, daughter of Bangladesh's first President Sheikh Mujibur Rahman, has spanned more than four decades. Highly populous Bangladesh had wasted a lot of years on hopeless politics, giving little attention to the development of its economic infrastructure. The government's focus started to shift rapidly since 2009. This has come under the lenses of such multilateral organisations as the Asian Development Bank, International Monetary Fund and the World Bank.
The IMF stats put Bangladesh GDP at 42nd position (nominal) and 31st (under purchasing power parity), per capita GDP at $1,751 (Nominal) and $4,561.66 (PPP). In its annual assessment of the Bangladesh economy, IMF said the country will need to boost productive investment by addressing infrastructure bottlenecks and strengthening the banking sector to keep the momentum going. Growth in Bangladesh has averaged more than 6 per cent over the last decade, significantly lifting per capita income. Poverty has declined steadily and other social indicators, like gender disparity in education and maternal mortality, have also improved. The country has diversified away from being principally agrarian to a more manufacturing-based economy. The ADB had forecast that Developing Asia, including Bangladesh, would expand by 6.0 per cent in 2018, and by 5.9 per cent in 2019. Bangladesh is far ahead of ADB's 'Developing Asia' average.
Clearly, Bangladesh, under Sheikh Hasina, is undergoing a transformation from a low-income to a middle-income economy. Driven by increasing consumer spending and investment, the country continues to generate strong growth. Much of the country's future development will depend on the progress and success of its infrastructure and manufacturing sectors, choice of technology and foreign partners. The country should steer clear of the latest geopolitical buildups in the region and heavy borrowing from any individual country to ensure that its political, economic and diplomatic policies do not get mortgaged, in the process, to any strong donor country in the neighbourhood. Banks are the main source of funds for companies and their ability to extend credit at reasonable terms is important to keep the growth trend going. However, this will require strong bank balance sheets and efficient operations. There is significant room for improvement, given that non-performing loans continue to increase, particularly in the state-owned commercial banks as in next-door India.
The IMF report recommends a higher public investment to upgrade the infrastructure such as roads and electricity coverage, spur more private sector activity, and ultimately create more jobs. Tax revenues in Bangladesh are currently low at 9 per cent of GDP. The country needs more revenues to finance infrastructure investment and social spending. The average tax revenue to GDP ratio for non-resource rich, low-income countries is around 15 per cent. Therefore, the priority is to implement the delayed value-added tax, preferably with a single rate, reaching a broad base to help raise much-needed revenue. Any tax policy reform should also be supported by efforts to strengthen tax administration and improve tax compliance. The Sheikh Hasina government should seriously try to address these issues. There is no doubt that Bangladesh has revealed a remarkable turnaround. The country's per capita GDP is now higher than Pakistan's. It has been able to achieve well in the area of population control as the economic successes of Bangladesh is gradually gaining momentum.
When Bangladesh was first reported to have grown at a faster rate than Pakistan in 2006, it was considered by many as a temporary blip. Now, Bangladesh even has a lower population growth rate than Pakistan's. This explains why the per capita income of an average Bangladeshi is growing at an even faster rate. The country now regularly feature in the top 10 fastest-growing economies around the world. Its per capita GDP is forecast to exceed India's by 2022. Sheikh Hasina's new team should take forward the government's well-trusted and executed socio-economic policies and expand their reach to benefit more of the country's grassroots population. The new challenges before the government include better quality education, encouraging innovation and improvement of healthcare facilities. In the social sector, the government would do well to encourage learned criticism and debate within and outside the party and strongly fight fundamentalist forces having strong potential to divide the people and disrupt the momentum.
(The views expressed are strictly personal)