Economy of Bangladesh

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Fishing is an important source of income in Bangladesh

Bangladesh has made significant strides in its economic sector since its independence in 1971. Bangladeshi garments industry is one of the largest and comprehensive industry^{[citation needed]} in the world. Before 1980, Bangladesh's economy and foreign exchange earnings were driven by the jute industry. However, this industry started to fall dramatically from 1970, when polypropylene products gained popularity over the jute products.

Current GDP per capita of Bangladesh registered a peak growth of 57% in the Seventies immediately after Independence. But this proved unsustainable and growth consequently scaled back to 29% in the Eighties and 24% in the Nineties.

Bangladesh has also made major strides to meet the food needs of its increasing population, through increased domestic production. Currently, Bangladesh is the third largest rice producing country in the world.^{[citation needed]} The land is devoted mainly to rice and jute cultivation, although wheat production has increased in recent years;^{[citation needed]} the country is largely self-sufficient in rice production.^{[citation needed]} Nonetheless, an estimated 10% to 15% of the population faces serious nutritional risk. Bangladesh's predominantly agricultural economy depends heavily on an erratic monsoonal cycle, with periodic flooding and drought. Although improving, infrastructure to support transportation, communications, and power supply is poorly developed. The country has large reserves of natural gas and limited reserves of coal and oil. While Bangladesh's industrial base is weak, unskilled labor is inexpensive and plentiful.

Since independence in 1971, Bangladesh has received more than $30 billion^{[citation needed]}in grant aid and loan commitments from foreign donors, about $15 billion of which has been disbursed.^{[citation needed]} Major donors include the World Bank, the Asian Development Bank, the UN Development Programme, the United States, Japan, Saudi Arabia, and West European countries. However, Bangladesh’s poverty rate remains high. With nearly half of its 138 million people living below the poverty line, Bangladesh still has the highest incidence of poverty in South Asia and the third highest number of poor people living in a single country after India and China. As in other countries with similar income levels, Bangladesh still faces deficiencies in the quality of social services. Bangladesh has historically run a large trade deficit, financed largely through aid receipts and remittances from workers overseas. Foreign reserves dropped markedly in 1995 and 1996 but due to remarkable remittance growth in recent years, especially the large contributions made by the expatriate Sylheti community^{[citation needed]}, had stabilized at around $3.1 billion.(or about 2.2-2.5 monthly import cover)in around beginning of 2006, by September 2006, the Forex reserves had grown to $3.6 billion.

1 Moves toward a market economy
2 Macro-economic trend
3 Agriculture
4 Industry and investment
5 Overview
6 References
7 External links
8 See also

[edit] Moves toward a market economy

Commercial Offices

Following the violent events of 1971 during the fight for independence, Bangladesh--with the help of large infusions of donor relief and development aid--slowly began to turn its attention to developing new industrial capacity and rehabilitating its economy. The statist economic model adopted by its early leadership, however--including the nationalization of much of the industrial sector--resulted in inefficiency and economic stagnation. Beginning in 1975, the government gradually gave greater scope to private sector participation in the economy, a pattern that has continued. A few state-owned enterprises have been privatized, but many, including major portions of the banking and jute sectors, remain under government control. Population growth, inefficiency in the public sector, and limited natural resources and capital have continued to restrict economic growth. In the mid-1980s, there were encouraging, if halting, signs of progress. Economic policies aimed at encouraging private enterprise and investment, denationalizing public industries, reinstating budgetary discipline, and liberalizing the import regime were accelerated. From 1990-1993. In 1985 1989-1993, the government successfully followed an enhanced structural adjustment facility (ESAF) with the International Monetary Fund.

Grameen Bank Building in Dhaka

Although the Khaleda Zia Government (1991-1996) initially took significant strides toward pro-market reform, including tax reform and allowing increased foreign direct investment in the gas and power sectors, preoccupation with its domestic political troubles stalled progress on this critical front in the last year of its tenure.^{[citation needed]} The government of Prime Minister Sheikh Hasina, elected in June 1996, indicated that it would continue along the path toward privatization and open-market reform, but progress has been slow, especially in privatization. While the Awami League government has managed to maintain economic growth levels around 4%-5%, and single-digit inflation—except for a period of months after the 1998 floods—per capita income levels still remain distressingly low, at less than $1 per day.

Efforts to achieve Bangladesh's macroeconomic goals have been problematic. The privatization of public sector industries has proceeded at a slow pace, due in part to worker unrest in affected industries. The government also has proven unable to resist demands for wage hikes in government-owned industries. Economic growth has been further slowed by a largely dysfunctional banking system which has impeded access to capital-state-owned banks, which control about three-fourths of deposits and loans, and carry classified loan burdens of about 50%. Some efforts are being made to alleviate this problem through microcredit programs such as Grameen Bank.

[edit] Macro-economic trend

This is a chart of trend of gross domestic product of Bangladesh at market prices estimated by the International Monetary Fund with figures in millions of Bangladeshi Takas.

Year	Gross Domestic Product	US Dollar Exchange	Inflation Index (2000=100)
1980	250,300	16.10 Takas	20
1985	597,318	31.00 Takas	36
1990	1,054,234	35.79 Takas	58
1995	1,594,210	40.27 Takas	78
2000	2,453,160	52.14 Takas	100
2005	3,913,334	63.92 Takas	126

For purchasing power parity comparisons, the US Dollar is exchanged at 12.86 Takas only.

[edit] Agriculture

Most Bangladeshis earn their living from agriculture.

Most Bangladeshis earn their living from agriculture. Although rice and jute are the primary crops, wheat is assuming greater importance. Tea is grown in the northeast. Because of Bangladesh's fertile soil and normally ample water supply, rice can be grown and harvested three times a year in many areas. Due to a number of factors, Bangladesh's labor-intensive agriculture has achieved steady increases in food grain production despite the often unfavorable weather conditions. These include better flood control and irrigation, a generally more efficient use of fertilizers, and the establishment of better distribution and rural credit networks. With 2000000.2 million metric tons produced in 1999, rice is Bangladesh's principal crop. National sales of the classes of insecticide used on rice, including granular carbofuran, synthetic pyrethroids, and malathion exceeded 13,000 tons of formulated product in 2003 [1][2]. The insecticides not only represent an environmental threat, but are a significant expenditure to poor rice farmers. The Bangladesh Rice Research Institute [3] is working with various NGOs and international organizations to reduce insecticide use in rice [4]. In comparison to rice, wheat output in 1999 was 1.9 million metric tons. Population pressure continues to place a severe burden on productive capacity, creating a food deficit, especially of wheat. Foreign assistance and commercial imports fill the gap. Underemployment remains a serious problem, and a growing concern for Bangladesh's agricultural sector will be its ability to absorb additional manpower. Finding alternative sources of employment will continue to be a daunting problem for future governments, particularly with the increasing numbers of landless peasants who already account for about half the rural labor force.

[edit] Industry and investment

Fortunately for Bangladesh, many new jobs--1.5 million,^{[citation needed]} mostly for women--have been created by the country's dynamic private ready-made garment industry,^{[citation needed]} which grew at double-digit rates through most of the 1990s.^{[citation needed]} Despite the country's politically motivated general strikes, poor infrastructure, and weak financial system, Bangladeshi entrepreneurs have shown themselves adept at competing in the global garments marketplace. Bangladesh's exports to the U.S. surpassed $1.9 billion in 1999. Bangladesh also exports significant amounts of garments and knitwear to the EU market. The country has done less well, however, in expanding its export base—garments account for more than three-fourths of all exports,^{[citation needed]}dwarfing the country's historic cash crop, jute, along with leather, shrimp, pharmaceuticals and ceramics. Bangladesh has been a world leader in its efforts to end the use of child labor in garment factories. On July 4, 1995, the Bangladesh Garment Manufacturers Export Association, International Labour Organization, and UNICEF signed a memorandum of understanding on the elimination of child labor in the garment sector. Implementation of this pioneering agreement began in fall 1995, and by the end of 1999, child labor in the garment trade virtually had been eliminated.

The labor-intensive process of shipbreaking for scrap has developed to the point where it now meets most of Bangladesh's domestic steel needs. Other industries include sugar, tea, leather goods, newsprint, pharmaceutical, and fertilizer production.

The Bangladesh government continues to court foreign investment, something it has done fairly successfully in private power generation and gas exploration and production, as well as in other sectors such as cellular telephony, textiles, and pharmaceuticals. In 1989, the same year it signed a bilateral investment treaty with the United States, it established a Board of Investment to simplify approval and start-up procedures for foreign investors, although in practice the board has done little to increase investment. The government created the Bangladesh Export Processing Zone Authority to manage the various export processing zones. The agency currently manages EPZs in Adamjee, Chittagong, Comilla, Dhaka, Ishwardi, Karnaphuli, Mongla, and Uttara. An EPZ has also been proposed for Sylhet [5]. The government has given the private sector permission to build and operate competing EPZs-initial construction on a Korean EPZ started in 1999. In June 1999, the AFL-CIO petitioned the U.S. Government to deny Bangladesh access to U.S. markets under the Generalized System of Preferences (GSP), citing the country's failure to meet promises made in 1992 to allow freedom of association in EPZs.

Sylhet is fast becoming the retail capital of Bangladesh,^{[citation needed]} with many shopping centres being built by expatriates to serve fellow expatriates visiting Sylhet and the emerging middleclass. Many of these developments hark back to Britain. [6]

[edit] Overview

The area of Gulshan is a commercial hub of the country

Karwan Bazar is home to many of Bangladesh's important offices

The city of Dhaka has grown rapidly over the last few years

Bazaars in Bangladesh are popular trading places for everyday household necessities.

Bangladesh has made significant strides in economic sector since independence in 1971. Although the economy has improved vastly in the 1990s, Bangladesh still suffers in the area of foreign trade in South Asian region. Despite major impediments to growth like the inefficiency of state-owned enterprises, a rapidly growing labor force that cannot be absorbed by agriculture, inadequate power supplies, and slow implementation of economic reforms, Prime Minister Begum Khaleda Zia's government has made some headway improving the climate for foreign investors and liberalizing the capital markets; for example, it has negotiated with foreign firms for oil and gas exploration, better countrywide distribution of cooking gas, and the construction of natural gas pipelines and power stations. Progress on other economic reforms has been halting because of opposition from the bureaucracy, public sector unions, and other vested interest groups. The especially severe floods of 1998 increased the country's reliance on large-scale international aid. So far the East Asian financial crisis has not had major impact on the economy. World Bank predicted economic growth of 6.5% for current year. Foreign aid has seen a decline of 10% over the last few months but economists see this as a good sign for self-reliance.There has been 18% growth in exports over the last 9 months and remittance inflow has increased at a remarkable 25% rate. Export was $10.5 billion in fiscal year 2005 exceeding the target export by $0.4 billion. Target export for current year is $11.5 billion. An estimated GDP growth of 6.7% was predicted for FY 2006.^{[citation needed]}

Basic economic indicators
GDP-purchasing power parity	$275 billion (2004 est.)
GDP-real growth rate	6.7% (2006 est.)
GDP-per capita: purchasing power parity	$2,000 (2004 est.)
Aid-per capita	$10.1 (2003)
GDP-composition by sector
agriculture	20.5% (2004)
industry	26.7% (2004)
services	52.8% (2004)
Revenue, excluding grants	23.4% (2004)
Population below poverty line	35.6% (1995-96 est.)
Household income or consumption by percentage share
lowest 10%	3.9%
highest 10%	28.6% (1996)
Inflation rate (consumer prices)	5.8% (2000)
Labour force	64.1 million (1998)
Note: extensive export of labour to Saudi Arabia, Kuwait, UAE, Oman, Qatar, and Malaysia; workers' remittances estimated at $1.71 billion in 1998-99
Labour force-by occupation
agriculture	65%
services	25%
industry and mining	10% (1996)
Unemployment rate	3.6% (2002)
Budget
revenues	$4.9 billion
expenditures	$6.8 billion, including capital expenditures of $NA (2000)
Industries	jute manufacturing, cotton textiles, garments, tea processing, paper newsprint, cement, chemical, light engineering, sugar, food processing, steel, fertilizer
Industrial production growth rate	6.2% (2001)
Electricity-production	13.493 billion kWh (2000)
Electricity-production by source
fossil fuel	92.45%
hydro	7.55%
other	0% (2000)
Electricity-consumption	12.548 billion kWh (2000)
Electricity-exports	0 kWh (2000)
Electricity-imports	0 kWh (2000)
Industry and international trade
Agriculture-products	rice, jute, tea, wheat, sugarcane, potatoes, tobacco, pulses, oilseeds, spices, fruit; beef, milk, poultry
Exports	$6.6 billion (2001)
Exports-commodities	garments, jute and jute goods, leather, frozen fish and seafood
Exports-partners	US 31.8%, Germany 10.9%, UK 7.9%, France 5.2%, Netherlands 5.2%, Italy 4.42% (2000)
Imports	$8.7 billion (2001)
Imports-commodities	machinery and equipment, chemicals, iron and steel, textiles, raw cotton, food, crude oil and petroleum products, cement
Imports-partners	India 10.5%, EU 9.5%, Japan 9.5%, Singapore 8.5%, China 7.4% (2000)
Economic aid-recipient	$1.575 billion (2000 est.)
Exchange rates	Taka per US dollar - 69.00 (October 2006), 55.807 (2001), 52.142 (2000), 49.085 (1999), 46.906 (1998), 43.892 (1997)
Source:Discovery Bangladesh

Debt - external: $16.5 billion (1998)

Economic aid - recipient: $1.475 billion (FY96/97)

Currency: 1 taka (Tk) = 100 poisha

Exchange rates: taka (Tk) per US$1 - 69.000 (Ocotber 2006), 49.085 (1999), 46.906 (1998), 43.892 (1997), 41.794 (1996), 40.278 (1995)

Fiscal year: 1 July - 30 June

Growths in remittance and exports have contributed to an overall positive balance of payment (BoP) in the last fiscal year (FY 2005-06).

Country's trade imbalance also recorded a decrease of 13 percent as export outweighed import in the last fiscal.

Overall BoP recorded a surplus of US$ 365 million in the FY '06, which was a smaller surplus with $ 67 million in FY '05, according to Bangladesh Bank statistics.

Exports saw a 21.63 per cent growth during last fiscal whereas in FY '05 the growth was 13.83 per cent.

Earning from export amounted to $10.52 billion in FY' 06, which was $8.65 billion during FY '05.^{[citation needed]}

During the last fiscal, growth in import was 12.05 percent or $1431 million whereas export had a growth of 21.63 percent or $1849 million.

On the other hand, remittance inflow maintained the growth rate over 24.78 percent, touching $4.8 billion mark in the last fiscal mainly due to increase in skilled labour abroad and government's efficient move against money laundering.

Due to better performance by the export sector, the country's trade deficit decreased largely in the last fiscal. Reducing by $418 million country's deficit in trade balance now figures at $2879 million.

Despite larger service and income deficit, current account balance recorded a surplus of $572 million in the last fiscal against the deficit of $557 million during FY '05.

The overall BoP recorded surplus despite decline both in foreign aid and net foreign direct investment (FDI) in the last fiscal.

According to official statistics from Bangladesh government, net FDI amounted to $675 million in financial year 2005-06, which was $800 million in FY '05.

Bangladesh Bank statistics also reveals that foreign aid amounted to $1241.21 million in last fiscal, which was $1260 million in FY '05.^{[citation needed]}

[edit] References

This article contains material from the CIA World Factbook which, as a U.S. government publication, is in the public domain.
This article contains material from the US Department of State's Background Notes which, as a US government publication, is in the public domain.