ASIAN ECONOMIC OUTLOOK: BANGLADESH
Need for Speed
By Bertil Lintner
BANGLADESH'S ECONOMY may grow at a rate of 5.4% this year, up from an estimated 4.2% during 2002. According to the Asian Development Bank, rich rice harvests and an export recovery in the garment industry are the main reasons behind the increase. But in a country where most people live on less than a dollar a day, the ADB also cautions that Bangladesh actually needs a growth rate of up to 8% to meet the poverty-reduction target of 50% by 2010.
A poor law-and-order situation and infrastructure bottlenecks must also be resolved if Bangladesh wants to attract more foreign investment. Moreover, Berlin-based Transparency International has for several years placed Bangladesh among the most corrupt countries in the world, which also impedes both production and investment.
But, for the time being, overall trends appear to be positive. The ADB says that revenue collection is encouraging, grain harvests have been satisfactory, exports are picking up and the growth in remittances from Bangladeshis working abroad--an important source of foreign exchange--shows no sign of abating. Reserves also remain at healthy levels and stood at $1.73 billion at the end of September. Now the ADB has promised to lend Bangladesh $560 million to promote economic growth and reduce poverty. The road ahead is not easy, however. Bangladesh needs a dramatic increase in foreign direct investment to sustain its economic growth and the garment industry has had its ups and downs. Over the past few years, 1,200 garment factories have closed down following a slowdown in global demand. In 2002, however, 120 of them resumed production. Hope now is pinned on gas exports to India, according to a report released by the United Nations' Economic and Social Commission for Asia and the Pacific in October last year. But that is uncertain due to political problems and strained relations with Bangladesh's powerful neighbour.
Despite the progress Bangladesh will also remain heavily dependent on foreign aid, and many donors have tied that to an improvement in law and order. Cumulative foreign aid received over the past four years stands at $5.6 billion, lower than the projected $7.7 billion. Sadly, despite its recent economic growth, Bangladesh remains one of the world's poorest countries.
This article first appeared in the Far Eastern Economic Review, February 13, 2003
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