Economics, trade, politics and infrastructure of Bangladesh

This section provides you with recent information on Bangladesh’s economic performance, economic prospects, trade and investments, politics and international relations and infrastructure.

Economic performance

The country has experienced significant fluctuations in its growth rates up until 1981, but after that it managed to grow sustainably in an average of 6 % during the last decade, which raised per capita income and decreased poverty (World Bank, 2018). During the same period, the economy of Bangladesh underwent a marked change from a basically agrarian to a manufacturing country, which is manifested by the rapid growth of the garment industry. Bangladesh has already developed the second largest textile industry in the world, after China, which generates large part of GDP and employment of the country. In 2015, the government of Bangladesh developed a new 5 year plan with the pronounced goal to reach the middle-income level by 2021 (ADB, 2018). Regardless of the political unrest, which was the outcome of the peculiar character of the 2014 elections, the country continued to grow and the value of exports rose almost 25% from 2015 to 2017 (ICT Trademap, 2018). Potentially, the rapid pace of growing could lead to a long term reduction of poverty, but corruption remains a substantial problem.

Economic outlook

The Economist Intelligence Unit is projecting in average a 5.9% growth between 2018 and 2030, but also a slowdown of GDP growth at an average of 3.7% in 2031 to 2050, pinpointing low education levels and corruption as barriers for the further development of the country. Other long-term potential challenges include the need for an upgrade of infrastructure and the significantly high levels of inequality and poverty. The Asian Development Bank also underlines the importance of, a general tax system reform to ensure the capital needed for investments in infrastructure and education, economic diversification of product and decentralization of production, as the only ways for Bangladesh to achieve sustainable and inclusive  (ADO, 2018).

Key indicators
Population

157.8 million (2017)

Capital

Dhaka

Currency

Taka

Time zone

UTC +6

GDP at market prices

$ 285.8 bln (2019)

Real GDP growth rate

6.4%

GDP per capita

$4,560 (2018)

Doing Business In Index*

177 out of 190 (2018)

Corruption Index**

143 out of 180 (2017)

Source: WorldBank (2018)
* doingbusiness.org
** transparency.org

Trade & Investments

Bangladesh, which is the 8th most populous and one of the most densely populated country in the world, it currently undertakes a transition period moving from a low-income to a middle-income economy. Benefiting not only from its abundant and cheap workforce, Bangladesh also benefits from its strategic position in the South East Asian and Pacific trade routes. The exports of Bangladesh are dominated by products of the garment industry (ICT, 2018). In this respect, the main exports in terms of values are apparels and clothing accessories, either knitted or not, which represent the 86% of the total value of Bangladeshi exports. Other important exports are textiles, footwear and jute products. Agricultural exports, including the products of fisheries and aquaculture cover almost 2.4% of exporting value. More specifically, frozen shrimps and prawns equate to 47% of total export agriculture value, constituting an important export commodity for the Bangladeshi economy as a whole. The biggest trading partners of Bangladesh, in terms of export, are the USA with almost 20% of total export value, followed by Germany with 15% and United Kingdom with around 11%. Total value of export in EU markets, including UK, has reached 54.5% of total export value in 2015. On the other hand, the most important trading partners, in terms of import value, are mostly neighboring countries such as China, India, Singapore, Hong Kong and Indonesia. Main imports are cotton, machinery and electric machinery, mineral fuels and cereals. According to the World Bank’s Doing Business 2018, Bangladesh ranks in the 177 position among the 190 countries that were surveyed, which is considerably lower than other adjacent countries. The World Bank pinpoints the problems in infrastructure, particularly those concerning electricity, along with bureaucracy as the principal reason for this low ranking. The EIU recognized that the Bangladeshi planned investments in infrastructure will drive growth for years to come, but the political instability, the increase of interest rates in USA and delays in the tax system of the country will pose a challenge.

Politics and international relations

After the 14th amendment of the Bangladeshi constitution the country adopted the political structure of a parliamentary representative democracy, where the Prime Minister is the head of government and the President is the head of the state. Legislative power rests upon the government and the national unicameral parliament, which consists of 300 members, elected for a 5 year term by local constituencies. The country is divided into 8 divisions and 64 districts, whose officials are appointed by the government. Nevertheless, Sub-district, City, Municipal and Rural councils are publicly elected. The judicial branch of the government is based on common law and the highest authority is the Supreme Court. The current president, Abdul Hamid, was reelected until 2023, by the parliament, for a second term to his post in February 2018 for a second term. Sheikh Hasina Wazed holds the office of Prime Minister since January 2009, but her political legitimacy is shadowed by the elections of 2014, which were at large boycotted by the opposition. Political instability due to opposition led strikes and fear from terrorist attacks continue to pose as major risk for the country’s future prospects (EUI, 2018). Corruption is an endemic phenomenon in all aspects of social and political life in Bangladesh. Despite the adoption of a strong legal framework, bribery, nepotism and other forms of political corruption remain prevalent, due to a lack of implementing tools, making Bangladesh one of the most corrupted countries in the world (Transparency International, 2015). In 2017, the country ranked in the 143th in the Corruption Perceptions Index. Bangladesh is a founding member of South Asian Association for Regional Cooperation (SAARC), Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and a member of World Trade Organization (WTO).

Infrastructure

Bangladesh occupies a small coastline of around 580 km, but the country has one of the main inland cargo routes (CIA Factbook). The Mongla port is the most important river port, situated in the Sela River. In parallel, the Chittagong seaport, located in the estuary of the Karnaphuli River, on the northeast part of the Bay of Bengal, has always been the largest and by far most important seaport in Bangladesh, with almost all of the national container cargo passing from there. Nonetheless, both of those ports are not fit for large container ships, forcing the Bangladeshi government to seek international investors, such as China, Japan and India, for the construction of a new deep sea port. Till now the proposed plans for a deep sea port construction close to Chittagong, or to Sonadia,  Matarbari or to Payra, have not yet materialized or delayed, mainly due the conflicting geopolitical priorities of major regional powers in the area (The Diplomat, 2016). More generally, the quality of port infrastructure has been classified as being below the world average in 2017, by the World Bank. In regard to the infrastructure of Bangladesh, the World Economic Forum Global Competitiveness Report ranks the country 111th out of 137, well below neighbouring India (66st) and most other East Asian countries. The low quality of the road and air transport system and the poor condition of the telecommunications infrastructure are cited as the reasons for the country’s low ranking. In fact the inadequate supply of infrastructure is identified as one of the primary barriers for entrepreneurship and investment in Bangladesh, along with corruption and bureaucracy.

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