The Bangladesh story: Test case to paradox

K.A.S. Murshid | Published: April 25, 2016 18:43:44 | Updated: October 24, 2017 21:42:23

The Bangladesh story has not been properly told. It is a powerful and compelling story that deserves far greater attention from international and national development experts. This is the unlikely story of a nation that has defied all the odds and dire predictions of imminent Malthusian collapse, only barely postponed by a huge influx of foreign aid, especially food aid.
This narrative has now changed. Bangladesh is no longer a country that is perennially on the brink of disaster or famine; it is a country that has generated entrepreneurship, and saw the rise of an independent capitalist class; it has set up some of the largest NGOs (non-governmental organisations) in the world, experimented with grassroots development models, introduced a revolutionary financial concept - microfinance, and an even more revolutionary concept - the ubiquitous "samiti" or micro-institutions that have sprouted up in every nook and corner in every village.
It has become one of the largest global garments manufacturing hubs, it has tackled food insecurity and population growth, and it has reduced poverty, especially extreme poverty which only a few years ago seemed almost intractable - in fact, Bangladesh's achievements have been remarkable, and across many, many fronts.
GROWTH AND POVERTY REDUCTION: Since 1990, GDP (gross domestic product) has been growing at a sustained 5.5-6.5 per cent per annum in real terms (or 3-4 per cent per annum in per capita terms); the growth is broad-based - it has trickled down, benefiting everyone, including the poor. In fact, fall in extreme poverty was even faster than overall poverty decline. Bangladesh has recorded disproportionate poverty reduction for its amount of growth, halving poverty ahead of the MDGs (Millennium Development Goals).
In particular, agriculture has played a crucial role in poverty alleviation and employment generation, especially in more recent years. According to the World Bank "Poverty Assessment Report", the achievement of agriculture has been phenomenal, especially since 2005. The most important factor behind poverty reduction is related to agricultural performance.
In this context, some relevant questions are: a. Can agriculture continue to play this role?
b. Should we focus more on the non-farm sector in the future? c. Why didn't manufacturing, particularly RMG (ready-made garment), play a bigger role in reducing poverty?
INEQUALITY: Inequality has been rising alarmingly - so we are frequently told. This is correct, especially if we compare the situation now in 2016 with what was the case, say, in the early 1990s. We would generally expect to see inequality rising in the early stages of growth although we are reminded that East Asians were able to avoid this trap to a large extent. Sharp inequality is ugly and destabilising especially when it feeds, not so much on ability, merit or entrepreneurship but on rent-seeking, patronage and nepotism - and is thus a symptom of a wider malaise. However, recent evidence seems to suggest that again, since 2005, inequality has tended to decline. The key question here is to examine is whether this now marks a new chapter in our economic journey where growth and equity can proceed hand in hand.
BASIC CONDITIONS IN PEOPLE'S LIVES: Over the past 20 years, Bangladesh has made some of the biggest gains in the basic conditions of people's lives seen anywhere. Between 1990 and 2010, life expectancy rose by ten years, from 59 to 69. Today it is over 70. Bangladeshis now have a life expectancy that is four years longer than Indians, despite the fact that the Indians are twice as rich, on average. The improvement in life expectancy has been as great among the poor as the rich.
As is well-known, major gains have been made in education, health and gender parity. This is reflected in school enrolment of girls, reduction in child, infant and maternal mortality. In 1990, women could expect to live a year less than men; today they can expect to live two years more than men.
The most dramatic period of improvement in human health in history is often taken to be that of late-19th century Japan during the remarkable "Meiji Restoration". Bangladesh's record on child and maternal mortality reduction has been comparable in scale.
Clearly, these improvements cannot be a simple result of increases in income.
Bangladesh remains a poor country. So what are some of the key factors responsible?
FERTILLITY DECLINE: The data is dramatic. In 1975 the number of live births per woman was 6.5. This has come down to 2.2 today. The country may be close to the replacement fertility rate and the population could stabilise at 180-180.5 million - if so, this would be much earlier than was expected. I can tell you that I did not expect to see this happen within my lifetime.
There is of course a debate: how did it happen? Was it a result of the intense family planning campaigns supported by access to the necessary technology and input/service delivery? Or was it due to broader socio-economic changes that altered household behaviour and encouraged families to have fewer children? This is an ongoing debate but my own view here is that both were important, and that one reinforced the other.
THE GREEN REVOLUTION AND FOOD SECURITY: This story is well-known, namely that rice production tripled in three decades; this benefited all farmers, lowered food prices, created employment and served as a powerful poverty-reduction tool. Growth in farm incomes drove half the reduction in poverty between 2000 and 2010. In other words, farm income became the most important single driver of poverty reduction.
Can agriculture continue to play this role or perhaps we need to focus more on the non-farm economy in the future? What are the emerging linkages between the farm and the non-farm sector?
It will be important to revisit agriculture in terms of the greater need to address nutritional challenges. This requires diversification but more importantly, there is a need for a new generation green revolution (GR) as the first generation GR potential is all but exhausted.
And then there is the question of land availability, and the trade-offs between agriculture and non-agricultural investment: What strategy should we adopt?
MICROCREDIT AND THE ROLE OF NGOS: The subject has given rise to a lot of academic debate and controversy. It would seem that the academic findings are about equally divided - with some convinced this has done more harm than good while others equally vocal of the great role that it has played in poverty reduction and inclusive finance. The subject is complex; nevertheless, a few observations may be noted:
-Microcredit perhaps is best viewed as creating an entry point for establishing micro-institutions (samitis)
-These samitis have then become the basic structure at the village level that has served as a conduit for new ideas, technology, and, of course, credit as well;
-This enabled a development focus on poor women who have been brought into the market economy.
Thus the real contribution of the NGOs and microcredit, in my view, is not the credit itself but these village-level institutions which have enabled inputs, services and technologies to be delivered at the door of the poor man and women. I am not aware of any such comprehensive look at the role of NGOs and micro-institutions.
This early exposure of NGOs to development work has  later on expanded to include many other elements but especially pioneering work on nutrition, health and education, e.g. by BRAC.
REMITTANCE AND LABOUR EXPORTS: Remittances have had a profound impact both at the macro and micro level. Young men have gone abroad while young women have gone to the cities to work in the RMG industry. This has injected purchasing power into the rural areas that has led to increased consumption as well as investment. It has also eased rural financial markets and generally raised living standards, directly and indirectly.
The benefits of labour exports are well-known. However, there are costs and trade-offs. Further, there is the broader question of whether we are maximising the returns from our 'demographic dividend'?
Costs are mainly social ones, borne by the families left behind. Costs also relate to the substantial migration costs funded through land or asset sale, or the costs associated with risky migration. Rising wages is another cost that will become more important in the future.
Export of unskilled or poorly skilled labour also damages the country's image apart from the fact that much higher potential earning opportunities are foregone. An effective skills-training programme would go a long way in boosting returns.
THE RMG SECTOR AND OTHERS: The story is well-known - there remains considerable potential to further exploit in this sector. Global opportunities, despite dark clouds, are substantial and the RMG sector has matured and is well-positioned to go much further. The question is: does it require any further government support or should it now stand on its own feet? Has the time come for the government to focus now on some other sector like ICT (information and communications technologies) or IT (information technology)? There are a number of potential risks to RMG: the Trans-Pacific Partnership agreement could pose some problems as far as entry to the US market is concerned. The continued hostility of some segments of the American establishment is also not to be taken lightly. Dark allegations of slave-like labour conditions in RMG by some US vested interest groups should not be taken lightly. Bangladesh will have to learn to address such challenges in a much more robust and pro-active manner.
There are a few other sectors that showed early promise: pharmaceuticals and leather/leather goods. While their performance has not been bad, their contribution to the economy remains well below potential.
The IT or ICT sector is beginning to gain ground. The government is contemplating large investments in this sector, particularly on infrastructure. The bottleneck, however, appears to be availability of skills. We produce some 5000 IT graduates per annum; this is simply not sufficient to bring about an IT revolution, even assuming that all 5000 are equally skilled.
THE HEALTH INFRASTRUCTURE: Bangladesh is fortunate in having an abundant, cheap, accessible safe water resource, namely in the form of rich groundwater resources. This is the basis of the success of the GR in Bangladesh. It has also allowed us to solve a critical public health issue relatively quickly - hand pumps to provide safe drinking water spread quickly replacing ponds and surface water sources for drinking. The significance of this change cannot be overemphasised, even though subsequently, the threat of arsenic contamination has tempered this success somewhat.
There are a number of other campaigns in the health sector that seems to have been very successful: 1. Total sanitation; 2. Oral-saline campaign; 3. Child immunization; 4. Rural health infrastructure, including community clinics; 5. Availability of cheap generic drugs
Further progress would be more difficult and will require not just resources but a focus on quality of service.
EDUCATION AND HUMAN RESOURCES: For a resource-strapped, land-constrained country our future depends crucially on how we develop our rich human resources. We have made some progress, mainly in primary education. This is inadequate. Quality of teaching and learning is a big barrier. On top of that, there are numerous educational streams, including madrasah, that sit uncomfortably with the needs of a modern, skilled and enlightened society. We require serious reforms in this sector.
Higher education is failing to deliver on quality and we ignore this at our own peril. The traditional thinking on higher education supported by some donors was wrong-headed. It is important for a country like Bangladesh to have a few centres of excellence in the hard and soft sciences, as well as in the humanities. Otherwise, we will turn into a nation of half-literates led by other, unenlightened half-literates passively receiving the wisdom emanating from outside. If there is one thing that we have learnt from our development journey, it is this: indigenous solutions generated by our own people and local institutions paved the way despite huge obstacles. The demand for such entrepreneurship both within the government and outside will increase manifold in the future. We will need innovators, entrepreneurs, intellectuals, managers and leaders in every field. That we are falling short in this regard is no secret
TARGETED INTERVENTIONS: Government, NGOs and donors have all been particularly focused on targeting the poor - and the poorest - with various interventions, usually involving some form of free or subsidised credit, food or inputs. These interventions collectively referred to as Social Safety Nets (SSN), are quite large, accounting for some 2.5 per cent of GDP (gross domestic product). There is little doubt that SSN has been useful although allegations of leakage and poor targeting remain. Given the emerging changes in the labour market as well as changing seasonality, the time has come to review SSN and make it more relevant, more effective and more efficient.
There is a growing labour shortage in the country marked by increasing female participation in the labour market and higher wages. This trend will strengthen further. In other words, all able-bodied men and women willing to work will be able to find work. Those who are differently abled, the too old or the too young, pregnant women, etc. are the ones who might find themselves in difficulty. Common sense suggests that it is these groups that should be increasingly targeted.
The old problem of too many programmes managed by too many agencies remains and is unacceptable. There should be a single, separate agency that should be charged with delivering on SSN.
a. The rise of an 'independent' capitalist class in Bangladesh has been one of the most significant achievements. Without independence, this would not have happened. This has given rise to a large, confident and aggressive private sector that bodes well for the future. However, there are questions about how independent is this sector, and in particular, whether the rent-seeking, Robber Baron phase is finally over? The various 'scams' suggest it is not.
b. Development entrepreneurship - NGOs: Their role has been enormous. The question is where do we go from here? The GO-NGO relationship is a love-hate relationship and there are certainly forces in GO (government) that continue to view NGOs with deep suspicion. I believe we need to allow NGOs the space that they need to thrive; the government needs partners!
c. Technology: Technological adoption and change was crucial in our journey, especially for agriculture but also for manufacturing/RMG.
d. Policy reforms: Policy reforms, notably, the trade liberalisation and structural adjustments of the 1990s including the reform of the agriculture and food sector, played a very important role in our journey. This suggests Bangladesh should further pursue reforms with vigour.
e. Institutions: Public institutions may have improved at the margin but has not been subjected to extensive and meaningful reforms. It would be difficult to embark on development in the 21st century with institutions that are based on models that are perhaps a 100-years old.
f. Civil society: It has a glorious past in Bangladesh. We can be proud of our civil society. However, it is sad to see that it has been weakened and divided so sharply. This would be a sad loss - their role in development cannot be overestimated. One should remember that our students and young people are a central part of CS.
This reminds me of a placard I saw: "If bullets could stop students, then Bangladesh would never have been born"! This is how important CS is.
THREATS - OLD AND NEW: Corruption;  Terrorist threat and growing religious intolerance;  Climate change; Rapid urbanization;  Educated unemployment
CONCLUSION: While we have achieved much we need to understand that the journey has just started. Further progress will depend on our ability as a nation to overcome our divisiveness and forge a unity based on a common consensus. We cannot afford to alienate any significant group in society but must find a way to develop together. We have always considered our ethnic homogeneity to be our strength. Right now we are not really using this to our advantage as we find numerous ways to create otherness. This needs to be reversed.
The writer is the Director General of Bangladesh Institute of Development Studies (BIDS). The paper was presented as keynote speech in the inaugural session of BIDS Critical Conversations, 2016 held in Dhaka on April 23, 2016.

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