Introduction to Bangladesh Economy

Sunjida Khan
Senior Lecturer
Department of Business
Administration
Daffodil International
University
 Content

Introduction
Economic activities
The economic activities of the people of Bangladesh
Different economic system
Characteristics of capitalistic economic system
Characteristics of socialistic economic system
Characteristics of mixed economic system
Underdeveloped, developing and developed economies
Whether Bangladesh is an underdeveloped or developing country
Vicious circle of poverty
Basic economic problems of Bangladesh
Solution of economic problems of Bangladesh
 Introduction

Economic
problem
Limited
resources
Wants
increases
Makes efforts again and
to fulfill again
Limited demand with
resources limited
Earn money
by engaging resources
Facing wants in various
works
 Economic activities

Definition: In the way man earns money and spends it to fulfill his wants and the activities which he
performs in this regard are called economic activities. So, the economic activities of human beings
are mainly of two types-
1. Activities related to earning money and
2. Activities related to spending money.

The main objective of economic activities is to satisfy wants through consumption.

 The economic activities of the people of Bangladesh
The nature of economic activities of any country depends upon-
1.Geographical and natural conditions 2.Traits of the race population 3.Rate of education 4.Stage of development
5.The overall socioeconomic conditions.

Fish Rearing
Agricultur Business Work in cultivation Driving
Service small and animals
e and trade and vehicles
cottage and birds
catching
industries fishes

The major economic activities of the people of Bangladesh

 Different Economic System
Economic System: The economic rules and regulations and the environmental factors by
which overall economic activities of a country are conducted is called the economic system.

3 main types of economic systems prevail in different countries of the world, such as:
(1) Capitalistic economic system
(2) Socialistic economic system
(3) Mixed economic system
 Capitalistic Economic System

Individual Non-government Automatic pricing Freedom of Free competition Profit earning

ownership of initiative system consumers • The ultimate
resources • Individual can • Economic • Consumer can • There is free objective of all
• Individual acquire resources functions are enjoy freely any competition
ownership of land, from opportunities regulated through commodity
production is to
among large earn profit.
factories and other available. automatic pricing according to his
properties.
number of
• No government system. ability, desire and producers. • If there is
• Individual can intervention or • Price of a commodity choice. possibility of
freely enjoy and control in the case • price is low and
is determined by • Producers produce
transfer his property. of non-government demand and supply, new inventions more profit,
goods according to there will be
initiative. and production and
the demand of
become possible
consumption are
consumers. more
based on pricing
system.
investment.

Characteristics of Capitalistic Economic System

 Socialistic Economic System
State ownership of • The general public of the country or the state is the owner of the
wealth.
wealth • Whatever is earned from these resources is spent for the society.

Absence of • All activities relating to industry, agriculture, trade and commerce, etc.
individual are carried out at the initiative of the state.
• There is no scope of making any individual profit.
initiative
• All economic activities are performed at the instruction of the central planning
Central authority.
planning • Authority decides about the commodities and their quantity that are to be
Main exponents of
produced.
socialism- Karl Marx and
Angles
• Consumers can not spend money purchase goods of any type
Limitation of the in sufficient quantities according to their choice
freedom of consumer • Freedom of consumer in socialism is limited.

Characteristics of Socialistic Economic System

 Mixed Economic System
• There is freedom of non-government ownership and individual ownership and individual initiative
Co-existence of government • There are some industrial factors, trade and commerce etc, conducted under state ownership.
and non-government sectors

• Government rules and regulations are imposed on production, trade and commerce etc,
Government control in cases where necessary even though they are operated on individual ownership
• Government control is imposed especially in cases of monopoly business.
• Production and consumption are regulated by the automatic pricing system.
Pricing system • But this pricing system is partially controlled in some cases by government rules and
regulations.
• Consumers enjoy commodities according to their ability and choice.
Freedom of consumers • Government sometimes controls production and prices of some specific goods for the
greater interest of the public.
• Motive of profit earning remains active as there is full freedom of individual initiative.
Profit earning • But the government keeps some control over the price and profit, keeping in mind the welfare
of the public.

Characteristics of Mixed Economic System

 Underdeveloped, developing and developed economies

The economic conditions of all countries of the world are not the same. Some countries are very developed in respect of
industry, agriculture, trade and commerce, etc. The per capita income of their people and their standard of living are very
high. Again many countries are economically less developed. Their per capita income is less and standard of living is low.

That is why the countries of the world are classified into three groups on the basis of the level and stage of economic
development such as:

• Underdeveloped countries
• Developing countries
• Developed countries.

Those countries are
called underdeveloped
ones where-
• No economic
development in real term
has taken place
• Per capita of the people is
less
• The standard of living is
low
• Importance of primary
occupation is very high
• Capital is less
• Unemployment is high
• Most of the demands of
the people remain
unfulfilled.
Underdeveloped Countries
• Less Per Capita Income and Standard of Living
• Overdependence on Agriculture
• Underdeveloped Industry
• Less Capital
• Insufficient use of Natural Resource
Main
• Wide-spread Unemployment
Characteristics of
• Lack of Technical Knowledge
• Underdeveloped Transport and Communication System
Underdeveloped
Countries • Illiteracy
• Over-dependence on Foreign Aid
• Adverse Social Environment
 Developing Countries
Those countries are called Tendency Gradual
developing ones where- of Per Developme
nt of Dynamism
• per capita income and Capita Agriculture in
standard of living of the Income and Economic
to Programs
people are gradually Industry
increasing Increase
• economy is gradually
advancing forward
Gradual
Unemploy
• sufficient potentialities for ment and
Planned Socio- Developme
the increase in per capita Economic
Developme economic nt of Social
nt Efforts problems Environme
income and standard of Disparity
nt
living have been created
• per capita income and
standard of living is less
compare to developed Main Characteristics of Developing
countries Countries
 Developed Countries
Those countries are called High Per Capita
developed ones where- Income and Extensive Abundance of Full Utilization of
• Substantial development has taken Standard of Industrialization Capital Resources
place Living
• Per capita income of the people Developed
and their standard of living are Developed
Transport and Higher Rate of Skilled
very high Technological
Communication Education Manpower
Knowledge
• Productivity in agriculture and System
industry is high
• Rate of unemployment is
negligible Less Pressure of Developed Social
Population Environment
• The supply of goods of daily use
and luxury are sufficient
• Transport and communication
system is developed
• Facilities for education, health, Main characteristics of developed countries
housing, etc. are available in
abundance
 Whether Bangladesh is an underdeveloped or developing country? 😒
Less per capita income
Low standard of living
Underdeveloped
agriculture and industry
Dynamism in respect of
development has come High population growth
into force. Wide unemployment
Per capita income is Food deficit and
increasing though at a malnutrition
slow rate. Shortage of savings,
Standard of living of Underdeveloped
the people is gradually transport
improving. communication system
gradual increase in the Less education rate
rate of education
Inadequate health,
Future expansion in
economic development
housing and other basic Per capita incomes of some developing countries
facilities
Prevalent social
indiscipline and
Political instability
 Vicious circle of poverty
The main obstacle towards economic development faced by both undeveloped
and developed countries is poverty. 😭 ‘The vicious circle of poverty is such a
combination of certain forces which through mutual actions and reactions keep
a country poor”.- Professor Ragnar Nurkse

The basic vicious circle stems from the fact that in least developed countries
(LDCs) total productivity is low due to
Professor Ragnar Nurkse
• Deficiency in capital
• Market imperfections,
• Economic backwardness
• Underdevelopment.
 Demand side and Supply side Vicious Circle of Poverty
Capital Low Capital Low
Deficiency Productivity Deficiency Productivity

Figure 1 Figure 2

Low Low Low

Low Income Investment Income
Investment

Low
Low Savings
Demand

Supply Side: - Low productivity is reflected in low

Demand Side: - The low level of real income leads
to low level demand, which in turn, leads to a low
rate of investment and hence back to deficiency of
capital, low productivity and low income. Figure 1
real income. The low level of real income means
low savings. The low level of savings leads to a low
level of productivity and to deficiency of capital.
Deficiency of capital, in turn, leads to a low level of
productivity and back to low income. Figure 2
Underdeveloped Human and Natural Resources

Market Imperfections

Underdeveloped Natural Resources

Backward People

The development of natural resources is depending upon the productive capacity of the people of the
country. If people are backward and illiterate, lack in technical skill, knowledge and entrepreneurial
activity, the natural resources will tend to remain unutilized even misutilized. On the other hand, people are
economically backward in a country due to underdeveloped natural resources. Therefore both
consequences cause of backward people.
 Basic economic problems of Bangladesh
Undeveloped • 75% people of this country are dependent on agriculture
• due to traditional system of cultivation, lack of facilities for irrigation, manures, seeds,
Agriculture agricultural loans and natural hazards etc.

Undeveloped • The pace of industrial development of this country is very slow due to lack of capital, developed technical
knowledge, skilled labor, improved infrastructure, proper planning etc
Industry • The contribution of industry to the national income is only 29.93%.

Less Per Capita • In the United states are per capita income is 47094 dollar, in Japan 34692 dollar, in Germany
35308 dollar,
Income • in Bangladesh it is only 1587 (UNDP-2011) dollar

Low Standard of • 50% people of Bangladesh live below the poverty line due to low income.
• More than half of people of this country at present suffering from hunger, malnutrition have become
Living seek and have lost strength for work.

Inadequacy of • Savings in Bangladesh are less because of low income. As a result, the rate of capital formation is low.
• Due to lack of adequate capital investment and production in agriculture and industry are very low.
Capital
 Basic economic problems of Bangladesh
Rapid Population • The present rate of population growth in Bangladesh is 1.40%.

Growth • This rate of population increase is much higher compared to many other countries of the world.

Unemployment • Unemployment problem exists in Bangladesh due to rapid population growth and lack of employment
opportunities.
Problem • About 30 percent of productive labors of the country are unemployed.

• At present our annual food deficit is about 40 lacks of tons.

Food Deficit • Because of undeveloped method of cultivation, lack of improved seed, fertilizer and pesticides, absence of
sufficient irrigation facilities, natural calamities, and rapid population of is less than the requirement.

• At present in Bangladesh about 55% of population is illiterate.

Lack of Education • Because of this wide spread illiteracy, social environment of our country is not favorable for economic
development.

Deficit in Foreign • Since production in agriculture an industrial sector in Bangladesh is low, the volume of export is also less
• To meet the diversity of demand of our ever increasing population and also for developmental needs imports are
Trade far greater than export.
 Basic economic problems of Bangladesh
Over Dependence on • As the per capita income of the people of Bangladesh is low their savings are also low.
• As a result sufficient fund that is required for economic development cannot be met from
Foreign Aid international resources.

Underdeveloped Socio- • Our economic Infrastructure is not developed so as the social infrastructures
• For poor infrastructure the economic and social development of this country hampered.
economic Infrastructure
• In Bangladesh there is absence of proper pragmatic planning for economic development.
Lack of Proper Planning • As a result, desired development cannot be achieved in agriculture, industry, education,
health etc. sectors.

Undeveloped Social • The influence of social environment in Bangladesh is not developed due to lack of
education, bad education, superstitions, religious fanaticism, unreasonable religious
Environment decrees etc.

• Political stability and discipline and peace are the preconditions of development.
Political Instability • But in Bangladesh, production in mills and factories and other development oriented
programmes are hampered due to prevailing political instability.
 Solution of economic problems of Bangladesh
Rapid Full Utilization
Agricultural Capital Population
Industrializatio of Natural
Development Increase Control
n Resources
At present it is not There are fertile
Agricultural possible on the
development shall
An increase in capital agricultural land, It is not possible to
part of any country investment in the water resources, achieve economic
have to be attained of the world to sector of agriculture, natural gas and other
through adoption development in the
attain economic industry, trade and mineral resources in
of modern commerce etc. will present rate of
progress without Bangladesh.
agricultural lead to increase increase of
industrial production and population cannot
method. development income. Bright prospect for be controlled.
discovery of some
Use of improved Industrial more mineral
seeds and manures, development in our For this purpose, resources is also For this, the
increased irrigation country shall have to savings of the people there production,
facilities, adequate be achieved side by are to be increased income and tendency of
agricultural loan, side with agriculture for increasing capital. population
employment
flood control, for increasing Proper social increase should be
opportunities will
cooperative farming environment has to
etc. is necessary for
national income and increase if these controlled through
employment be maintained for natural resources are family planning.
the purpose. opportunities. profitable investment. properly utilized.
 Solution of economic problems of Bangladesh
Improvement Solution of Development Proper
Spread of
of Technical Unemploymen of Economic Utilization of
Education
Knowledge t Problem Infrastructure Foreign Aid
Technical
knowledge of Unemployment shall Developed economic Bangladesh receives
The illiteracy of
workers shall have have to be removed infrastructure is every year a huge
the people shall
to be improved for for the purpose of indispensable for amount of foreign
have to be
the purpose of increasing per capita improvement of loans and aid form
removed through World Bank other
increasing income of the people agriculture, industry
extensive spread organizations and
production in mills and improving their and trade and
of education. different countries
and factories. standard of living. commerce.

Rapid development of
As a result, For this purpose, For this purpose, labor basic infrastructure in our
efficiency of labor it is necessary to intensive small country like roads and Proper utilization of
will increase and establish more industrial factories and high ways, rail and water this foreign
development technical schools, professions instead of ways, telecommunication, assistance will
oriented attitude of colleges and capital intensive water irrigation, electric increase the pace of
the people will be industries shall have to supply, ports, our development.
training centers in embankments, etc shall
created. the country. be built up. have to be made.
 Solution of economic problems of Bangladesh
Poverty
Sound
Alleviation
Planning
Programmes
Innumerable helpless
and poor men and
Sound planning is women of Bangladesh
most essential for should be given loans
solution of and aid through various
economic government and non-
problems and rapid government
organizations for self
development.
employment.
Besides, Through this assistance
formulation of they will be able to keep
rural based themselves engaged in
self-employed occupations
planning and such as dairy poultry
implementation
farming, live-stock rearing,
are essential for cultivation of flowers and
development of vegetables, establishment
our rural economy. of handicrafts, small shops
etc.
Equitable
Improvement Sound
Distribution of
of Social Administrative
National
Environment Arrangements
Income
Our social
At present wealth is being environment shall Our administrative
concentrated in the hands have to be improved system shall have to
of a few people of through expansion of be made sound and
Bangladesh. As a result, education and efficient for solving
the number of poor people culture, social economic problems
and their level of poverty movement and and to help economic
are increasing. formulation of development.
appropriate laws.
The path of
Arrangement shall
development will be Proper understanding
have to be made for
equitable distribution
smooth with the and cooperation
removal of among different
of income and wealth
superstitions, administrative
through adoption of
religious fanaticism, divisions are to be
appropriate principles
adverse social rules increased.
of development.
and regulations etc.