The Economy of Bangladesh:

Transition
and
Transformation
 STORY HIGHLIGHTS

 Bangladesh economy continued to have robust

growth and macroeconomic stability
 Infrastructure gap, predominance of informality in
labor markets, and slow structural reforms have
reduced the pace of job creation
 By focusing on micro-financial stability, structural
reforms, urban planning and technological advances,
Bangladesh can create more, better and inclusive
jobs and boost its growth potential

(Ref: World Bank: http://

www.worldbank.org/en/news/feature/2017/09/27/bangladesh-development-update-more-bette
r-and-inclusive-jobs-can-boost-growth
)
 STORY HIGHLIGHTS
 Bangladesh has made substantial progress in reducing
poverty, supported by sustained economic growth
 The country achieved the MDG 1 on halving poverty five
years ahead of time, with 20.5 million people rising out
of poverty during the 1991-2010 period
 sustained growth has rapidly increased the demand for
energy, transport and urbanization.
 Bangladesh is both an inspiration and a challenge for
policymakers and practitioners of development.
 The World Bank has identified job creation as the
country’s top development priority

(Ref: World Bank: http://www.worldbank.org/en/country/bangladesh/overview)

The Historical Transition of Bangladesh Economy

 Mujib era: Between 1972 and 1975, the government of Bangladesh took
nationalization policy for nationalized state-owned-economy.

 Zia era: Between 1976 and 1981, the approach changed from nationalized
economy to denationalized economy.

 Ershad era: Between 1982 and 1990, the government focused on

denationalized economy, more specially development of private sector as
reflected by the establishment of Privatization Board in 1989.

 Khaleda Zia era: Between 1991 and 1996, 2001 and 2006; more importance
was given to trade due to the wave of globalization, liberalization (free market
economy). Roving trade representative of the country was appointed.

• Sheikh Hasina era: Between 1996 and 2001, and (2008-), the government
focused on building up the international migration & remittances and explained
the concept of "Bay of Bengal Industrial Growth Belt (BIG-B)" as an initiative to
aim at cooperation in infrastructural development, the improvement
of investment environment and regional connectivity.
Nature of the Economy of BD
 It is a mixed economy (Four economic systems in the World: Capitalism,
Socialism, Islamic and Mixed). Bangladesh follows mixed economic system. It is
the combination of all economic system).
 It has free market economy & open border relationship with rest of the world;
 Bangladesh is developing the concept of privatization;
 Bangladesh is implementing initiative driven economy rather than policy driven
system.
 It emphasizes on Foreign Direct Investment (FDI): for example EPZ.
 Dependency on national and international loan;
 Dependency on development actors (local NGOs and INGOs: BRAC,
PROSHIKA,ASA, GRAMEEN BANK, OXFAM, USAID, DFID, UNDP, and others),
organizations and countries;
 The service sectors contribute most of the development of national economy
(white color job vs., blue color jobs).
 Recent Economic Trends in Bangladesh
 The country's foreign exchange reserve is reported to have hit a new high with a record
of $33.45 Billion (October, 2017). The reserves were up nearly 5 percent from a year
earlier, and are sufficient to cover about 10 months' worth of imports.

 By the end of September 2017, inflation stood at 6.12 percent, rose slightly as rice
prices rose to record highs as food inflation increased 55 basis points in
September to hit 7.87 percent- the highest in 38 months.
 In the fiscal year (FY) 2014-15, more than 8 million migrant workers migrant workers
sent home $15.31 billion in remittance. In 2015-16, it was $14.93B but the inflow has
decreased by 14.48 percent and stood at $12.76B in 2016-17 FY; lowest in five years on
the back of low oil prices and deepening conflicts in Gulf countries.
 The inflow of foreign direct investment to Bangladesh crept up 4.4 percent in
2016 from a year earlier. In 2016, some $2.33 billion of FDI flew into
Bangladesh, which is only 4 percent of the total FDI inflows to South Asia and
just 0.1 percent of global flows.

 The pace of job creation has fallen in recent years: between 2003 and 2010, the total
employment grew by 3.1 percent per annum, whereas between 2011 and 2016 the total
employment grew by only 1.8 percent per annum. (World Bank Report, 2017)
LDC to Developing Countries
The UN's Committee for Development Policy (CDP) on March 15 officially declared
Bangladesh eligible for graduating from the LDC and handed over a letter in this
regard to Bangladesh's Permanent Representative to the UN Masud Bin Momen the
following day.

According to the UN's graduation thresholds set at the triennial review in 2015, gross
national income (GNI) per capita of a country has to be $1,242 or above to be
grouped within the “developing country” category. Bangladesh's GNI per capita
rose to $1,610 at the end of 2016-17 fiscal.

The GNI per capita is the value of a country's final income in a year divided by its
population. It reflects the average income of a country's citizens.

On the other two indexes, human assets and economic vulnerability, a country has to
score 66 or above and 32 or below respectively. Bangladesh's score in the human
assets index stood at 72.9 and the economic vulnerability index at 24.8, meaning
the country met all the criteria.

Bangladesh, however, will have to maintain the thresholds for the three indices till the
country's graduation from the LDC category, which the UN will declare in 2024.
Prerequisites: LDC to Developing Countries
Despite challenges, Bangladesh will benefit
from LDC graduation: United Nations
Remittance Inflow & Export-Import Scenerio
FDI Inflow, Investment & Inflation in Bangladesh
 Approaches to Development Planning in BD
Development planning provides the road map for accelerated growth and lays
down broad approaches for eradication of poverty, inequality, and human
deprivation. Bangladesh's economy has been an orphan without a long-term
perspective plan, more like a vessel without a compass. Marking vision 2021 a
reality, is a strategic articulation of the development vision, mission, and goals
of the Bangladesh government. To make the Vision 2021 a reality, the
Perspective Plan of Bangladesh 2010-2021 was adopted. Specific strategies and
the task of implementation will be articulated through the two five-year plans:
Sixth Five Year Plan (2011-2015) and the Seventh Five Year Plan (2016-2020)
which are further broken down as Annual Development Programs.
 Vision 2021 Expectations

The expectations are that by 2021, the war against poverty will have been
won, the country will have crossed the middle income threshold, with the
basic needs of the population ensured and their basic rights respected, when
everyone is adequately fed, clothed and housed, and have access to health
care. And all this is achieved on a sustainable basis without damaging the
environment. Furthermore, this progress will be ensured in an environment
where every citizen has the opportunity fully and positively to contribute to
the economy and society and equitably share the benefits from progresses
achieved.
 Annual average growth (%)
Plan Period Target Actual

First five year plan (FY1973-FY1978) 5.5 4.0

Two year plan (FY1978-FY1980) 5.6 3.5
Second five year plan (FY1980-FY1985) 5.4 3.8
Third five year plan (FY1985-FY1990) 5.4 3.8
Fourth five year plan (FY1990-FY1995) 5.0 4.2
Fifth five year plan (FY1997-FY2002) 7.0 5.1
Interim PRSP (FY2003-FY2005) - 6.2
Unlocking the Potential: NSAPR-I (FY2005-
FY2008) - 6.4
Steps towards Change: NSAPR II (FY2009-FY2011) - 6.3
Sixth five year plan (FY2011-FY2015) 7.3 (revised from 8) 6.3
Seventh five year plan (FY2015-FY2020) 8.0 -
 Role of Planning Commission
The Bangladesh Planning Commission is the central planning organization of
the country. It determines objectives, goals and strategies of medium and
short-term plans within the framework of long-term perspective and
formulates policy measures for the achievement of planned goals and targets.

Functions of Planning Commission:

I. Policy Planning: determination of goals, objectives, priorities, strategies

and policy measures for development plans;
II. Sectoral Planning: identification of the role that the various sectors of the
economy are required to play in the context of the Plan objectives;
III. Programme Planning: formulation of detailed resource allocation to
realize the Plan objectives and goals;
IV. Project Planning: appraisal of projects embodying investment decisions
for the implementation of the sectoral plans; and
V. Evaluation: impact analysis of projects, programmes and Plans on the
people’s living standard.
 Role of ECNEC
Executive Committee of National Economic Council: ECNEC is the apex body of
the government to examines and approves all public sector development projects above a
certain threshold value. ECNEC receives project proposals that are initiated at the level of
agencies of the government and pass through a process of appraisal involving concerned
ministries and the Planning Commission.

Present Composition of ECNEC:

 Prime Minister - Chairperson
 Finance Minister - Alternate Chairperson
 Planning Minister – Vice Chairperson
 Minister of LGRD - Member
 Minister of Education - Member
 Minister of Food - Member
 Minister of Water Resources - Member
 Minister of Industries, Commerce- Member
 Minister of Post and Telecommunications - Member
 Minister of Agriculture - Member
 Minister of Science and Technology – Member.
 Functions of the ECNEC

I. Consider & approve project concept papers for all investment projects;

II. Consider & approve public sector projects having investment expenditure of above
Tk. 25 crore

III. Review the progress of implementation of development project;

IV. Consider proposals for investment companies (private or with foreign participation);

V. Promote the economic situation and review overall performance of the economy;

VI. Consider financial performance of statutory corporations;

VII. Consider rates, fees & prices of public utility services or products of public
enterprises;

VIII. Consider and approve yearly target of foreign aid, expansion of trade, export of
manpower as well as to review the progress of the yearly targets.
Budgeting in Bangladesh

Budget is an itemized estimate of expected income and expense for a given

period in the future. A government budget is a government document
presenting the government's proposed revenues and spending for a financial
year. Major institutions in budget formulation & implementations in BD are:

• Ministry of Finance
i. Finance Division: overall & expenditure
ii. Internal Resource Division- domestic
iii. Economic Relations Division- external

• Ministry of Planning- FYP, ADP

• Planning Commission- Coordinating & finalization of investment plans
• IMED - Implementation Monitoring and Evaluation Division
• Line Ministries- Scrutinizing demand
• Directorate/Offices- Organizing demand
 Preparation of Revenue Budget
The revenue budget pays for the normal functioning of the government and is
intended to be fully financed from domestically generated sources. The Ministry
of finance and planning is responsible for the preparation of revenue budget in
cooperation with different ministries/divisions and account offices. The steps of
the preparation of revenue budget are-

a)Distribution of forms: It means the process of distribution of budget

forms. It includes Estimating officer’s forms and controlling officer’s forms.
b) Submission of estimates to the Finance division: The accountant general
submits the final estimates of receipt and expenditure to the finance
division.
c) Finalization of estimates: The budget wing of the finance division
examines the estimate report from the controlling officers and accountant
general. Then it makes the final best judgment about the budget.
d) Schedule of new expenditure: It means the detection of some new
expenditure for the upcoming year. Though it is a part of revenue budget,
sometimes it can be presented separately.
 Common Problems in Economic Sector in BD
 POLITICAL INSTABILITY: Political instability is probably a never ending problem for
Bangladesh. The instability of politics has imparted severe problems in education
system, economy and poverty reduction.
 INEQUALITY: Growth and equality are the important factors for the development
objectives. There are different logics regarding linkage between growth, income
distribution and poverty.
 CORRUPTION: Corruption is one of the major barrier to economical development of a
nation. The cancer ‘’corruption’’ is a global problem, heavily in under-developed and
developing nations.
 Over POPULATION: The population of Bangladesh has been one of the major problems to
the economical growth. Policies and programmers by GOB and NGOs have been
constantly trying to reduce the birth and growth rate.

 NATURAL CALAMITIES & ENVIRONMENT PROBLEM: Environment and natural calamities

plays a vital role against the economical and infrastructure development of Bangladesh.
The disastrous effect of several cyclones and hurricanes are still imparting pressure on
the national economy.
 Some Measures for Economic Development in BD

 Avoid political slander

 Bangladesh needs to reform its entire taxation system.
 The proper use of the budget in implementation of ADPs are required.
 Bangladesh needs to increase labor force in the industrial sector.
 Bring discipline in banking sector & identify top bank loan defaulters
 It have to work to expand market by promotion of trade.
 We need to build national & international cooperation.
 Bangladesh needs to develop political harmonies in the world.
 To increase remittances & intellectual investment, Bangladesh needs to focus on
global market.
 More private-sector investment for new job creation.
 Combat money laundering & fight against grand level corruption.
 Attract more FDI through ensuring better investment climate.
1. What is the nature of Bangladesh economy?
2. What is ECNEC?
3. What Planning Commission?
4. What is Vision 2021?
5. How Bangladesh Government earns?
6. What are the major barriers in economic system in
Bangladesh?
7. What are the salient features of Bangladesh
economy?

Thank You