Economics

Bangladesh

• IMF classifies Bangladesh as a “frontier economy” – mostly rural, quite poor but with a growing manufacturing sector and rapid growth in recent years. • Population 161m on land mass smaller than New England. One of the

most densely populated countries in the world. • Manufacturing sector began growing in mid-2000s. • In last ten years, annual GDP growth avg. 6%. Per capita growth avg.

4%.

Background • When British partitioned Indian subcontinent in 1947, created nations

of India and Pakistan. • Pakistan consisted of West Pakistan and East Pakistan (today

Bangladesh) – 1,600km apart, non-contiguous • Majority of population in East and main language Bengal, but power

resided in West. Urdu declared national language. • Over next 25 years, frequent uprisings, independence movements,

civil unrest. • Culminated in declaration of independence in 1971

Bangladesh Liberation War • Violent war for independence in 1971 resulted in 1m – 3m deaths. • India supported Bangladesh • Government formed – called itself socialist and received aid from

Soviets and East European countries. • Destruction of war extreme. Some 6m homes were lost. Roads,

communications destroyed. Most farmers lost animals, homes, tools. • Most larger businesses closed and cash, equipment removed to

Pakistan.

Famine and aftermath • Devastation of war followed by severe flooding and hoarding of rice >>>

famine in 1974 • Estimated that 6% of population starved. • US withheld food aid because of Bangladesh trade with Cuba. • Bangladesh Rural Advancement Committee (BRAC) and Grameen Bank both

founded to rebuild country after war and famine. • 1975 – First of several military coups. • ISI policies established under military rule, but corrupt, so little growth. • Country remained under military rule until mass uprisings by pro-democracy

movements >>> elected government in 1991.

Opening economy • By 1991, no forex reserves, little trade, Soviet aid gone • IMF and World Bank loans conditioned on opening up economy to market forces • By 2000, small scale industry established and by mid-2000s increase in growth rates and

emergence of export-oriented garment industry. • Currently 3/4 population rural and 1/2 workers employed in agriculture. 1/5 employed in

manufacturing. • High population density allows many rural households to supplement income with mfg.

jobs. • X = 20% GDP • Imports = 25% GDP • Remittances = 11% GDP, so has current account surplus (8th highest remittances in world –

most from middle east, Malaysia, UK)

Garments • Garment manufacturing increased x12 since 2000. • Over 1/10 of GDP • 94% of all garments are for export and garments comprise 4/5 of

Bangladeshi exports (also has small pharmaceutical export industry). • Employs about 4.5m workers, 80% F (though almost all production

workers female). • Little FDI (only 1% GDP). Mostly local firms who subcontract with

large retailers and clothing brands (Target, Primark, GAP, Walmarts, H&M, etc.)

Working Conditions • One of the worst records of industrial accidents in world. • Series of fires in garment factories in 2012-2013 followed by collapse of

Rana Plaza (1129 killed, 2000 injured) >>> mass demonstrations and scandalized western consumers. • Large EU/US retailers feared consumer boycotts • EU retailers signed accord on fire and building safety in 2013, which

established standards on safety and also on forced overtime and physical abuse. Funded inspections. Fairly good enforcement mechanisms • US firms formed Alliance for Bangladesh Worker Safety. Disbanded after a

few years and inspections carried out by Bangladesh-funded organization.

Working conditions • Vast improvements followed – fire doors, alarms, sprinkler systems. • Recent backsliding. Industry wants foreign inspectors out. Estimated

that 45% garment factories lack adequate fire detection and alarm systems. • Also about 1/4 factories are producing for non-EU/US retailers, so not

inspected or covered by accords.

Labor • Minimum wage – $94/month. • Average manufacturing wage around $125/month • Living wage estimated at $200/month. • Bangladesh has not ratified ILO Convention on Child Labor. Estimates

that nearly 1m children working in garment factories (under 18) • Sexual harassment of female garment workers common. Recent survey

by BBC found 80% workers had witnessed or experienced harassment. • Official workweek is 40 hours, but violations routine. • Garment industry politically powerful, so enforcement of labor laws poor.

Social indicators • Per capita GDP = $4,300 (PPP) • Poverty rates high but have fallen dramatically •

Source Poverty Rate 1990 Poverty Rate 2015

World Bank 70% 45%

Government measure 57% 32%

• Gini index estimates unreliable – CIA estimate of 32.4 in 2010. • Estimates on social indicators for 2010

Indicator Bangladesh South Asia Average Change since 1990

Life Expectancy 70 years 67 years +14

Infant Mortality 33/1000 45/1000 -67

Child Mortality 41/1000 57/1000 -103

Improved Sanitation 57% 39% +24

Improved Water 97% 80%

Immunization 0-2 years 82% 44%

Years of Education - Male 8 years 8.6 years +4

Female 9.2 years 8.3 years +6