Case 3: Economic Development in Bangladesh

Summary

This case explores the economic development of Bangladesh since its independence from Pakistan in 1971. At that time, Bangladesh was a country plagued with a lack of natural resources, a poor infrastructure, political instability, and high levels of corruption. The country was in such bad shape that then U.S. National Security Adviser Henry Kissinger referred to it as a basket case. Today, Bangladesh, once one of the worlds poorest nations, ranks as 64th of 154 countries in the World Banks global poverty database with just 18.5 percent of its population living in poverty in 2010, down from 44.2 percent in 1991. Much of Bangladeshs remarkable economic turnaround can be attributed to the reforms that took place in the 1980s reforms designed to reduce food and agricultural subsidies, privatize state-owned enterprises, and withdraw import restrictions. These reforms were complemented by financial liberalization, and in 2003, a floating exchange rate. Today, the country boasts a thriving textile sector, facilitated by low-cost labor, favorable trade agreements, and reduced import duties. Bangladesh is now the worlds second-largest exporter of ready-made garments. Bangladesh has also benefitted from the microfinance movement and the loans it makes to entrepreneurs. Despite its success, problems do remain. The country continues to face infrastructure challenges and a need to diversify its industrial base, as well as issues related to the adverse effects of climate change. Corruption is also still a threat. Even so, the changes in Bangladesh should provide both a lesson and inspiration for other countries hoping for a better future.

Discussion Questions

1. What were the principle reasons for the economic stagnation of Bangladesh after its war for independence?

2. Explain how the liberalization program in the 1990s enabled Bangladesh to start climbing the ladder of economic progress. What are the main lessons here that can be applied to economic development in other nations?

3. Bangladesh is dependent for its prosperity upon agriculture and textile exports. What are the risks here? How might Bangladesh diversify its industrial and commercial base?