Case Study 1 Comparative Economic Development: Pakistan and Bangladesh In 1971, Bangladesh declared independence from The war for independence itself and the eco- Pakistan. Previously, Bangladesh had been known nomic destruction deliberately visited on Bangla- as East Pakistan, and what is now Pakistan was called desh's industry left an even wider gap, while human West Pakistan. Though separated by more than 1,600 rights abuses, including mass rape as a weapon of kilometres (1,000 miles), both were part of a single war, left severe psychological and physical scars. country, with economic and political power concen- A severe famine followed the war. One US statesman trated in West Pakistan. Because they were once the undiplomatically dubbed Bangladesh the "interna- same country, Pakistan and Bangladesh make for an tional basket case." Others somewhat more tactfully interesting exercise in comparative development, in called it the "test case for development"-meaning that the two shared a common national policy in the that if development could happen in Bangladesh, it early years, even if they did not benefit from it equally. could happen anywhere. A half-century later, Bang- Pakistan and Bangladesh had a similar population in ladesh is still confounding the sceptics. Pakistan has 2017: an estimated 197 million in Pakistan and 165 held a lead in per capita income, which was more million in Bangladesh. Both countries are located in than 40% higher than Bangladesh in 2017. However, the South Asian region, are overwhelmingly Islamic, there was understandable widespread celebration and were once part of the colonial British Raj of India. in Bangladesh in 2014, when Bangladesh passed the Bangladesh was for a long time the global symbol of threshold from being a low-income country to reach suffering, from the Bengal famine of 1943 to the glob- lower-middle income status. Moreover, Bangla- ally publicised 1971 Concert for Bangladesh organ- desh has now moved to the lead in the new Human ised by former Beatle George Harrison, to the horrors Development Index (HDI) rankings; in the 2018 of the 1974 post-independence famine. update, Bangladesh ranks #136, nine places above But analysts such as William Easterly have on the HDI than predicted for its income level; while declared Pakistan a leading example of "growth Pakistan, at #150, is 14 places below what would be without development," with low social indicators predicted by income alone. Bangladesh is also ahead for its income and growth. Meanwhile, Bangladesh, on many of the Sustainable Development Goal though still afflicted with many of the social problems indicators. found in Pakistan, has transformed itself from a sym- The point is not that Bangladesh has surpassed bol of famine to a symbol of hope. When Bangladesh Pakistan by all important measures; as mentioned, gained its independence in what is known as the Pakistan remains significantly ahead in average Bangladesh Liberation War, it was viewed as lagging income and Bangladesh continues to have serious insurmountable behind (West) Pakistan. Indeed, its development problems that need to be addressed. poor social and economic development in compari It is rather that Bangladesh has made relatively bet- son with West Pakistan was a major impetus behind ter progress than Pakistan, particularly on social the independence movement, which complained development indicators, despite its handicaps at that Bangladesh was being drained of tax revenues independence and expectations that it would con- to benefit West Pakistan. tinue to fare badly. Bangladesh started at a muchlower level of human development and still has lower income. But in achieving more progress on human development. Bangladesh now also has the conditions for accelerating economic progress in the coming years, particularly if continuing problems of governance can be overcome. Dutput and Income Growth PPPadjusted income estimates vary; but all show average income remains higher in Pakistan than in Bangladesh ($5,311 in Pakistan in it'll? and $3,615'? in Bangladesh according to UNDF estimates). in Pakistan, per capita income grew at about 1.1% per year in the halfvcentuty from 195i) to 2000. As a result, per capita income tripled. But the growth rate declined over time, even as it rose in other countries such as India. The decline in the growth rate may be a result of the poor performance on social indicators, for example with a less educated cohort entering the workforce. Prom Elli!) to Hill", GDP growth in Pakistan averaged 5.1%; with population growth in this period of 2.1 its per capita GDP growth was about 3%. in Bangladesh, GDP growth averaged 45% frcim 200i] to 2D]? World Bank}. With a signicantly lower 1.3% population growth in this period, per capita GDP growth in Bangladesh was about 43%, outpac- ing Pakistan in this period. Agriculture Agricultural development proceeded more rapidly in Bangladesh, and the benets were less unequally distributed. Farm yields are up dramatically. Social constraints may havebeen the most important factor hold log back agricultural development in Pakistan. William Easterly speculates that in earlier stages, growth of the agricultural sector may have been "possible with the landlord elite taking advantage of the immense potential of the irrigation network and the green revolution, using only unskilled agri- cultural laborers. But agricultural growth may also have run into diminishing returns. as irrigated land and human capital did not grow at the same rate as other factors of production." Textile and Garment Sectors As with many countries in. their early stages of industrialisation, the textile and garment secr tors have been central to growth in Bangladesh. When the international textiles quota system of the Multi-Fiber Arrangement ended in eons, Bang!- desh garment factory jobse major source of job creationwere at ongoing risk. The speed and astuteness of the market response was a major test of the resilience of the Bangladeshi economy. The outcome was substantially better than many pre- dicted; and the impact of the EDGE global nancial crisis on employment in the sector was also compar- atively modest. But horrifying mass factory deaths due to fire and building collapse in the early Eills, such as the 2313 Rana Plaza disaster that resulted in the loss of nearly Lilli] lives, were caused by negli- gence and irresponsibility of owners and put future growth of this sector in jeopardy. Some high-profile international customers threatened to stop sourcing products from Bangladesh. The subsequent interna- tional monitoring and other agreements and reguiad tions led to some improved conditions. But as Sarah Labowitr. and Dorothee Baumann-Pauiy document. many factories still operate in the informal sector, unobserved and even unrecorded by the monitoring programmes mtablished since 213. Work conditions still have plenty of room for improvement, especially for women. {We return to this critical topic later, in the section on gender equality.) Poverty In Bangladesh, 14.8% live below the $1.9ii per day poverty line, with 59.2% under 53.213, and 84.5% living on less than sass per day based on 2015 data. In Pakistan, income poverty is lower than Bangladesh, with 4% living on less than $1.91"! per day, 343% with less than $3.31, and 95.4% less than $5.50 World Bank WDI, survey data from Eilld and 21315 respectively]. But poverty progress has been impressive in the one-time "basket case\" of Bangladesh. and incomes of the poorest people are rising. Many factors have contributed to the relatively rapid decrease in extreme poverty in the country, including the early and quickly dissem- inating green revolution, the impressive role of Bangladeshbased nongovemmentai organisations {Ns} ghting poverty in rural areas, opportuni- ties tor women's employment in export industries, and remittances from relatives working abroad. But the poverty comparisons are reversed when examining the Pakistan UNDP Multidimensional Poverty Index [MP1, discussed in Chapter 5}. The MP] in Pakistan was [1.223, with 43.9% living in multidimensional poverty; the corresponding fig- large and apparently growing gaps, both countries ures for Bangladesh were a still-high 0.194 and 41.1% are making progress. (survey data are from 2012-13 and 2014 respectively in the 2018 HDR statistical update). Health Life expectancy in Bangladesh is now 69 years, com- Education and Literacy pared with only 65 in Pakistan (2012 Population Ref- According to UNESCO, the youth (ages 15-24) erence Bureau); but in 1970 life expectancy was 54 literacy rate was 85.6% in Bangladesh but 72.8% in in Pakistan and only 44 in Bangladesh. Since 1990, Pakistan (2014 comparable data). Much of the dif- the prevalence of child malnutrition in Bangladesh ference is explained by gender, with Bangladesh has fallen from two-thirds to less than half. Nutrition rated as having gender parity, but Pakistan rated in Bangladesh has benefited from a successful green as female strongly disadvantaged. Rates are sub- revolution. But child malnutrition remains lower in stantially worse for adults over 24, reflecting pro- Pakistan, at about 38%. gress over time. The UNESCO comparable (2011) Under-5 mortality in Bangladesh has fallen dra- estimates for Pakistan a female literacy rate of just matically. On the eve of independence in 1970, the 40% for all women over the age of 15 (the male rate under-5 mortality rate in Bangladesh was 239 per was 69%), while for Bangladesh there was 53% liter- 1,000 live births; the rate in Pakistan was 180 per acy for all women over the age of 15 (the male rate 1,000. In 1990, the rate in Bangladesh had fallen was 62%). to 139, and in Pakistan to 122. By 2011, both coun- In Pakistan, about 30 times as many public educa- tries continued to make strong progress, but again tion dollars are spent per pupil for university educa- their positions were reversed, with the Bangladesh tion as for primary school education. Primary school under-5 mortality rate falling to 46 per 1,000, but that expenditures are extremely unequal, with the lion's in Pakistan only to 72 per 1,000 (2013 WDI, Table 1.2). share of funds going to schools that more often train Thus, both countries have made progress on health, the few students who will eventually go on to uni- but the edge is strongly with Bangladesh. versities. Many teachers are hired for political rea- sons rather than professional competence, and their Population absence from the classroom and, all too often, from Bangladesh has made much greater progress than school altogether ("teacher truancy") is a serious Pakistan in reducing fertility. Shortly after independ- problem. Easterly and other analysts such as Ishrat ence in 1971, both countries had an extremely high Husain believe that Pakistan's poor performance on level of over six births per woman. In Bangladesh, education and literacy may result from the incen- fertility fell to 2.2 by 2011. But for Pakistan, fertility tives of the elite to keep the poor from gaining too has fallen only to 3.3 (2013 WDI data), with much of much education. Looking to the future, Bangladesh Pakistan's decline very recent. has the clear edge in school enrolments; for example, Accordingly, Pakistan's population has increased in 2016 Bangladesh had a 69.0% (gross) enrolment far more quickly. In 1960 (a decade before Bangla- in secondary school, compared with just 46.1% in desh become independent), the populations were Pakistan (2018 WDI, Table 2.8). Despite school qual- almost identical: Bangladesh had a population of 45 ity problems in both countries, this differential will million, and Pakistan 48 million. translate to higher literacy rates and general knowl- These changes reflect both cause and effect. Fer- edge in Bangladesh in a few years. Thus, as we look tility tends to fall as social and economic progress ahead, we can also expect much greater parity in increases. Women perceive better economic oppor- male and female literacy levels in Bangladesh. In tunities and less need to rely on having several chil- Bangladesh just a few decades ago, attending school dren for security. But with lower fertility, more can was an almost unimaginable luxury for most of the be invested in each child in health and education, by poor. The non-formal education programmes of families, by governments, and by NGOs. Thus, the NGOs such as BRAC provide a major contribution to productivity of the next generation is higher. A virtu- this progress, especially in education's early stages ous cycle can take hold as the country passes through (see the case study in Chapter 12). But despite the its demographic transition (see Chapter 6). Looked atdifferently, given the negative relationship between natural resources. But, apparently, natural resources population growth and income per capita growth do not offer an explanation for differing social (see Chapter 6), continuing high fertility augurs rel- performance. atively poorly for Pakistan as we look ahead (though fertility is falling in Pakistan as well). Rather than Fractionalisation simply converging, Bangladesh is actually on a trend William Easterly and Ross Levine propose that to pull ahead of Pakistan as they follow divergent countries with a multitude of social divisions, eth- paths, with greater human capital investment in nic groups, and languages tend to have lower social Bangladesh. The early and strong emphasis on an development and growth rates, although the result effective family planning strategy was an important is largely muted if the regime is democratic (see factor in the progress of Bangladesh. Chapters 2 and 14). It is essential to note that the Finally, it should also be mentioned that aside problem with such "fractionalisation" is a global from a few city-states, Bangladesh is the most average, for which there are important exceptions densely populated country in the world. For per- that offer lessons on how to improve conditions spective, the Netherlands is famous for its crowding elsewhere. For example, Mauritius is very diverse and has 509 people per square kilometre (km ). But but has experienced successful development; India Bangladesh is more than twice as densely populated, is diverse but has done better than either Pakistan or with 1,265 people per km-(Pakistan has 256 per km'). Bangladesh. Nonetheless, Bangladesh is quite homo- Bangladesh has more than half the population of geneous; as much as 98% of the population is consid the United States, living in an area less than the size ered ethnic Bangla (Bengali) and speaks the Bangla of Wisconsin. (A partial countervailing factor is the language. Pakistan has a very high level of ethnic greater ease of connecting people and economic and language diversity. Even its name derives from activity, facilitating the benefits of the division of a compound of the first initials of three of its major labour, for example; see Chapter 7.) provinces or regions: Punjab, Afghanistan, Kashmir. Other distinct areas include Baluchistan. Pakistan's Geography official language is Urdu, but it is spoken as a first To the degree that geography constrains develop- language by only 7% of the population (the largest ment success, Bangladesh would seem to be at a language group is Punjabi, at 48%). The failure to considerable disadvantage. Tropical and sub-tropical provide a fair allocation of revenues and services countries such as Bangladesh have done more and resolve other issues for one of the largest ethnic poorly around the world, other things being equal. groups, the Bangla, led to the division of Bangladesh Pakistan, though facing some geographic disad- from Pakistan in the first place. Easterly concludes vantages, including difficult-to-reach mountainous that part of the cause of Pakistan's "fractionalism lies areas, would seem to hold the edge here. in ethnolinguistic fractionalisation" and argues that "Pakistan is the poster child for the hypothesis that a Natural Resources Not an Explanation society polarised by class, gender, and ethnic group The most commonly cited other examples of coun- does poorly at providing public services." tries exhibiting "growth without development" are the Middle Eastern oil-exporting economies of the Gender Equality Persian Gulf states. Elites contest control of natural As already seen, today in Bangladesh, more girls resources, an enclave economy develops with rela- than boys are enrolled in education, while in tively few strong links to other sectors of the econ- Pakistan, the enrolment level of girls is less than omy, and social spending is crowded out by national three-quarters that of boys. But both countries defence expenditures-nominally to ward off exter- have a male-to-female ratio of 1.05, an indicator nal attack, but at least implicitly also to control the of gender inequality (higher mortality of girls and domestic population. In contrast, Pakistan has min- selective abortion). The availability of opportuni- imal oil reserves, has to import about four-fifths of ties for work outside the home, notably in garment its crude oil requirements, and may have to begin factories, has probably increased the autonomy of importing natural gas. Bangladesh has even fewer women. Improved safety is the most urgent priority.Conditions are harsh in inner ways by htstem stand- li'trtisIr and many workers are paid below the ofcial minimum wage: unions are often suppressed. At the same time. incomes are still far higher than alter- natives such as domestic work. in which women are often abused; and the factory jobs have offered a way out for hundreds of thousands of formerly impoverished Bangladeshi women. Ongoing risks facing women factory workers were brought into public view with a factory Fire that killed 112 people in November 2012. and a building collapse in April 211113 that killed 1.12? peoplethe most deadly gan merit factory disaster In history. More than half of those killed were women: some of their children also died in the buildings. The factory owners knowingly subjected garment workers to risky factory condi- tions; sustained government. union. and civil society action will be needed to help ensure that safety can be instituted to avoid other needless deaths. Rather than simply treating this as a public relations disaster and shifting contracts to other countries. in 3113 a group of major European retailers set up an "Accord.\" and a grouping of North American retailers set up an "initiative." to set standards and monitor work- places proriucing their contract garmant orders. {if the two programmes. the European Accord was viewed by many civil society and union observers as beirtg more legally binding than the North Ameri- can initiativeand hence more effective (us retailers claim this is because they could face lawsuit risks}. As mentioned earlier. there remains a long way to go. as many subcontractors are not even monitored or identified. BRAC University in Dhaka [affiliated with the famous Bangladesh N60} is engaged in a project to fully identify this industry. in any case. Bangla- deshi workers would benefit from enhanced cooperv ation and coordination between these two alliances. Meanwhile. conditions do not seem to be much. if any. better in Pakistan; for esaruple. in less-publicised incidents. more than ass garment workers died in factory res in Pakistan in September 212. Foreign Aid Pakistan has received a great deal of aid. Since inde- pendence in 194?. it hasbeen oneof thetup aidrreceiving countries. in the aftermath of the terrorist attacks on the United States oneptember 11.3111. Pakistan assumed great importance as a strategic ally of the United States in the struggle against terrorism. Sanctions were lifted. and various toms of aid were greatiy increased. The country was also a major Cold War ally of the United States. but the poor seemed to derive little benet from that associatim't. Bangladesh also received considerable aid. Effecdveness in the use of aid may be ImportantI particularly the active involvement of effeCtive N005 in Bangladesh. which received directly a significant portion of aid from some sources. The major indige- nous HGDs and similar groups in Bangladesh placed a central emphasis on empowerment of women. and the impacts are generally viewed as having been very strong. Govemnnce, Entrenched Elites. and the Role of the Military The military has always played a prominent role in Pakistan. and from 1999 to sees the nation was gov+ erned by a military ruler. General Pervea Musharraf. Pakistan's long-standing rivalry with india and tar- ritorial dispute with It over Kashmir since 194? have diverted resources as well as government attention from social priorities while reinforcing the influence of the military. The conicts in northwest Pakistan and neighboring Afghanistan aim emphasise a mili- tary role. {in the other hand. in a heartening sign that democracy is taking firmer root. the May 2MB elecr tions were widely considered fair and represented the first time that Pakistan has seen a civilian transfer of power after successful completion of a full term in office of a democratically elected government. Although the military was very active in Bangladeshi politics for nearly two decades after independence in 195'1. the military's relative withdrawal from poli- tics and government after was probably has been a factor in the country's subsequent progress Military involvement as the backer of a caretaker government in Bangladesh in kill]? and EMS was widely viewed as relatively benign. and the country returned to elected civilian rule in arms. but political polarisa- tion and violence escalated dangerously in late 11113 and early IBM. In the ears elections. one of the two major parties [the BNP} boycotted the election. after which the ruling Awami League party took decisive control. Neither country has been particularly trans- parent or free from corruption. in fact. in its 201? Corruption Perceptions index. Transparency inter- national gave poor scores to both countries. with 32 for Pakistan and an even worse 23 for Bangladesh l[out of a possible Hill}. Crony capitalism is a major ' "-'--' l-' Ile*"ra " .. ._|._,_. problem in Pakistan, but is also a serious concern in Bangladesh. Pakistan elected a new government in Edit! on an anti-corruption platform, and has begun new, if small-scale, poverty alleviation programmes. The new president was elected with high hopes, taut with awareness that elites are so entrenched that it is difficult to achieve transfer-motive changes. cos Society When both government and the private sector have serious weaknesses, there is a special need for civil society or "citizen sector,\" including nongovern- mental organisations [NGDs], also called nonprofit organisations. Here the difference is dramatic. Bang- ladesh has one of the most vibrant NGCI sectors in the world, the most highly developed in Asia. This will be explored in detail in the end-of-chapter case study in Chapter 11, where different approaches of NGs to poverty action in Bangladesh will be dis- cussed in the cases of Elliot: and of the Gramcen Bank. An indicator of how far Bangladesh has comeboth its economy and civil societyis the way it handled the Rohingya refugee crisis after rooms Muslims ed from atrocities and persecu- tion in Myanmar {Burma} by 2013. If a larger NED sector could be developed in Pakistan. perhaps led by the many educated Pakistanis living in the United Kingdom, the United States, and |lilanada, it might play a similar catalysing role. lshrat Husain proposed that Pakistan has experi- enced an "elitist growth model," which he identied as combining a powerful leader or succession of lead- ers operating without checks and balances, a bu reau- cratic class that unquestioningly implements the wishes of the leader, and a passive and subservient population. He argued that "failure of governance and the consistent domination of political power and state apparatus by a narrowly based elite seeking to advance private and family interesbr to the exclusion of the majority of the population lies at the root of the problem." Husain showed that Pakistan has exhib- ited these characteristics since independence and points out that "this combination of strong autocrac leaders, at pliant bureaucracy, and a subservient pop- ulation made it possible for the benets of growth to be unequally distributed and concentrated.\" He concluded that "the ruling elites found it convenient to perpetuate low literacy rates. The lower the pro- portion of literate people, the lower the probability that the ruling elite could be replaced." Doe reason is that, while education for girls as well as boys is a boon for development as a whole, it is not necessarily in the economic and political interests of some of the elites in powerful positions, especially at the local or regional level. The dominance of large landowners over tenants in the social, political, and economic spheres is all too apparent in rural Pakistan. With education, as some landlords and business operators well know, workers, especially women, may finally demand that laws that are in place to protoct them be enforced. it is sometimes in the owners\" interest to see that this does not happen. Concluding Remarks The differences in social develop them in Bang- ladesh and Pakistan are not as overwhelming as would be found in a comparison with Sri Lanka, which has had favourable human development statistics for its low-income level despite enduring civil conflict, or even as dramatic as found between low-income states in india, such as the relatively high human development state of Kerala and the low-development state of Bihar. But Pakistan's growth has been higher than many countries that have made much greater social improvements and have done much better with available aid. The alter- native interpretation of Pakistan's experience is that economic growth is, after all, possible even without high investment in health and education. But the long-term trends are for slower growth in Pakistan and higher growth in Bangladesh, making this inter- pretation simply untenable. As Easterly conjectured, some \"development and growth was attainable with a skilled managerial elite and unskilled workers, but over time this strategy ran into diminishing returns, as human capital did not grow at the same rate as the other factors. . . " The current development levels of these two countries are not dramatically different. But this itself is the dramatic finding, given the wide dispan ity when the countries separated in 19131. Source: Easterly, W. [1003}, 'The political economy of growth without development: A case study of Pakistan,I in Dani Rodrik {ed}, in Search of Prosperity: Ana- lytic Narratives on Economic Growth, Princeton, N.].: Princeton University Press