Bangladesh has witnessed steep economic growth since its independence, especially in the last two decades, which has invariably resulted in our rising prosperity. But while we should continue to tune up and build on the engines that are driving this growth, we should also consider the speed bumps that lie ahead.
The economic growth we have experienced over the past decade or so has enabled our consumers to consume more and enjoy better standards of living. We have had a strong consumerist culture created over the same period, and digitisation has only accelerated that. After the Covid-19 outbreak, we have witnessed a surge in e-commerce which has crossed urban boundaries and is now sweeping all across the country. Modern logistics companies who cater to e-commerce players primarily have achieved countrywide network coverage to support customers’ needs and are still expanding further towards the interior. The EMI (equated monthly installment) culture has caught on amongst urban young professionals and is being fuelled by their means meeting the ends. Beyond the urban and into the semi-urban and rural areas, we can also see the surge of people going for white goods and consumables. It could only be possible as an impact of their overall income being elevated.
I must note here that a vast majority of producers at the rural level (peasants and growers of food) are still facing an increased challenge of not being given their full dues due to the layers in our supply chain where middlemen are making the gains. This is one challenge that needs to be tackled over the years to come. The ongoing digitisation can be a long-term solution to this as it will essentially enable the growers to get their proper dues through connecting them directly to the customers.
Economic growth also is a proven driver in reducing absolute poverty and enabling a rise in life expectancy. In our case, both have happened. With higher output and positive economic growth, firms tend to employ more workers creating more employment. That has happened in our case, albeit not at the pace we had envisaged. This is another area that needs to be closely looked at by the relevant policymakers, along with actions required to improve the scenario. At the same time, I see a rise of entrepreneurs across the country, in urban, semi-urban and rural areas. Young minds are driven towards becoming entrepreneurs with the purpose of earning better livelihoods.
There is another issue that also needs to be scrutinised. Economic growth ideally creates higher tax revenues, and there is less need for spending money on benefits such as unemployment allowance. Economic growth helps in reducing government borrowing. It also plays a role in reducing debt-to-GDP ratios. Unfortunately, one of the major institutional weaknesses that we have is the tax net and revenue earning for the government. Much effort has gone into improving revenue generation, but it seems that major reforms and a change of mindset among the masses would be required to address this situation.
It is obvious from examples over the years that with higher economic growth, a society can devote more resources to promoting recycling and the use of renewable resources—which, in our case, is also visible despite all the other limitations that we have. The state is also playing a major role here by setting longer-term SDGs and through regular monitoring of those at different levels. We are seeing the change of outlook of entrepreneurs all around the country who are increasingly investing in green facilities. These conversions to green facilities may not have a direct revenue impact vis-à-vis the higher capital expenditure that one needs to incur, but many entrepreneurs are still doing it because they have the capacity and mindset to do so.
High economic growth also leads to increased profitability for firms, enabling more spending on research and development. Also, sustained economic growth increases confidence and encourages firms to take risks and innovate. Today, we are expecting our local pharmaceutical companies to achieve success in their declared quest to successfully launch a home-grown Covid-19 vaccine. I see it as an outcome of economic development.
The economic development that has come with our economic growth has not only improved the lifestyle of a large portion of the population working in agriculture/subsistence farming, but has also diverted the economy with people being able to work in services sector, manufacturing and having a greater choice of lifestyles.
Our economic development has also come with costs. One of the detrimental effects that we have experienced is increased pollution and congestion. At the same time, this has increased unequal distribution of wealth and income. As evidenced in history, growth has primarily benefitted the richest in society. It would perhaps be wrong to state that it has only made the rich richer, but the inequality has given stress to certain socio-economic behaviours of the demography. Corruption has become embedded within different processes and that has also been one enduring characteristic of most developed economies. The intention to curb corruption is what matters, and this is where the state requires to take stern steps before it is too late. Financial scams and other relevant instances must be governed with full attention. We have to take lessons from the past and introduce strong mechanisms of accountability that can offer a long-term solution to this problem.
We must also bear in mind that many developing economies had to forego a couple of decades to have the right norms institutionalised. We are better off than most other South Asian economies with respect to most of the social indexes that matter, and this gives me hope.
To sum up, our robust economic growth has directly and significantly facilitated our economic development. Today, we have an expanded middle class with higher demand to consume; our social index in most of the count has improved; and the private sector has been resilient with consistent growth momentum where the state played a prudent role in providing them with the right infrastructural support given the inherent limitations to combat with. Our young economy with a population of more than 170 million people—consisting of a huge demographic dividend—is a huge asset which must be nurtured and invested in.
We have seen Boston Consulting Group forecasting that middle and upper-middle classes of consumers shall soon attract global retail chains to step in, and that now seems imminent. Where we require to focus more and invest more time and energy is in increasing governance standards across all verticals, and we need to ensure that the benefits are equally distributed amongst all. We have many challenges and a long way to go, but with the right guidance and policy support, this is very much possible. This will ensure the fitness of our growth momentum and take the country to the next level of prosperity.
Rahel Ahmed is an economic and financial industry analyst. His Twitter handle is: @rahelahmed1971.
