When the Bangladesh War of Independence concluded, Bangladesh finally broke free of the shackles of the foreign yoke which had bound the Bangladeshi people to the servitude of the British since 1757, then to the Hindu landlords, and a policy of a majority artificially kept as a minority and treated as such, evident in the reversal of Bengal Partition. If it is to be said that wealth was drained from the Ganges to the Thames, then in the case of Bengal the Ganges was squeezed dry. A drought of wealth created by pocketing of local riches by British bureaucrats led to famine the first of these was in 1770, followed by severe ones in 1783, 1866, 1873, 1892, 1897, and lastly in 1943-44 killing millions. Then after partition, the situation can be best described by the phrase ‘Under new management’.The same continued with local people governed by foreign bureaucrats.
All these injustices have left a deep impact on the Bangladeshi people but it has not hindered their progress, as the people have not let the past define their future.
In 1972 Bangladesh’s nominal GDP was an estimated $6.29 billion for a population of about 70 million but today it has surpassed $416.26 billion with a nominal GDP per capita of $2500, more than both India and Pakistan. Even its GDP has surpassed Pakistan’s by a huge margin, and the gap seems to be growing at an accelerated rate, with some reports speculating Bangladesh to be a trillion dollar economy by 2040.
Now the question arises of how a nation so chained down can fly so high, and even higher than its neighbors.
Firstly Bangladesh and Pakistan are ranked similarly in all major aspects of democracy, such as the rule of law, and accountability of government. And the condition of grand corruption is appalling in both countries, and even other types of corruption are very prevalent in all strata of society. One more requirement of a healthy economy is political stability, which is almost nonexistent in both countries since their respective independences. Stability has been marred by military rule and dynastic politics. However Bangladesh has seemed to improve its political instability over the last decade but it seems to have come at the cost of principles of democracy with the ruling party, Awami League, holding 302 seats out of 350 having virtually no opposition. The situation in Pakistan is also not great, as no government has been able to complete its full term, and with major instances of horse trading, and dynastic politics, the situation doesn’t seem to be improving. However, both countries have a lot to gain from maintaining the illusion of democracy, as it provides them protection from sanctions and also allows them to benefit from lucrative aid and packages from the IMF and World Bank, not to mention foreign investment.
Bangladesh has come a long way since 1971, especially in the sector of food security, from once being called a “basket case”, is now self-sufficient in food, and through effective flood and drought management techniques, it has also prevented frequent and periodical disasters. However, Pakistan has only done the bare minimum to ensure water security and flood and drought, only building dams mandated by Indus Water Treaty, and even those are in disrepair and under capacity due to siltation. This has caused Pakistan to fear dying of thirst at one time and dying of flooding at others. And with India seeking revisions to the treaty, the situation looks increasingly bleak.
In 2021, Agriculture formed 11.63% of Bangladesh’s GDP while 22.6% of Pakistan’s. This is an indicator of the unskilled population difference between Bangladesh and Pakistan. Also, Industry forms 33.32% of Bangladesh’s GDP while only 18.8% of Pakistan’s. This shows that Bangladesh is a manufacturing economy while Pakistan is still a primary sector economy. Both countries have about 50% contribution from the service sector. This means Bangladesh has been successful in industrialization while Pakistan still has a long way to go.
On the topic of Bangladesh’s industrialization, the role of the textile sector is the biggest. It is not only the biggest industry in Bangladesh, but it is also the world’s biggest textile industry. This allows Bangladesh to benefit from economies of scale. It employs 3.5 million people, 80% of whom are women, lifting many out of poverty. It is also Bangladesh’s leading source of export earnings earning almost $35 billion. The most shocking thing is that Bangladesh produces less than 0.2 million cotton bales (1 bale equals roughly 480 pounds) a year against the annual demand for 8.5 million bales, according to official statistics. While Pakistan produced 15 million bales in 2014/1 5. Its textile export only brings in an estimated $10 Billion. Once Pakistan had a burgeoning textile industry but now many have moved to Bangladesh unable to compete internationally while operating in Pakistan mainly due to the energy crisis, and no government incentives or aid, rather the government destroyed the industry by keeping the value of the rupee artificially high to incentivize imports rather than exports.
Islamic banking has also played a major role in the economic development of Bangladesh and allowed religious people the opportunity to take loans for expenditure which creates demand, while also allowing them to invest their savings to get better returns. Even non-religious people are moving towards Islamic banking as there are better returns than conventional banking. This can be seen from Islamic banking having a domestic market share of 28.5% of total industry loans and advances. It is expected by Fitch Rating, the Bangladeshi Islamic finance industry will grow to over USD 58 billion.
One of the most important reasons for the growth of the economy and the reduction of poverty, increasing incomes for many is the availability of micro-finance and micro-credit institutions. Over a period of 2 decades, Microcredit accounted for a 10 percent reduction in rural poverty in Bangladesh over that time—meaning MFIs lifted some 2.5 million Bangladeshis from the ranks of the poor. Today, Bangladesh’s MFIs cover some 32 million members and give out more than $7.2 billion annually. MFIs have allowed agricultural rural households to diversify by providing funds for buying machinery, fertilizer, better seeds, farm animals, etc. While in Pakistan only now have these types of institutions started to have any impact and even that is very minimal. Pakistan can learn from its success in Bangladesh and can also try to invite some institutions to Pakistan.
Also, both governments have established special economic zones called Export Processing Zones (EPZs) to attract investors and promote export industries. These zones have played a key role in Bangladesh's export economy, however, that is not the case in Pakistan as essential infrastructure such as water, and electricity is not available at all or only during certain times of the day.
Both Pakistan and Bangladesh have a growing IT industry employing 600,000 and 300,000 respectively.
Another reason for the strength of the Bangladesh economy is its Trade Surplus which has allowed its foreign reserves to grow which has given it more flexibility while Pakistan is in a huge trade deficit, leading to falling foreign reserves. As the world moves towards a recession Bangladesh still stands strong with $33,747 Million in Foreign Reserves while Pakistan has only $3700 million left as of now.
Pakistan has a literacy rate of only 58% while Bangladesh’s is 74.91%. This is an indicator of a failing education system in Pakistan. This will lead to a huge unskilled population which will be a burden on the economy in the long run coupled with a high birth rate.
The only sector in which Pakistan seems to surpass Bangladesh is Remittances with Pakistan receiving $2.2 Billion and Bangladesh $1.5 Billion in October 2022. But we must not be fooled by these statistics as this is an indicator of major underlying problems such as lack of jobs, fair compensation, discrimination, and mind drain. Also, this is a huge liability rather than an asset for any nation if it is hugely dependent on remittances, as any nation can use the threat of expelling the diaspora.
Both countries continue to face problems such as growing inequality due to economic growth and exploitation of workers and curtailing of their rights. And have a long way to go before achieving the eradication of absolute poverty.
A major reason for such spectacular growth in Bangladesh is the intervention of the government in certain areas such as EPZ and giving full reign to private companies in certain areas. A great implementation of a mixed market economic system, which can be compared with that of China, Singapore, or South Korea.
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