This year, as Bangladesh celebrates the 50th anniversary of its independence, a plethora of writings have attempted to explain its remarkable transformation from a country known for its famines and natural disasters to one of the world’s fastest growing economies. fastest in the world. The stories echo the same themes, namely Bangladesh’s impressive performance on several social indicators, the success of its clothing exports, migrant worker remittances, the spread of microfinance and the remarkable role of NGOs.
The important role of government is lost in these narratives. In some writings the government is the bad guy – Bangladesh’s impressive performance is said to have come “despite the government”. Those who mention the government say the government has helped development by staying on the sidelines, giving NGOs space to provide social services long considered the responsibility of government.
The government has been a major player in the development of Bangladesh since independence in 1971.
But the government has been a major player in Bangladesh’s development journey since independence in 1971. By ignoring this perspective, most narratives about Bangladesh have missed an opportunity to demonstrate how a government, weak in many ways, can nevertheless make strategic contributions over an extended period.
Take, for example, the government’s investment in rural road construction in the late 1980s and 1990s. By the mid 1980s, the country had a good road network connecting medium-sized towns to larger towns. , notably the capital Dhaka and the large port city, Chittagong. However, rural Bangladesh suffered from poor connectivity. Most of the roads connecting the villages with each other, and with the towns, were not paved and were not accessible all year round. This situation changed remarkably in the space of 10 years, from 1988 to 1997, with the construction of so-called feeder roads. In 1988, Bangladesh had about 3,000 kilometers of feeder roads. In 1997, this network extended to 15,500 kilometers. These “last mile” all-season roads have linked the villages of Bangladesh to the rest of the country.
The origins of this transformative road building program can be traced to a 1984 article by the Bangladesh Planning Commission. The document entitled “Strategy for Rural Development Projects” looked at past rural development projects. He concluded that these projects had not achieved their stated goal of reducing rural poverty. The reason: too much emphasis on agricultural growth, ignoring the importance of rural infrastructure. The strategy paper argued that future rural development efforts should also include physical infrastructure such as roads, storage facilities and markets. It helped catalyze the rural road infrastructure program mentioned above.
Something else was brewing at the time, which had a huge impact in rural Bangladesh. After ups and downs in the 1960s, production of rice, the country’s main crop, shifted to a modest, but steady growth path, from 1972. The use of high-yielding varieties of rice (HYV ) introduced in the 1960s, extended. In addition, thanks to irrigation, there has been a significant expansion of rice cultivation during the dry winter months.
When the transformative potential of HYV irrigation and rice was recognized, the government began to liberalize agricultural input markets in the 1980s. It removed some restrictions on the importation of used pumps and small diesel engines. for irrigation and privatized the distribution and importation of fertilizer, a key input for growing HYV rice. While experts recommended bolder reforms, the government initially moved slowly with small, incremental reforms. However, a slowdown in agricultural production in the mid-1980s led to a government review which recommended more substantial reforms. These began in the late 1980s and continued into the early 1990s.
Meanwhile, in the industrial sector, two policy innovations in the mid-1980s — the back-to-back letter of credit and duty drawback facilities across bonded warehouses– removed two major constraints for the country’s nascent garment industry. The first allowed a clothing manufacturer to obtain letters of credit from domestic banks to finance its importation of inputs, by presenting letters of credit from foreign buyers of clothing. The second reimbursed manufacturers for duties paid on imported inputs upon proof that the inputs, stored in bonded warehouses, had been used to manufacture the exports.
These political actions have had a significant economic impact. The long-term trend in crop production shows a major inflection point in the late 1990s and early 2000s. Experts have attributed this to the agricultural input liberalization policies of the 1980s and early 1990s. (see this and this), as well as the rural road construction program (see this and this). Likewise, after modest growth in the early 1980s, clothing exports accelerated considerably from the second half of the 1980s. The transformation policy and public investment actions of the 1980s and 1990s broadened the scope of the economy. horizons of Bangladeshi entrepreneurs, from small farmers to clothing exporters.
The acceleration of clothing exports has helped the country earn valuable foreign exchange and maintain macroeconomic stability. But, because the bulk of the garment workforce was made up of rural women, it also resulted in a huge infusion of funds into rural Bangladesh. This was complemented by remittances from Bangladeshi migrant workers, which have risen sharply since the turn of the century, from $ 1.7 billion in 1997 to over $ 15 billion in 2014. The increase in incomes in rural Bangladesh has also supported the growth of rural non-agricultural activities, which has developed considerably in parallel with agricultural growth.
This history of political action leading to transformative change continued over the following decades. For example, the liberalization of telecommunications from the beginning of the 90s led to mobile phone subscriptions exceeding the size of the population by 2019; a post-2010 power sector program increased power generation capacity from 3,700 megawatts in 2007 to 13,000 megawatts in 2019; and a 2011 regulatory reform the authorization of mobile financial services led to a fifteen-fold increase in the value of mobile money transactions between early 2013 and late 2020.
The government of Bangladesh does not perform well on conventional indicators of transparency or efficiency. And yet successive governments have shown an incredible ability to respond to emerging economic developments with political actions that have triggered transformative change. In many cases, the political actions of liberalizing one administration have served to undo what previous administrations had done years, decades, or even centuries ago. For example, it was the government that assumed responsibility for purchasing and distributing agricultural inputs before independence, and it was the government that abolished this monopoly in the 1980s. Nevertheless, the will of the various administrations to move away from the entrenched policies that they had inherited is commendable.
Some of the Government of Bangladesh’s policy actions have been influenced by development partners through their conditionalities, advice and persuasion, but often not at the speed desired by external actors. This had frustrated the latter and created the image of a government that is slow to reform. However, successive governments in Bangladesh seemed to have been inspired by Frank Sinatra’s immortal song: they chose to do things their own way. There have been no major reforms in Bangladesh, but no serious setbacks either. The approach has been one of gradual reforms, but which deepen steadily. The government has taken some action, seen the market reaction, and taken other action. This approach may not always have been appreciated, but its results are now being recognized.
What can differentiate Bangladesh from many other developing countries is the supply response to policy actions. Such supply-side responses by a variety of economic actors, such as farmers, industrial companies, and traders, in turn, generated demand for new policy actions that were often to come. Such a synergy between the actions of public policies and the entrepreneurial activities of economic actors has been repeated over and over again in recent decades. This is an important, but underestimated, part of the story of Bangladesh’s remarkable development journey.