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Rise of Bangladesh

Ichiro Suzuki It is widely expected that India overtakes China as the most populous country on earth, half way through 2023, and it may have already happened. Whereas not only China but also the entire Far East is facing a real risk of a demographic crisis, South Asia continues to lead the world in population growth along with the Middle East and Africa. While India always receives a spotlight, Bangladesh, the 8th most populous country as a home to 170 million people, also enjoys a population boom. It is a country as young as and growing as fast as India. Its per capita GDP at $2,500 is comparable to that of India’s $2,600. Bangladesh achieved independence in 1971, seceding from Pakistan, which was created on partition of India at the time of independence from Britain right after WWII. Back then, it was one of the world’s poorest countries. The Pakistani government in East Bengal stressed on economic development on local raw materials such as jute, cotton and leather. After flirting with socialist experiments in the 1970s, the Bangladesh government gradually moved toward running its economy on market forces, still holding onto the new country’s traditional industries. In the 1980s, reforms removed major constraints for the country’s fledging garment industry, vastly improving local textile manufactures’ access to financing, creating opportunities for exports. Such a move built a very vibrant private sector, which accounts for 80% of economic output today. Footsteps Bangladesh has taken is essentially a standard process of economic development, which starts with light industries to earn foreign exchanges, employing a large number of young people at factories, taking advantage of abundant labor supply. This is how Japan started its development process in the late 19th century, and this process was followed in the 1970s and the 1980s by what came to be known as the ‘Asian Tigers’ and eventually by China at around the turn of the 21st century. Bangladesh’s textbook development strategy stands in stark contrast to that of the the neighboring India. The newly most populous country on earth has never been known as exporters of textiles and toys. In the 1960s, India subscribed to a development strategy of import substitution that was in vogue among developing countries. Instead of importing steel, electronic appliances, cars and all those things that were essential in running an economy, some large countries, notably Brazil and India, made ambitious efforts to be self-sufficient, rather than draining precious foreign exchange reserves to pay for imports. That strategy appeared to have worked for a time. Shutting down imports from the developed world, domestic manufacturing industries boomed, contributing to high economic growth rates. The fall of Berlin Wall at the end of the 1980s and the dawn of the age of globalization, however, has revealed harsh realities of import substitution. India was capable of producing a wide variety of industrial goods on its own, but found none of them globally competitive and domestic consumers being forced to buy expensive goods of inferior quality. That strategy was based on central planning and its shadows continue to linger in India in the 21st century, with the country’s penchant for regulations and red tapes that are believed to be holding down growth opportunities. In contrast, Bangladesh is more laissez-fair and chaotic. A path for Bangladesh’s garment industry to where they stand today, the second largest textile exporter, has never been smooth. There has been no shortage of stories of young women at factories being abused, having been forced to work in less than acceptable working conditions. (For Bangladesh’s defense, many such horror stories were also heard 100 years ago in what is today the developed world.) Most notable of all, Rana Plaza factory building collapse in April 2013 claimed 1,134 lives, making international headlines. The tragedy didn’t stop the industry from rising. It moved on with tightened safety standards and improved working conditions. In recent years, developed countries’ drive for ESG is also contributing to safer work places. Fierce competition in the industry has enhanced competitiveness of made-in-Bangladesh clothes in the global market, and consumers in the developed world keep loving them. One of the companies that has stuck with Bangladesh was Uniqlo. The Japanese apparel maker kept working with Bangladesh’s textile makers to make the country an integral part of its global supply chain, in response to rising labor costs in China. For Uniqlo, Bangladesh today is not only a major supplier of the clothes they market around the world, but also is a home to its own sustainable brand. Grameen Uniqlo is a joint venture with Grameen Bank and produces and sells clothes unique only in Bangladesh at their 16 stores, and expanding. With an orthodox growth strategy focused on textile exports, Bangladesh is keeping up with India in economic growth. In some measures, Bangladesh’s per capita income has already surpassed that of India, which has been receiving all the buzzes made around the tech industry. From a different perspective, India isn’t richer than Bangladesh despite high income generated in Bangalore. Apple CEO Tim Cook says that India is at tipping point as the world’s most valuable company is pivoting from China. Such well publicized moves into the high-end tech space, however, still fall far short of creating hundreds of thousands of jobs, absorbing only a cream of India’s young workforce. It seems that growth is more evenly distributed in Bangladesh than in India, with factories that employ a vast number of young people, the majority of whom are women. At around 25%, both India and Bangladesh are burdened with a high rate of those who are able to neither read nor write. Among those who are able to do it, more Bangladesh people, in percentage terms, are engaged in jobs away from farmland, whereas almost half the Indian people still work on the land. With 1,147 inhabitants per square kilometers, Bangladesh is most densely populated among the ten most populous countries. Much higher population density than India’s 433 could be one of the major reasons that make the Bangladesh economy less dependent on farmland, driving the country for greater urbanization, especially as opposed to India. The future for Bangladesh looks bright.

About the author: Mr. Suzuki is a retired banking executive based in Tokyo, Japan.


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