4 February 2020

Bangladesh is on the rise – but progress is not secure


“In 1990 there were 37% of the world’s population in absolute poverty – that is now down to less than 10%.”

At his speech in Greenwich yesterday Boris Johnson was quite right to trumpet the tremendous progress the world has made in the last three decades – a trend that will be familiar to regular readers of this site.

Yet the PM was also right to sound a note of caution. “This beneficial magic is fading,” he warned, as “free trade is being choked”.  “The mercantilists are everywhere…tariffs are being waved around like cudgels” and “the decline in global poverty is beginning to slow”.

A decline in free trade is not the only reason that poverty reduction has slowed, of course. The poorest countries tend to be dictatorships or embroiled in military conflict or both. Would international investors be likely to risk not only their money but even their lives by pitching up in Syria, Zimbabwe, North Korea, or South Sudan?

The presence of such vile regimes, which are often far from receptive to offers of outside assistance, makes tackling extreme poverty in some parts of the world very challenging indeed. At the same time there are other countries – China being the obvious example – where the economics have been liberalised while the politics remain pretty brutal.

Nonetheless, progress is still being made, and in some countries it is pretty dramatic. Let us consider the case of Bangladesh, a country commended last week by the World Bank for its “remarkable” reduction in poverty. It now enjoys an 8% annual growth rate, with a population of 163 million. As the Chinese experience makes so clear, a large population plus a high growth rate means an awful lot of people moving out of grinding poverty and enjoying a better life.

It is a relatively young nation, having gained independence from Pakistan in 1971. That was followed by two decades of miserable socialist rule – an authoritarian period when opposition newspapers were banned and people were trapped in poverty. Natural disasters and refugee crises have been part of its troubled history. It is also a country with which we have close ties – and our own troubled history. There are around 500,000 people of Bangladeshi heritage in the UK, many of whom live in London, most famously in and around Brick Lane.

The economic progress in Bangladesh does not mean the country is some kind of paradise. Far from it. It remains very poor. It also has a regime which abuses human rights. “The Bangladesh government has intensified its crackdown on civil society, media, and critics,” says Human Rights Watch. “Authorities have killed and disappeared members of the political opposition, while failing to protect bloggers, gay rights activists, and religious minorities from violent and often fatal attacks by militant groups.”

Corruption is also endemic, with businesses often forced to make “informal payments” to gain licenses from state agencies. Big infrastructure projects such as the Padma Bridge, a road-rail bridge across the Padma River, have run into funding difficulties due to bribery. All that has a knock-on effect in reducing the opportunities of privatisation to advance competition, efficiency, and innovation as the process becomes discredited as “crony capitalism”.

None of this should be ignored. But nor should the good news. The garment manufacturing industry is the engine of a booming export economy. And though there is still certainly room for improvement in terms of working conditions, the International Labour Organization says there have been “significant gains in safety” since the horrendous Rana Plaza fire of 2013.

The economy is also well structured to promote growth, with a top rate of income tax is 25%. While there is a long way to go on gender equality, more and more women are now entering the labour market, with the rate of labour force participation rising from 26% in 2003 to 36% in 2016. Lifting that figure would go a long way to boosting the country’s overall productivity.

On home ownership there have been positive steps too, with the government recently halving stamp duty on property registration from 3% to 1.5%.

Salman Fazlur Rahman, an adviser to prime minister Sheikh Hasina, credits her with liberalising the economy in two terms, first from 1996 to 2001, and again from 2009 onwards.

“When she first came to power in 1996, she broke the monopoly in the telecommunications industry, paving the way for intense competition between companies. As an obvious consequence, we now enjoy one of the cheapest mobile data and lowest mobile phone usage costs in the world, which, among others, has helped our globally celebrated mobile financial services to flourish. While in power, Sheikh Hasina has opened up many sectors traditionally reserved for the public sector to the private sector, including health, banking, higher education, TV and even export processing and economic zones.”

These “special economic zones” are not dissimilar to the UK’s enterprise zones – duty-free import of raw materials, big tax exemptions, and exemptions from work permits on foreign nationals and other controls. They are administered direct by the Bangladesh Economic Zones Authority – rather than by pesky bribe-seeking local officials. The Heritage Foundation, in its index of Economic Freedom, acknowledges “some progress in streamlining business regulations”.

Social change has been impressive too. On becoming independent in 1971, Bangladesh had a literacy rate of just 17%. It is now 73%. Pakistan’s literacy rate was 23% but has risen only to 57% over the same period. Bangladesh has a high population density – but its population is only growing by 1% a year, half the rate of Pakistan.

How secure is this progress? The economic historian Douglass North is among those to have reflected on the need for stable and sound institutions as the basis for development. It would be a stretch to say Bangladesh has reached that point. Reform of the banking sector is one example of unfinished business.

As Ludwig von Mises told us: “Freedom is indivisible. As soon as one starts to restrict it, one enters upon a decline on which it is difficult to stop.” Economic freedom can not be secure when the rule of law is only erratically upheld or when persecution takes place on the basis of political or religious beliefs.

Yet surely our moral duty, as well as our economic interest, is to develop a closer trading relationship with Bangladesh. Perhaps as we look for new trade deals around the world some of these success stories will get more attention – as we become less Eurocentric and rediscover a more global outlook.

Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.

CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.

Harry Phibbs is a freelance journalist