Transcript Economic Features of Bangladesh

Economic Features of
Bangladesh
Part 1
Spring 2016
Background
• In the past few decades Bangladesh has experienced a
sustained economic growth driven mainly by exports in
the garments sector.
• GDP growth trend:
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3.2% in 1980
4.8% in 1990
5.8% in 2000
6.2% in 2014
• Shift from agriculture towards manufacturing and
services has helped to reduce poverty
– Employment in garments: 12% in 1985 and 24% in 2010
Background
Bangladesh’s Economy in 2015
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44th largest economy in the world
14th highest industrial growth rate
7th largest labor force size in the world
107th in ranking of unemployment rate
167th in the tax collection country ranking
68th largest exporter in the world
64th largest importers
68th highest gold and foreign currency reserve
71st in terms of debt
Figure 1:GDP growth trend
Figure 2: Bangladesh’s position in Asia
Three Major Economic Sectors of
Bangladesh
SECTOR
EXAMPLE
Agriculture
Rice, jute, tea, wheat, sugarcane, potatoes,
tobacco, pulses, oilseeds, spices, fruit; beef,
milk, poultry
Transportation, Telecommunication, Banking,
Real Estate
Jute, cotton, garments, paper, leather,
fertilizer, iron and steel, cement, petroleum
products, tobacco, pharmaceuticals, ceramics,
tea, salt, sugar, edible oils, soap and
detergent, fabricated metal products,
electricity, natural gas
Service
Industry
Figure 3
Economic Sectors: Contribution to GDP
Sector wise GDP in 2011
Country Agriculture
Bangladesh
18
USA
1.2
Malaysia
12
Saudi
2.1
Arabia
India
18.1
Industry
30
22.1
40
67.6
Service
52
76.7
48
30.4
26.3
55.6
Important Economic Features
• Rise of nontraditional industrial export such as
RMG (Figure 3-previous slide)
• Growth of intensive irrigation led agriculture
• Shift in economic governance:
– 1970s style: centralized
– Present: liberal and integrated to rest of the world
• Until 1980 economy was heavily dependent
on international aid but since 1990 it has
gradually moved to export oriented. (Figure 3)
Important Economic Features
• Garment industry has brought changes in the
gender composition of the labor force
• Low level of tax revenue collection
• Extensive money laundering for political
purposes
• Political instability
• Volatility in international markets
Classifying the Economy of
Bangladesh into 3 segments
1. The Formal Economy since 1971: Agriculture, Energy,
Foreign Aid, Economic Governance
2. Bangladesh in the International Economy: The Rise of
Nontraditional export
RMG, Shrimp, Remittance,
Peacekeeping
3. Bangladesh in the International Economy: Global and
Regional Issues:
Energy and Investment, Relations with India, Relations
with China
4. The Blue Economy
1. The Formal Economy since 1971
1.1 Agriculture
1.2 Energy
1.3 Foreign Aid
1.4 Economic Governance
1.1 Agriculture
• Agriculture: consists of four sub-sector
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Crops and Horticulture
Animal husbandry
Forestry
Fisheries
• Rice from Bangladesh accounts 9% of the world’s
production and accounts 10% of the country’s
GDP
• Food security is at the heart of policy and
planning
1.1 Agriculture: SWOT Analysis of
Agriculture Sector in Bangladesh
Strengths
 Favorable climate
 Agricultural research and development
 Available technologies for major crops
 Agricultural network
 Farmers are innovative and adaptive
 Sufficient workforce
 Available irrigation
Weakness
 Weak marketing system
 Loss during harvest
 Lack of agricultural credit access
 Water, fertilizer use efficiency is low
 Low private sector investment
 Weak quality control mechanism
 Lack of academic involvements
 Use of ICT
 Absence of farmers’ training
Opportunities
 Technological know-how is available for
dissemination
 Proper utilization of hilly areas
 Export potential is high
 Scope for crop diversification
 Market for value added product exists
Threats
 Environmental vulnerability
 Declining soil quality
 Declining amount of cultivable land
 Uncertainty in fair prices
 Declining budgetary allocation
 Land transformation
• https://www.youtube.com/watch?v=fvBK122y
nCs
• https://www.youtube.com/watch?v=cIM4dX4
9VxE
1.3 Foreign Aid
• Who are donors?
• Multilateral donors: WB, ADB, IMF, EC and
OECD
• Bilateral Donors: Canada, Germany, the
Netherlands, the UK, and the USA offer tied
aid while Japan, Sweden, and Arab countries
offer untied aid
• Soft vs. hard donors
Grant, Loan, Investment etc.
 Grant is non-repayable funds disbursed by one party (grant makers), often a
government department, corporation, foundation or trust, to a recipient, often a
nonprofit entity.
 loan is a debt evidenced by a note which specifies, among other things, the principal
amount, interest rate, and date of repayment.
 Concessional loan sometimes called a "soft loan," is granted on terms substantially
more generous than market loans either through below-market interest rates, by
grace periods or a combination of both. Such loans may be made by foreign
governments to poor countries
 investment is putting money into an asset with the expectation of capital
appreciation, dividends, and/or interest earnings.
 ODA (official development assistance) Flows of official financing administered with the
promotion of the economic development and welfare of developing countries as the
main objective. By convention, ODA flows comprise contributions of donor
government agencies, at all levels, to developing countries. It is 0.7% of the GNI of
OECD countries.
GREEN CLIMATE FUND
Multilateral
INTERNATIONAL
Institutions
UN Agencies
AF
UNDP
LDCF
SCCF
UNEP
Others MDBs
WB-CIFs
GEF
FAO
NATIONAL/BILATERAL
CTF
ADB
Brazil Amazon Fund
SCF
AfDB
Bangladesh Climate Change
Resilience Fund
Indonesia Climate Change Trust
Fund
EBRD
FIP
EIB
SREP
Yasuni ITT
IDB
PPCR
Guyana REDD
Investment Fund
WB FCPF
Donor
Countries
Dedicated
Bilateral
Initiates
Bilateral
Institutions
Australia
Canada
EU
France
Germany
ICI
IFCI
AusAID
CIDA
Japan
FSF
Norway
ICFI
UK
US
ICF
EU REDDF
FFEM
BMZ
MOFA
Ex-Im
RECP
MIES
GIZ
JBIO
NORAD
CCPO
OPIC
GCCA
AFD
KfW
JICA
ODIN
DFID
USAID
1.3 Foreign Aid
• Types of Aid in Bangladesh:
– Food aid: Cereal imports during food crisis or
during natural calamities
– Commodity aid: Industrial raw materials import,
agricultural imports, pesticides, insecticide and
petroleum.
– Project aid: Specific development projects such as
the construction of roads and highways, irrigation
systems etc.
1.3 Foreign Aid
• After independence, Bangladesh was very
cautious about taking on the commitments
and obligations of foreign aid
• But since 1980, the country was open to
foreign aid
• Per cent of GDP:
– 7.6% of GDP in 1990
– 2% in 2001
• Cause: strict donor conditionality, overall
decline in aid flows
2. Bangladesh in the International
Economy: The Rise of Nontraditional
Exports
2.1 RMG
2.2 Shrimp
2.3 Remittance
2.4Peacekeeping
Economic Features of
Bangladesh
Part 2
Spring 2016
Ekhtekharul Islam
Senior Lecturer, EWU
Remittance: Lecture Outline
• Basics of Remittance
• Remittance flow mechanism in Bangladesh
• Impacts of remittance
• Challenges faced by the migrant workers
(based on the video)
Basics of Remittance
• Definition: Any form of money transfer or
payment done from your working country to
home country.
• Bangladesh is 7th largest remittance receiver in
the world
• Bangladesh is third largest remittance sender
to India (6.6 billion USD)
Let’s talk about some NUMBERS
• There are 232 million migrant workers in the
world
• Higher rate of migration?
– Developing countries to developing countries
OR
– Developing countries to developed countries
• 94% of the migrants move for economic reasons
Think about ….
• Which one is more powerful?
–Foreign aid to developing countries
OR
–Remittance to developing
countries
…………..
• 100 USD to send to home country requires
7.9 USD
• To send 440 billion USD as remittance last
year 32 billion USD was spent ….. Which is
equivalent to 1/3 of the foreign aid
Incoming Remittance in Bangladesh
$14,060,000,000 in remittances were sent to Bangladesh from
other countries in 2012
Outgoing Remittance from Bangladesh
$4,123,000,000 in remittances were sent from Bangladesh to other countries
in 2012
Interactive Map
• http://www.theguardian.com/globaldevelopment/interactive/2013/jan/31/remitta
nces-money-migrants-home-interactive
Types of remittances
Remittance
Domestic
International
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Community remittance
Family remittance
money for community
development activities
Other Types
of Remittance
Migrant worker
remittance
Social remittance
e.g. ideas, practices &
social capital
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Channels to send remittances
Official Channel
• Telegraphic/Bank Transfer
• Western Union
Unofficial Channel
• Hundi
• Relatives and friends
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Remittance flow mechanism
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Sector wise of remittance in
Bangladesh
• Family maintenance (22%)
• Paying loans (13%)
• Purchasing homestead land (6%)
• Purchasing land (14%)
• Market lands (4%)
Impacts of Remittance
Macroeconomic At national level
Types of
Impacts
Microeconomic
At household
level
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Macroeconomic impacts of remittance
• To ease our foreign exchange constraint (BOP)
• Stabilizing the exchange rate
• Allowing Bangladesh to import much needed raw
materials, intermediate goods and capital
equipment along with rapid growth of our export
sector.
• Increased women participation
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Microeconomic impacts of remittance
39
Must Watch Video
• I AM A MIGRANT
• https://www.youtube.com/watch?v=jUOa4H_
e33k
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Videos
• Social remittance:
https://www.youtube.com/watch?v=ZjSxwzbF
wLo
• https://www.youtube.com/watch?v=pENko3Y
hPdc
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RMG
• RMG sector has been central to Bangladesh’s
industrialization process
• Export:
– .64 billion USD in 1990
– 4.86 billion USD in 2001
– 11 billion USD in 2009
• Employment: 2.5 million people, 90% of them
are women
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RMG
• No connection with historical textile
production
• Multi Fibre Arrangement (MFA): MFA was
introduced in 1974 by the developed
countries. It aimed to protect clothing
manufacturers of the developed world from
the cheap clothing materials from emerging
and developing world.
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RMG
• MFA primarily designed to protect European and
North American producers but it also offered
opportunities for developing world.
• Under MFA there was no quota for Bangladesh
whereas assigned quota for South Korean was already
filled. This has led to mass expansion of garments
industry in Bangladesh.
• MFA was ended in 2005. Bangladesh was expected to
suffer the most from the ending of the MFA, as it was
expected to face more competition, particularly
from China. However, this was not the case.
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RMG
• Because, three set of factors have contributed
to the mass expansion:
– Wider external trade environment
– Low wage rate and low cost of infrastructure and
factory space. As for example, Bangladesh’s
garments are 40-100% cheaper than Chinese
counterpart and 30-70% cheaper in US market.
– Trade liberalization through back to back letter of
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credit system