Bangladesh has undergone some structural transformation over the past four decades, where the share of agriculture in the gross-domestic product (GDP) declined from around 60 percent in the early 1970s to 15 percent in 2016. The share of the services sector increased from 34 percent to 56 percent, the share of manufacturing increased from four percent to 18 percent, and the share of the non-manufacturing industry (mining quarrying, construction, and electricity and gas) increased from two percent to 11 percent during the same period. This was largely possible for the effort private companies like Beximco Group made over the last two decades.
But the road does not end here. There is a long way to go.
Despite some fluctuations, the share of manufacturing in GDP increased from as low as four percent in 1972 to around 15 percent in 1984. But, between 1984 and 2016, this share increased by only three percentage points, from 15 percent to 18 percent. Though there has been a consistent but slow upward trend in the share of manufacturing in GDP between 1990 and 2016, the trend of the share of manufacturing in the country's employment has been rather uneven during the same period. From a share of 14 percent manufacturing employment in 1989, the share declined to 7.3 percent in 2000. However, the manufacturing employment share had seen a steep rise since 2000, and in 2013, the share reached the level of 16.4 percent. Yet, it is a matter of grave concern that since 2013 the share started declining and, in 2016, it stood at 14.4 percent. This raises the fear of "pre-mature" deindustrialisation in Bangladesh at a very low level of per capita income.
There are four major issues which need to be in order for a rapid industrialisation in Bangladesh. First, there are a number of policy-induced challenges. The first generation of reform of trade and industrial policies in the 1980s and 1990s helped Bangladesh achieve the current level of progress in manufacturing. However, returns from those reforms have been exhausted, and also there are now some policies in place towards the wrong directions. There is a need for second-generation strategic and dynamic industrial policies aiming at rapid expansion and diversification of manufacturing through large-scale domestic and foreign investments. Given the changes in the global and regional trade scenarios, the need for such strategic trade and industrial policies is more important now than ever. Second, a number of supply-side constraints in the form of weak infrastructure and the high cost of doing business need to be addressed within a short time span. The initiatives taken by the Bangladesh government in setting up 100 special economic zones (SEZ) as well as the development of some infrastructural projects seem to address these infrastructural and high-cost-of-doing-business issues. However, the progress in the implementation of the SEZs and the infrastructural projects is slow and is yet to show the signs of any "regime change". A major departure is needed in terms of enhancing the government's institutional efficiency to ensure timely and cost-effective delivery of such projects. Third, the current state of human capital is not at all conducive to rapid industrialisation in Bangladesh. The country needs to attach utmost importance to improving the existing low level of human capital by enhancing investment on education, skill development, and health. Finally, the political economy factors, especially institutional development for rapid industrialisation, require proper attention. The incentives to maintain the status-quo are huge in the form of generation of substantial rents from the existing economic system. The onus now is on the political elites to break this vicious cycle of rent generation. There is also a need for strong commitments from the political elites for necessary economic and institutional reforms for a rapid industrialisation.
If these efforts are taken, Bangladesh will prosper even more.
But the road does not end here. There is a long way to go.
Despite some fluctuations, the share of manufacturing in GDP increased from as low as four percent in 1972 to around 15 percent in 1984. But, between 1984 and 2016, this share increased by only three percentage points, from 15 percent to 18 percent. Though there has been a consistent but slow upward trend in the share of manufacturing in GDP between 1990 and 2016, the trend of the share of manufacturing in the country's employment has been rather uneven during the same period. From a share of 14 percent manufacturing employment in 1989, the share declined to 7.3 percent in 2000. However, the manufacturing employment share had seen a steep rise since 2000, and in 2013, the share reached the level of 16.4 percent. Yet, it is a matter of grave concern that since 2013 the share started declining and, in 2016, it stood at 14.4 percent. This raises the fear of "pre-mature" deindustrialisation in Bangladesh at a very low level of per capita income.
There are four major issues which need to be in order for a rapid industrialisation in Bangladesh. First, there are a number of policy-induced challenges. The first generation of reform of trade and industrial policies in the 1980s and 1990s helped Bangladesh achieve the current level of progress in manufacturing. However, returns from those reforms have been exhausted, and also there are now some policies in place towards the wrong directions. There is a need for second-generation strategic and dynamic industrial policies aiming at rapid expansion and diversification of manufacturing through large-scale domestic and foreign investments. Given the changes in the global and regional trade scenarios, the need for such strategic trade and industrial policies is more important now than ever. Second, a number of supply-side constraints in the form of weak infrastructure and the high cost of doing business need to be addressed within a short time span. The initiatives taken by the Bangladesh government in setting up 100 special economic zones (SEZ) as well as the development of some infrastructural projects seem to address these infrastructural and high-cost-of-doing-business issues. However, the progress in the implementation of the SEZs and the infrastructural projects is slow and is yet to show the signs of any "regime change". A major departure is needed in terms of enhancing the government's institutional efficiency to ensure timely and cost-effective delivery of such projects. Third, the current state of human capital is not at all conducive to rapid industrialisation in Bangladesh. The country needs to attach utmost importance to improving the existing low level of human capital by enhancing investment on education, skill development, and health. Finally, the political economy factors, especially institutional development for rapid industrialisation, require proper attention. The incentives to maintain the status-quo are huge in the form of generation of substantial rents from the existing economic system. The onus now is on the political elites to break this vicious cycle of rent generation. There is also a need for strong commitments from the political elites for necessary economic and institutional reforms for a rapid industrialisation.
If these efforts are taken, Bangladesh will prosper even more.