Bangladesh Economic performance:

Source:ADB

GDP growth in fiscal year (FY)2001 (ending 30 June) is estimated at 5.2%, lower than

the 5.9% growth rate achieved in FY2000. This relatively robust growth was due to a

bumper crop in agriculture and growth in the industry sector of 7.2%, higher than the

6.2% growth achieved in FY2000. Growth in the services sector in FY2001 was 5.4%,

against 5.5% in FY2000. Inflation, as measured by the CPI, declined to 1.6% in FY2001

from 3.4% in FY2000, mainly due to depressed food prices. Government revenue

increased to 9.6% of GDP in FY2001, compared with 8.5% in FY2000 as a result of

improved tax collection, increased imports, and a new compulsory preshipment

inspection system. However, the budget deficit remained high at 6.1% of GDP due to a

surge in expenditures. Exports, mainly garments and knitwear, grew by 12.4% in

FY2001, compared with 8.2% the previous year. However, the current account deficit

increased to 2.1% of GDP compared with 1% in FY2000, following a surge in imports

and a decline in private current transfers, including remittances. Foreign exchange

reserves declined to $1.3 billion or 1.7 months of imports at the end of FY2001,

compared with $1.6 billion at the end of FY2000. Because the domestic garment industry

and overseas job markets—which have absorbed a large proportion of the population

entering the labor market during the last 2 decades—have become saturated, Bangladesh

faces the challenge of absorbing 2 million labor force entrants annually, as well as

addressing large-scale underemployment.The country emphasizes on accelerated

economic and social development of its people. The government lays more stress on

private investment, massive development programs and involving NGOs in development

activities to benefit the rural poor. The country is following the framework of guided

economic development through Five Year Plan (FYP) since its independence in 1971.

The structure of the economy is improving with each FYP. The realized growth rates

from first FYP to fourth FYP (1990-95) have been around 4% against targets of 5%. The

current fifth FYP (1997-2002) has set the target of 7% growth, envisages greater role of

private sector, and allocates largest (16.46%) share to agriculture sector. The past low

growth rates of GDP of Bangladesh are attributed to almost stagnant agriculture

productivity and exponential growth of human population.

The contribution of the forestry sector to GDP is small (2.32%) but is very important for

rural people and environment. This percentage does not reflect the true importance of the

forestry sector due to the non-valuation of many of its non-marketed goods and services.

The share of sectors other than "agriculture" are slowly increasing (Table 34 at

Appendix). However, the agriculture sector continues to make the maximum contribution

to the GDP (Fig. 19) even when it is being pulled down by the other sectors.

The national accounts (1984 prices) show (Fig. 3.5) lot of temporal variation in the growth rate of contribution to GDP by different sectors and sub-sectors (Table 35 at Appendix). The revival of economy since 1998 may exert more pressure on forests in terms of production (timber etc.) and on environment (Fig. 20).

Fig: Growth rates of contribution to GDP

The trend of growth rate of contribution to GDP by forestry sub sector (Table 35 at Appendix) is just apposite of "agricultural crop" sub-sector (Fig. 21).

Fig:Growth rates for Crops, Fishery, Livestock and Forestry

The sectors contributing in Bangladesh economy:

Agricultural sector of Bangladesh:

Agricultural activities dominate the national economy and account for 38% of gross

domestic product (GDP). The scarce land resource is subjected to continuously increasing

pressure by a growing population. Considering the size of the agricultural population, the

availability of arable land per capita is less than 0.1 hectares. This level of population

pressure has made it difficult to make landuse allocations based on land capability.

Farm Size and Farming Intensity - Farm land distribution is quite skewed, average

property size is about 0.8 hectares. This average, however, camouflages great unevenness

in land distribution. About 40% of the rural population is classified as landless. Small

groups of affluent land owners hold land much in excess of their family needs. Some of

this excess lands is share cropped by landless labourers. In the case of small and medium

land holders, fragmentation of land holdings is increasing alarmingly and impedes

efficient utilization.

1983-84 official data indicate that 57% of the total number of rural households is landless

and more than 50% of their income comes from non-farm activities. Therefore, economic

development and poverty alleviation must focus on increasing intensity of farming and on

increasing non-agricultural income. Forestry could play a much more important role.

Bangladesh land use distribution

Garment Industry in Bangladesh:

Garment Industry Large-scale production of organized factories is a relatively new

phenomenon in Bangladesh. The sector rapidly attained high importance in terms of

employment, foreign exchange earnings and its contribution to GDP. In 1999, the

industry employed directly more than 1.4 million workers, about 80% of whom were

female. In 1983-84, Garment exports earned only $0.9 billion, which was 3.89% of the

total export earnings of Bangladesh. In 1998-99, the export earnings of the Garment

sector were $5.51 billion, which was 75.67% of the total export earnings of the country.

The garment industry of Bangladesh has been the key export division and a main source

of foreign exchange for the last 25 years. At present, the country generates about $5

billion worth of products each year by exporting garment. The industry provides

employment to about 3 million workers of whom 90% are women.

However, the workers are facing many problems. Most workers come from low income

families. Low wage of workers and their compliancy have enabled the industry to

compete with the world market. Even though trade unionization is banned inside the

Export processing Zones (EPZ), the working environment is better than that of the

majority of garment industry that operates outside the EPZs. But, pressure from buyers to

abide by labor codes has enabled factories to maintain satisfactory working conditions in

recent times, garment workers have protested against their low wages. The first’s protests

broke out in 2006, and since then, there have been periodic protests by the workers. This

has forced the government to increase minimum wages of workers.

Spinning & Textile Industry in Bangladesh:

Spinning is the first stage of the four major processes of the textile industry. At present,

there are 118 spinning mills in the country of which 30 units are under the public sector

and remaining 88 units are under the private sector. The important problems of the

spinning sub-sector are obsolete technology (about 45 spinning mills are aged more than

25 years), frequent failure of electricity supply, scarcity of raw materials and high import

duty on raw materials and spares, high percentage of wastage, lack of proper maintenance

of machinery and slow progress of privatization of public textile mills.

Leather Industry:

Bangladesh is capable of producing 180 million square feet of leather per year. The

Bangladeshi leather remains one of quality. There exist a number of leather industries in

Bangladesh far above the standard of cottage industry. More than 80% of the country’s

annual production is exported throughout the world. The products manufactured can

either be finished or semi-finished such as gloves, sports shoes, bags/accessories,

suitcases etc.

The country counts on 25 shoe industries being able to produce in large quantity and

another 2500 small units throughout the country.

The local leather industries export their products to 53 countries across the world, and the

declared profits in 2002-2003 were $230 million.

Jute Industry: 

AT the time of every budget, proposals are floated for addressing the problems of the jute

sector. Many arguments are advanced for assisting the jute sector. The main thrust of this

proposal is on providing financial assistance to the jute sector. It is forcefully pointed out

that given the government assistance, the jute sector can stand on its on legs.

It is said that 30% loss of the jute sector is caused by power shortage and another 30% is

attributed to interest charges. Jute sector itself is responsible only for another 30% of the

losses. This is nice arithmetic. Readymade garments, ceramics, cement and many other

sectors are operating profitably inspite of power problem and high interest rate. It is

argued that coordinated initiative can solve the problem of the jute sector. But the details

of this initiative are not known.

It is true that jute industry is associated with livelihood of many people. Even if these

mills are closed, the government will have to pay to many agencies. But this will be one

time payment. Public sector jute mills are assisted by the government and no assistance is

available to the private sectors mills. Farmers lost interest in jute for not getting fair price.

There was a minimum price of jute in the past but now it is not enforced because of open

market economy policy. Bangladesh Jute Mills Corporation (BJMC) can not buy jute in

July for lack of money which becomes available in September / October. Farmers got

good prices during the last two years. It is time that India is getting the market for jute

goods and Bangladesh is losing. This is because India is competitive. Environment

friendly products are wanted by international buyers but we do not have enough research

and capability to produce such goods.

In order to have a balanced jute policy public sector mills may be privatised. This will

eliminate the loss of the government. There is no chance of improving the operational

efficiency of public sector mills. The government can adopt a uniform policy for the

private sector if all the jute mills are in the private sector.

During Pakistan time, it was argued that the then West Pakistan was being developed

with the earnings of jute products but where the money is going now. India is successful

in the jute sector but Bangladesh is unable to do the same. We may have feelings for the

jute sector but this will not help us to become competitive and without this there is no

future for jute industry.

Donors are blamed for the failure of the jute sector. This is a political statement. Donors

are not imposing jute policy on the government. In a recent seminar the following

proposals were made:

(i) to waive the interest charges of public sector jute mills, (ii) to re-open the closed mills,

(iii) to pay the due of the workers, (iv) to release money to buy raw jute, (v) to reduce

power shortage, (vi) to produce geo-textiles, (vii) to set up modern jute mills, (viii) to

nationalise the privatised jute mills and (ix) to provide assistance for jute farming and

diversification of jute products. These are all good proposals. But who will bear the cost

of implementing these proposals.

A left-oriented politician has suggested for an allocation of Tk. 3.0 billion (300 crores)

for the jute sector in the coming budget. He also said that the money spent on the closure

of Adamjee jute mills could have been utilised for making the mill viable. He did not

realise that a financial disaster was averted by closing down the Adamjee Jute Mills.

According to him, bonus voucher was given to jute goods exporters in Pakistan for

making the mills profitable. This was abolished after independence. The government may

examine the reintroduction of bonus voucher. But the amount of bonus voucher may not

be adequate to recover losses. It is alleged that there is a conspiracy to destroy the jute

sector.

It is argued that jute is part of our culture. The excuse given for loss-making jute mills is

not acceptable. But this is an emotional statement and is far from reality. Adamjee area

has been converted into an Export Processing Zone (EPZ) and a number of industrial

units are already under implementation. New jobs will be created in the Adamjee area.

The allocation of Taka 3.0 billion was proposed to purchase raw jute, spares, fuel and

other material for production. If the government is convinced about revival of the jute

sector, then only they should make this allocation. Without addressing the jute sector as a

whole, this money will go into the black hole. It has been proposed to set up a jute

commission to deal with the entire situation. I think no commission is called for. The

government has enough information for taking decision. It must take a hard decision once

for all about the jute sector. The caretaker government is in the best position to take such

a decision. Piecemeal allocation of money will go down the drain.

The government has not made any allocation for jute sector in the budget. This decision

was taken perhaps on the basis of the fact that there is no viable project in the jute sector.

Private sector may consider funding viable jute diversification projects.

Table Growth of jute industry in Bengal, 1879-1939

Year Mills Looms Spindles Employment

1879-80 22 5,000 71,000 27,000

1900-01 36 16,100 331,400 114,800

1920-21 77 41,600 869,900 288,400

1938-39 110 69,000 13,70,000 299,000

Sugar Industry:

Sugar Industry From time immemorial places in and around Bangladesh has been

growing SUGARCANE for making GUD or sucker or khandeswari. Such sweeteners are also

produced from date and palm juice. Bengal was well known for quality sugar in the 16th

century. The EAST INDIA COMPANY exported large quantities of sugar from Bengal every

year

In the 1980s, the industry employed 15% of the labor force and had 30% of the fixed

assets of the food industry as a whole. With 1.5% of world production, Bangladesh

ranked 67th among the 130 sugar producing nations. In 2000, the country had 15 sugar

mills at Panchagarh, Thakurgaon, Setabganj, Rangpur, Shyampur, Rajshahi,

Mahimaganj, Jaipurhat, Darshana, Kushtia, Mobarakganj, Jamalpur, Kaliachapra,

Narsingdi, and Pabna. The estimated total annual production capacity of these mills was

about 215,000 tons but the mills did not work in full capacity and, therefore, the

production remained far less than the country's total estimated annual demand of about

400,000 tons. A major reason for the mills to work below full capacity is the shortage of

cane as farmers often find it more rewarding to use land for production of Rabi and kharif

crops.

Tea Industry:

Tea Industry was pioneered in the 19th century by the British planters. Later, some Indian

entrepreneurs purchased tea gardens from their European owners. Indian entrepreneurs

also came forward to develop new plantations

Tea industry of the country faces serious problems and the economic condition of about

80 gardens is critical. In the 1980s, some 40 gardens became sick and their workers

became 'surplus'. Sick tea gardens now number at about 48. Some have large overdue

loans of BANGLADESH KRISHI BANK and do not have adequate funds or earnings to repay

or service the debt. Average tea production in sick gardens per hectare is 274 kg,

compared to the national average of more than 1100 kg. Irregular power supply is also a

major cause of production loss. The tea sector contributes about 0.8% of the GDP in

Bangladesh. About 0.15 million people are directly employed in the tea industry, which

constitutes about 3.3 percent of the country's total employment. Many more people are

indirectly employed in other sectors related to tea.

Bangladesh ranks tenth among the ten largest tea-producing and exporting countries in

the world. In the year 2000, the country’s tea production was 1.80% of the 2,939.91

million kg produced worldwide.

Handloom Industry:

The handloom industry plays an important role in the economy of Bangladesh. It is the

second largest source of rural employment next only to agriculture. About 50 lakh people

are directly or indirectly engaged in this industry. The handloom industry accounts for

about 60 percent of the total fabric production of the country. As per the World Bank

Report of 1991, production capacity of handloom is 105.50 crore meters, but due to

various reasons actual production level ranges between 55-60 crore meters per annum.

Sericulture & Silk Industry:

Sericulture exists in wide areas in Bangladesh, particularly in the North-Western region.

About 4000 hectares of land is now under mulberry cultivation. Nearly 29,000

households having population of 1, 50,000 are engaged in it. Women of the low income

group in the village form a significant portion of manpower engaged sericulture.

This sub-sector is labor-intensive and its value addition is high. In spite of its enormous

prospect, production of cocoons, yarn and finished fabrics in this sub-sector did not

exceed 8, 00,000 kg. 39,000 kg. And 6, 47,000 meters respectively duty to various

problems. Since Bangladesh is capable of producing quality silk, the proper development

of this sub-sector in order to cater to the vast international market, has now become very

important.

Tourism Industry:

“Bangladesh tourism industry and its market have failed to grow properly not merely

because it lacks enough attractions. Its tourism appears to have suffered mostly due to

inadequate infrastructure, insufficient facilities at the destinations, and inaccessibility to

the destinations by road, rail and air transports.” Bangladesh also suffers from an image

problem. Many foreigners still know Bangladesh as country of poverty, beggars, floods,

and political unrest. Besides, the main providers of tourism services in Bangladesh like

Bangladesh Parjatan Corporation and other private sector tour operators lack in

marketing orientation in their business activities. Almost 60% of foreign tourist arrivals

are for business or official purposes, and the number of leisure tourist arrivals is

insignificant.

Foreign Investment:

The melancholy performance of the manufacturing sector is partly explained by the state

of foreign investment in the country. The net foreign investment, including foreign direct

investment (FDI), portfolio investment and foreign investments in the Export Processing

Zones (EPZs), registered as jump in FY98 recording a net flow of $ 320.82 million. This

measure took into account cash flow through bank channels as well as investments in the

form of equipment brought in, particularly in the energy sector. The figures obtained

(using the same estimation technique) recorded a fall in the flow to $ 262.61 and $ 228.68

during FY99 and FY00 respectively.

While the anarchic state of affairs in portfolio investment may be partly blamed for the

emerging situation, it is also true that there had been slowdown in the flow of FDI during

the last two years. The net FDI figures for FY98, FY99 and FY00 were $ 273 million, $

200 million and $ 184.4 million respectively.

These estimates clearly contradicts the periodic claims made by the Board of Investment

(BOI) about billions of dollars of FDI being invested in Bangladesh. The BOI has

historically tended to confuse the registered intention of investors to invest with actual

realisation of this investment.

However, one of the most worrisome developments in the foreign investment scenario

relates to the EPZs. FDI (including local investments in joint-ventures) in the EPZs in

FY00 had almost been half (about $ 35 million) of that recorded in FY99 ($ 70.6

million). The corresponding figure for the first quarter of FY01 is only $ 7.84 million.

One is inclined to believe that the prospect of introduction of traditional trade union

activities in the Bangladesh EPZs has already started to take its toll.

Import:

After, a long spell of sluggish import growth (6.6% and 4.8% in FY99 and FY00

respectively), imports seem to be picking up in FY01. Statement on opening and

settlement of letters of credit (L/Cs) during July-September, 2000 indicates an import

growth (in dollar term) of 22.2% and 25.9% over the matching figures for FY00.

However, one should not miss the strengths and weaknesses of the emerging import

composition while analysis the recent trends in import scenario.

Regarding the strengths, one may observe (as per opening of new L/Cs) the fall in

foodgrain import (by more than 45%) and increase in imports of capital machinery (more

than 52%) and “other machineries” (more than 76%). Perceptible upswing is also

observed in case of imports of intermediate goods (12.7%) and industrial raw materials

(10.4%).

The evolving pattern of imports is corroborated by the disbursement figures relating to

both term loans and industrial working capital loans which increased by 22.3% and

35.1% respectively during FY00. (Information on industrial credit disbursement for the

first quarter of FY01 was not available.)

The major weakness of the import composition relates to increase in payments by more

than 81.4% (as per fresh opening of L/Cs) on account of import of petroleum and

petroleum products subsequent to price like in the world market. Needless to mention,

given its strategic nature, the government will have to continue underwriting the import

demand of petroleum and its products, irrespective of global prices.

Whatsoever, the upsurge in imports during the first quarter of FY01 by more than 20%

has also given rise to a number of concerns. The first relates to the prospect of over-

invoicing of the imports as a conduit of capital transfer. If that really be the case, then one

is dealing with a phenomenon of “investment illusion” driven by over-priced imports.

Secondly, real imports or not, the current surge in import payments is definitely creating

a debilitating pressure on the foreign exchange reserve situation. Under the circumstances

the enhancing the inflow of foreign exchanges to the will increasingly gain in priority in

the coming months.

Exports:

During FY99 exports stood at $ 5312.86 million which grew to $ 5752.20 million in

FY00 showing an increase of 8.27%. Thankfully, in the face of robust import surge, the

growth in exports during July-September 2000 had been also impressive. During the said

period, the export target was overachieved by 10.6%, recording a growth of 25.4% over

the corresponding figure for FY00.

An analysis of the export basket reveals that apart from raw jute and jute goods, almost

all other items have registered an increase in export value during the first quarter of

FY01. While the case of tea (105%) is to be particularly noted, the recovery of frozen

food (54.6%) is also spectacular. More importantly, after a long recess, the woven-RMG

has recorded an impressive growth (20.5%) along with RMG knitwear and hosiery

(31.2%).

Foreign Remittances:

During the last couple of years, the current account balance of the economy has enjoyed

increasing flow of private transfers, particularly in the form of remittances by migrant

workers. In FY00 the country received, $ 1.95 billion on account of workers’ remittances

which was about 14.2% higher than matching figure for the preceding year.

Initial figures on FY01 indicate that a total amount of $ 460 million has been remitted by

the migrant workers during July-September 2000. This amount is 8.5% more than that of

the corresponding figure for FY00. However, one notices from the monthly data, a

declaration in the rate of growth of foreign remittances. For example, from the year

closing monthly figure of $ 196 million in FY00, the flow has subsequently declined to $

165 million, $ 148 million and $ 147 million during July, August and September

respectively.

Some Other Sectors:

Shipbuilders may change Bangladesh   economy :

Shipbuilding, which is a very labor-intensive industry, has the potential for generating a

huge foreign currency and developing extraordinary skills in the field of engineering. Our

country has skilled and semi-skilled professionals as well as necessary ingredients to be a

shipbuilding nation. So the industry holds the potential for transforming Bangladesh into

a middle-income country in near future.

Some private companies are now doing ship building business. Ananda is one of them.

Earlier Ananda exported its first ship Stella Maris to another Danish company at $6

million on May 5, 2008 and six others to the Mozambique government at $6.2 million on

November 13, 2008.

Recently the company sold Stella Moon, at $7.5 million to a Danish buyer. The company

has so far secured export orders for 34 ships at $373.50 million. It has received export

proceeds and advance payments of $48.54 million. Denmark, Germany, Norway and

Mozambique have placed the orders.

This sector can be one of the most foreign currency earnable sectors of Bangladesh.

Crocodile exporting sector:

Recently Bangladesh has started exporting crocodile. A private firm started crocodile

cultivation. The firm launched crocodile cultivation on 15 acres of land at Uthura of

Valuka in Mymensing after bringing 75 salt water reptiles of crocodiles porous species

from Malaysia on Dec 2004 .As a result at present in our country we are able to produce

crocodile. Bangladesh will export the skin, bone, teeth and meat of crocodile from a

commercially run firm. The firm will export 100 crocodiles from the first batch. One

crocodile can be sold up to $ 1500.

The firm wants to grow 15,000 crocodiles by 2015 with export of 5,000 crocodiles a year.

If the firm can export such an amount of crocodile, Bangladesh government will receive a

huge amount of tax .That will help to develop our economy.

Fisheries & livestock sector of Bangladesh:

In recent years, the fisheries and livestock sector has been playing an increasingly

important role in the economy uplift efforts of Bangladesh. It is a labour-intensive and

quick-yielding sector which augments growth and alleviates poverty. Around 1.3 million

people are directly employed in the fisheries sector alone.

The country has immense natural potential for developing the fisheries sub-sector. The

sector contributes 3.3% of the GDP and 10.33% of the agriculture sector. The sector

includes open water bodies such as rivers, canals,lakes, etc. And closed water bodies such

as ponds and flood-control polders totalling 4 million hecteres. Almost 80% of the

country's protein requirement, around 70% of exports in the primary commodity category

and almost 9% of toral exports come from this sub-sector. The sub-sector marked a

continuous annual growth of 8.6% since 1996. This increase is due to both Government

and private initiatives. Fish production increased to over 1 .4 million during 1997-98.

The Government is providing various incentives to the sector like offerings infrastructure,

credit, research and extension facilities. Different NGOs are also undertaking programs to

motivate and train fishermen and thereby raise production. Hatcheries are being set up

through private initiatives. Bangladesh Fisheries Development Corporation is providing

marketing and storage facilities to the fishermen and fish traders.

With an annual growth rate of over 8% since 1993, the contribution of the livestock sub-

sector to GDP and the agriculture sector as a whole is currently 3.2% and 10.11%

respectively. Showing much potential to develop as a commercial sector with

employment and income generating opportunities both in the rural and urban areas. A

large number of enterprises-cattle, poultry and dairy farms have grown in the private

sector in recent years.