Bangladesh - iuj.ac.jp€¦ · COUNTRY PROFILE 2001 Bangladesh This Country Profile is a reference...

COUNTRY PROFILE 2001

BangladeshThis Country Profile is a reference work, analysing thecountry’s history, politics, infrastructure and economy. It isupdated annually. The EIU’s quarterly Country Reportsanalyse current trends and provide a two-year forecast.

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EIU Country Profile 2001 © The Economist Intelligence Unit Limited 2001

Comparative economic indicators, 2000

1


Contents

3 Basic data

4 Politics4 Political development7 Constitution, institutions and administration

12 International relations and defence

14 Resources and infrastructure14 Population15 Education16 Health16 Natural resources and the environment17 Transport, communications and the Internet20 Energy provision

24 The economy24 Economic structure25 Economic policy29 Economic performance31 Regional trends

31 Economic sectors31 Agriculture, forestry and fishing34 Mining and semi-processing35 Manufacturing38 Construction38 Financial services41 Other services

41 The external sector41 Trade in goods43 Invisibles and the current account44 Capital flows and foreign debt45 Foreign reserves and the exchange rate

46 Appendices46 Regional organisations47 Sources of information49 Reference tables49 Population49 Labour force49 Energy reserves and production of natural gas50 Transport50 Gross domestic product51 Gross domestic product by expenditure51 Gross domestic product by sector52 Central government finances53 Tax revenue receipts53 Money supply53 Interest rates53 Consumer prices

2


54 Consumer prices (national)54 Consumer price indices (urban and rural)54 Index of nominal wages55 Agricultural crop production55 Production and value of non-energy minerals55 Production and value of selected manufactured items57 Stockmarket indices57 Main exports57 Main imports58 Main trading partners58 Balance of payments, IMF series59 External debt, World Bank estimates59 Remittances from Bangladeshis working abroad60 Net official development assistance60 Foreign reserves60 Exchange rate

Bangladesh 3

© The Economist Intelligence Unit Limited 2001 EIU Country Profile 2001

Bangladesh

Basic data

147,570 sq km

129.2m; male 65.8m, female 63.4m (2001 census)

Population in ‘000 (1991 census)

Dhaka (capital) 12,300a

Chittagong 2,348 Khulna 1,002 Rajshahi 545

a 2000, UN Population Division, World Urbanisation Prospects.

Tropical monsoon

Hottest month, July, 23-35°C (average daily minimum and maximum); coldestmonth, January, 11-28°C; driest months, December and January, 5 mm averagemonthly rainfall; wettest month, July, 567 mm average monthly rainfall

Bengali; Urdu and Hindi are minority languages and English is also used

Imperial system. Local measures include: 1 tola=11.66 g; 1 seer=80 tolas=932 g;1 maund=40 seers=37.29 kg

Numbers are commonly expressed in crores and lakhs; 1 crore=10m, written1,00,00,000; 1 lakh=100,000, written 1,00,000

Taka=100 paisa. Annual average exchange rate in fiscal year 2000/01:Tk53.95:US$1; exchange rate on October 2nd 2001: Tk54:US$1

July 1st-June 30th

6 hours ahead of GMT

January 1st (New Year’s Day), 8th (Eid-ul Fitr); February 21st (Mourning day);March 16th (Feast of Sacrifice), 17th (Birth of Sheikh Mujibur Rahman), 26th(Independence Day); April 6th (Islamic New Year); May 1st (May Day); June15th (Birth of the Prophet); August 15th (Assassination of Sheikh MujiburRahman); November 7th (National Revolution Day); December 16th (NationalDay); religious holidays that depend on lunar sightings and optional holidaysfor different religious groups.

Land area

Population

Main towns

Climate

Weather in Dhaka

Languages

Measures

Currency

Fiscal year

Time

Public holidays in 2000

4 Bangladesh


Politics

Bangladesh has a parliamentary democracy based on universal suffrage. Acabinet led by the prime minister exercises executive power. A four-partyalliance dominated by the Bangladesh Nationalist Party (BNP), led by BegumKhaleda Zia, was elected on October 1st 2001. The Awami League (AL), led bySheikh Hasina Wajed, had ruled for the five years up to July 2001, and acaretaker government had administered Bangladesh in the run-up to thegeneral election. Bangladesh had a presidential form of government before theconstitution was amended in 1991.

Political development

The eastern part of Bengal became part of Pakistan as British rule in Indiaended in 1947. East Pakistan from the beginning had an uneasy relationshipwith the more powerful and richer West Pakistan. Discontent grew, and despitesome concessions from the government in West Pakistan, such as approvingBengali as a joint official language with Urdu, and dividing Pakistan into twowings (East and West) with equal representation in parliament, a secessionistmovement led by Sheikh Mujibur Rahman and the AL gained increasingsupport. In 1970 Sheikh Mujib led the AL to victory in East Pakistan in aparliamentary election and demanded a loose federation of the two parts ofPakistan, in which a central authority would be responsible for foreign affairs,the currency and defence only. Pakistan’s president, General Yahya Khan,refused, compounding the resentment felt in East Pakistan about the lack ofgovernment aid after it had been hit by a severe cyclone and tidal waves a fewmonths earlier. On March 26th 1971 the AL declared independence, havingbegun a non-co-operation movement earlier that month. A full-scale civil warbroke out, which the Bengali freedom fighters eventually won, after the Indianmilitary intervened on their side, on December 16th 1971.

Sheikh Mujib led the AL to an electoral victory in 1973, but the overalleconomic and political situation then deteriorated rapidly. Sheikh Mujibdeclared a state of emergency in late 1974, and in early 1975 became president,assuming dictatorial powers through one-party rule. He was assassinated inAugust 1975 together with several family members. A series of further coupsensued, but by 1997 General Ziaur Rahman had consolidated his power andbecome president. Since then politics has been characterised by continuedarmy intervention and an intense rivalry between the two main parties, the ALand the BNP. Army officers have been prominent in both parties, and periodsof democratic government have alternated with periods of martial law andstrong executive government.

General Zia’s period in power was characterised by improvements in publicorder and economic management. In June 1978 he won the presidentialelection, and in the following year his newly formed party, the BNP, won two-thirds of the seats in parliament. In May 1981, however, General Zia wasassassinated by a group of army officers. In March 1982 the army chief,

Bangladesh winsindependence

Military involvement

Bangladesh 5


General Hossain Mohammad Ershad, took power in a bloodless coup, replacingJustice Abdus Sattar, who had succeeded General Zia.

General Ershad initially attempted to hold parliamentary and presidentialelections to legitimise his position, but major opposition parties refused toparticipate claiming that any elections would be unfair under martial law. InMarch 1985 he banned all political activities and staged a presidential election,in which he declared himself the winner, despite a 5% voter turnout. Hisautocratic rule provoked violent riots, and in 1987 the main opposition groupsbegan an united movement to force him out. Three years of violence followed,during which General Ershad proclaimed a state of emergency and arrestedscores of opposition activists. Opposition strikes and demonstrationsintensified and in December 1990 General Ershad handed over power to acaretaker government, which organised Bangladesh’s first free and fair electionin February 1991. General Ershad and many of his cronies faced charges ofcorruption and the illegal possession of arms. He was sentenced to 13 years’imprisonment in 1991 but was released in January 1997 in recognition of hisparty’s crucial support for the newly elected AL government.

The 1991 election was won by the BNP, led by Begum Zia, the widow ofGeneral Zia. There was initially an uneasy truce in parliament between the ALand the BNP government. But after alleged irregularities by the BNP at a by-election in February 1994, all opposition parties boycotted parliament,demanding that the government resign and a general election be held.Although the government dissolved parliament in late 1995, the oppositionboycotted the general election in February 1996, because Begum Zia hadrefused to step down before the election. The BNP claimed victory in a low-turnout election, but as the violence escalated it was forced to transfer power toa caretaker government.

In the 1996 election, supervised by a caretaker government, the AL, led bySheikh Mujib’s daughter, Sheikh Hasina Wajed, won the largest number ofseats and was able to form a government with crucial support from the JatiyaParty (Ershad). The AL government repealed the Indemnity Ordinance, passedin 1975 to protect the killers of Sheikh Mujib. A trial of some of the accusedbegan in January 1997 and in November 1998 15 former soldiers weresentenced to death, although most of them had already fled the country. Asingle-member High Court Bench confirmed the death sentences of 12 of thesoldiers in May 2001 and the case will be considered by the Supreme Court.

The government of Sheikh Hasina completed its five-year term in July 2001,making way for a caretaker government. The achievements of the governmentincluded reaching an agreement with India on sharing the water of the Gangesriver; reaching a peace treaty with tribal rebels in the Chittagong Hill Tractsthat ended a 20-year-long insurgency; repairing the devastation of the 1998floods; annual average real GDP growth of 5.7% in fiscal years 1996/97-2000/01; and achieving self-sufficiency in food production. But thegovernment of Sheikh Hasina failed to resolve crippling power shortages andto maintain law and order, which deteriorated alarmingly during its tenure.Human-rights groups have also criticised it for using the Public Safety Act (PSA)

The return to democracy

The AL rules in 1996-2001

6 Bangladesh


for political ends, in particular the detention of opposition activists, whileopposition parties have objected to a law that provides life-long protection forSheikh Hasina and another surviving daughter of Sheikh Mujib. Intensepolitical antagonism between the AL and the BNP continued throughout theHasina administration as the BNP, leading a four-party opposition alliance,emulated former AL tactics to undermine political stability, by boycottingparliament and elections under AL rule.

The four-party alliance led by the BNP won by a landslide in the generalelection held on October 1st 2001. According to unofficial results released bythe Election Commission (EC), the BNP-led alliance captured 214 seats out ofthe 298 seats declared in the first week of October, with the BNP alone taking191 seats in the 300-member parliament. The AL, which governed in the fiveyears to July 2001, captured only 63 seats compared with 146 seats in theprevious election held in June 1996. In terms of votes cast, the BNP alliancewon 46.9% and the AL 40.2%. Sheikh Hasina described the election as rigged,claiming that the non-partisan caretaker government, which hadadministered Bangladesh in the run-up to the general election, had conspiredwith the EC to oust the AL. She has, however, so far avoided specifying whataction her party will take. Contrary to Sheikh Hasina’s claim, monitors fromdomestic and international delegations said that polling on election day wasin the main free, fair and peaceful. They called on the AL to accept the resultof the election.

The preceding campaign was not civil, however, and the EU observer missionnoted that the parties’ use of smear campaigning, inflammatory language andbrutal election campaign material had contributed to a heated atmosphere andgreater risk of intensified violence. Around 200 people were killed in thepolitical violence that lasted throughout the campaign and was still continuinga week later. In some localities the election had to be postponed because ofviolence. To try to ensure an orderly environment the caretaker governmenthad deployed around 55,000 soldiers to reinforce the paramilitary and civilianpolice and had ordered the suspension of mobile phone services during pollingto prevent mobile phones from being used to organise attacks. Election daywas only relatively peaceful, with six people killed and violence causing votingto be postponed in 16 constituencies. The campaign was even more violent,with bomb explosions, frequent street fights, intimidation of voters, andaround 150 people killed in political clashes.

Important recent events

February 15th 1996: The Bangladesh Nationalist Party (BNP) governmentwins a landslide victory in the general election, which is boycotted by all of theopposition parties.

June 12th 1996: The Awami League (AL) wins the majority of seats in theparliamentary election forced by the opposition boycott of the Februaryelection and later protests. Sheikh Hasina Wajed leads the first AL governmentsince the murder of her father, Sheikh Mujibur Rahman, in 1975.

The BNP returns to powerin a landslide victory

Bangladesh 7


December 12th 1996: A 30-year agreement is reached with India on thesharing of the waters of the Ganges.

January 6th 1997: The leader of the Jatiya Party (JP), General HossainMohammad Ershad, is released from jail on bail in recognition of his party’scrucial support for the AL government.

December 2nd 1997: A peace treaty between the Chakma rebels in theChittagong Hill Tracts and the AL government is signed, ending a 20-yearinsurgency.

July 15th-September 30th 1998: Bangladesh experiences severe floods thatcause extensive damage across more than two-thirds of its territory.

November 8th 1998: The verdict on the killing of Sheikh Mujib in August1975 is announced in Dhaka. Of the 19 accused, 15 receive death sentences.

January 6th 1999: The main opposition political parties form an allianceunder the leadership of the BNP to drive the AL government from power.

February 15th 2000: Parliament passes the Public Safety Act 2000, whichconfers on the police the discretionary power to hold suspects for 75 dayswithout any recourse to the courts.

July 15th 2001: The AL government of Sheikh Hasina steps down aftercompleting its full term, and a caretaker government, the second inBangladesh’s history, is given responsibility for conducting free and fairelections within 90 days.

October 1st 2001: The BNP-led alliance wins a two-thirds majority inparliament. Although the AL says that the election was rigged, this claim isrejected by domestic and foreign election monitors.

Constitution, institutions and administration

Bangladesh has a parliamentary system of government based on universaladult franchise. Before the 12th amendment of the constitution in 1991, therewas a presidential form of government. Under the current system, the primeminister is vested with executive power and the president (elected byparliament) can act only on the advice of the prime minister. The presidentappoints the council of ministers on the advice of the prime minister. Thejatiya sangshad (parliament) is a unicameral legislature with 300 directlyelected seats and a term of five years. Laws are passed by a simple majority inparliament, but constitutional amendments require a two-thirds majority.

Bangladesh has a four-tier local government system. The country is dividedinto 64 districts, each with its own district council. Beneath the districts are460 subdistricts. The union councils comprise the third and the villagecouncils the fourth layer of government. Although the constitution providesfor elected bodies at all tiers of local government, only the third tier—unioncouncils and municipalities (mostly subdistrict and district administrativecentres)—is elected; all others are administratively controlled. Bangladesh has

Parliament

Local government system

8 Bangladesh


six administrative divisions—Dhaka, Chittagong, Khulna, Barisal, Rajshahi andSylhet—and four major municipal corporations—Dhaka, Chittagong, Rajshahiand Khulna. The mayors of the municipal corporations are directly elected andwield considerable political power.

A village council act, passed in September 1997, gives the central governmentthe authority to appoint nine male and three female members to each villagecouncil, with no provision for direct election. A district council act, passed inJune 2000, provides for an indirectly elected government for the districtcouncils. According to this law, a 20-member committee, with five femalemembers from a reserved quota and a chairman, would be elected for five yearsby elected public representatives within the district. The local members ofparliament would serve the council as advisers. The act drew criticism from theBNP because it provided for an appointed chairman of the council until anelected chairman could take over. A writ was filed against the act, and the HighCourt—junior only to the Supreme Court—suspended its implementation andit remains suspended.

A candidate can contest a maximum of five constituencies in a parliamentaryelection, allowing political leaders to ensure their election to the legislature. Aby-election occurs if a candidate wins in more than one constituency. Theconstitution provides for a non-party caretaker government to organisegeneral elections.

A provision reserving 30 additional seats in parliament for women, usuallyappointed by the majority party, expired in April 2001 because the BNP wasrefusing to co-operate with the AL on any matters at the time. Majorpolitical parties tend not to nominate women candidates for fear of losingseats. Only 35 female candidates ran in the 2001 general election out of atotal of 1,933 candidates. Both major parties have female leaders and arecommitted to greater female representation, so it is likely that the provisionwill be reinstated.

The caretaker government

The 13th amendment to the constitution, passed on March 26th 1996,provides for a non-party caretaker government to hold free and fairparliamentary elections. The caretaker government is responsible for givingthe Election Commission “all possible aid and assistance that may be requiredfor holding the general election of Members of Parliament peacefully, fairlyand impartially”.

The caretaker government takes office within 15 days of the dissolution ofparliament and must hold the general election within 90 days of thedissolution of parliament. The caretaker government is led by a chief adviser,who runs the government with not more than 10 other advisers, appointed bythe president on his advice.

The chief adviser enjoys the status and privileges of a prime minister, but doesnot have the power to make any policy that goes beyond the responsibility toensure the smooth conduct of the election. He and his advisers are collectively

Women in politics

Constitutional peculiarities

Bangladesh 9


responsible to the president—unlike the prime minister—and carry on theroutine functions of government. The supreme command of the military forcesis vested in the president for the duration of the caretaker government.Bangladesh has had two caretaker governments, the first one oversaw thegeneral election in June 1996, and the second one, led by the former chiefjustice, Latifur Rahman, took power in July 2001 to oversee the eighthparliamentary election, which was held on October 1st 2001.

The Supreme Court is the highest court and its judges are appointed by thepresident. There is a nationwide system of both criminal and civil courts andmetropolitan magistrates in the major cities. In addition, money-loan courtsand bankruptcy courts deal with financial matters. The legal framework,however, is archaic and court procedures are often cumbersome. The judiciaryis not fully independent of the executive. It has, however, been playing a moreactive role: in 1999 and 2000 the Supreme Court reprimanded the formerprime minister, Sheikh Hasina, for making misleading statements about thejudiciary and demanded that the executive branch consult with the chiefjustice in appointing High Court judges.

Citizens are equal before the law and free from arbitrary arrest anddiscrimination. But detention without trial is allowed in a state of emergencyand under the Special Powers Act (SPA) 1974 and the Public Safety Act (PSA)2000. The original constitution of 1972 did not provide for the arrest anddetention of ordinary citizens. The PSA is more severe than the SPA. The PSAenables the government to deny bail to a suspect for up to 75 days with norecourse to the courts. The police detained over 65,000 people under the SPA in1981-96 and was holding more than 50,000 people under the PSA in August2001. The High Court is considering writs challenging the constitutionality ofthe PSA.

The main political parties are the Awami League (AL) and the BangladeshNationalist Party (BNP). The AL, which spearheaded the war of independenceunder Sheikh Mujib, is now led by his daughter, Sheikh Hasina. The AL was ingovernment between June 1996 and July 2001, after 21 years in opposition. Itmoved away from its previous commitments to nationalisation and economicself-sufficiency to support market-oriented economic policies. Despite the partyline, the AL contains politicians who strongly oppose leaving the economy tothe private sector.

The BNP, founded by a former president, General Zia, in 1978, is led by hiswidow and the current prime minister, Begum Zia. The BNP espousesBangladeshi nationalism with anti-Indian and pro-Islamic nuances. The BNP iscommitted to fostering a market economy and liberal democracy, andencourages both domestic and foreign investment.

The differences between the AL and the BNP in terms of official economicpolicy had largely disappeared by the late 1990s. While the AL plays on itsleading role during the war of liberation in 1971 and attacks those whoopposed it, the BNP appeals more broadly to nationalist forces, drawingsupport from forces that had been on both sides of the liberation war. A bitter

Political forces

The judiciary

10 Bangladesh


personal animosity between Begum Zia and Sheikh Hasina keeps the twoparties apart.

Other parties active in Bangladesh include the Jatiya Party (JP), led by thedeposed president, General Ershad. It has experienced several damaging splitssince 1997 owing to its alternating support for the AL and the BNP. TheJamaat-e-Islami (Jamaat) is a fundamentalist party that espouses an Islamicstate. In recent years it has come under a severe onslaught for its pro-Pakistanstance in 1971. The Islami Oikyo Joite (IOJ), a member of the BNP four-partyalliance, also seeks to implement Islamic doctrine, but draws more supportfrom extremist elements of society. Nonetheless extremist Islamic forces inBangladesh are not as strong as in Pakistan. There are several leftist parties,including a communist party, which have entered a variety of shifting alliancesfor electoral purposes.

General election results(no. of parliamentary seats)

19961979 1986 1988 1991 Feba Jun 2001b

Awami League (AL) 39 76 – 96 – 146 63

Bangladesh National Party (BNP) 207 – – 139 272 116 191c

Jatiya Party (JP) – 153 251 35 – 31 14cd

Jamaat-e-Islami (Jamaat) – 10 – 18 – 3 17c

Others 54 61 49 12 – 4 13

1973 1976 1983 1990 1995 2000 2001

Total no. of voters (m) 35.2 38.4 47.3 62.0 60.0 77.7 75.0 % of the population 50.7 50.5 51.5 60.3 47.3 54.0 58.0

a Boycotted by opposition parties; not all seats were filled as violence disrupted the election. b 298 constituencies out of 300 had returned resultsby October 12th 2001. c The BNP-led alliance, embracing the BNP, a section of the JP, Jamaat and the Islami Oikyo Joite, won 214 seats. d Agrouping dominated by the JP faction led by General Ershad.

Sources: Election Commission; press reports.

With the promulgation of the People’s Representation Order 2001 (PRO 2001)in August 2001, the Election Commission (EC), a constitutional bodyresponsible for holding elections, has gained considerable autonomy to carryout its responsibilities. The PRO 2001 raises election expenditure ceilings toTk500,000 (US$8,900 at an exchange rate of Tk56.13:US$1) from Tk300,000and grants wide powers to the EC to monitor elections.

Students play an active role in Bangladeshi politics, within political parties andmore generally. This stems from the important role that they played in theliberation war in 1971. In 1990 the All-Party Students’ Union was instrumentalin forging the alliance between the quarrelling opposition parties thatultimately toppled the government of General Ershad. But the active role ofstudents in national politics has come under criticism in recent years, becauseviolent elements, including non-students, are perceived to be dominatingstudent politics.

The election commission isstrengthened

Student politics

Bangladesh 11


The army has played a prominent role in Bangladeshi politics, starting with thewar of liberation in 1971, but especially after a military coup in mid-1975.After the fall of General Ershad in 1990, the army withdrew from politics. Inthe run-up to the general election in June 1996, however, the chief of staff,Abu Saleh Mohammad, led a failed military revolt against the caretakergovernment. That failure has since kept the army away from politics, and thegovernment has steered the army towards playing a role in UN peacekeepingoperations instead. Many leading politicians in both major parties are formersoldiers and, in the event of a serious breakdown of law and order, militaryintervention cannot be ruled out.

The civil service, which was instrumental in sustaining military or pseudo-military rule during 1975-1990, remains divided, politicised and corrupt. Onereason for holding general elections under neutral caretaker governments isthat many civil servants back one of the political parties in the hope oflucrative postings and other benefits. In the run-up to the general election inOctober 2001 the caretaker government transferred more than 1,100government officials from their posts, believing them to be partisan. The civilservice, organised in more than two dozen cadre services, also suffers fromserious conflicts between specialists and generalists.

Major political figures

Begum Khaleda Zia: The leader of the Bangladesh Nationalist Party (BNP)and the current prime minister, Begum Zia was previously prime minister in1991-96. The wife of a former president, Ziaur Rahman, she assumed leader-ship of the BNP in 1981, after the assassination of her husband by a group ofrebel military officers.

Sheikh Hasina Wajed: The leader of the Awami League (AL) and primeminister in 1996-2001, Sheikh Hasina is a daughter of Bangladesh’s foundingpresident, Sheikh Mujibur Rahman. She became leader of the AL in 1981.Under her leadership, the AL returned to power in 1996 after 21 years inopposition and completed its five-year term on July 15th 2001.

General Hossain Mohammad Ershad: The leader of the Jatiya Party (JP)and a former president. He overthrew the government of Justice Abdus Sattarin a bloodless military coup in 1982 and ruled as an autocrat until 1990.

Shahabuddin Ahmed: Recently reappointed as president, he is a formerchief justice who led the caretaker government in 1991 that oversawBangladesh’s first free and fair election. He became president in 1996 with thesupport of the AL. His new five-year term runs concurrently with thatof parliament.

Matiur Rahman Nizami: Mr Nizami leads Jamaat-e-Islami, Bangladesh’slargest Islamist party. Jamaat remains controversial because of its pro-Pakistanirole in 1971.

Jamuruddin Sircar: Appointed speaker of parliament in October 2001.

The army’s role in politics

The bureaucracy’s role inpolitics

12 Bangladesh


International relations and defence

Bangladesh became a member of the UN in 1974 and has been elected to theUN Security Council twice, in 1978 and 2000. It is a member of the SouthAsian Association for Regional Co-operation (SAARC, see Appendices: regionalorganisations), the Non-Aligned Movement (NAM) and the G-8, a group ofdeveloping countries. Bangladesh is expected to become the next chairman ofNAM at the summit due in Dhaka in November 2001. It is also member ofthe Organisation of the Islamic Conference (OIC), the Commonwealth ofNations and the World Trade Organisation (WTO). In addition to its leadingrole in regional and international organisations of developing countries,Bangladesh has in recent years been one of the largest contributors ofpeacekeepers to UN missions.

Relations between Bangladesh and India improved during the ALadministration—the AL is more pro-Indian than the BNP—from June 1996 toJuly 2001. India nearly surrounds Bangladesh, with a long and porous borderon three sides of Bangladesh. India assisted Bangladesh in establishing itsindependence from Pakistan in 1971, but relations became strained from themid-1970s after the AL lost power. After the AL’s return to government in June1996, Bangladesh and India signed a Ganges water-sharing agreement and inDecember 1997 the Chittagong Hill Tracts (CHT) Peace Accord was signed—thetribal insurgents in Chittagong had used training camps inside India. In July1999 the AL government agreed in principle to provide overlandtransshipment facilities to the north-eastern states of India, a long-standingIndian demand. But the proposal was shelved because of strong politicalopposition, especially from the BNP-led four-party alliance. Railway and busservices, linking major cities of both countries, have been introduced in recentyears. The BNP has indicated that it may seek to renegotiate the Ganges water-sharing treaty and has threatened to cast aside the CHT treaty.

Relations with Pakistan have improved since the establishment of diplomaticrelations in 1974 on the basis of mutual recognition. The relationship is,however, strained by Pakistan’s refusal to take back around 500,000 people,Urdu speakers known as Biharis (a large proportion of whom migrated toPakistan from the Indian state of Bihar), who claim Pakistani citizenship.Relations with Myanmar have been under pressure since 1992 when around250,000 Rohingyas—Muslims from the Arakan region of Myanmar—fled intoBangladesh, in the vicinity of Chittagong, alleging persecution by the Burmesearmy. Most Rohingyas had returned by 1995, but about 20,000 remain incamps around Cox’s Bazar, a beach resort 152km south of Chittagong.

Bangladeshi relations with China have improved since mid-1975 when theysigned an accord on mutual recognition; at that time relations with Pakistanwere strengthening while relations with India were cooling. As relations withIndia improved under the AL government of 1996-2001, so relations with Chinacooled somewhat, although bilateral trade continued to grow. During the 1990sthe share of Bangladeshi imports sourced from China increased from 0.3% to7%, while the share of exports taken by China remained around 1.1%.

Relations with India

Relations with Pakistanand Myanmar

Relations with China andNepal

Membership ofinternational bodies

Bangladesh 13


Bangladesh backed Nepal when India blockaded the kingdom in 1989 andlooked to Nepal for support against India over the Ganges water-sharing issue.

Japan has been Bangladesh’s largest bilateral donor in recent years, especiallywith regard to providing assistance for infrastructural development. Traderelations have been less strong. Japan’s share of Bangladesh’s imports fell from13% in 1990 to 6% in 1999, and its share of Bangladesh’s exports fell from 4%to 1.5% over the same period. Meanwhile, Japanese trade with other SouthAsian countries flourished. The same pattern is visible in weak flows ofJapanese direct investment into Bangladesh compared with that destined forother South Asian countries.

The relationship with the US has improved over the last two decades, withnearly all of Bangladesh’s heads of state paying official visits to the US. InMarch 2000 the then US president, Bill Clinton, visited Bangladesh. The US hasgiven over US$4.2bn of food and development assistance since the early 1970s,making it one of Bangladesh’s biggest bilateral aid donors. The participation ofBangladeshi troops in the 1991 Gulf war coalition strengthened therelationship. In recent years US annual direct investment into Bangladesh hasexceeded US$1bn, almost all destined for natural gas exploration and powergeneration. The US is the largest importer of Bangladesh’s flagship export,ready-made garments. Bangladesh’s market position in the US has, however,come under stress since the US granted concessionary market access to somesub-Saharan African countries in 2000.

The armed forces totalled 137,000 in 2000. Expenditure on defence hashovered at around 2% of GDP in recent years and is on the rise (in absoluteterms). The inclusion of Bangladeshi troops in UN peacekeeping forces aroundthe world has given the army an international role and a new source of incomeboth for itself and the government. In April 2001 6,131 Bangladeshi nationalswere serving in ten UN peace missions, with 4,233 in Sierra Leone and largecontingents in Iraq-Kuwait and East Timor. At least 13 Bangladeshi soldiers hadlost their lives in UN peacekeeping operations by April 2001.

The government has faced criticism for its recent purchases of MiG–29 militaryaeroplanes, air defence radar systems and frigates. Opponents argue that thelow level of external threat does not warrant the cost, particularly because it isproving to be a drain on foreign-exchange reserves.

The army began recruiting women in 2000 for all officer ranks except for combatroles. Previously, recruitment of female officers was restricted to the army medicalcorps. Almost one-third of Bangladesh’s army medical officers are female.

Defence forces, 2000

Army 120,000

Navy 10,500

Air force 6,500

Total 137,000

Paramilitary 55,200

Source: The International Institute for Strategic Studies, The Military Balance 2000/2001.

Relations with Japan

Relations with the US

Defence

14 Bangladesh


Resources and infrastructure

Population

Bangladesh, with a land area of 147,570 sq km and a population officiallyrecorded at 129.2m in the 2001 census, is among the world’s most denselypopulated countries (see Reference table 1 for historical data on population).The urban population has been growing at approximately twice the overallpopulation growth rate and now accounts for 23.4% of the total. Theprincipal urban centre, Dhaka, is one of the largest cities in the world, with12.3m people in 2000 according to the UN Population Division. Other majorurban centres are Chittagong, Khulna and Rajshahi. The 1991 censusindicated that 88% of the population was Muslim, 11% Hindu and theremainder mainly Buddhist or Christian (a breakdown of the 2001 census hasnot yet been published).

Population by age, 1998

Age Population (m) % of total Male (m) Female (m)

0-4 15.3 12.1 7.7 7.6

5-9 17.6 13.9 9.1 8.5

10-14 15.4 12.2 7.7 7.7

15-49 60.6 48.0 31.1 29.5

50-59 7.7 6.1 4.0 3.7

60+ 9.6 7.6 5.2 4.4

Total 126.2 100.0 64.8 61.4

Source: National Data Bank.

The population is estimated to be expanding at about 1.5% per year, andcontaining population growth remains a high priority, given the scarcity ofland and resources. Internationally funded programmes have supplementedgovernment initiatives on population control and family planning. In 2000/01Bangladesh had a crude birth rate of 17.9 per 1,000 and a crude death rate of3.7 per 1,000. These rates compare well with those of other developingcountries. As contraception use has become more prevalent, the fertility rate(the average number of children that a women bears in her lifetime) fell to 2.5in 2000, from 6.8 in 1965.

Health indicators

1998/99 1999/2000 2000/01a

Crude birth rate (per 1,000) 19.9 18.9 17.9

Crude death rate (per 1,000) 4.8 4.2 3.7

Infant mortality rate (per 1,000 live births) 57 54 51

Maternal mortality rate (per 1,000 live births) 3.0 2.6 2.3

Life expectancy (years) 60.8 61.3 61.8

a Estimates.

Source: Ministry of Finance, Bangladesh Economic Survey 2001.

A dense, fast growingpopulation

Bangladesh 15


The agricultural sector provides work for about 60% of the labour force. Thegovernment employs around one-third of those in formal sector employment,either directly in the civil service or through state-owned enterprises (SOEs).Since the early 1990s there has been a leap in the size of the labour forcefollowing the recognition of many household activities, mainly carried out byfemales, as economic activities. In 1995/96 (the latest data available) thecivilian labour force stood at 56m compared with 30.9m in 1985/86. Only7.7% of the total labour force was classified as industrial labour. (See Referencetable 2.)

The number of Bangladeshis working abroad and remittances from thoseemployed abroad rose throughout the 1980s and 1990s. Whereas only 70,000skilled and unskilled persons obtained employment abroad in 1985/86, thenumber had swelled to 240,000 in 1999/2000. Annual remittances from abroadrose from about US$500m to US$1.9bn over this period. Popular destinationsfor Bangladeshi workers are Saudi Arabia, the UAE, Kuwait, Oman, and morerecently, Malaysia and Singapore. In 1999 around 41.6% of overseas workerswere classified as skilled or professional, according to the Bureau of Manpower,Employment and Training, 13.4% as semi-skilled, and 45% as unskilled.

Education

In early 2000 the literacy rate among adults (those over 15 years of age) hadincreased to 64%, from 51% in 1997. Although large disparities in literacyremain between the urban and rural, and male and female, populations, thegaps are narrowing. The government is the main provider of primaryeducation, while private schools predominate in secondary education. Primaryeducation has been made universal, compulsory and free since 1993. Boys areentitled to five years of free schooling and girls eight years (reflecting the factthat families are less willing to pay to educate their daughters). Thegovernment aims to achieve universal literacy by 2006.

Expenditure on education

1998/99 1999/2000 2000/01a

Total public expenditure on education (Tk bn) 47.6 52.9 56.6

Public expenditure on education per head (Tk) 372 406 430

a Estimates.

Source: calculated from budget data provided by the Ministry of Finance.

As a result of increased budgetary allocations, the employment of femaleteachers, stipends for female students and a food-for-education programme,the level of enrolment in primary schools increased dramatically in the 1990s.The number of primary school children increased from 12m in 1990 to 17.7min 2000, and the proportion of female students rose from 44.7% to 48.7% overthe same period. However, fewer than half of all children complete five years ofprimary education. Badly trained or absentee teachers, large classes and ashortage of books are believed to be responsible for the poor quality ofelementary education.

Agriculture provides thebulk of employment

The literacy rate isincreasing fast

16 Bangladesh


Secondary education is provided largely by the private sector. In 2001 therewere 12,614 secondary schools with 6.6m students. At the higher level, manyvocational and technical colleges and institutes are not well attended.Universities receive generous government subsidies but generally producepoor-quality graduates at a high cost. Female participation in the educationsystem remains significantly low compared with male participation and incomparison with many countries in South-east Asia.

Health

Medical facilities are extremely scarce. In 2000 there were 31,872 hospital beds,30,868 registered doctors, 17,446 registered nurses and 15,235 midwives in thepublic sector, which provides more than 90% of health services. Taking intoaccount private-sector health facilities, there was one hospital bed per 3,009persons and one doctor per 4,205 persons.

Annual spending on healthcare and family planning remained at around 1%of real GDP in the late 1990s. Access to medical services is more restricted inBangladesh than in neighbouring Pakistan and India. Government healthservices are poor, and only about 12% of serious cases are referred to publichealth facilities. Poor-quality and poorly regulated private clinics haveproliferated in both urban and rural areas. In addition, non-governmentalorganisations (NGOs), such as the Bangladesh Rural Advancement Committee(BRAC), have been providing health services.

Bangladeshis suffer from some of the highest malnutrition levels in the world.Major problems include childhood protein-energy deficiency, maternal under-nutrition as evidenced by low weight, short stature and anaemia in expectantand nursing mothers, and micronutrient deficiencies, particularly of vitamin A,iron and iodine, which affect all ages. In 1996-97 56% of children under fiveyears of age were moderately or severely underweight, or suffering frommoderate or severe stunting. About 2m children suffer from an iodinedeficiency disorder and about 40,000 children go blind every year owing to avitamin A deficiency.

Natural resources and the environment

The land in Bangladesh is mostly flat, although there are hilly areas in thenorth-eastern and south-eastern regions. Much of the land is intersected bythe numerous waterways of the Ganges delta and the Brahmaputra river(known locally as the Padma and Jamuna), the annual flooding of whichprovides rich alluvial soils. The monsoon climate results in annual averagerainfall that is among the world’s heaviest, exceeding 2,540 mm and fallingmainly between July and October. Every year massive flooding takes placeduring the monsoon season, with soil erosion and changes to river channelsposing constant problems. The possibility of natural disasters is a fact of life asmany Bangladeshis live in precarious dwellings close to rivers and the coast.The low-lying areas at the mouth of the Ganges delta are at risk of tidal surgesand cyclones.

Mainly flat land withextremely heavy rainfall

Health services are poor

Bangladesh 17


Most of Bangladesh’s soil is rich and fertile. In 2000 forests covered 2.5mhectares, or 17% of the total land area. About 67% of the total land area iscultivable and around 75% of the planted crop area is devoted to rice crops. Alarge and growing proportion of the cropped area is subject to multiplecropping. Weather conditions, improved seed varieties and irrigation facilitiespermit two or three rice crops each year in the approximately 70% of cultivableland that is not subject to serious flooding. In the remaining low lands, onlyone or two crops each year are planted. Bangladesh has little additional landthat can be brought under crop production. According to the World Bank, thetotal land area available increased by about 4% between 1974 and 1996, whileduring the same period the area of land unavailable for cultivation increasedby 8%. This latter trend largely reflects the impact of urbanisation.

Bangladesh is poor in non-energy minerals. Known resources include naturalgas, limestone, glass sand and certain heavy minerals such as trace deposits ofuranium and thorium. There are five major coal deposits in the country, butmuch of the coal lies too deep for commercial exploitation. The largest coalmines are Khalashpir (Rangpur), which is 12.6 km wide with reserves of 685mtonnes; Jamalgonj (Joypurhat), 11.7 km wide with reserves of 1.1bn tonnes;and Barapukuria (Dinajpur), 5.3 km wide with reserves of 389m tonnes. In1995 deposits of high-quality bituminous coal were found at Dighipara(Dinajpur), which probably contains the largest coal reserves in the country(see Mining and semi-processing).

Natural gas is the main energy resource and to date 22 gasfields have beendiscovered, of which 12 are being exploited, seven are being prepared forproduction and three have had production suspended. (See Reference table 3for data on energy reserves and production of natural gas.) Total reserves areestimated at around 24.7trn cu ft and recoverable reserves at 15.5trn cu ft. Infiscal year 1999/2000 actual production was 331bn cu ft, compared with 307bncu ft in the previous year.

Transport, communications and the Internet

Historically, poor transport facilities and infrastructure have severely hinderedeconomic development. But in recent years the situation has improved. Theroad network connects every district and subdistrict administrative centre,even those in remote areas. The 4.8-km bridge over the Jamuna river, the 12thlongest in the world, opened in June 1998 carrying a railway, gas pipelines,electricity transmission cables and telecommunications lines to the westernpart of Bangladesh, which had previously been more isolated. Outside of themajor cities, Bangladesh is criss-crossed by a myriad of rivers and waterways,used for water-borne transport.

Bangladesh had 2,733 km of railways in 2000, operated by BangladeshRailways, a state-owned enterprise with monopoly rights, compared with2,884 km in the early 1980s and 2,874 km in the early 1970s. Over the yearsthe length of railways has declined and the standard of service has

Recent improvements topoor infrastructure

Mineral reserves

Railways

18 Bangladesh


deteriorated, whereas the volume of freight and the number of passengerstransported by road has increased.

Bangladesh Railways

1998/99 1999/2000 2000/01

Railway locomotives 279 268 268

Passenger coaches 1,287 1,282 1,282

Freight wagons 11,152 10,929 10,929


The railway service has experiencing a secular decline in its passenger carriagesince Bangladesh’s independence in the early 1970s, because of poor serviceand the phenomenal growth of road communications. Bus services, largelyprivate, emerged as a huge challenge to the railways, by connecting remoteplaces and providing better services. The state-owned railway continues toabsorb large subsidies from the government, owing largely to inefficientmanagement and a failure to control costs and collect fares. But the railwayservice has also been affected by flood damage and other natural disasters.Over the five years to 1999/2000 passengers have taken longer journeys, sothat despite a fluctuating number of passengers travelling by rail, the numberof passenger-kilometres per year increased, although it had not surpassed the4.1bn passenger-km recorded in 1994/95—in 1999/2000 3.9bn passenger-kmby rail were recorded. (See Reference table 4 for data on transport.) Theopening of the Jamuna bridge in 1998, allowing railway links to previouslyremote areas and to neighbouring India, has encouraged longer journeys andassisted the recent partial recovery in railway usage. The Asian DevelopmentBank is financing a project to improve cost efficiency, labour rationalisationand institutional reform.

Bangladesh had a road network extending about 20,958 km in 2000, comparedwith 14,104 km in 1991. There are 3,090 km of national highways (about 15%of total road length), 1,752 km of regional highways (8%), with feeder roadsaccounting for the remaining 16,116 km. In addition, local governmentsmaintain more than 16,000 km of rural roads, but only 8,546 km of these arepaved. In many parts of Bangladesh animal-driven carts still provide the mainmeans of land-based transport for shorter distances. Despite the problems ofroad transport, 66% of all freight and 73% of all passengers were transportedby road in 1997, up from 35% and 54%, respectively, in 1975.

Waterways have become less important as a means of transport owing to thedeclining navigability of some rivers and the poor performance of the largelystate-operated system. There are about 8,300 km of navigable inlandwaterways, although this drops to 3,800 km in the dry season. The waterwaynetwork is particularly important as a transport link to some of the mostremote parts of the country. Badly needed improvements to waterways includemore dredging programmes, better boat safety regulations and the privatisationof some of the ferry and cargo routes.

Roads

Waterways

Bangladesh 19


There are two major seaports, at Chittagong and Mongla, and smaller inlandports at Dhaka, Narayanganj, Chandpur, Barisal and Khulna. Chittagong is thelargest of the seaports, handling around 80% of sea-borne merchandise importsand 73% of merchandise exports in 1998/99. Chittagong is well connected toinland road, rail, river and air routes. Container handling at Chittagong portincreased rapidly from 150,000 TEUs in 1992/93 to 407,053 TEUs in1999/2000. The quantity of cargo handled has also increased from 1.4m tonnesto 3.8m tonnes during the same period (the tonnage of imports passingthrough all ports is more than eight times that of exports). The port authoritiesare building additional berth facilities for increased container services and anew container yard. The labour unions are, however, opposed to private-sectorplans to set up two modern container terminals—one at Patenga in Chittagongand the other at Pangaon in Dhaka.

Mongla handles around one-quarter of Bangladesh’s merchandise trade, but itlacks navigability for ocean-going ships. Dredging and other renovations arerequired to improve its operations.

Bangladesh Shipping Corporation (BSC), a loss-making state-owned company,has handled around 9% of Bangladesh’s sea-borne merchandise trade recentyears compared with an 18% share of goods imports and 14% share in goodsexports in the early 1990s. Private international shipping companies handlethe rest of Bangladesh’s merchandise trade.

The national airline, Bangladesh Biman, serves 26 overseas and seven domesticdestinations, including direct flights from Dhaka to New York and Tokyo. In1999/2000 Biman carried 1.3m passengers and 36,830 tonnes of cargo,compared with 1.2m passengers and 30,869 tonnes of cargo in 1998/99. Bimanhas recorded growth in the number of passengers carried every year since1995/96, except for 1997/98. The rate of growth in the tonnage of cargo carriedhas been erratic, but annual average growth in 1999/2000-2000/01 was nearly20%. However, although it had previously been profitable, Biman has incurredhuge losses since 1996/97, mainly because of competition from privatecompanies on both domestic and international cargo and passenger routessince 1996, but also because of loan and interest payments on the two Airbusesacquired that year. In early 2000 a plan was drawn up to commercialise theairline and turn it into a profit-oriented business run by shareholders, with thegovernment retaining 51% and a large holding sold off to an internationalairline, acting as a strategic partner. No international airline has come forth,however, and the plan has stalled.

No Bangladeshi private airlines run international routes, but GMG Airlines andAir Paravat operate some domestic routes. Bangladesh has 14 operationalairports—three international, six domestic, and five reserved for domesticprivate airlines—and two more under construction. The main internationalairport is Zia International at Dhaka. Biman has enhanced its flight handlingcapacity in recent years and set up a computerised departure control systemand upgraded ground-support equipment in 1999/2000. A secondinternational airport was opened in Chittagong in 2001, and Sylhet airport hasbeen upgraded to handle international services.

Seaports

Air transport

20 Bangladesh


With around five telephones per 1,000 inhabitants in 2001, Bangladesh hasone of the lowest telephone densities in the world. The number of telephonesincreased from 220,000 in 1991 to 800,000 in 2001. Internal communicationlinks consisting of 23,282 nationwide dialling circuits are now in operation,compared with 11,410 in 1997. In addition, the number of internationaldialling circuits increased from 1,645 in 1997 to 2,450 in 2001. A publictelephone card system, introduced in 1992, has been expanded to cover alldistrict and most subdistrict administrative centres. Around 800 operator-assisted dialling stations now provide telephone access to people in remoteareas. But access to domestic and international telecoms services is still limited.

Private-sector investment in the telecoms industry has been permitted since1992. The private sector now operates cellular mobile services, rural telephoneexchanges, Internet and e-mail services, and paging and operator-assistedservices. There are four private mobile telephone companies in Bangladesh.The first, Bangladesh Telecom (Citycell), received a licence in 1989. In 1996three more companies were allowed to operate, Grameen Phone, TelecomMalaysia International and Sheba Telecom. According to the government,Grameen is the market leader with 200,000 subscribers, while the others havefewer than 35,000 subscribers each. In 2001 107 companies had licences toprovide Internet services.

Postal services are extremely poor and archaic. There are only 9,336 post officesin Bangladesh, 793 in urban centres and 8,543 in rural areas. Only 164 postalstations, mostly in urban areas, provide guaranteed express post. Bangladeshhas agreements for an express mail service (EMS) with 49 countries, and for aninternational money order service with 13 countries. The postal service isscarcely available to the rural population. Before the completion of the bridgeover the Jamuna river, the entire north-western part of Bangladesh had no realpostal service.

There is a thriving local press with over 100 daily newspapers, about a dozen ofwhich are published in English. The press has considerable freedom, althoughreporting restrictions have been imposed during periods of political unrest.Until recently Bangladesh Radio and Bangladesh Television were statemonopolies, controlled directly by the Ministry of Information. A privatetelevision channel, Ekushe TV, came into operation in early 2000. Internationaltelevision channels are now permitted to operate in Bangladesh. In mid-2000an act was passed for the autonomy of the state-owned media, but critics saythat the act falls sort of granting real autonomy. Although the government hascreated two boards to run Bangladesh Television and Bangladesh Radio, thegovernment appoints the board members and the broadcasters depend on thegovernment for financial support.

Energy provision

Consumption of commercial energy per head is among the lowest in theworld, and a lack of reliable sources of electricity has been a major deterrent toforeign investment and a hindrance to higher economic growth. Installed

Media

Electricity provision is poor

Telecommunications

Postal services

Bangladesh 21


power generation capacity in 2001 stands at 3,770 mw, compared with2,908 mw in 1997, but, owing to outdated plants and inefficient management,actual production is likely to reach 3,074 mw in 2001, compared with2,105 mw in 1997.

Electricity generation per head is estimated to reach 120 kwh in 2001,compared with 99 kwh in 1997. Around 85% of households have noelectricity; no more than 60% of the electricity generated is actually paid for;and system losses are high at 37% of electricity generated in 2000. Electricity ismostly generated from gas—about 85%—and the rest comes fromhydroelectricity (7%) and liquid fuel (8%) generation. In 2000 the industrialsector consumed 46% of total electricity output, followed by households with42%, with the commercial and agricultural sectors consuming the balance.

Power supply remains severely stretched. Peak-hour demand is around3,150 mw, but supply is around 2,650 mw. As a result, load-shedding,especially in the evening hours, has been quite common. Inconsistent and low-voltage electricity supplies also force the state-run monopoly, the Water andSewerage Authority (WASA), to operate its nationwide network of water pumpsirregularly. Factories are often forced to run fewer shifts or opt for their ownexpensive generators, and irrigation systems in the countryside are oftendisrupted. In 1999 massive load-shedding prompted street protests anddemonstrations across Bangladesh.

The power crisis is likely to persist, despite 940 mw of new generating capacitycoming on stream since 1997 and the repair of older power plants. Threeprivate-sector barge-mounted power plants (BMPP) with total generatingcapacity of 310 mw, commissioned in 1998-99, have improved electricitysupply in the northern region. Four public-sector plants added 490 mw in1997-2000 and two public-private joint-venture plants at Mymensingh beganoperation in 1999-2000.

New power generation, 1997–2000

Capacity (mw) Start date of operations

Public sectorRouzan steam plant (2nd unit) 210 Sep 1997Ghorashal steam plant (6th unit) 210 Jan 1999Shahjibazar gas turbine (1st unit) 35 Mar 2000Shahjibazar gas turbine (2nd unit) 35 Oct 2000

Private sectorKhulna barge mounted power plant (BMPP) 110 Oct 1998Haripur BMPP 110 Jun 1999Baghabari BMPP 90 Jun 1999Public-private joint venturesMymensingh gas turbine (1st phase) 70 Nov 1999Mymensingh gas turbine (2nd phase) 70 Dec 2000

Total 940 –

Source: press reports.

Two more large plants—the 450-mw Meghnaghat plant and the 360-mwHaripur plant—and three 30-mw plants to be run by the Rural ElectrificationBoard (REB) are at various stages of installation. Including repairs to old

22 Bangladesh


plants, the government expects 1,200 mw of new capacity to be added to thenational power grid by 2002. The government estimates that demand forelectricity will grow to 5,171 mw by 2005 and to 6,071 mw by 2007. Since1998 private companies have been allowed to set up small, 10-mw powerplants and sell power directly in local areas. In 1996 the governmentseparated the power transmission system from power generation and createda new government agency, the Power Grid Company of Bangladesh (PGCB),to take over transmission.

Gas reserves, Dec 2000(trn cu ft)

Known discovered reserves (proven & probable) 24.7

Proven recoverable 15.5

Already used –4.1

Total recoverable reserves 11.4


Bangladesh has abundant reserves of environmentally friendly natural gas.There are 22 gas fields that hold estimated reserves totalling 24.7trn cu ft andrecoverable reserves of 15.5trn cu ft, of which 4.1trn cu ft had been extractedby December 2000. Annual gas utilisation has ranged from 260bn cu ft in1994/95 to 331bn cu ft in 1999/2000, but demand continues to rise and a largeproportion of the population remains without access to gas. Gas transmissionlines are being extended into the northern and western regions of the countryfollowing the construction of the Jamuna bridge. The Ashugonj-Bakhrabadpipeline, completed in 1998, allows the Surma basin to supply the Chittagongregion. About 50% of the gas produced is used for power generation, followedin importance by fertiliser production, household cooking and other industrialand commercial uses.

Production-sharing gas exploration contracts (to Jul 2000)

Oil company Block Location

Occidental of Bangladesh/Unocal 13, 14 Greater Sylhet district

Occidental Explorations of Bangladesh/Unocal 12 Greater Sylhet district

Cairn Energy & Holland Sea Search joint venture 15, 16 Bay of Bengal & Greater Chittagong

Rexwood Oakland joint venture 17, 18 Bay of Bengal

United Meridian Corporation 22 Greater Chittagong Hill district

Source: Petrobangla and press reports.

To encourage gas exploration, the government opened the gas sector to foreigninvestment in the mid-1990s and divided the country into 23 blocks. In thefirst round of bidding, six production-sharing contracts (PSCs) were signedwith international oil companies for gas exploration in eight blocks. A UScompany, Rexwood Oakland, has discovered gas at the Sangu gas field in theBay of Bengal and has supplied gas to the national grid since 1998. Another UScompany, Occidental, has discovered gas in Bibiana and Moulovi Bazar gasfields in Sylhet. In the second round of bidding for the remaining 15 blocks,bids were accepted for six of the blocks. A PSC was signed with Unocal forblock 7, with Tullow-Chevron and Texaco for block 9 and with Shell for blocks

Natural gas reserves areplentiful

Foreign investment inexploration is encouraged

Bangladesh 23


5 and 10. PSCs have also been concluded for blocks 11, 19 and 20. The biddingprocess has, however, drawn criticism at home and abroad, and several PSCs,believed to have been hurriedly concluded by the AL government that steppeddown in July 2001, have been shelved for further scrutiny. Critics charge thatthe bidding process has not been transparent, that Petrobangla, the state-owned oil and gas company that oversees the sector, is corrupt, and thatBangladesh should not export gas until it has secured a high level of reservesfor domestic use in the years to come.

The government has come under increasing pressure in recent years to allowgas exports to India. Foreign investors involved in gas exploration inBangladesh are finding the domestic market too small to recoup theirinvestments. The World Bank, the Asian Development Bank (ADB) and eventhe former US president, Bill Clinton, while visiting Bangladesh in 2000, havestepped up pressure, arguing that revenue from the gas exports would improveBangladesh’s fragile foreign-exchange position and increase foreign directinvestment. However, both the Awami League (AL) and the BangladeshNationalist Party (BNP) are committed to exporting gas only after ensuring thatBangladesh has 50 years of reserves for domestic use.

Gas export options are examined

The Asian Development Bank (ADB), which has played a major role inenhancing gas production and upgrading transmission and distributioncapacity since 1975, calculates that current recoverable gas reserves, 11.4trn cuft, would be sufficient to meet domestic gas demand for 35-40 years at thecurrent rate of consumption. Even if gas consumption grows at 8-10%annually, proven gas reserves would be adequate for 15-20 years. Bangladeshcould use its gas resources in three ways: fertiliser production for export; powerproduction for export; and pipeline exports of natural gas. The ADB rules outthe possibility of the first two options because they are not commerciallyfeasible given current production cost structures. The only feasible option ispipeline gas exports, to neighbouring India, which would have a market ofaround 250m to 300m cu ft/day within 5-6 years.

Primary energy balance, 2000(m tonnes oil equivalent)

Oil Gas Coal Electricity Other Total

Primary production 0.12 9.00 – 0.23a 7.60 16.95

Imports 3.23 – 0.20 – – 3.43

Exports – – – – – –

Stock change, etc – – – – – –

Primary supply 3.35 9.00 0.20 0.23a 7.60 20.38

Losses & transfers –0.47 –4.50 – –0.38 – –5.35

Transformation output – – – 1.35b – 1.35

Final consumption 2.88 4.50 0.20 1.20b 7.60 16.38

Note. Losses and transfers comprise inputs to transformation processes plus energy industry fuel and losses. a Expressed as input equivalents, onan assumed generating efficiency of 33%. b Output basis.

Source: Energy Data Associates.

Pressure for gas exportsmounts

24 Bangladesh


The economy

Economic structure

Main economic indicators, 2000a

Real GDP growth (constant market prices, 1995/95 base; %) 6.0

Consumer price inflation (av; %) 1.6

Current-account balance (US$ m)b –305.7

Exchange rate (av; US$) 53.5

Population (m)b 131.5

Foreign debt (year-end; US$ bn)c 16.2

Foreign-exchange reserves (US$ bn)d 1.5

a Estimate for fiscal year ending June 30th 2001. b Calendar year 2000. c Fiscal year 1999/2000.d End-2000.

Agriculture and fishing contributed 24.6% of real GDP in 1999/2000(according to data calculated using 1995/96 as the base year) and employs over60% of the labour force. (See Reference tables 5-7 for data on GDP.) In additionto meeting Bangladesh’s food requirements, agriculture supplies raw materialsfor the manufacturing and agro-processing sectors. Bangladesh has achievedfood self-sufficiency and has diversified the crop base (wheat is now the secondlargest crop after rice). But unpredictable climatic conditions—flooding anddroughts—regularly undermine production plans and targets, disrupt theeconomy and necessitate food imports.

Most non-agricultural raw materials, machinery and equipment have to beimported. Although natural gas production is increasing, Bangladesh still runsa heavy fuel import bill. Attempts are being made to diversify the economicand export base by promoting industries such as information technology andagro-processing, but the opportunities and success of the programmes havebeen limited.

Comparative economic indicators, 2000

Bangladesh India Pakistan Sri Lanka Vietnam

GDP (US$ bn) 46.8 473.7 61.3 16.3 31.3

GDP per head (US$) 340.8 472.7 445.8 842.3 404.4

Consumer price inflation (av; %) 2.3 4.0 4.4 6.2 –1.7

Current-account balance (US$ bn) –0.3 –4.2 –1.5 –0.8 0.2 % of GDP –0.8 –0.9 –2.4 –5.1 0.7

Exports of goods fob (US$ bn) 6.4 43.1 8.6 5.5 14.4

Imports of goods fob (US$ bn) 8.1 55.3 10.9 6.6 14.3

External debt (US$ bn) 17.1 96.1 34.8 8.9 13.3

Debt-service ratio, paid (%) 10.1 15.7 22.6 9.2 9.4

Source: EIU, CountryData.

Industrial activity is centred largely on Bangladesh’s two main cities, Dhakaand Chittagong. The government has set up export processing zones (EPZs) in

Agriculture plays a centralrole

Bangladesh 25


both cities to attract foreign investors, and offers generous tax concessions tofirms that locate there. Of the industrial sector’s contribution to real GDP, largeenterprises—those that employ more than ten workers—account for aroundtwo-thirds of total industrial output.

Economic policy

Successive governments in Bangladesh have been confronted with the problemof how to raise the rate of economic growth in a country where a substantialproportion of the population lives below the subsistence level. According tothe World Bank, the incidence of poverty, measured by the cost of the basicneeds of the poor, declined from 42.7% in 1991/92 to 35.6% in 1995/96. Butusing a head-count method, which measures poverty according to nutrition(daily calorie intake), the poverty rate fell from 47% in 1996 to 44.7% in 1999.These nationwide statistics mask, however, the fact that poverty is much moreprevalent in rural areas, where agriculture is the major source of employment.Because of the nature of agricultural production, seasonal and disguisedunemployment is higher in rural areas.

Bangladesh’s dependency on foreign aid has declined in recent years, withforeign aid as a proportion of GDP falling to 2% in 2000 from 7.6% in 1990.This decline is attributable to increased donor conditionalities and an overalldecline in global aid flows. Moreover, the bulk of aid has traditionally beengiven to finance the provision of food to the poor. As Bangladesh hasachieving food self-sufficiency in recent years, food aid has declined.

Summary of government finances, 2000/01 a

% change Tk bn year on yearb

Total revenue 241.9 13.4 Tax 192.7 12.7 Non-tax 49.2 15.8

Total expenditure 371.3 9.5 Current expenditure 196.3 6.5 Annual Development Plan 175.0 12.9

Budget balance –129.4 3.1

a Provisional, based on budgetary estimates. b Compared with actual revenue and expenditure offiscal year 1999/2000.

Source: Ministry of Finance, Bangladesh Economic Review, 2001.

Economic policies are guided by five-year plans, although most have failed toachieve their (usually unrealistic) objectives. Real GDP growth in the 1970s and1980s averaged around 3.3%, well below target owing to various problem—theworld oil-price shock, severe floods and cyclones, political disorder and inepteconomic management. In the 1990s, however, real GDP maintained annualgrowth of around 5%. Bangladesh has achieved self-sufficiency in food,reduced the rate of population growth, lowered the incidence of poverty andraised export income. Bangladesh’s flagship export commodity, ready-made

Reducing the incidence ofpoverty is a major goal

Higher growth wasachieved in the 1990s

26 Bangladesh


garments (RMG), is, however, facing an uncertain future as this sector becomesexposed to greater competition within the global trading system under theWorld Trade Organisation (WTO).

Policies of economic liberalisation gained momentum in the late 1980s andhave since been pursued by governments under both the Bangladesh NationalistParty (BNP) and the Awami League (AL). In 1991-96 the BNP governmentimplemented policies to reduce the role of government, encourage the privatesector and attract foreign investment. The BNP government also attempted toimprove the fiscal balance by cutting current expenditure and increasing taxrevenue by expanding the tax base and improving collection and admin-istration. Despite stiff opposition, the BNP government introduced value-addedtax (VAT) in 1992.

The AL government in 1996-2001 pursued economic policies similar to thoseof the former BNP government. It broadened the VAT net, tightened taxadministration and further streamlined tariff rates. It reduced the highest rateof import duty and eliminated some anomalies in the import duty rates forfinished goods and raw materials. But the fiscal deficit hovered around 5-6% ofGDP because of both expenditure overruns and revenue shortfalls. Revenuecollection was below target again in 1999/2000, partly because of the overlyambitious target set, but also as a result of widespread mismanagement andcorruption in the administration of tax revenue. (See Reference tables 8 and 9for data on central government finances and tax revenue receipts.)

The proportion of development projects financed from domestic resources hasbeen erratic, with domestic financing falling from 49% of the AnnualDevelopment Plan (ADP, the government’s capital expenditure programme) in1996/97 to 31% in 1998/99, before recovering to 50% in 1999/2000. The sharpfall in 1998/99 was caused by a devastating flood in 1998 that submergedalmost two-thirds of the country. The subsequent sharp rise in the domesticshare of the ADP in 1999/2000 is explained by a decline in foreign aid flows.

The banking system remains fragile. The central bank continues to set interest-rate bands for different types of loans and has been slow to develop a moremarket-oriented policy, focusing on regular Treasury-bill auctions andmonitoring of the bank rate. The money supply grew more rapidly thannominal GDP in the 1990s and interest rates were cut several times. (SeeReference tables 10 and 11 for data on money supply and interest rates.) In theearly 1990s the government dealt with the resulting inflationary pressures bygradually raising interest rates and selling government bonds to soak up theexcess liquidity. In the late 1990s several bumper harvests kept inflation incheck—food prices constitute a large share of the consumer price index—andoverall investment sentiment remained subdued.

Because of an expansionist monetary policy, broad money supply (M2) rose by19.3% in 2000 after annual average growth of 11.8% in the preceding fouryears. Narrow money supply (M1) growth followed the same pattern, but in amore pronounced way.

Economic liberalisation

A fragile banking system

Bangladesh 27


The banking system is beset with bad debts, corruption and overstaffing. In2001 about 34% of the combined portfolio of the nationalised commercialbanks (NCBs) and private domestic banks (PDBs), which together commandabout 80% of loans and 90% of total deposits, was classified as non-performingloans (NPLs). A large part of the problem is poor collection of bad loans,political interference and a legal system that allows defaulters to delay paymentindefinitely. In recent years some changes have been introduced in the legalframework to facilitate bad debt collection with the setting up of specialist loancourts and bankruptcy courts in Dhaka and Chittagong, following the passageof the Bankruptcy Law in 1997.

Major features of the 2001/02 budget

• The government has set total expenditure at Tk447.6bn (US$7.7bn) anddomestic revenue at Tk272.4bn in 2001/02, leaving an overall deficit ofTk175.3bn. Recurrent expenditure in 2001/02 is estimated at Tk220.4bn,12.2% higher than in the original 2000/01 budget.

• The Annual Development Programme (ADP), which comprises the bulk ofdevelopment spending, has been fixed at Tk190bn in 2001/02, 8.6%higher than the previous fiscal year’s budgeted ADP. About 51% of ADPfinancing is expected to be in the form of foreign aid and grants, with therest supplied from domestic resources.

• Reflecting heavy previous borrowing, interest repayments are forecast atTk45.6bn, Tk36.3bn on domestic loans and Tk9.3bn on foreign loans.

• No new taxes were imposed, reflecting the pressure of an election year. Toincrease revenue, tax payment procedures were simplified, the tax net wasexpanded, and all businesses, whether profitable or not, were required tosubmit tax returns.

• The government proposed to set up a revenue commission and a publicexpenditure review commission to examine the use of resources in thepublic sector.

• To assist agriculture, tax exemptions were provided for income from seedproduction, marketing of locally produced seed and poultry feedproduction until June 2005.

• Rice imports were discouraged by imposing a 25% import duty on rice,replacing the previous 10% regulatory duty and the 5% duty on riceimports.

• Import duties were increased on a number of consumer goods andindustrial items to give an incentive to local industries.

• Tourist industries were given a tax holiday of five to seven years dependingon their location.

In 1972, under a government committed to socialist principles, the economywent through wholesale nationalisation of industrial, commercial and tradeenterprises. In recent years attempts have been made to reduce governmentinvolvement in industry and to increase the role of the private sector. Morethan 600 state-owned enterprises (SOEs)—ranging from small to large,commercial to industrial—had been either denationalised or divested by 1986.But the process came to a standstill thereafter, and in 1993 the BNPgovernment of Begum Khaleda Zia established a Privatisation Board to expedite

The privatisation of state-owned enterprises

28 Bangladesh


the process. A law in 1994 allowed SOEs to be turned into public limitedcompanies. Despite these efforts, only 12 SOEs were privatised by the BNPgovernment before the June 1996 general election.

In March 2000 the Bangladesh Privatisation Commission Act, passed by theAL government of Sheikh Hasina transformed the Privatisation Board into aPrivatisation Commission with greater power and flexibility. Around 90 SOEswere targeted for privatisation by direct sale, stockmarket flotation, or theoffloading of government shares in joint-venture companies. A total of 33SOEs were divested and privatised in 1996-2001: nine through tender, sevenby floating shares, and seven by offloading government shares in jointventures, and the ownership of eight SOEs was transferred to the workers. Butmost of the 33 SOEs divested in 1996-2001 were smaller units, and theprivatisations have not materially diminished the government’s role in theeconomy or lessened public-sector losses. The public sector still controls over40% of Bangladesh’s manufacturing and utility assets. The gross losses of non-financial SOEs remain at around 2% of GDP, but are increasing. The SOEsincurred losses of Tk33.1bn (US$611m) in the first ten months of fiscal year2000/01, 51% higher than total losses in 1999/2000. Privatisation efforts arehindered by a lack of political commitment, bureaucratic resistance and labourunion opposition.

Bangladesh’s first export processing zone was built in Chittagong in the early1980s and is dominated by garments manufacturing firms. The Dhaka EPZ,which specialises in high-technology firms, was opened in 1993. Three otherEPZs are being developed: one at Chalna near Mongla port in Khulna; one inComilla; and another EPZ in Chittagong. Two more EPZs are being planned atIshwardi in Pabna and Niphamari in the north of Bangladesh. By January 2000the EPZs had accumulated total investment of US$452.6m and total exportincome of US$891m. In 1999/2000 EPZ exports represented 15.5% of totalexport earnings. Of the 154 firms, employing 102,388 workers, located in theEPZs, 27% make ready-made garments and 12% textiles. South Korea is thelargest investor, followed by Japan, the US, the UK, China, Malaysia and India.

The liberalisation of industrial and investment policies in the 1990s hassharply reduced bureaucratic control over private investment and opened upmany investment areas previously reserved for the public sector. Exchangecontrols were liberalised for current-account transactions; the Board ofInvestment (BOI) was given the task of facilitating rather than regulatinginvestments; and import controls were reduced and import permits abolished.VAT replaced import sales taxes, and most domestic excise duties and tariffrates have been simplified and reduced. In 2001 the highest rate of importduty was 37.5%, although an infrastructure development surcharge (IDS) of2.5%, introduced in 1997, has been retained. Exports have been encouragedthrough duty-drawback schemes and special bonded warehouse (SBW)facilities, which have been crucial for the spectacular success of the RMGindustry. Firms located in EPZs can import capital and raw materials free ofduty, retain foreign-currency earnings, employ expatriates and non-unionised

Export processing zones

Incentives for privateinvestment

Bangladesh 29


labour, and enjoy ten-year tax holidays and preferential treatment inestablishing utility connections.

Economic performance

The economy grew by an annual average rate of 3.4% in the 1970s and 1980s.Growth then averaged 4.9% in the 1990s (calculated using 1995/96 as the baseyear). The credit for this acceleration has often been given to the rapidliberalisation of the early 1990s. The top customs duty rate was cut from 350%in 1991 to 35% by 2001. The rate of GDP growth reached 4.9% in 1998/99,5.9% in 1999/2000 and was estimated to be 6% in 2000/01. Sectoral growthrates also improved in the 1990s. The annual average growth rate of agriculturereached 3.3% in the 1990s compared with 2% in the 1980s. Manufacturingsector growth rose from an annual average rate of 3% in the 1980s to 7% in the1990s. Export growth followed a similar trend, growing by an annual averageof 16% in the early 1990s, compared with 7% in the 1980s. (See Referencetable 7 for data on GDP by sector.)

Despite the vagaries of the weather, agriculture, representing about one-quarterof real GDP in 2001, remains the driving force behind economic growth,particularly as the industrial sector sources many of its inputs from the cropand fisheries sectors. The catastrophic floods of 1998 damaged infrastructureand disrupted normal economic activities for several months. However, theywere followed by several bumper harvests in the post-flood seasons, whichpushed up the rate of GDP growth in 1999/2000 to a respectable 5.9%.Agriculture grew by nearly 7% in 1999/2000, boosted by the more rapidgrowth of its subsectors—fisheries, livestock and forestry.

The manufacturing sector grew by 4.8% in 1999/2000, compared with 3.2% in1998/99, but this was still a dismal performance compared with the 8.5%growth rate recorded in 1997/98. The growth of small-scale industriesimproved dramatically in 1999/2000 to reach 5.8% from 0.7% in the previousfiscal year, while large-scale industries grew by 4.3% in 1999/2000, a smallimprovement compared with the 4.2% achieved in the previous year.

Export earnings rose by 8% year on year to US$5.7bn in 1999/2000, comparedwith US$5.3bn in 1998/99, when export earnings registered the lowest year-on-year growth in the 1990s of only 2.9%. This slowdown was mainly owing tothe floods of 1998 that caused havoc to infrastructure. Exports of primarycommodities, such as raw jute, frozen food, tea and agricultural productsearned US$469m, or one-tenth of total export earnings in 1999/2000, whileexports of manufactures, such as ready-made garments, knitware, jute productsand handicrafts earned US$5.3bn. The share of manufactures in Bangladesh’sexports has risen since the late 1980s, as RMGs emerged as a leading exportcommodity. The government has increased its efforts to set up display centresin Bangladesh’s overseas missions and websites in an attempt to boost exports.

In 1999/2000 national income per head reached around Tk18,270 (US$368),having risen by an annual average of only 3% in real terms since 1993/94. Agrowth rate of around 7% has been targeted as necessary if there is to be any

GDP growth rates

Low savings andinvestment rates

30 Bangladesh


meaningful reduction in poverty. A major obstacle to achieving this target hasbeen a failure to raise significantly the rate of savings and investment as apercentage of GDP. The domestic savings rate increased to 17.8% in 2000 from14.6% in 1991, and the investment rate rose to 23% from 19.7% during thesame period. Private sector investment accounted for 15.6% of GDP, withpublic-sector investment standing at 7.4% of GDP. In recent yearsapproximately 80% of total investment has been construction-related, with theprivate sector accounting for two-thirds. Investment in machinery and equip-ment follows trends in the construction sector. With only limited opportunitiesto expand investment from domestic sources, the priority remains to attractforeign direct investment (FDI), by encouraging export-oriented industries,reducing bureaucratic obstacles and selling off loss-making SOEs.

Macroeconomic stability kept the annual average rate of consumer priceinflation between 2.5% and 8.9% in the 1990s. Food accounts for almost two-thirds of the index. In December 1998 the year-on-year rate of inflation soaredto 12%, owing to flood-related food shortages. But with an increase in theavailability of food in recent years, the inflation rate has declined to average2.3% in 2000, with even lower food price inflation acting as the driving force.(See Reference tables 12-14 for historical data on prices.) Although inflationaryeffects have been unevenly spread between rural and urban areas, and rich andpoor households, since the early 1990s the differences in the impact of pricerises on different income groups have become less pronounced. Despite therecent expansion in monetary policy and increased borrowing by thegovernment from domestic banks, inflation remains subdued, reflecting theincreased availability of food at cheaper prices and slack industrial activity.

Prices and wages, 2000/01(% change)

Annual average2000/01 1995/96-1999/2000

Consumer pricesNational 3.4 5.7 of which: food 2.4 6.2Rural population (national) 3.7 n/a of which: food 3.8 n/aUrban population (national) 3.3 n/a of which: food 4.2 n/a

Wage ratesAll occupations 5.8 5.1 Agriculture 4.5 4.3 Manufacturing 7.1 6.8

Source: Bangladesh Bureau of Statistics, Monthly Statistical Bulletin.

Nominal wage growth has tended to fall behind consumer price inflation sincethe mid-1990s. The average wage increase (across all occupations) in 1995/96-1999/2000 was 5.1%, while the average rate of inflation in 1995/96-1999/2000was 5.7%. In 1999/2000 wages grew fastest in the manufacturing sector,

Real wages fall behind

Inflation remains subdued

Bangladesh 31


followed by the construction sector. Wage growth in the agricultural sectorpicked up from 3.7% in 1997/98 to 4.5% in 1999/2000. (See Reference table 15for historical data on nominal wages.)

Regional trends

There is considerable disparity in incomes across Bangladesh. Income per headis highest in the centres of economic activity—Dhaka, Chittagong and Khulna.Dhaka is the seat of the government, has the largest international airport andlies at the centre of the transport network. Chittagong is the main port andcommercial centre and the location of the first EPZ. The airport at Chittagongwas recently upgraded to handle international traffic. Sylhet airport is alsobeing upgraded into an international airport. Inhabitants of Chittagong enjoyan income per head well above the national average, largely because of theeconomic benefits of Chittagong port. By contrast, people living in northerndistricts such as Rangpur and Pabna, situated along the Ganges-Jamuna rivers,have incomes per head lower than the national average. The opening of the4.8-km Jamuna bridge in June 1998 has improved access to the northern andwestern areas of Bangladesh. The bridge provides a rail and road link, andcarries a gas pipeline. Of the three main river systems in the delta, the Meghnaand Brahmaputra (Jamuna) rivers now have bridges, leaving only the Ganges(known locally as the Padma) without a fixed link. Recently the Japanesegovernment agreed to provide funds for the construction of a bridge at Rupsaover the river Ganges.

Economic sectors

Agriculture, forestry and fishing

Agriculture accounted for 24.6% of real GDP in 1999/2000, compared withmore than 30% in the early 1990s. The declining share of agriculture arisesfrom the incorporation into the GDP calculation since 1995/96 of manyinformal sector activities that were previously unaccounted for. The crop sectorcontributed 14% of GDP in 1999/2000, maintaining its position as a majorsource of agricultural growth. Other agricultural subsectors—fisheries, livestockand forestry—also experienced higher growth rates on a sustained basis in the1990s. (See Reference table 16 for data on agricultural crop production.)

Serious flooding is a constant threat to agricultural production, destroyingcrops, livestock and human life, and placing unforeseeable strains on foreign-exchange requirements and exports, particularly when jute or tea crops aredamaged. Despite a noticeable improvement in recent years, crop yields,particularly with regard to food crops, remain well below attainable levels. Theapplication of chemical fertilisers is infrequent and unbalanced, and althoughchemical fertiliser use is increasing, the fertility of the land has fallen in recentdecades. Manure from animals is still by far the largest source of fertiliser. The

Serious flooding is aconstant threat

Agriculture remainsimportant

Infrastructure influenceswide regional disparities

32 Bangladesh


distribution and marketing of fertiliser was privatised in the late 1980s, butgovernment controls have been resumed following the fertiliser crisis in 1995,when the government had to distribute fertilisers.

The total land area of Bangladesh is about 36.5m acres, of which two-thirds isunder cultivation. The population explosion, urbanisation and river erosionhave reduced the proportion of cultivated land over the years. Around 5% offarm households own and operate about one-quarter of all agricultural land inBangladesh. Ownership of agricultural land is highly fragmented because ofpopulation increases and cumbersome inheritance rights. The fragmentation offarms and the insecurity of tenure discourage investment in the long-termproductivity of the land. The use of more intensive methods of cultivation andmodern technology to raise agricultural output has begun to marginalise thepeasantry, with small farmers that use traditional farming methods finding itdifficult to survive. The liberalisation of seed policy has allowed theintroduction of new high-yielding varieties of rice and wheat, and hascontributed to increased production.

Land utilisation(‘000 acres)

1983/84 1997

Total cultivable area 22,674 20,209

Net cultivated area 20,238 17,449

Uncultivated area 2,436 2,760

Source: World Bank, Bangladesh: Study of Land Issues.

The area under irrigation has expanded from 17% of cropped land in the late1980s to 60% in 2000, with modern methods, such as pumps and shallow anddeep tube wells, gradually replacing traditional ones. By 2001 about 4.9m ha ofland were irrigated. The increased irrigation has helped to raise yields,especially for the boro (dry season) rice and vegetable crops. But the long-termfuture of tube-well irrigation, which supplies over 90% of the irrigated area andhas been the linchpin of agricultural growth, is now being questioned. There iswidespread belief that the recent arsenic crisis, which emerged as a serioushealth hazard for a large segment of the population, was related to the suctionof underground water for irrigation.

The introduction of high-yielding varieties of rice, coupled with increasedirrigation and fertiliser application, has resulted in rising rice production in thelast two decades. Rice production increased from 17.8m tonnes in 1990/91 to24.4m tonnes in 2000/01. The major contribution came from high-yieldingboro varieties, production of which has risen in the last ten years, from 6.3mtonnes in 1991 to an estimated 11.2m tonnes in 2000/01. Rice production,however, remains susceptible to drought, floods and fertiliser shortages, asmanifested in 1998 when the devastating floods wiped out much of the aus(late dry/early monsoon season) and aman (monsoon season) harvests and thegovernment was forced to import 1m tonnes of food. Output of wheat, thesecond largest food grain, grew rapidly over the same period, from an annualaverage of 100,000 tonnes in the early 1970s to about 2m tonnes in 2000/01.

Structure of land and farmownership

Rice and wheat

Bangladesh 33


This was achieved by planting high-yielding varieties and bringing new areasunder cultivation.

Food grain production(m tonnes).

1994/95 1995/96 1996/97 1997/98 1998/99 1999/2000

Total cereals production 18.1 19.1 20.3 20.7 21.9 24.9

Cereals imports 2.6 2.4 1.0 1.9 5.4 2.1

Source: World Bank, The WTO and South Asian Agriculture (forthcoming publication).

Bangladesh is the largest exporter and the second largest producer of raw jutein the world. Jute is an important industrial raw material and exportcommodity. The main markets are India, which is itself the largest producer ofraw jute, and Pakistan. Bangladesh accounted for 27.6% of world juteproduction in 2000/01 according to the UN Food and Agriculture Organisation(FAO), 92% of world jute fibre exports and 64.6% of jute manufactured exportsby weight. The International Jute Study Group (IJSG), under the auspices of theUN Conference on Trade and Development (UNCTAD), superseded theInternational Jute Organisation as the international body concerned with thejute market in March 2001. The main difference is that the IJSG involves theprivate sector. In Bangladesh about 3m farm households are involved in theproduction of jute. The area under jute cultivation fluctuates in response tochanges in the relative procurement prices of jute and rice, but has been indecline. In 2000/01 400,000 ha of land were under jute cultivation, comparedwith 570,000 ha in 1997/98. Exports of raw jute have also fluctuated in recentyears. In 1999/2000 Bangladesh earned US$72m from exports of raw jute,compared with US$108m in 1997/98.

Tea is an important cash crop and export commodity, and exceptionally strongdemand raised tea exports in the late 1990s. The production of tea has risenfrom 38,000 tonnes in 1981/82 to 56,000 tonnes in 1998/99, but it stillremains below potential despite a major rehabilitation program carried out inthe 1980s. In 1999/2000 tea exports fetched only US$18m, compared with anaverage of US$44m in 1997/98-1998/99. Poor climatic conditions,management problems in the tea estates, falling demand for Bangladesh’s teaabroad and low tea prices are some of the problems afflicting the industry.Domestic demand has, however, been increasing.

Other important crops include sugarcane, tobacco and cotton. Sugarcaneoutput is subject to wide swings from year to year. In the early to late 1990sannual production ranged between 7,000 and 7,500 tonnes. Low mill priceshave diverted some cane from crushing at the mills to use in the production ofgur, used as a local sweetener. Smuggling of cheaper sugar from India is aconstant problem. Tobacco output, which finds a ready domestic market, hasdeclined since the mid-1990s. Cotton is a fairly new crop. There are plans forlarge production increases in order to reduce Bangladesh’s high import bill forthe commodity, used to supply the textiles and garments industry.

Jute

Tea

Other crops

34 Bangladesh


The livestock sector grew strongly in the 1990s. In 1999/2000 the sectoraccounted for 2.7% of real GDP and 15.5% of agricultural output. While it isonly a minor source of food, it plays a critical role in agriculture. Livestock areoften the only source of non-human farm energy, providing most of thedraught power for ploughing, crushing and rural transportation. They alsoproduce manure, the largest source of fertiliser. The sector also provides hidesand skins, which are sources of export income. The livestock sector has thepotential to contribute to increased employment and poverty alleviation inrural areas. Around 25% of the population is directly involved in this sector.

Bangladesh has a total forest area of approximately 2.5m ha, around 17% ofthe total land area, of which planted forests account for 45%. In 1999/2000forestry contributed 1.8% to real GDP and 9.6% to real agricultural output, andgrew at a rate of 4.9%. The government began a 20-year plan in 1993 toexpand forestry and preserve the ecological balance. In addition, massive treeplantation programmes are under way under the Forestry Policy initiated in1994. The commercial felling of timber is limited, amounting to around6.1m cu ft in 1994/95. The timber is used as sawn timber and to produce pulpfor the paper and newsprint industry. Besides providing industrial andcommercial raw materials, forestry remains a major source of firewood for therural population.

With around 4.3m ha of rivers, canals, ponds and water reservoirs, andterritorial waters that extend for 12 nautical miles into the Bay of Bengal,Bangladesh offers good prospects for fisheries development. In 2000/01 thissector contributed 5.9% to overall GDP and accounted for 6% of exportincome and nearly 60% of revenue from primary exports, especially throughthe shipment of frozen prawns. In 1999/2000 export earnings from frozenprawns were US$344m, compared with an average of US$284m in 1997/98-1998/99. Overall export earnings in 1999/2000 from the fisheries sector wereTk18.1bn (US$358m), the highest recorded. Bangladesh has 781 fishhatcheries—141 publicly owned and 640 private—and fish production stood at1.7m tonnes in 1999/2000.

Mining and semi-processing

Figures for the contribution of mining and quarrying to real GDP (using1995/96 as the base year) show that this sector accounted for only around 1%of GDP in 1998/99-1999/2000. Mining and mineral exploration are carried outunder the auspices of the publicly owned Petrobangla (Bangladesh MineralExploration and Development Corporation), and under production sharingcontracts (PSCs) with international oil and gas exploration companies. Theonly minerals commercially exploited at present are limestone and china clay,although mining of coal from Barapukuria in Dinajpur has begun. (SeeReference table 17 for historical data on the production and value of non-energy minerals.)

Livestock

Forestry

Fisheries

Mining is of minimalimportance

Bangladesh 35


Manufacturing

The manufacturing sector is largely taken up with the processing ofdomestically produced agricultural raw materials. In the late 1980s industrialactivities expanded into new, non-traditional areas, such as ready-madegarments (RMGs) and fertiliser manufacturing. The manufacturing sectorreturned to a respectable growth rate in 2000/01, recording growth of 9.1%,compared with 3.2% in 1998/99 when a devastating flood wreaked enormousdamage to the economy. The growth rate of the manufacturing sector rangedbetween 3% and 10.5% in the 1990s, averaging 6.9%—a considerableimprovement compared with the 1980s, but well below potential. (SeeReference table 18 for data on the production and value of selectedmanufactured items.)

Manufacturing: growth rates for small- and large-scale industries(% change)

1995/96- 1995/96 1996/97 1997/98 1998/99 1999/2000 2000/01 2000/01a

Large-scale 5.7 4.0 9.3 4.2 4.3 9.7 6.2

Small-scale 8.3 7.7 6.8 0.7 5.8 7.5 6.1

a Annual average percentage change.

Source: Bangladesh Bureau of Statistics.

In 2000/01 large-scale industries grew faster than small-scale industries, whichtypically utilise little capital to produce simple goods wholly for the domesticmarket. The annual average growth of small-scale industries in 1995/96-2000/01 was, however, similar to that of large-scale industries, at 6.1-6.2%.Overall, the manufacturing sector accounts for 14.8% of real GDP. Thedominance of the state sector and the draining of scarce public resources tostate-owned enterprises (SOEs) crowd out the resources available for the privatesector. This is one of the major sources of slower growth; other problemsinclude industrial unrest, unwieldy labour unions and a corrupt bureaucracy.

The SOEs still dominate the manufacturing sector and are among the worstperformers in terms of investment, growth and efficiency. The combined lossesof the SOEs grew to around US$500m per year in the late 1980s, then fellsharply in the 1990s after the government reduced subsidies under the JuteSector Adjustment Credit programme (JSAC), implemented with World Bankassistance in 1994. Government cuts in subsidy were especially severe in thejute sector, which is the largest loss-maker. Annual losses at the 40 state-ownednon-financial corporations (an SOE subcategory) have increased rapidly inrecent years, reaching Tk21.9bn in 1999/2000 compared with Tk4.7bn in1998/99. These corporations also owe Tk47bn in outstanding loans to state-owned banking institutions, about 29% of which are classified as non-performing. In recent years subsidies to the SOEs have increased, from Tk614m(US$13.5m at the 1997/98 average exchange rate of Tk45.46:US$1) in 1997/98to Tk1.3bn in 2000/01.

Recent government policy to revitalise manufacturing has focused onpromoting private-sector investment, mainly through an export push and the

State-owned enterprisesdominate

36 Bangladesh


gradual lowering of import tariffs and controls. Current industrial policy aimsat raising the contribution of the industrial sector to GDP and the proportionof the labour force employed in the sector over the next decade. It also aims toeliminate differences between the treatment of domestic and foreigninvestment and to diversify the industrial base.

Trends in industry(annual averages)

2001a 1997–2001a

Industry % of nominal GDP 15.8 16.3 % change 9.1 5.3

Large-scale manufacturing % of nominal GDP 11.4 11.0 % change 9.8 5.4

Small-scale manufacturing % of nominal GDP 4.4 4.5 % change 7.5 4.8

a Fiscal years ending June 30th; provisional.

Source: Ministry of Finance, Bangladesh Economic Survey, various years.

Bangladesh is the second largest producer of manufactured jute goods in theworld after India and the largest exporter. Earnings from jute products havedeclined in recent years. In 1999/2000 export earnings from jute wereUS$266m, compared with US$304m in 1998/99. In the long term the jutesector faces competition from synthetic substitutes and needs to address theproblem of extremely inefficient production in Bangladesh, despite juteproducts having won international recognition from the “green” movement.Jute goods produced include carpet backing, twine and sacking, and efforts arefocused on improving the quality of raw jute to produce paper. The productionof jute goods declined from 368,000 tonnes in 1998/99 to 342,000 tonnes in1999/2000. Between 1982 and 1986 35 of the 66 jute mills were privatised. But,as the government remains the largest shareholder of many of the privatisedmills and wholly owns the Bangladesh Jute Mills Corporation (BJMC), the jutesector remains a drain on the national exchequer.

There has been a rapid proliferation in export-oriented RMG manufacturingenterprises (typically small) over the last two decades. Most of the inputs usedin the manufacturing process have to be imported. There are about 2,600factories employing 1.4m workers, about 95% of whom are female. Clothinghas become Bangladesh’s most important export item, accounting for around70% of export earnings. Bangladesh has been particularly successful insupplying RMGs to the US and the EU, benefiting from the Multi-FibreArrangement (MFA) in the case of the US and the Generalised System ofPreferences (GSP) in the case of the EU. In 1999/2000 RMG export earningsreached US$3.1bn, compared with US$2.7bn in 1998/99. Bangladesh will,however, face new competition as a result of the US decision to grant specialconcessions to RMG imports from some African countries. Moreover, the MFAwill end by 2004, exposing Bangladesh to competition from countries such asChina, India and Vietnam.

Jute goods

Ready-made garments

Bangladesh 37


The ready-made garments sector at a crossroads

The ready-made garments industry (RMG), which accounts for almost 70% ofBangladesh’s foreign-exchange earnings, is at a crossroads. The following threedevelopments impinge on its future.

• The EU decision in early 2001 to grant duty- and quota-free access toproducts from all 49 least developed countries (LDCs). The EU decision willallow Bangladesh to continue to enjoy the benefits of duty- and quota-freeaccess that it has enjoyed under the Generalised System of Preferences(GSP), which will expire at end-2001. Over 40% of Bangladesh’s RMGproducts are shipped to the EU market. However, Bangladesh’s exports willnow have to compete with those from other LDCs, while free access underthe new regime will be accompanied by tighter import monitoringsafeguards and more stringent rules of origin.

• The US Trade and Development Act (TDA) 2000, which grants 33 LDCs,including Bangladesh, duty- and quota-free access to the US market. Overhalf of Bangladesh’s RMG exports go to the US. A study conducted in 2001by the Bangladesh Garments Manufacturers And Exporters Association(BGMEA) points out that for Bangladeshi manufacturers to competesuccessfully against the other 32 LDCs, mostly Caribbean and sub-SaharanAfrican countries, they would have to reduce costs by 15-20%.

• The full integration of the textiles and clothing sector into the global traderegime under World Trade Organisation (WTO) rules by end-2004. The fullintegration of the sector poses a serious problem because Bangladesh’sRMG industry has developed under the discriminatory protection of theMulti-Fibre Arrangement (MFA). Consequently, the sector lacks backwardlinkages, and some studies suggest that establishing backward linkages tofabric production may not be economically viable. It is believed that atleast some of the countries that supply fabrics to Bangladesh will becomecompetitors in the quota-free trade.

The abundance of natural gas in Bangladesh has led to the establishment of achemicals industry that mainly produces urea fertiliser, for which there is hugedomestic demand. From 610,000 tonnes in 1982/83, Bangladesh’s productionof urea rose to 1.8m tonnes in 1999/2000. Six fertiliser factories operate underthe state-owned Bangladesh Chemical Industries Corporation (BCIC). There isalso the Karnaphuli Fertiliser Company (KAFCO) at Chittagong, a joint venturebetween the government and foreign investors from Japan and Italy. With theincreased availability of natural gas in recent years, the government is nowencouraging domestic and foreign investment in order to establish morefertiliser factories, mainly for export purposes.

Small manufacturing enterprises include those producing matches, cigarettes,bicycles, tyres and tubes, batteries, pumps, motors and engines, radios andtelevision sets, and other electrical items. Recently there has been someexpansion into electronics, with a number of foreign investors setting up lightelectronics assembly plants in the export processing zones (EPZs), encouragedby the lower wages in Bangladesh compared with many other Asian countries.

Chemicals

Other industrial andconsumer products

38 Bangladesh


Construction

The construction sector has experienced strong growth since the early 1990s,especially in urban areas with high-rise apartment complexes being built tomeet the demands of the growing middle class. The annual average growthrate in 1996/97-2000/01 was 7.7% compared with 6.4% in the preceding fiveyears. Although the new buildings have further strained the power, gas, waterand sanitary services in the major cities, the construction industry has alsogenerated growth in related industries, such as transport, storage,communications, housing and trade services. The industry has received aboost from government policies encouraging build-operate-own (BOO) andbuild-operate-transfer (BOT) power and gas, bridges and roads projects. In2000/01 the share of the construction sector in real GDP was 8% using1995/96 base numbers.

From around 200,000 tonnes in 1992/93, cement production increased to543,000 tonnes in 1997/98 and to 1.48m tonnes in 1999/2000. Given thatdomestic production can only meet 10-15% of domestic demand, Bangladeshremains dependent on cement imports, costing around US$100m each year.Encouraged by the booming domestic construction industry, internationalinvestors are beginning to invest in the cement sector. Several new plants,including joint ventures with companies from South Korea, France andScandinavia, are expected to come on stream soon.

Financial services

The financial services sector is small and undeveloped and, despite reforms,remains less than 2% of real GDP. There have been reforms such as interest-ratederegulation, a strengthening of loan classification standards, a reduction inthe central bank’s control over financial transactions and loan recoverymeasures. Despite these efforts, the financial system still suffers from highlevels of non-performing loans (NPLs)—bank NPLs represented 40% of totalloans outstanding at end-June 2000 compared with 32% at end-1995,according to the Asian Development Bank. An extremely low loan recoveryrate, a failure of local banks to meet capital adequacy requirements, rampantinsider trading, fraudulent transactions and various other systemicinefficiencies lie behind the high levels of NPLs. One reason for the highproportion of NPLs is that the government has encouraged banks to lend toloss-making SOEs and several large private-sector defaulters that wieldconsiderable political influence.

Bangladesh Bank is the central bank and currency issuing authority, but it hasproved ineffective in its use of monetary policy and its control of the bankingand financial sectors. There has been a failure to define clearly the functionsand responsibilities of the central bank, and to make it fully independent. Thecentral bank lacks the powers to supervise the nationalised commercial banks(NCBs) or the private banks effectively, dictate monetary or exchange-ratepolicy, or enforce regulations without interference from the Ministry of

Strong growth

Cement

A huge burden of non-performing loans

The central bank

Bangladesh 39


Finance. It is also overstaffed, inefficiently managed and highly unionised. Acentral bank technical assistance project, under consideration by the WorldBank, would aim to improve prudential regulation, external loan managementand the use of computers at the central bank.

State-owned banks—the NCBs—dominate the financial sector. Given that thegovernment is the owner, regulator and major customer of the NCBs, there hasbeen ample opportunity for mismanagement and political interference.Despite major reform programmes, including the financial sector reformprogramme (FSRP) and the commercial banking restructuring project (CBRP)—both mainly implemented in the 1990s—the banking sector remains hobbledby poor credit discipline, an archaic loan recovery system, corruption,inefficiency, overstaffing and unionisation. The Ministry of Finance approvesall NCB budgets; salaries of NCB officials are tied to government pay scales;and there is no system for encouraging good or penalising poor performance.

The four NCBs are the Agrani Bank, the Janata Bank, the Rupali Bank and theSonali Bank. Two former NCBs were privatised in the 1980s—the Pubali Bankand the Uttara Bank. The remaining four NCBs account for around 60% oftotal deposits and 50% of total lending. The NCBs, whose lending is oftendirected by the government, have large portfolios of NPLs, standing at around33% of total loans outstanding, and the default rate of their NPLs wasestimated at over 45% in December 2000, using international accountingstandards. They have also been forced by the government to undertake loan-forgiveness programs. The four NCBs were recapitalised in 1992 and 1993 at acost of Tk31.9bn, but they are once again suffering from capital inadequacy.

The growth of private banks since the 1980s has injected much-neededcompetition into the banking sector. There are now 42 private banks inBangladesh—29 domestic and 13 foreign—whose more competitive interestrates challenge the position of the established state banks. The proportion ofdeposits and advances at private banks rose from 42% of total deposits in1997/98 to almost 49% in 1998/99, and the proportion of total lending byprivate banks rose from 25% in 1997/98 to 26% in 1998/99. The private banksoperate exclusively in urban areas, primarily Dhaka and Chittagong. They farebetter in terms of operational efficiency, as indicated by lower staff ratios andmore competitive compensation levels. But they also suffer from capitalinadequacy and insider trading, with some private banks manipulating theirdividend declarations and share prices through unfair and underhand dealings.The activities of foreign banks tend to be restricted to offshore and foreigntrade businesses. Foreign banks are, however, gradually emerging ascompetitors in the local deposit and credit markets.

There are two specialised banks for industry, the Bangladesh Shilpa Bank (BSB)and the Bangladesh Shilpa Rin Sangstha (BSRS), and two for agriculture, theBangladesh Krishi Bank (BKB) and the Rajshahi Krishi Unnayan Bank (RAKUB).All four banks are publicly owned, have a negative net worth and a highdefault rate on their loans. The BKB has, however, made some improvementsin the last few years: its loan disbursement rate, the percentage of targeted

The nationalisedcommercial banks

The private banks

The specialised banks

40 Bangladesh


loans actually disbursed, rose to 90% in 1998/99 from 85% in 1997/98. Otherspecialised banks in Bangladesh include the Investment Corporation ofBangladesh, the Grameen (“rural”) Bank and the House Building FinanceCorporation. The state-owned specialised banks suffer from politicalinterference, poor management and a culture of lax credit discipline. TheGrameen Bank, founded by Mohammad Yunus, has earned a global reputationfor its provision of micro-credit.

There are 60 private insurance companies, including one that is foreign-owned.The bulk of insurance activity is, however, in the hands of two nationalisedcompanies, Jiban Bima Corporation (life insurance) and Sadharan BimaCorporation (general insurance). The largest private insurance company isGreen Delta.

There are two bourses in Bangladesh: the Dhaka Stock Exchange (DSE) and theChittagong Stock Exchange (CSE), which opened in October 1995. (SeeReference table 19 for data on stockmarket indices.) The demand for shares,however, remains weak because of the preference for and the availability oflow-risk high-yielding government bonds and saving schemes. The stock-market is poorly developed, with only around 240 companies’ shares beingtraded, and liquidity is low. The market capitalisation of the stock exchangesrelative to GDP, at 0.5%, is low. Share prices rose dramatically after the June1996 election (market capitalisation reached US$6bn, or 19% of GDP, onNovember 4th 1996), fuelled largely by unofficial kerbside dealers. Evidence ofwidespread manipulation of share prices emerged later.

The DSE all-share index has traded in a range of 540 to 670 in the last fewyears, down from more than 3,600 in November 1996, and hopes for arecovery remain slight. Some measures have been taken to boost the capitalmarket in recent years, but with limited success. In 1997 the governmentwithdrew the lock-in system for initial public offerings (IPOs) to attract foreigninvestors, waived capital gains taxes on bonus shares, increased ceilings forcredit against shares and debentures from 40% to 50% of the market value, andintroduced a circuit breaker system to control abnormal fluctuations.

In a bid to encourage institutional investors, the government in 1998 gavepermission for the setting up of 16 merchant banks, about half of which werein operation by 2001. From mid-2000 commercial banks—domestic andforeign—were also allowed to operate as merchant banks. Share transactionsare now automated in both bourses following the installation of a centraldepository system (CDS)—a system of scripless electronic transactions—in2001. Both bourses introduced separate blue-chip indices in early 2000 to shoreup investors’ confidence in companies that hold regular annual generalmeetings and pay annual dividends. The securities and exchange commission(SEC), the securities market watchdog set up in 1994, suffers from financial andadministrative irregularities, further inhibiting government efforts to kick-startthe capital market.

Insurance companies

The stock exchanges

Bangladesh 41


Other services

The tourism sector is small, but between 1991 and 1999 the number of visitorsto Bangladesh increased from 110,000 to 170,000, an increase of 55%, whileearnings from tourism increased from Tk594m to Tk2.4bn. The sector hasreceived a boost in recent years with the end of the tribal insurgency in theChittagong Hill Tracts (CHT) area, which has lakes, mountains and other sightsthat have traditionally attracted both foreign and local visitors. The mostimportant origin of foreign visitors is, predictably, India, accounting for 34% ofthe total number in 1999, followed by the UK, Germany, Thailand and the US.Bus services that have connected Dhaka with Calcutta, the capital of India’sWest Bengal, since June 1999 and with Agartala, the capital of the Indian stateof Tripura, since July 2001 have enabled easier access for Indian visitors toBangladesh, and a passenger railway service to India is likely to be created.

The external sector

Trade in goods

Bangladesh suffers from a chronically weak foreign-trade account, reflecting itsdependence on imports for most essential goods and generally poor prices forits traditional staple exports of jute, jute manufactures and tea. Its largestexport, ready-made garments, requires a large proportion of imported inputs.(See Reference tables 20-22 for data on external trade.)

Foreign trade, 1999/2000(Tk bn)

Exports fob 249.2 of which: ready-made garments 157.2 fish & prawns 18.1 jute products 11.3 hides, skins & leather 7.6 jute & meshta 3.7 tea 0.9

Imports cif 422.8 of which: machinery & transport equipment 107.3 textile yarn & fabrics 90.6 petroleum & petroleum products 32.1 iron & steel 19.8 cereals & dairy products 19.2 chemicals 14.0

Trade balance –173.5

Source: Bangladesh Bank, Economic Trends.

Import liberalisation, coupled with the growing demand for industrial inputsin the 1990s, has increased the pressure on the merchandise trade account.Between 1990 and 2000 imports grew by an average of 10.6% per year. The

Tourism is small butgrowing

Recent import trends

A chronically weak foreigntrade account

42 Bangladesh


average rate of growth in the early 1990s, when the government removedquantitative restrictions on imports and substantially reduced import tariffrates, was high. In the late 1990s the annual average rate of import growth fellto less than 5% because of weak industrial activity, subdued investment andincreased illegal trade with India. In 1999/2000 imports grew by 9.9% year onyear to Tk422.8bn (US$8.4bn), compared with Tk384.8bn in 1998/99.

The non-traditional garments industry overtook jute goods as the major exportearner in 1987/88, and by 1999/2000 garments export earnings stood atTk157.2bn. Ready-made garment (RMG) exports are, however, highly import-dependent. The cost of imported fabric, yarn and buttons came to Tk90.6bn in1999/2000; hence the net benefit to export earnings was only around 40% ofthe sector’s gross export earnings. The RMG industry employs around 1.4mworkers, of whom about 95% are female. The industry is, however, facing anumber of challenges stemming from the phasing out of the Multi-FibreArrangement (MFA) under the Uruguay Round trade agreement, and fiercecompetition in its main export markets in the US and the EU is likely as aresult of the granting of duty-free market access by these economies to manydeveloping countries in recent years.

The jute industry’s share of total export earnings fell from 49% in 1985/86 toless than 10% by the late 1990s. Earnings from jute, tea and hides are highlysusceptible to fluctuations in prices on world markets. Recent initiatives haveencouraged production in the leather industry, export earnings of which havegrown steadily to account for around 5% of total earnings in the 1990s. Asizeable export trade in frozen and processed fish products has been developed,of which prawns are by far the most important product, and further exportgrowth should be possible, barring any problems meeting the hygienestandards of export markets.

Main trading partners, 2000

Exports to: % of total Imports from: % of total

US 33.4 India 9.7

Germany 10.9 Japan 9.3

UK 7.1 Singapore 8.3

France 5.2 China 6.9

Netherlands 4.2 Hong Kong 5.4

Italy 4.0 South Korea 3.9

Belgium 3.0 Saudi Arabia 2.8

Canada 1.7 UK 2.8

Source: IMF, Direction of Trade Statistics.

In 1993 Bangladesh Bank, the central bank, liberalised foreign-exchangeregulations, allowing dealers to fix exchange rates and increasing theirpermitted holdings of foreign currency. Subsequently, it made the takaconvertible for current-account transactions and allowed foreigners to invest inthe capital market and repatriate the proceeds. Quantitative restrictions wereremoved from a large number of imported goods and tariff rates weresimplified with a top rate of 37.5%. However, an infrastructure development

Garments exports faceinternational competition

Foreign-exchange and traderegulations

Bangladesh 43


tax of 2.5%, introduced in 1996/97, remains in place, with some exceptions.Tariff rates need further rationalisation because both nominal and effectiverates of protection remain higher than in competitor countries, such asIndonesia, Korea, Malaysia and Thailand.

Direction and composition of trade, 1998(US$ m)

Exports fob US Germany France UK Total

Food & live animals 144.9 5.0 2.1 16.3 358.5 of which: fish 142.5 4.9 1.9 15.2 285.1Leather 1.4 2.0 3.4 3.2 106.0Textile fibres, yarn, cloth & manufactures 99.2 7.8 9.2 20.3 516.4 of which: raw jute 0.4 0.1 0.0 1.0 83.0 jute yarn & fabrics 6.6 3.2 0.5 10.0 131.5 Jute twine 6.9 0.5 0.0 1.4 47.2 jute sacks, bags, etc 3.5 1.9 0.5 1.2 86.7Clothing 1,690.9 422.1 413.3 318.3 3,785.8Total incl others 1,992.7 449.0 447.5 371.1 5,056.9

Imports cif India Japan Singapore South Korea Total

Food & live animals 300.4 0.1 2.4 2.1 704.0 of which: dairy products 6.9 0.0 1.0 0.0 64.8 cereals & preparations 236.1 0.0 0.5 0.6 416.7Cement, etc 75.4 1.5 1.3 5.2 278.0Mineral fuels 7.0 0.0 154.1 1.5 527.0Animal & vegetable oils & fats 0.9 0.0 4.7 0.0 243.0Chemicalsa 78.4 26.1 52.3 61.3 676.8Paper & manufactures 9.8 6.7 1.5 33.1 141.1Textile fibres, yarn, cloth & manufactures 319.4 13.6 73.9 159.7 1,860.5 of which: raw cotton 18.0 0.0 1.2 0.1 236.6Non-metallic mineral manufactures 8.9 0.4 0.7 0.4 45.4Iron & steel & manufacturesb 51.4 149.5 30.0 66.0 545.1Other metals & manufacturesb 37.4 1.0 13.4 14.7 161.6Machinery & transport equipment 112.8 250.8 94.1 37.4 1,373.1 of which: road vehicles & tractors 30.6 81.3 1.7 1.1 162.4 ships 0.9 70.3 10.5 0.0 225.4Total incl others 1,040.7 478.7 455.5 425.1 7,018.0

a Including crude fertilisers and manufactures of plastics. b Including scrap.

Source: UN, External Trade Statistics, series D.

Invisibles and the current account

Bangladesh runs a large deficit on its invisibles (services and income)account, primarily comprising the costs of freight and insurance on imports,expenses relating to technical and financial services for development projects,and interest on foreign debt. (See Reference table 23 for data on the balanceof payments.)

A large invisibles deficit

44 Bangladesh


Current account, 2000(US$ m)

Merchandise exports fob 6,399.2

Merchandise imports fob –8,052.9

Trade balance –1,653.7

Services balance –805.1

Net income –266.4

Net transfers 2,419.5

Current-account balance –305.7

Source: IMF, International Financial Statistics.

The deficits on the merchandise trade and invisibles accounts are largely offsetby current transfers. After several years in surplus, the current account dippedheavily into deficit in 1995, as net transfers of around US$2bn could notcounter the soaring trade and services deficits. The current-account deficitreturned to a lower level of US$286m in 1997 on net current transfers ofUS$2.1bn. Since 1997 the current-account deficit has been manageable; it wasUS$306m in 2000. The bulk of current transfers is made up of remittances fromBangladeshis working abroad (private transfers), with the remaindercomprising foreign grants and food aid (official transfers). Workers’ remittanceshave grown steadily over recent years, from Tk50bn in 1995/96 to Tk97bn in1999/2000, as Bangladeshi nationals continue to seek employmentopportunities overseas (see Reference table 25 for data on remittances fromBangladeshis working abroad). Official transfers, however, have tended tofluctuate; for example, aid for flood damage boosted official transfers in 1998.As a result, current transfers reached US$2.5bn in 1999, owing to the rise in aidinflows to assist the government during the flood crisis, and remained aroundthat level in 2000.

Capital flows and foreign debt

Almost all inward capital flows consist of foreign loans for developmentprojects, much of which is channelled through the Consortium ofDevelopment Partners (see Reference table 26 for data on net officialdevelopment assistance). Between independence in 1971 and 1999 a total ofUS$33.2bn in foreign aid was disbursed, of which 48% was in the form ofgrants and 52% in the form of loans. In 2000 donor countries agreed to grantBangladesh around US$2bn in aid, depending on the pace of economicreforms and the implementation of good governance. Much of the project aidcommitted over the last few years has not been disbursed because ofbureaucratic delays and the government’s inability to raise sufficient domesticresources to match donor assistance.

Aid inflows are increasingly tending to take the form of loans, and total debtservice will therefore rise over the next few years. Although the debt/GDP ratiowas estimated at about 38% in 1999, over 90% of the debt is long-term officialbilateral and multilateral debt on concessional terms with long maturities, low

Transfers

Foreign aid and loans

Bangladesh 45


rates of interest and ten-year grace periods. This makes the debt burdenconsiderably easier to bear.

The inflow of foreign direct investment (FDI) has accelerated in recent years inline with the increase in gas exploration and the building of new power plants.Net annual FDI inflows increased from only US$2m in 1995 to US$280m in2000, according to the IMF. Foreign interest in the energy sector has, however,begun to diminish as some foreign companies have slowed or closedexploration operations, arguing that gas production will not be profitableunless the government allows gas exports to India. The heavy concentration ofFDI in the sector has raised concerns about the government’s ability to meetforeign-currency repayment obligations. Pressure on the government to agreeto gas exports is mounting, with investors arguing that that the domesticmarket is too small to ensure a return on their investments. Both the WorldBank and the Asian Development Bank have advised the government to exportgas to improve the country’s foreign-exchange reserves and encourage moreforeign investment. Other than the gas extraction sector, export processingzones (EPZs) have benefited from an increase in FDI in recent years.

Foreign reserves and the exchange rate

As the balance-of-payments position improved in the early 1990s, reservesincreased steadily, peaking at US$3bn in 1994, equivalent to seven months ofimport cover. But the recording of chronic current-account deficits since 1995has been reflected in a large reduction in foreign reserves, which fell toUS$1.1bn in May 2001, providing less than two months of import cover. Hard-currency remittances from Bangladeshi workers abroad, principally in theMiddle East, have helped to offset lower aid disbursements, but Bangladesh’sforeign-exchange position remains fragile. (See Reference table 27 for data onforeign reserves.)

In 1995 the Bangladesh Nationalist Party (BNP) government began a policy ofallowing the value of the taka to depreciate against the US dollar, the maincurrency in the basket of currencies against which the taka is measured. (SeeReference table 28 for data on the exchange rate.) The taka has been devaluedin stages ever since. The sharpest adjustment in the value of the taka came inAugust 2000, when the taka was devalued by 6% in response to an earlierdepreciation of the Indian rupee, raising the official purchasing rate toTk53.85:US$1 and the selling rate to Tk54.15:US$1. Facing falling export pricesand dwindling foreign-exchange reserves owing to the global slowdown,Bangladesh Bank in mid-May 2001 devalued the taka by a further 5.5%. Takingthis latest adjustment into account, the taka was devalued against the US dollarby 50% in the 1990s, compared with a 62% devaluation of the Indian rupeeand a 68% devaluation of the Pakistani rupee over the same period.

Foreign direct investment

Foreign reserves have beenfalling

46 Bangladesh


Appendices

Regional organisations

The South Asian Association for Regional Co-operation (SAARC),which comprises India, Pakistan, Sri Lanka, Bangladesh, Nepal, the Maldivesand Bhutan, was established in 1985 at a meeting in Bangladesh. SAARC’s aimsinclude promoting welfare, accelerating economic growth, eradicating povertyand improving relations between member states.

Summit meetings are intended to be held annually and are complemented bytechnical committees, meetings of foreign ministers and a standing committee,which comprises the foreign secretaries (civil servants) of each country. Anunder-resourced secretariat, established in 1987, is based in Kathmandu andled by the secretary-general, Nihal Rodrigo, co-ordinates SAARC’s activities.

In the early years agreements were made to establish a food security reserve (anagreement that has never been implemented), to establish a meteorologicalcentre, to combat terrorism and to create various cultural exchanges betweenmember states. Along with micro-level issues, SAARC has also proposed thecreation of a South Asian Free-Trade Area (SAFTA). SAFTA, seen as areplacement for the South Asian Preferential Trading Arrangement,which was agreed in 1995 and which had, by 1996, identified more than 2,000products as eligible for preferential treatment, was initially to be put in placeby the ambitious target of 2001. After the 1997 SAARC conference, an eminentpersons group was constituted to plot the way forward for the association. Thegroup argued that closer economic ties were the key to the future, andproposed that a free-trade area should be in place by 2008 (2010 for the leastdeveloped member states), a customs union in place by 2015 and an economicunion by 2020. Political factors weigh against even this prolonged timetable.

India’s refusal to participate in the SAARC summit of 1999, in protest at themilitary coup in Pakistan, led to the cancellation of summits in 1999 and 2000,although a summit may take place late in 2001. Tensions between India andPakistan have continually hampered SAARC’s progress on wider issues, thoughit has been relatively effective in providing a forum for meetings of non-governmental organisations and professional groupings. There is pressure onSAARC from the smaller countries for the association to deal with bilateralissues—much of this pressure stems from the problematic relationship betweenIndia and Pakistan. There is a growing feeling that this problem preventsmultilateral progress, thus leading to a growing emphasis on bilateral tradingrelationships. India has signed bilateral free-trade agreements, effectivelybypassing SAARC, with Sri Lanka (2000) and Nepal (1996). Bhutan and Indiaalso have a free-trade agreement. Much of SAARC’s work is also likely to besuperseded by WTO regulations.

SAARC’s ability to reposition itself as the preferred conduit for bilateralrelationships within South Asia is likely to determine the success, or otherwise,of the organisation. SAARC’s success in arranging greater civil society linkages

The South Asian Associationfor Regional Co-operation

Bangladesh 47


within South Asia contrasts strongly with its failure to boost government-levelties. With the largest members of SAARC, India and Pakistan, engaged inpersistent low-level warfare, it is perhaps unsurprising that SAARC hasperformed poorly on this front.

Sources of information

Bangladesh Bank, Annual Report

Bangladesh Bank, Economic Trends (monthly)

Bangladesh Bureau of Statistics, Bangladesh Census of Agriculture and Livestock,1983/84

Bangladesh Bureau of Statistics, Bangladesh Health and Demographic Survey:Findings in Brief, 1994 and 1995

Bangladesh Bureau of Statistics, Child Nutrition Survey of Bangladesh, 1997

Bangladesh Bureau of Statistics, Labour Force Survey, 1995/96

Bangladesh Bureau of Statistics, Monthly Statistical Bulletin

Bangladesh Bureau of Statistics, Population Census, 1991

Bangladesh Bureau of Statistics, Statistical Pocketbook of Bangladesh, 1998(annual)

Ministry of Finance, Annual Budget

Ministry of Finance, Bangladesh Economic Review (annual)

Bank for International Settlements, International Banking and Financial MarketDevelopments (quarterly)

Energy Data Associates, Bishops Walk House, 19–23 High Street, Pinner,Middlesex HA5 5PJ

IMF, International Financial Statistics (monthly)

International Institute for Strategic Studies, Military Balance (annual), London

OECD, Financial Statistics Monthly

OECD, Geographical Distribution of Financial Flows to Developing Countries(annual)

UN Food and Agriculture Organisation, Quarterly Bulletin of Statistics, Rome

World Bank, World Debt Tables (annual), Washington

World Bank, World Development Report (annual), Washington

World Bank, World Tables (annual), Washington

National statistical sources

International statisticalsources

48 Bangladesh


Moudud Ahmed, Democracy and the Challenge of Development: A Study of Politicaland Military Interventions in Bangladesh, Dhaka University Press, 1995

Jorge Barenstein, Overcoming Fuzzy Governance, Dhaka University Press, 1994

CAF Dowlah, Privatisation Experience in Bangladesh, 1991-96, World Bank,Dhaka, 1997

Clare E Humphrey, Privatisation in Bangladesh: Economic Transition in a PoorCountry, Dhaka University Press, 1992

Merlinda Doder Ingco (ed), The WTO and South Asian Agriculture, OxfordUniversity Press on behalf of the World Bank, forthcoming

Stanley A Kochanek, Patron-client Politics and Business in Bangladesh, DhakaUniversity Press, 1995

Rounaq Jahan, Pakistan: Failure in National Integration, Dhaka University Press,1976

Lawrence Ziring, Bangladesh from Mujib to Ershad: An Interpretative Study,Karachi, Oxford University Press, 1992

Government of Bangladesh: http://www.bangladeshgov.org

Prime minister’s office: http://www.bangladeshgov.org/pmo/index.htm

Ministry of Agriculture: http://www.bangladeshgov.org/moa/moa.html

Ministry of Finance, Finance Division: http://www.gobfinance.org

Securities and Exchange Commission: http://www.secbd.org

Ministry of Commerce, Export Promotion Bureau: http://www.epbbd.com

Ministry of Foreign Affairs: http://www.bangladeshonline.com/gob/mofa

Ministry of Planning, National Data Bank: http://www.bangladeshgov.org/mop/ndb/index.htm

Bangladesh Bank: http://www.bangladesh-bank.org

Election Commission: http://www.bd-ec.org/

Bangladesh International Election Observer Network: http://www.bangladeshelections.org

The Daily Star newspaper: http://www.dailystarnews.com

The Independent newspaper: http://www.independent-bangladesh.com

Select bibliography

Internet home pages

Bangladesh 49


Reference tables

These reference tables provide the most up-to-date statistics available at the time ofpublication.

Reference table 1

Population1996 1997 1998 1999 2000

Total population (m) 122.1 124.3 126.5 128.1 130.2

% change, year on year 1.6 1.8 1.8 1.3 1.7

Sources: Bangladesh government; the World Bank; press reports.

Reference table 2

Labour force(m)

1985-86 1989 1990-91 1995-96

Total civilian labour force 30.9 50.7 51.2 56.0 Male 27.7 29.7 31.1 34.7 Female 3.2 21.0 20.1 21.3

Employed population 30.5 50.1 50.2 54.6 Male 27.4 29.4 30.5 33.8 Female 3.1 20.7 19.7 20.8

Source: Bangladesh Bureau of Statistics, Report on Labour Force Survey in Bangladesh, 1995-96.

Reference table 3

Energy reserves and production of natural gas(bn cu ft)

Total reserves Cumulative Cumulative Balance of(proven & reserves production reserves

Gas fields probable) (recoverable) (up to Dec 2000) (Dec 2000)

In productionBakharabad 1,432 867 587 280Habigonj 3,669 1,895 818 1,077Jalalabad 1,500 815 52 763Kailastilla 3,657 2,529 232 2,297Meghna 159 104 23 81Narsingdi 194 126 29 97Rasshidpur 2,242 1,309 195 1,114Sylhet 444 266 166 100Sangu (offshore) 1,031 848 91 757Salda Nadi 200 140 15 125Titas 4,138 2,100 1,783 317Bianibazar 243 167 5 162

Not yet in productionBegumgonj 25 15 – 15Fenchugonj 350 210 – 210Kutubdia (offshore) 780 468 – 468Semutang 164 98 – 98Shahabazpur 514 333 – 333Bibiyana 3,150 2,401 – 2,401Moulvi Bazar 500 400 – 400

continued

50 Bangladesh


Total reserves Cumulative Cumulative Balance of(proven & reserves production reserves

Gas fields probable) (recoverable) (up to Dec 2000) (Dec 2000)

SuspendedChhatak 447 268 27 242Kamta 33 23 21 2Feni 178 125 40 85

Total 24,745a 15,507 4,084 11,423

a Total does not sum in source.

Source: Ministry of Finance, Bangladesh Economic Survey.

Reference table 4

Transport1995/96 1996/97 1997/98 1998/99 1999/2000

Railway trafficFreight carried (m tonnes) 689.0 782.4 803.8 896.4 777.1Passengers carried (m) 32 34 38 37 36Passenger-km (m) 3,333 3,753 3,856 3,678 3,941

Sea transport (Chittagong & Mongla ports)Vessels handled 1,624 1,684 1,641 1,851 1,858Cargo (imports) handled (‘000 tonnes) 11,181 11,237 9,635 12,027 12,675

Air traffic 1995 1996 1997 1998 1999Air traffic movements (‘000) 68.3 66.6 114.4 85.8 105.7Passengers carried (‘000) 2,522 2,660 2,785 2,636 3,202Freight/mail carried (‘000 tonnes) 137.0 75.9 80.8 88.8 98.3

Sources: Ministry of Finance, Bangladesh Economic Survey; Bangladesh Bureau of Statistics.

Reference table 5

Gross domestic product(market prices)

1995/96 1996/97 1997/98 1998/99 1999/2000

GDP (Tk bn)At current prices 1,663 1,807 2,002 2,196 2,370At constant (1995/96) prices 1,663 1,752 1,844 1,934 2,049 % change, year on year 4.6 5.4 5.2 4.9 5.9

GDP per head (Tk)At current prices 13,622 14,538 15,824 17,150 18,270GDP per head (in US$) 334 340 348 357 368

Sources: Ministry of Finance, Bangladesh Economic Survey; Bangladesh Bank.

Bangladesh 51


Reference table 6

Gross domestic product by expenditure(Tk bn at current prices; % of total GDP in brackets)

1995/96 1996/97 1997/98 1998/99 1999/2000a

Private consumption 1,345.1 1,440.7 1,561.3 1,708.1 1,875.3 (80.8) (79.7) (78.0) (77.7) (77.7)

Government consumption 73.2 78.8 94.6 100.8 108.4 (4.4) (4.4) (4.7) (4.6) (4.5)

Gross fixed investment 332.5 374.5 433.0 487.6 540.8 (20.0) (20.7) (21.6) (22.2) (22.4)

Exports of goods & services 184.3 216.7 266.8 289.9 331.5 (11.1) (12.0) (13.3) (13.2) (13.7)

Imports of goods & services –310.9 –325.6 –365.9 –409.9 –467.0 (18.7) (18.1) (18.3) (18.7) (19.3)

GDPb 1,663.2 1,807.0 2,001.8 2,196.9 2,412.7

Net factor income from abroad 49.5 58.4 64.8 75.2 84.6

Gross national income at current market prices 1,712.8 1,865.5 2,066.6 2,272.5 2,497.3 (104.6) (105.1) (104.9) (103.0) (104.0)

a Provisional figures. b Includes statistical discrepancy.


Reference table 7

Gross domestic product by sector(Tk bn; constant 1995/96 prices; % change year on year in brackets)

1995/96 1996/97 1997/98 1998/99 1999/2000

Agriculture 324.4 342.5 348.1 359.4 384.2(2.03) (5.6) (1.6) (3.2) (6.9)

Crops 239.9 255.4 258.1 266.1 287.7(1.7) (6.4) (1.0) (3.1) (8.1)

Forestry 30.8 32.0 33.5 35.3 37.0(3.5) (4.0) (4.5) (5.1) (4.9)

Livestock 53.6 55.0 56.5 57.9 59.6(2.5) (2.6) (2.6) (2.7) (2.7)

Fisheries 85.5 92.0 100.2 110.2 120.0(7.3) (7.6) (8.9) (9.9) (8.9)

Mining & quarrying 16.7 17.3 18.3 18.5 20.3(7.8) (3.5) (5.7) (1.3) (9.5)

Manufacturing 246.3 258.8 280.9 289.9 303.7(6.4) (5.1) (8.5) (3.2) (4.8)

Large-scale 175.7 182.7 199.7 208.0 217.1(5.7) (3.9) (9.3) (4.2) (4.3)

Small-scale 70.6 76.1 81.2 81.8 86.6(8.3) (7.7) (6.8) (0.7) (5.8)

Construction 109.9 119.5 130.8 142.5 154.6(8.5) (4.6) (9.5) (8.9) (8.5)

Power, water & sanitation 24.0 24.5 25.0 26.5 28.3(5.4) (1.9) (2.0) (6.0) (6.8)

continued

52 Bangladesh


1995/96 1996/97 1997/98 1998/99 1999/2000

Transport & communications 144.8 152.8 161.5 171.0 181.4(5.1) (5.5) (5.6) (5.9) (6.1)

Wholesale & retail trade 206.1 217.4 230.4 245.4 263.3(4.6) (5.5) (6.0) (6.5) (7.3)

Hotel & restaurants 9.8 10.3 10.9 11.7 12.5(5.0) (5.0) (6.5) (6.7) (6.9)

Real estate, etc 151.1 156.4 162.3 168.5 175.0(3.4) (3.5) (3.8) (3.8) (3.8)

Banking & insurance 25.2 26.5 27.9 29.4 31.0(4.9) (5.1) (5.3) (5.4) (5.5)

Education 33.0 34.6 37.4 40.3 43.4(2.6) (4.8) (8.1) (7.7) (7.7)

Public administration & defence 40.2 42.4 44.8 47.4 50.3(4.1) (5.5) (5.9) (5.7) (5.6)

Health & social work 36.4 37.8 39.5 41.4 43.3(2.7) (3.9) (4.6) (4.8) (4.9)

Community, social & personal services 142.9 146.9 151.1 155.6 160.3(2.8) (2.8) (2.9) (3.0) (3.1)

GDP at constant producer pricesa 1,596.4 1,681.7 1,769.3 1,857.6 1,971.6– (5.3) (5.3) (5.0) (6.1)

Import duty 66.9 73.3 75.2 76.7 77.7– (9.6) (2.6) (2.0) (1.3)

Totala 1,663.2 1,755.0 1,844.5 1,934.3 2,049.3(4.6) (5.5) (5.2) (4.9) (6.0)

a Totals may not add owing to rounding.

Source: Ministry of Finance, Bangladesh Economic Survey.

Reference table 8

Central government finances(Tk bn unless otherwise indicated)

1995/96 1996/97 1997/98 1998/99 1999/2000

Total revenue 155.1 171.4 187.8 197.0 213.4 Tax 122.3 140.7 150.0 158.5 170.9 Non-tax 32.8 30.7 37.8 38.4 42.5

Total expenditure 218.3 235.8 255.4 292.7 339.1 Current expenditure 118.1 125.3 145.0 167.6 184.4 Development expenditure (Annual Development Plan) 100.1 110.4 110.4 125.1 154.7

Budget balance –63.2 –64.4 –67.5 –95.7 –125.4

Government expenditure as % of GDP 13.1 13.0 12.7 13.3 14.4

Source: Ministry of Finance, Bangladesh Economic Review.

Bangladesh 53


Reference table 9

Tax revenue receipts(Tk m)

1995/96 1996/97 1997/98 1998/99 1999/2000

Customs duty 37,772 40,130 45,391 47,387 42,482

Excise tax 1,831 2,032 2,152 2,232 2,611

Income tax 15,332 16,648 19,536 23,615 26,108

Value-added taxDomestic 13,047 15,508 16,682 18,128 21,078Imports 25,559 27,880 29,007 30,472 30,618

Supplementary taxDomestic 14,641 16,187 17,157 17,096 17,094Imports 3,594 4,521 5,659 7,669 9,476

Total tax revenue incl others 133,701 125,032 137,489 148,693 151,150

Source: Bangladesh Bank.

Reference table 10

Money supply(Tk m unless otherwise indicated)

1995/96 1996/97 1997/98 1998/99 1999/2000

Currency outside banks 71,233 75,746 81,533 86,866 101,760

Demand deposits 73,361 75,924 77,352 85,628 97,053

M1 144,594 151,670 158,885 172,494 198,813 % change, year on year 9.7 4.9 4.8 8.6 15.3

M2a 457,600 507,110 558,690 630,267 747,624 % change, year on year 8.3 10.8 10.2 12.8 18.6

a M1 plus time deposits.

Source: Bangladesh Bank.

Reference table 11

Interest rates(%; period averages unless otherwise indicated)

1996 1997 1998 1999 2000

Short-term interest rate (av)a 13.41 13.69 12.96 13.09 12.95

Short-term interest rate (end-period)b 6.11 6.67 8.93 9.54 8.98

a Commercial bank prime lending rate . b Deposit interest rate from Bangladesh Bank

Sources: IMF, International Financial Statistics; Bangladesh Bank.

Reference table 12

Consumer prices(1995=100; period averages)

1996 1997 1998 1999 2000

Consumer price index 104.1 109.5 118.6 125.9 128.8 % change, year on year 4.1 5.2 8.3 6.2 2.3


54 Bangladesh


Reference table 13

Consumer prices (national)(1985/86=100; period averages)

1995/96 1996/97 1997/98 1998/99 1999/2000

Consumer price index 190.3 195.1 208.7 227.3 235.1 % change, year on year 6.7 2.5 7.0 8.9 3.5

Food items 189.1 191.9 205.6 229.7 239.1 % change, year on year 7.0 1.4 7.1 11.8 4.1

Non-food items 191.9 201.0 214.5 223.1 229.0 % change, year on year 5.8 4.8 6.7 4.0 2.6

Source: Ministry of Finance, Bangladesh Economic Review.

Reference table 14

Consumer price indices (urban and rural)(% change year on year in brackets)

1995/96 1996/97 1997/98 1998/99 1999/2000

All urban (1985/86=100) 186.0 191.3 204.4 222.6 229.9n/a (2.9) (6.9) (8.9) (3.3)

All rural (1985/86=100) 191.5 196.4 210.2 228.3 236.8n/a (2.5) (7.0) (8.6) (3.7)

Middle income government employees (1969/70=100) 1,964 2,048 2,171 2,299 2,449n/a (4.3) (6.0) (5.9) (6.5)

Rural population, Dhaka region (1973/74=100) 690 685 722 792 802(6.2) (–0.7) (5.4) (9.7) (1.3)

Rural population, Chittagong region (1973/74=100) 729 722 756 805 818n/a (–1.0) (4.7) (6.5) (1.6)


Reference table 15

Index of nominal wages(1969/70=100; period averages; % change year on year in brackets)

1995/96 1996/97 1997/98 1998/99 1999/2000

Manufacturing 2,064 2,161 2,395 2,522 2,701(6.0) (4.7) (10.8) (5.3) (7.1)

Construction 1,754 1,848 1,990 2,163 2,286(8.7) (5.3) (7.7) (8.7) (5.7)

Agriculture 1,738 1,804 1,870 1,950 2,037(5.1) (3.8) (3.7) (4.3) (4.5)

All occupations 1,900 1,989 2,141 2,259 2,290(6.4) (4.6) (7.6) (5.5) (1.4)


Bangladesh 55


Reference table 16

Agricultural crop production(‘000 tonnes)

1995/96 1996/97 1997/98 1998/99 1999/2000

Cereals 19,056 20,333 20,665 21,893 24,906 Rice 17,687 18,883 18,862 19,905 23,066 of which: aus 1,676 1,871 1,875 1,617 1,734 aman 8,790 9,552 8,850 7,736 10,305 boro 7,221 7,460 8,137 10,552 11,027 Wheat 1,369 1,450 1,803 1,988 1,840

FibresJute 739 883 1,057 811 711Cotton 39 38 36 29 35

VegetablesPotatoes 1,492 1,508 1,553 2,762 2,933Sweet potatoes 435 406 398 383 378

Other cropsPulses 508 501 519 413 383

Oilseeds 472 477 482 449 406Spices & condiments 265 270 267 395 406Sugarcane 7,165 7,520 7,379 6,951 6,910Tea 48 53 51 56 n/aTobacco 39 38 37 29 35

Sources: Bangladesh Bureau of Statistics; Bangladesh Bank.

Reference table 17

Production and value of non-energy minerals1995/96 1996/97 1997/98 1998/99 1999/2000

LimestoneTonnes 20,574 28,273 32,324 5,053 14,140Tk m 12.3 17.0 19.4 3.0 7.6

China clayTonnes 6,855 8,849 7,731 8,137 8,845Tk m 5.4 7.2 5.9 6.9 6.8


Reference table 18

Production and value of selected manufactured items1995/96 1996/97 1997/98 1998/99 1999/2000

Jute manufactures‘000 tonnes 405 411 409 368 342Tk bn 10.4 10.0 11.3 9.3 8.3

Cotton clothm metres 10.3 10.9 10.3 11.1 11.8Tk bn 5.6 3.7 3.4 3.7 3.9

Cotton yarnm kg 50.0 50.1 52.8 53.2 57.3Tk bn 75.8 76.6 80.6 83.2 88.4

continued

56 Bangladesh


1995/96 1996/97 1997/98 1998/99 1999/2000

Ready-made garmentsm dozens 48.8 53.4 65.6 64.8 66.6Tk bn 79.7 94.7 129.0 143.2 154.4

Leather for exportm sq metres 16.1 12.0 12.1 16.2 10.9Tk bn 8.7 8.5 7.4 8.2 9.9

Cement‘000 tonnes 426 611 543 1,514 1,475Tk bn 1.9 2.6 2.5 3.6 3.8

Steel ingots‘000 tonnes 21 16 23 9.1 n/aTk m 24.9 22.1 42.0 12.7 n/a

Paper (all kinds)‘000 tonnes 82.3 67.5 45.9 59.9 54.9Tk bn 2.8 2.5 2.0 2.2 2.0

Chemical fertilisers‘000 tonnes 2,248 1,773 2,031 1,799 1,904Tk bn 8.5 6.8 9.7 8.5 9.1

Sugar‘000 tonnes 184 135 166 153 123Tk bn 5.0 3.7 4.6 4.3 3.4

Tea‘000 tonnes 51 53 54 44 51Tk bn 2.4 2.0 2.9 2.0 2.6

Shrimps & frogs’ legs‘000 tonnes 26.0 25.7 18.6 19.9 28.6Tk bn 11.1 9.4 1.2 10.4 17.1

Bicycles’000 12.7 12.6 12.9 12.9 12.9Tk m 22.2 20.9 21.4 21.5 21.4

Motorcycles‘000 10.7 9.6 9.9 10.2 11.2Tk m 566 567 620 687 804

Motor vehicles‘000 1.3 1.2 1.3 1.3 0.9Tk m 1,013 820 851 905 887

Diesel enginesNo. 270 525 360 256 311Tk m 40 27 23 4.8 20

Televisions (black & white)‘000 31 56 81 70 78Tk m 156 225 355 299 337

Televisions (colour)‘000 30 24 50 37 39Tk m 436 394 630 521 579

Dry-cell batteriesm 55 51 48 62 57Tk m 627 513 695 579 628


Bangladesh 57


Reference table 19

Stockmarket indices(1986/87=100; averages)

1995/96 1996/97 1997/98 1998/99 1999/2000a

Banks & financial institutions 221.2 352.3 248.9 198.5 240.2

Engineering & construction 1,219.8 3,975.6 1,711.9 473.5 691.5

Food & allied products 264.1 631.4 371.9 440.4 337.2

Jute industries 178.5 236.4 124.3 188.6 161.2

Pharmaceuticals & chemicals 298.3 523.6 275.9 218.2 230.5

Textiles industry 165.1 238.1 164.8 143.7 118.7

Power & fuel 297.2 487.2 274.5 277.5 256.8

Paper & printing 95.2 242.7 184.2 127.1 110.8

Transport & communications 109.9 286.0 116.1 97.6 107.4

Miscellaneous 187.0 726.8 536.8 392.8 436.2

General index 245.8 580.1 380.4 282.1 284.5

a June 2000.


Reference table 20

Main exports(Tk bn; fob)

1995/96 1996/97 1997/98 1998/99 1999/2000

Clothing 82.0 98.9 126.2 129.8 157.2

Fish & prawns 13.1 14.0 14.9 14.8 18.1

Jute goods 12.4 13.3 13.3 11.7 11.3

Leather 9.0 9.0 8.1 7.7 7.6

Raw jute 2.9 5.4 4.8 2.7 3.7

Tea 1.2 1.5 2.1 1.5 0.9

Fertiliser 0.1 0.5 0.6 0.6 0.0

Total incl others 138.5 165.7 204.0 208.5 249.2


Reference table 21

Main imports(Tk bn; cif)

1995/96 1996/97 1997/98 1998/99 1999/2000

Yarn, fabric, etc for garments industry 64.0 74.0 84.1 81.2 90.6

Capital goods 67.9 80.4 82.7 94.6 107.3

Petroleum & petroleum products 18.6 22.0 19.8 18.7 32.1

Iron & steel 13.2 18.7 17.8 16.6 19.8

Food grains 23.9 7.9 16.8 34.2 19.2

Chemicals 8.2 11.0 11.2 12.0 14.0



58 Bangladesh


Reference table 22

Main trading partners(US$ m)

1995/96 1996/97 1997/98 1998/99 1999/2000

Exports to:US 1,019 1,290 1,368 1,411 1,893Germany 325 357 404 450 615UK 379 368 347 364 404France 227 262 254 263 294Italy 160 197 232 200 228Japan 104 87 64 71 75India 21 37 35 50 53Singapore 16 15 23 16 25

Imports from:India 1,018 796 1,179 1,024 885China 641 622 547 534 629Japan 673 472 456 559 203South Korea 368 379 331 291 354Singapore 313 251 430 659 756Hong Kong 392 431 452 441 485US 250 285 242 446 248UK 170 208 314 280 250

Source: IMF, Direction of Trade Statistics.

Reference table 23

Balance of payments, IMF series(US$ m)

1996 1997 1998 1999 2000

Goods: exports fob 4,009 4,840 5,141 5,458 6,399

Goods: imports fob –6,285 –6,551 –6,716 –7,536 –8,053

Trade balance –2,275 –1,711 –1,574 –2,077 –1,654

Services: credit 605 687 724 778 815

Services: debit –1,166 –1,284 –1,237 –1,397 –1,620

Balance on goods & services –2,837 –2,307 –2,087 –2,696 –2,459

Income: credit 129 87 92 94 78

Income: debit –193 –198 –206 –259 –345

Current transfers: credit 1,913 2,137 2,173 2,501 2,427

Current transfers: debit –4 –4 –6 –5 –7

Current-account balance –991 –286 –35 –364 –306

Direct investment inward 14 139 190 179 280

Direct investment abroad 0 –3 –3 0 0

Inward portfolio investment (incl bonds) –117 –10 –4 –2 2

Outward portfolio investment 0 0 0 0 0

Other investment assets –427 –678 –860 –1,144 –1,125

Other investment liabilities 623 411 561 518 698

Financial balance 92 –140 –116 –449 –145

Capital account credit 371 367 239 364 249

Capital account debit 0 0 0 0 0

Capital-account balance 371 368 239 364 249

Net errors & omissions 114 –76 201 260 171

Overall balance –414 –135 289 –189 –31

continued

Bangladesh 59


1996 1997 1998 1999 2000

Financing (– indicates inflow)Movement of reserves 500 254 –319 286 121Use of IMF credit & loans –86 –119 31 –97 –90Source: IMF, International Financial Statistics.

Reference table 24

External debt, World Bank estimates(US$ m unless otherwise indicated; debt stock at year-end)

1995 1996 1997 1998 1999

Public medium- & long-term 15,501 15,327 14,578 15,804 16,962

Private medium- & long-term 0 0 0 0 0

Total medium-& long-term debt 15,501 15,327 14,578 15,804 16,962 Official creditors 15,328 15,185 14,464 15,713 16,856 Bilateral 5,562 5,341 4,853 5,118 5,344 Multilateral 9,766 9,844 9,611 10,596 11,446 Private creditors 173 142 114 91 106

Short-term debt 203 163 175 150 255 of which: interest arrears 19 0 0 0 0

Use of IMF credit 622 517 372 422 318

Total external debt 16,325 16,007 15,125 16,376 17,534

Principal repayments 629 488 521 502 581

Interest payments 192 214 187 179 207 of which: short-term debt 10 10 9 8 14

Total debt service 821 702 708 681 788

Ratios (%)Total external debt/GNP (%) 41.8 38.2 34.6 35.9 37.1Debt-service ratio, paida 14.8 11.8 10.6 9.1 9.8Short-term debt/total external debt (%) 1.2 1.0 1.2 0.9 1.5Concessional long-term debt/total long-term debt (%) 93.3 94.4 95.2 95.6 95.7Multilateral long-term debt/total long-term debt (%) 59.8 61.5 63.5 64.7 65.7

Note. Long-term debt is defined as having original maturity of more than one year. a Debt serviceas a percentage of earnings from exports of goods and services.

Source: World Bank, Global Development Finance.

Reference table 25

Remittances from Bangladeshis working abroad(Tk bn)

1995/96 1996/97 1997/98 1998/99 1999/2000

Saudi Arabia 20.4 25.1 26.8 33.0 46.2

Kuwait 7.1 9.0 9.7 11.1 12.4

US 4.7 6.7 9.2 11.5 12.2

UAE 3.4 3.8 4.9 6.0 6.5

Oman 3.3 4.0 4.0 4.4 4.7

Malaysia 3.0 4.0 3.5 3.2 2.7



60 Bangladesh


Reference table 26

Net official development assistancea

(US$ m)

1995 1996 1997 1998 1999

Bilateral 713.1 644.5 560.0 623.9 607.3 of which: Japan 254.9 174.0 130.0 189.1 123.7 UK 76.0 71.4 70.3 99.0 114.9 US 56.0 41.0 30.0 4.0 113.6 Germany 61.5 84.0 47.3 65.1 46.6 Netherlands 57.5 67.2 63.7 57.9 36.1

Multilateral 573.9 591.9 452.3 630.1 588.2 of which: International Development Association 155.3 229.1 245.1 290.8 339.6 Asian Development Bank 248.6 263.2 149.2 183.3 214.1 UN Development Programme 11.2 5.9 9.3 20.8 13.9 UN Children’s Fund 27.6 24.5 18.0 14.4 13.9 UN High Commission for Refugees 5.5 3.9 3.0 0.7 0.8Total (including others) 1,277.0 1,235.2 1,009.8 1,251.5 1,203.1

a Disbursements by OECD and OPEC members and multilateral agencies. Official developmentassistance is defined as grants and loans, with at least a 25% grant element, administered with theaim of promoting economic or social development.

Source: OECD, Geographical Distribution of Financial Flows to Aid Recipients.

Reference table 27

Foreign reserves(US$ m unless otherwise indicated; end-period)

1996 1997 1998 1999 2000

Total reserves excl gold 1,834.6 1,581.5 1,905.4 1,603.6 1,486.0 of which: SDRs 109.6 29.2 12.9 0.9 0.4 reserve position with the IMF 0.2 0.1 0.2 0.3 0.2

Golda 28.0 25.3 22.3 20.2 29.6

Total reserves incl gold 1,862.6 1,606.8 1,927.7 1,623.8 1,515.6

a National valuation.


Reference table 28

Exchange rate(Tk:US$)

1996 1997 1998 1999 2000

Calendar year 41.79 43.89 46.90 49.05 52.56

Fiscal yeara 42.45 45.45 46.30 48.50 51.00

Editors: Duncan Wrigley (editor); Gareth Price (consulting editor)Editorial closing date: October 15th 2001

All queries: Tel: (44.20) 7830 1007 E-mail: [email protected]

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