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Nake M. Kamrany Headshot
Jessica Stauffer Headshot
Faiyaz Azim Headshot

Bangladesh's Rising Income Potential

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Bangladesh is poised to follow China and India's recent growth pattern of rising per capita income as the recent distribution of economic growth has shifted in favor of low and middle income countries. Bangladesh's estimate of economic growth is predicated upon its impressive growth performance of per capita income averaging 5-7.5 percent over the last decade, and expectation of continued positive economic performance. Moreover, it was able to reduce its population growth rate from 2.7 percent in 1970 to 1.58 percent in 2012, which will contribute to its population control and a steady rise of per capita income.

In addition, Bangladesh has a good prognosis to achieve the United Nation's Millennium Development Goals as they have reduced poverty below 40 percent, gained gender equality, enhanced education levels, maintained relative political stability over the last 20 years, and shifted their economy from agriculture in favor of industrial technology and communication including capturing employment in the "international outsourcing labor market."

Bangladesh's reform movement is of recent origin. It started in 1990 through sound macroeconomic policies, investment in education, drawing upon communication technology and maintaining relative political stability. The history of Bangladesh is linked to the departure of colonial British India in 1947 when India was initially dissected into three countries: East Bengal, India and Pakistan. Then East Bengal was amalgamated with Pakistan and became East Pakistan. However, due to cultural dissonance, East Pakistan seceded and formed Bangladesh in 1971 after nine months of bloody struggle for independence. It took Bangladesh an additional two decades to recover from the devastation and brutality of the war and reach a state of normalcy and stability. Currently Bangladesh has two major political parties, namely Awami League and BNP (Bangladesh Nationalist Party) that have been ruling alternatively during the past 20 years. A system of a neutral Caretaker Government has been responsible for administering elections for the past 15 years. Though this process has been abolished, the system has contributed to peaceful transition of political power and should be re-instated and continued.

Prospects for continued economic development look very promising, especially if Bangladesh begins development and reconstruction projects, including disaster preparedness necessary for incessant monsoons, instituting building codes for earthquake safety, fortifying waterways, and building infrastructure of road and cities. As a largely delta region with many rivers and one border of coastal land on the Bay of Bengal, waterways play a significant role in the economy. During British rule many of the waterways were fortified and flooding damages were minimized through dams and barrages, which were not kept up in the interim period. The construction of this infrastructure will contribute to significant growth of employment in the economy and such projects will enhance installation of hydroelectricity generators, which will provide substantial renewable energy. Improving infrastructure is crucial also to creating a positive foreign and domestic investment climate to mitigate the weather-related economic risk.

Relations of Bangladesh with India will have a major bearing upon the prospects of Bangladesh to join the "rich club" along with India and China. There are disputes between Bangladesh and India over unresolved water ways. Bangladesh has filed a legal action with the International Court of Justice to determine the maritime boundary regarding the rights in Teesta River, the fourth largest in the country. These disputes need to be resolved fairly either through the court system or bi-lateral negotiation. The resolution of these disputes will free Bangladesh to explore its natural resources of gas and oil within its water territories.

Moreover, India blocks a majority of Bangladesh's exports to India via excessive imposition of tariffs. Indeed the two nations must reach trade agreement that will be mutually beneficial and resolve the water way disputes expeditiously.

Nake M. Kamrany is a Professor of Economics at the University of Southern California. Jessica Stauffer and Faiyaz Azim are both students of Economics at the University of Southern California.