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What will it take for Bangladesh to become a Middle Income Country?

Zahid Hussain's picture

This is the fifth in a series of six posts about the recent report, Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth. The previous post looked at the numbers behind Bangladesh’s goal of middle income status by 2021. The next and last post will look at the way forward.

For Bangladesh, achieving its goal of middle income status by 2021 will require more than business-as-usual: the average annual GDP growth rate will have to rise from the current 6 percent to 7.5-8 percent, while sustaining remittance growth at 8 plus percent. Faster growth in turn will depend on four main factors: (i) increased investment, (ii) faster human capital accumulation, (iii) enhanced productivity growth, and (iv) increased outward orientation.

Increase investment by at least 5 percentage points of GDP. Investment is constrained by infrastructure, business environment, land, and skills. Analysis based on Investment Climate Assessment surveys highlights the role of infrastructure in triggering a virtuous cycle of growth: better infrastructure will improve productivity which in turn will make exports more competitive and attract FDI, thus leading to further increase in productivity. Expanded provision of infrastructure has to come with easing difficulties in doing business, increasing access to serviced land, and meeting skill shortages.

Build on achievements in human capital formation. Bangladesh has done well in increasing the stock of human capital, topping the list of Asian countries along with Vietnam by improving average years of schooling by 1.3 during 2000-10. Our analysis indicates that achieving the needed GDP growth rate will require further increases from the current 5.8 to 7.3 average years of schooling. In addition, relatively low returns to schooling point to the importance of improving quality of education. These will require addressing external and internal inefficiency as well as weaknesses in education management and finance.

Where is India's economy heading?

Ulrich Bartsch's picture

The India Economic Update 2012 will be discussed online.Ulrich Bartsch, the World Bank's outgoing senior country economist for India, will lead a 24-hour live chat on the World Bank India Facebook page. He and other experts will be discussing the Bank's latest India Economic Update. The chat will begin Wednesday, Oct. 10, at 4:30 p.m. India Standard Time (7 a.m. Eastern Daylight Time in the United States). Here, he provides a sneak preview.

India’s economic growth has slowed to a pace not seen since the beginning of the 2000s. At the same time, the current account deficit has reached a record high. We project growth in the current fiscal year to reach around 6%, a slowdown from the already low 6.5% growth in the previous year. This growth projection is predicated on an improving domestic and external environment, but the risks for a worse outcome are high.

Join us to discuss Exports in Bangladesh!

Naomi Ahmad's picture

Today, we're launching an online discussion on Exports in Bangladesh at the World Bank Bangladesh facebook page. Through the online discussion, we hope to hear from YOU on how Bangladesh can accelerate and diversify exports in order to achieve its aim of becoming a Middle Income Country.

Dr. Sanjay Kathuria, Lead Economist, World Bank Bangladesh is answering your questions and moderating the discussion. Let us know what you think!

What? Exports in Bangladesh: How can Bangladesh accelerate and diversify exports?

When? Today, August 07, 2012 (12:00 AM – 11:59 PM Bangladesh time)

Where? www.facebook.com/worldbankbangladesh

Engaging the Future: Conversations with Global Youth

Mabruk Kabir's picture

It is hard to talk about South Asia without invoking its demographics. The region will contribute nearly 40 percent of the growth in the world’s working age (15-64) population, and will need to add a staggering 1 to 1.2 million new entrants to the labor market every month for the next two decades. Absorbing the influx of youth into the labor force is one of South Asia’s core challenges. But while economists grapple with employment statistics and economic policy, jobs are created at the grassroots. Entrepreneurship is the spark that lights the fire, and the engine that generates opportunities in local communities.

Realizing India’s Potential

Kalpana Kochhar's picture

Yesterday, I discussed India’s incredible economic transformation over the last two decades and some of the challenges that the country is currently facing. So, what can India do to reduce the impact of global uncertainty and improve growth performance and boost investor confidence?

India’s firepower to respond to a crisis with traditional monetary and fiscal stimulus is much weaker now than prior to the 2008 crisis. Fiscal space for additional spending is severely constrained in light of continued high deficits. Room for monetary policy easing is modest in light of continued high inflation, and still low real interest rates. Moreover, when investor confidence is at a low ebb as it is in India, easing monetary policy would be tantamount to “pushing on a string.”

Keeping India’s Promise Alive

Kalpana Kochhar's picture

India has been a beacon to the world on how a thriving and vibrant democracy can transform itself into an economic powerhouse. The metamorphosis that took place in the Indian economy after the reforms of the early 1990s is nothing short of spectacular. The Indian economy was transformed into a dynamo of innovation and diversification. This fundamental transformation unlocked two decades of explosive growth in which poverty rates fell by nearly 20 percent, exports as a share of GDP increased nearly five-fold, and standards of living increased by a factor of almost four. This trajectory received but a glancing blow from the 2008 global financial crisis—this resilience was a testimonial to the benefits of the economic reforms of the previous 15 years.

Challenges to India’s Growth

But now, India’s economy once again faces formidable challenges and the fear is that it is considerably less well placed to deal with these challenges than at any time over the past two decades. The global economy is facing a new phase of the crisis characterized by an extreme bout of uncertainty, risk aversion and volatility, this time originating in the Euro Area. Some skeptics have recently questioned: Will India weather this storm as well as it did in 2008-09 and will the story of “Incredible India” remain credible?

The Unbanked in South Asia

Leora Klapper's picture

What is the account penetration among women in South Asia? Has the spread of bank agents affected how adults do their banking in Bangladesh and Nepal? How are people all over South Asia saving, borrowing, making payments and managing risk?

In the past, the view of financial inclusion in SAR has been incomplete, and the details unsatisfying. A patchwork of data from diverse and often incompatible household and central bank surveys was the only information available with which to construct a regional picture.

With the release of the Global Financial Inclusion Indicators (Global Findex) we now have a comprehensive, individual-level, and publicly-available database that allows for comparisons across 148 economies of how adults around the world manage their daily finances and plan for the future. The Global Findex database also identifies barriers to financial inclusion, such as cost, travel time, distance, amount of paper work, and income inequality.

India-Pakistan Trade: Making Borders Irrelevant

Tara Beteille's picture

In our blog post last November, we discussed Pakistan’s decision to grant India most favored nation (MFN) status. We were hopeful about the gains from easier trade between the two, but noted the many stumbling blocks in between. In the past 20 weeks, both countries have made serious efforts to address these blocks. Things are looking good. Here is an update.

Both countries mean business

In addition to the goodwill gesture of Pakistani President Asif Ali Zardari visiting India this April and Indian Prime Minister Manmohan Singh considering visiting Pakistan, important issues addressed include:

  • Pakistan issued an order in March 2012 to move from a positive list of 2,000 items for India to a negative list of 1,209 banned items. Pakistan intends to phase out the negative list altogether and formally give India MFN status by the end of 2012.
  • India, which formally granted Pakistan MFN status in 1996 (but maintained barriers) has agreed to reduce its sensitive list of 865 items by 30% within four months. India has also agreed in principle to allow Pakistani foreign direct investment in the country.

Make Trade, Not War in South Asia: Toward Regional Integration

Elizabeth Howton's picture

Can economics trump politics in South Asia, a region fragmented by decades of strife? Will greater regional cooperation and lowering barriers to trade bring harmony along with economic growth?

Those were the questions on the table Thursday as a panel from across the region discussed “Breaking Down Barriers: A New Dawn in Trade and Regional Cooperation in South Asia.”

Most panelists expressed optimism about trade’s pacifying abilities. Moderator Barkha Dutt, an Indian television journalist, opined that “What trade does, in its very ordinariness, is modulate the emotions.” Teresita Schaffer, former U.S. ambassador to Sri Lanka, agreed that “Trade can provide another conversation… and provide reasons why rivalries should not be allowed to get out of hand.”

But which comes first, the chicken or the egg? asked another panelist, Nepali journalist Kanak Dixit. Clearly, he said, it’s the chicken (commerce), because other things have been tried and have not worked. He said that “chicken” will lay two “eggs”: peace and prosperity.

Join Us At Our Three Upcoming Public Events!

South Asia's picture

Leveraging Technology and Partnerships to Promote Equity in South Asia

Wednesday, April 18 at 9:00AM

The Next South Asia Regional Flagship on equity and development (March 2013) will feature an eBook which will combine interactive multimedia as a part of the World Bank Open Data and Open Knowledge initiatives. This signals a new era in development analysis is produced and shared.

Please RSVP to Alison at areeves@worldbank.org by Tuesday, April 17th to attend.

Twitter hashtag: #wbequity

 

Breaking Down Barriers: A New Dawn on Trade and Regional Cooperation in South Asia

Thursday, April 19 at 3:00PM

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