Making of Shonar Bangla – How Bangladesh transformed its economy

Today, December 16, 2021, Bangladesh will achieve an important milestone – 50 years of independence. Little did we know that our country once labelled a ‘basket case’ would within a short fifty years prepare to enter the ranks of middle income. 

Stable 6% economic growth rates for over a decade; a dramatic decline in fertility rates from 7 to 2.03; steep declines in infant and child mortality; gender parity in access to education; and a global leader in disaster risk management.  And, not to forget, winning the U19 World Cup in cricket and doing so at the expense of our big neighbor! Fifty years on we have taken our place as a development miracle built on a path that is uniquely Bangladeshi. How have we achieved this?

History, chance, and astute state craftsmanship are at the core of Bangladesh’s success. 

History begins in the early 70s with the aftermath of a devastating cyclone and the post-war recovery.  Both led to the emergence of a unique community mobilization process where non-state actors organized people in the rural areas to take charge of their destiny. They were the precursors of the mighty NGO movement of Bangladesh. 

The real heroes, however, were the expatriate workers who sent an ocean of remittances back to their villages.  This is where fortune and chance mattered.  The OPEC oil boom opened the door for millions to go find work in the oil-producing nations and their remittances travelled back to the rural economy into the hands of women. The expenditure patterns of women were different – they invested in the human capital of their children. Moreover, it triggered the beginnings of women’s empowerment that is uniquely a Bangladeshi story. 

This private flow of resources into the rural economy – more powerful than public transfer schemes – interfaced with the community mobilization of non-state players. It catalyzed an already entrepreneurial people who had emerged from waves of migration into this fertile delta and who had built resilience in face of frequent natural disasters. Innovation so needed for survival now served the call of nation-building.   

The State’s responses to history and chance were equally critical. Few states would have supported – passively or otherwise – such a growth of alternate delivery mechanisms in access to credit markets and provision of health and education services.  Similarly, the government took advantage of the remittances in the late 70s to engage in foreign exchange rate reforms by unifying parallel systems and progressively eliminating the existing black market.

I remember in the early 70s it took over nine hours to reach our village home from Dhaka. Today, we can complete this journey in less than three.

The combination of remittances to villages, emergence of community-based providers, and a powerful exchange rate reform gave the rural economy – a tradeable sector – a real boost early in the nation’s growth.  The government further added its support by reforming agricultural policies – letting farmers take advantage of markets – and ensuring that in the aftermath of the war’s destruction every nook and corner of the country was connected by roads and bridges. I remember in the early 70s it took over nine hours to reach our village home from Dhaka. Today, we can complete this journey in less than three.

Chances consistently appeared and the state continued to respond. In the 80s, a Korean firm sensing a growing market waiting to be leveraged entered Bangladesh. In return, almost by chance, the firm introduced Bangladesh to garment production for the world market. What started off as a venture by one Bangladeshi company was scaled up by government initiative to grant all garment exporters exclusive access to imported inputs duty-free through a bonded warehouse system. 

Bangladesh did not initially respond with export zones. Instead, the whole country was eligible for the bonded facilities allowing garment exporters to locate wherever it was cost-effective to do so. Today Bangladesh is the second-largest garment exporting hub in the world, employing millions of young women, and furthering women’s labor force participation already catalyzed by remittances and community mobilization. 

By the mid-80s, the government introduced a new industrial policy and, five years ahead of India, quietly removed Bangladesh’s own “license raj” through a stroke of a pen. By late 80s Bangladesh engaged in trade liberalization, slowly tilting away from the traditional import-substitution focus. The public sector remained dominant in the economy but over the years the state leveraged in parallel the inherent entrepreneurial spirit of rural communities and private producers.

To leave the impression that these important shifts were smooth and painless would do disservice to Bangladesh’s difficult political journey. Long before the world officially recognized the terms “Fragile, Conflict, and Violence” in the development jargon, Bangladesh overcame brutal political assassinations, military rule, and insurgency to reclaim its democracy.  That it secured a development path with success in the midst of several decades of political upheavals deserves reflection and analysis. Similarly, how Bangladesh negotiated and leveraged donors also offers lessons for many.

So, what will the next 50 years bring?  The baton is being handed over to a new generation in an era where Bangladesh must address global challenges, engage regionally, and connect locally. The next 50 will not be easy but if 50 years of history is any indication, Bangladesh will respond.