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30 Years of economics for development

Resilient People, Fragile Governance: The Success of Bangladesh so Far (Part 1)

Lucy Scott

Bangladesh has made some remarkable strides in development and poverty reduction since independence. Yet the country is in many ways a paradox of success combined with often weak governance. This two-part article explores the paradox. Part 2 will appear in the next issue of Angle.

In 1975, just four years after its independence, Bangladesh was deemed a country in crisis with a struggling economy and a fear that it might slide into anarchy. It was portrayed as having a future without hope, destined to remain in fear of the next natural disaster. ‘Nature, not man, is in charge of the situation in Bangladesh’, was one description at the time.

Bangladesh remains vulnerable to natural disasters to this day. Located at the delta of a major river system and with 80 per cent of its area comprising floodplain, Bangladesh often features in the campaigns of international NGOs. Heavy monsoon rainfall resulted in flooding in 2007 and tropical cyclone Sidr in November 2007 led to the Disasters Emergency Committee, an umbrella organization of up to 15 humanitarian NGOs, launching a public appeal which raised GB£9 million.
As a low-lying country, Bangladesh is at forefront of the climate change challenge. Yet despite the periodic attempts of nature to take charge of the country’s destiny, Bangladesh has made enormous strides since independence. And women, as well as men, have propelled the country forward.

A development success story

Bangladesh is a development success story. Per capita GDP increased by 1.5 per cent per annum during the 1980s, with this figure rising to 3 per cent in the 1990s, according to government data. Growth further accelerated into the 2000s when, on average, per capita GDP increased by nearly 6 per cent per annum, according to World Bank estimates.

Impressive reductions in poverty have occurred alongside economic growth, with a poverty incidence of 59 per cent in 1991/92 declining to 50 per cent in 2000, and further decreasing to 40 per cent in 2005. Economic growth has remained stable despite flooding and cyclones. Indeed, disaster management and preparedness are a key component of Bangladesh’s success. A cyclone in 1970 in East Pakistan (becoming Bangladesh the year after) killed nearly half a million people. In 2008 a cyclone of similar strength killed 3,000—a remarkable feat, especially given the much larger population today.

At the national level, Bangladesh has consistently achieved its target of self-sufficiency in rice production since the turn of the century through investments in agricultural research and extension, including the promotion of high-yielding rice varieties. No nationwide famines have hit the country since 1974 and monga, seasonal hunger, which was previously experienced throughout northern Bangladesh, is now confined to a few districts in the north-west of the country, thanks to economic diversification away from agriculture.

In 2003 Bangladesh entered the medium Human Development league according to UNDP’s Human Development Report, where it remained until 2009 (in the 2010 and 2011 reports it is classified near the top of the ‘low human development’ category, a result of the thresholds being updated). It is on target to achieve the Millennium Development Goals (MDGs) for infant and child mortality and gender parity in education. Certainly, there are still failings in terms of household-level food security, while Bangladesh will not achieve the MDG on maternal mortality by a significant margin. These shortcomings though, should not negate the massive strides forward made by the country over the past 40 years.

The Bangladesh paradox

What makes this success even the more remarkable is that it has been achieved in the context of generally weak governance. This is often referred to as the ‘Bangladesh paradox’.
Bangladeshis have often been let down by their leaders. How has a country, which during the first half of the 2000s featured repeatedly at the bottom of Transparency International’s corruption perception index, experienced such economic and social progress?

Bangladesh has successfully made the transition from an authoritarian regime to a democracy. For the last four elections though, power has alternated between two prominent families, with the position of prime minister switching between the ‘two Begums’ (one the former first lady, and the other the eldest child of the first president of Bangladesh) who are leaders of the main parties, the Awami League and Bangladesh Nationalist Party (BNP).

When in power it is a situation of ‘the winner takes all’. Rather than building institutions to ensure effective governance, the overall aim of the ruling party is to squash the opposition, in ways that often go far beyond what is normal party politics. As a result, Bangladesh is one of the most centralized countries in the world. The central bureaucracy is responsible for the delivery of most public services while local government expenditures have never been more than 4 per cent of overall public expenditure, according to World Bank estimates.

Nevertheless, running alongside these structural problems associated with weak governance has been a set of macroeconomic policies that have protected sustained economic growth. The macroeconomic situation has been stable, with low inflation, thereby encouraging a buoyant domestic private sector.

Macroeconomic stability is one factor behind the success of the ready-made garment industry which comprises almost three-quarters of export earnings, accounting for US$11 billion in 2009. Moreover, the government has encouraged the international migration of Bangladeshi workers. Remittances—estimated to be US$9.6 billion in 2009 by the World Bank—provide considerable inward flows and amount to around 12 per cent of GDP. They vastly exceed aid flows, with ODA comprising 2.5 per cent of GDP in the same year. Remittances and the garment industry are now the main drivers of the economy.

NGO successes

Acknowledging an inability (or unwillingness) to deliver basic services, governments have provided an environment where NGOs can operate freely. NGOs are a major driving force behind remarkable progress on several of the key MDGs. And Bangladesh’s NGOs and their approaches have become something of a model for the rest of the world. Microfinance, pioneered by Grameen Bank in Bangladesh, is modelled throughout the world. BRAC, meanwhile, is now one of the world’s largest NGOs operating extensively both in Bangladesh as well abroad, including in Afghanistan and parts of sub-Saharan Africa.

Since the 1990s NGOs in Bangladesh have increasingly focused on the delivery of services, particularly microfinance, health and education. NGOs shifted their activities towards microfinance because of donor concerns about their financial sustainability. As donor funding decisions became based on technical criteria including cost-effectiveness and the provision of particular outputs, so NGOs switched from social mobilisation to service delivery.

NGOs in Bangladesh remain wary of social mobilization activities that aim to push the government to adhere to its responsibilities to its citizens (India’s NGOs have been more vigorous on this). The escalation in tensions between the government and Mohammed Yunus, Nobel Prize winner and head of Grameen Bank, are widely viewed as a response to his announcement to form a political party in 2007 (plans which he later abandoned). Clearly the long-standing political parties do not regard it as acceptable for NGOs to exceed their service provision mandate.

Lucy Scott is a Research Associate, UNU-WIDER. Working papers on the Bangladesh development experience will be published in 2012, under UNU-WIDER’s ReCom project. 

WIDER Angle newsletter
November 2011
ISSN 1238-9544

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