Aminul Islam Akanda

Henry Kissinger in 1976 presented Bangladesh as a bottomless basket after five years of its independence. The thought of basket case, however, ceased to exist even after one famine, three military coups and four catastrophic floods. The economy gradually grew at a higher rate from 3.7 per cent in the 1980s to 4.8 per cent in the 1990s and to 5.8 per cent in the 2000s. This progress along with a few social progresses is well acknowledged in an article of the Economist on 2nd November 2012. Meanwhile, the country has come out of 'a basket case' of development in line with which the subsequent discussion will highlight, weakness inside progress of Bangladesh's economy.

Broad economic sectors in Bangladesh are agriculture, industry and service, according to the Ministry of Finance. The agriculture includes crops, livestock, forestry and fishery, which kept up the growth rate from 2.5 to 3.2 to 3.5 per cents in the 1980s, 1990s and 2000s, respectively. On the other hand, the industry comprise mining and quarrying, electricity, gas and water, manufacturing, and construction, which recorded an average growth of 9.1 per cent in the 2000s from 5.7 per cent in the 1980s. The service sector also grew at the rate of 7.1 per cent in the 2000s from 4.5 per cent in the 1990s and 3.7 per cent in the 1980s. Auspiciously, every sector grew at a gradual higher rate over time, of which the industry is the most. Could such a growth lift the country's industry to a satisfactory level?

The agriculture sector pre-dominated with more than 60 per cent contribution to nominal GDP in the early years of Bangladesh, which gradually decreased to 17.8 per cent in 2010-11. The industry was stumpy with around 16 per cent of GDP's share until the 1980s, which started to rise in the early 1990s and lately reached 27.6 per cent in 2010-11. On the other hand, the service sector, the then second largest one, expanded from 36.9 to 42.2 per cent of GDP during 1975 -1985 and overtook the contribution of agriculture. Such changes differ from typical transformation from agriculture to industry according to the Structural Change Theory of Professor Arthur Lewis. Meanwhile, the industry crossed the agriculture in the late 1990s but the service sector became relatively larger than the industry because of the widening gap of GDP between industry and service sectors. Being the largest service sector consistent to a developed economy, it follows a fallacious pattern of development bypassing the industry sector. May it be a query about the economic viability of shifting employment to the industry sector in the past?
Employment as the per centage of the total shifted by 13 per cent from agriculture during 1980-1995, mostly to service sector with a rise in its share from 27 to 38 per cent. However, the share of employment increased only two per cent for the industry. The shift thereafter, in terms of share in total employment, was insignificant to service sector but had a rise of four per cent for the industry. It is estimated that any single per cent employment in agriculture contributed for 0.6 per cent to real GDP in the early 1980s, which gradually came down to 0.5 per cent in 2010. Moreover, the contribution of the same to service sector was 2.0 per cent to real GDP in the early 1980s, which came down to 1.3 per cent in 2010. On the other hand, the contribution of one per cent employment in the industrial sector was 1.6 per cent in the 1980s, which increased to 2.0 per cent in the early 2000s and subsequently came down to 1.7 per cent in 2010. The dynamics of differentiate contributions of employment among different sectors seem to rationalise the shift of employment from one to another sector.
In the 1980s, the shift of employment was higher to service sector because of one per cent added growth in real GDP for a three per cent shift of employment to services than that of industry. However, in the late 1990s, such shift of three per cent employment to industry contributed additional two per cent in GDP growth than that of service sector. Notwithstanding the fact that the industrial sector failed to create jobs, it is expected to create more jobs in coming years as reflected from a higher pay-off of employment in the 2000s. Now the question is how much is our economic structure capable to assist economic growth to absorb surplus labour amounting to over one-third of the country's labour force?
The country lags behind industrialisation due to its colonial episode that is extensively criticised. Besides, the growth was unsatisfactory until the 1980s in the Bangladesh episode, too. However, the private sector-led industries attained a double-digit growth rate in the mid 2000s.In addition, a market for value-added industrial product has been created. The Vision 2021 envisaged the domestic industry to contribute at least 40 per cent to the GDP in 2021. On the other hand, the service sector has come out of its low-productive activities and expanded with high-productive enterprises especially during the 2000s. In this take-off stage, the insufficiencies in construction, electricity, gas and water sub-sectors of industry, have appeared as obstacles to smooth expansion of economic activities. How has the energy and infrastructures been relatively scarce is an obvious fact what comes up in explaining the fate of further expansion of either industry or service sector in the country. 

A large flow of private investment made the manufacturing sub-sector to contribute18 per cent to the GDP in 2010-11. In addition, a huge amount of private investment had been made in the services like telecommunication, banking, education and health in the 2000s. Meanwhile, the ratio of private investment to the total increased from 55 to 79 per cent over the past two decades. The energy (electricity, gas and water sub-sector in industry) and infrastructures (the sum of construction, electricity, gas and water sub-sectors) are the agents for economic growth, which is supposed to lead to public sector initiatives. However, the GDP's share of energy to manufacturing relatively declined since the early 1990s. The same pattern is found in case of GDP's share of energy to service sector that started declining in the mid 1990s. On the other hand, the ratio of infrastructure to manufacturing also declined slightly since the late 1990s and the same to service declined since the early 1990s. Because of the relative more scarcity of energy and infrastructures, the private sector-led development initiatives tend to be hampered in coming years. Are the government initiatives sufficient to offer adequate energy and infrastructures in future?
Public initiatives for infrastructure creation are usually implemented through the Annual Development Program (ADP). However, the share of ADP to GDP declined from 9.0 per cent in 1979-80 to 4.5 per cent in 2010-11. The allocation was raised in some pre-election years in the mid 1990s, late 1990s and mid 2000s but had a severe fall to 3.74 per cent in 2008-09. Such a decline in ADP is a bad omen for infrastructure development. Though the government blames it on inadequacy of domestic fund, the country has huge national surplus of savings over investment. Starting acquisition in the early 1990s, this surplus reached more than 5.0 per cent of GDP in the late 2000s. In addition, it has a larger annual flow of wage erasers' remittance amounting to more than 10 per cent of GDP. What is needed to channel out such fund is to rationalise real interest rate and to avoid hasty move of monetary tools. Moreover, the government initiative of pubic-private partnership (PPP), which is still fruitless, could be made effective with suitable pay-off on private investment. Now the question is whether the politicians will go for any serious drive, when the economic grows at seven per cent with dysfunctional politics.
It is not rational to expect a double-digit growth within a next few years likewise seven per cent as achieved presently. It will be clear from analyses of diminishing marginal product and marginal factor productivity. At the early stage of private sector-led investment, it contributes theoretically more and more to growth, which subsequently faces the diminishing marginal productivity. In this context, the additional private initiatives under insufficient infrastructures and inefficient public sectors will experience a catch-up effect. Meanwhile, instable politics, red-tapism and corruption have appeared as constraints to limit growth. Real examples of such a frontier are visible in case of private transport due to insufficient roads and private industries due to inadequate energy supply. In this context, do our politicians have any scope to go-slow with cheers for the past success factors praised by the Economist?
The recent article of the Economist has highlighted the progress with women's status in the society, poverty situation of the poorest, basic social spending and participation of the non-government organisations in soco-economic development. Though the article mentioned the politics dysfunctional, the Transperecy Inernational Bangladesh (TIB) showed the Members of the Parliament (MPs) use politics largely for unethical tasks. The parliament has, however, critically rejected the findings of the TIB report. On the other hand, the government itself idenfied and acknowdged the black money amounting to 42-82 per cent of the GDP. The government stand on this seems ambiguous to identify the black money holders, to recover the money and to stop generation of black money. If our politicians have any real expectation towrds the Vision 2021, they must move with wisdom dedicated to stop politically backed illegal activities and to make politics functional at the earliest.
.......................................
Dr. Akanda is Associate Professor and Chairman, Department of Economics, Comilla University. Email: akanda_ai@hotmail.com