Economic Solutions

By Asif Javed | March 2021

The recent report of the IMF has indicated that Bangladesh has overtaken Pakistan and India in terms of per capita GDP. According to IMF statistics, even amid Covid-19, Bangladesh might turn out to be the third highest growing economy in the world and the highest in Asia in 2020. There are only 23 countries which may achieve positive growth. Goldman Sach has forecast that Bangladesh may dominate the future world economy. The World Economic League has projected that the Bangladesh economy will be among the top 25 economies by 2035 based on its demographic dividend and rising per capita income. This has become possible based on effective government policies which helped in reviving the economy over the last few years.

Over recent years, Bangladesh has sustained a higher growth rate which has enabled it to progress at a fast pace. Pakistan’s growth rate remained lower as compared to Bangladesh’s growth rate.

It can be seen from the Table 1 that from 2015, Bangladesh’s growth rate is increasing continuously and in 2019 the highest growth rate of 8.2% was achieved. On the other hand, in 2020, Pakistan’s GDP growth rate plunged to negative due to Covid-19 and poor performance of the Large Scale Manufacturing sector. The Bangladesh population growth rate is now around 1%, which is lower than Pakistan’s growth rate of around 2%. Hence per capita income is growing at a rapid pace in Bangladesh as compared to Pakistan.

The textile sector is a major industry in both Bangladesh and Pakistan; it absorbs millions of workers and contributes significantly to the GDP of both economies. Bangladesh’s readymade garment exports are among the highest in the world. The cheap labour force and the minimum wage in Bangladesh gives it an edge over its competitors. The textile sector in Pakistan showed negative growth in FY 20.

Bangladesh is developing hundred special economic zones which will help in creating job prospects and spur economic growth. Bangladesh passed the One-Stop Service Act in 2018. All the required services will now be available to investors from a single point. According to the World Bank Report (2019) on Bangladesh, net FDI in the country increased by 43%. From July-November 2020, FDI dropped around 17% in Pakistan while investment into new ventures also declined over the past few years.

Pakistan has a better ranking in terms of Ease of Doing Business as compared to Bangladesh. The overall ranking of Pakistan is 108 while Bangladesh is at 168 and the ranking of both countries in the region is 5th and 7th, respectively.

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During the Covid-19 period, the Bangladesh government announced a stimulus package of Tk 120,000 crore. The measures also included maintaining bank interest rates in single digit in order to assist businesses in borrowing. Remittance inflow also helped in providing a valuable foreign exchange reserves which surged to record levels. The Pakistan Government also announced a hefty relief package for households and small businesses which provided much needed relief.

Pakistan could not increase its exports beyond a certain level whereas Bangladeshi exports increased considerably over the past few years. Pakistan’s exports increased from $22.1 million in 2015 to $ 23.8 million in 2019 while Bangladesh exports increased from $ 31.7 million to $ 47.5 million during the same period.

These insights indicate the consistent performance of the Bangladesh economy which is ensured by appropriate and long-term economic policies. These favourable policies helped in attracting foreign investment to Bangladesh while the textile sector also showed significant growth. On the other hand, Pakistan could not achieve a sustainable growth rate which retarded economic growth. There has been a dearth of consistent policies and long-term economic planning which is affecting economic growth. Exports of the textile sector of Pakistan also could not grow significantly despite continuous support from the government.

Bangladesh’s progress has lessons for Pakistan and their growth path indicates that with effective planning, Pakistan can also achieve the same growth level. Pakistan has to develop efficient trade and investment linkages to attain economic stability. Post Covid-19 recovery is a vital phase in which support to key industries, including textiles, leather and agriculture, should be ensured to revive economic activities. The Information Technology sector possesses immense potential for Pakistan and IT sector exports are growing at a rapid pace. Developing the ICT infrastructure will bring forth positive outcomes in terms of employment opportunities and export growth for Pakistan.

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Economic Solutions

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