Economic growth in Bangladesh - experience and policy priorities

Economic growth in Bangladesh - experience and policy priorities

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Economic growth in Bangladesh: experience and policy priorities ____________________________________________________________ The Liberation War of 1971 destroyed about a fifth of Bangladesh’s economy, and the post-war dislocations left the country on a slow growth trajectory for better part of two decades. Then the economy accelerated from 1990, driven by a remarkable turnaround in the growth of multi-factor productivity. We identify factors that inhibit another growth spurt: low levels of human capital; poor infrastructure; market failures specific to individual industries; low levels of international trade; corruption; and cumbersome regulations. Of these, we consider tackling infrastructure bottlenecks, promoting trade, and carrying out regulatory reforms as top priorities for the policymakers. __________________________________________________________________ Jyoti Rahman Drishtipat Writers’ Collective jyoti.rahman@drishtipat.org Asif Yusuf Driven Partnership asif.yusuf@gmail.com We are grateful to Syeed Ahamed, Rumi Ahmed, Towfiqul Islam Khan, Naeem Mohaiemen, and Asif Saleh for their comments and suggestions. All errors are ours, and ours alone.
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1. INTRODUCTION In the 1960s, the then East Pakistan’s economy grew by an annual average rate of around 4 per cent. About a fifth of that economy was destroyed during the Liberation War of 1971, and severe dislocations caused at that time left Bangladesh on a slower economic growth trajectory for the following two decades. Then the economy accelerated sharply from 1990. Chart 1 illustrates Bangladesh’s economic trajectory over the past five decades. Chart 1: Real GDP 13.00 13.25 13.50 13.75 14.00 14.25 14.50 14.75 15.00 15.25 1960 1967 1974 1981 1988 1995 2002 2009 13.00 13.25 13.50 13.75 14.00 14.25 14.50 14.75 15.00 15.25 Log of million taka Log of million taka The solid grey line shows actual path of GDP. Dotted lines are hypothetical trend paths based on: 1960s trend (green); 1970s/1980s trend (red). Source: Bangladesh Bureau of Statistics, World Bank, authors’ calculations. Had it continued to grow at the 1960s pace in the decades since, Bangladesh’s GDP would have been 10 per cent higher by 2009. On the other hand, if not for the post-1990 acceleration, the Bangladesh economy would have been 29 per cent lower in 2009 than the actual. The implications of an even a small but sustained increase in economic growth is self-evident. Therefore, it is natural to ask whether another sustained economic acceleration is possible. To paraphrase Lucas (1988): Is there some action the government could take that would lead the Bangladesh economy to increase its growth rate by another 2 percentage points? If so, what exactly? If not what is it about the "nature of current Bangladesh" that makes it so. The consequences for human welfare involved in questions like these are simply staggering. Once one starts to think about them, it is hard to think about anything else. We analyse Bangladesh’s growth experience and explore policy priorities that could spur another sustained pick up in growth rate. The paper is structured as follows.
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This note was uploaded on 05/24/2011 for the course ECON 105 taught by Professor Mr.kent during the Spring '11 term at European School of Economics, New York.

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Economic growth in Bangladesh - experience and policy priorities

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