Bangladesh Economic performance:

Source:ADB

GDP growth in fiscal year (FY)2001 (ending 30 June) is estimated at 5.2%, lower than
the 5.9% growth rate achieved in FY2000. This relatively robust growth was due to a
bumper crop in agriculture and growth in the industry sector of 7.2%, higher than the
6.2% growth achieved in FY2000. Growth in the services sector in FY2001 was 5.4%,
against 5.5% in FY2000. Inflation, as measured by the CPI, declined to 1.6% in FY2001
from 3.4% in FY2000, mainly due to depressed food prices. Government revenue
increased to 9.6% of GDP in FY2001, compared with 8.5% in FY2000 as a result of
improved tax collection, increased imports, and a new compulsory preshipment
inspection system. However, the budget deficit remained high at 6.1% of GDP due to a
surge in expenditures. Exports, mainly garments and knitwear, grew by 12.4% in
FY2001, compared with 8.2% the previous year. However, the current account deficit
increased to 2.1% of GDP compared with 1% in FY2000, following a surge in imports
and a decline in private current transfers, including remittances. Foreign exchange
reserves declined to $1.3 billion or 1.7 months of imports at the end of FY2001,
compared with $1.6 billion at the end of FY2000. Because the domestic garment industry
and overseas job markets—which have absorbed a large proportion of the population
entering the labor market during the last 2 decades—have become saturated, Bangladesh
faces the challenge of absorbing 2 million labor force entrants annually, as well as
addressing large-scale underemployment.The country emphasizes on accelerated
economic and social development of its people. The government lays more stress on
private investment, massive development programs and involving NGOs in development
activities to benefit the rural poor. The country is following the framework of guided
economic development through Five Year Plan (FYP) since its independence in 1971.
The structure of the economy is improving with each FYP. The realized growth rates
from first FYP to fourth FYP (1990-95) have been around 4% against targets of 5%. The
current fifth FYP (1997-2002) has set the target of 7% growth, envisages greater role of
private sector, and allocates largest (16.46%) share to agriculture sector. The past low
growth rates of GDP of Bangladesh are attributed to almost stagnant agriculture
productivity and exponential growth of human population.

The contribution of the forestry sector to GDP is small (2.32%) but is very important for
rural people and environment. This percentage does not reflect the true importance of the
forestry sector due to the non-valuation of many of its non-marketed goods and services.
The share of sectors other than "agriculture" are slowly increasing (Table 34 at
Appendix). However, the agriculture sector continues to make the maximum contribution
to the GDP (Fig. 19) even when it is being pulled down by the other sectors.
The national accounts (1984 prices) show (Fig. 3.5) lot of temporal variation in the
growth rate of contribution to GDP by different sectors and sub-sectors (Table 35 at
Appendix). The revival of economy since 1998 may exert more pressure on forests in
terms of production (timber etc.) and on environment (Fig. 20).

Fig: Growth rates of contribution to GDP

The trend of growth rate of contribution to GDP by forestry sub sector (Table 35 at
Appendix) is just apposite of "agricultural crop" sub-sector (Fig. 21).

Fig:Growth rates for Crops, Fishery, Livestock and Forestry

 The sectors contributing in Bangladesh economy:

Agricultural sector of Bangladesh:

Agricultural activities dominate the national economy and account for 38% of gross
domestic product (GDP). The scarce land resource is subjected to continuously increasing
pressure by a growing population. Considering the size of the agricultural population, the
availability of arable land per capita is less than 0.1 hectares. This level of population
pressure has made it difficult to make landuse allocations based on land capability.

Farm Size and Farming Intensity - Farm land distribution is quite skewed, average
property size is about 0.8 hectares. This average, however, camouflages great unevenness
in land distribution. About 40% of the rural population is classified as landless. Small
groups of affluent land owners hold land much in excess of their family needs. Some of
this excess lands is share cropped by landless labourers. In the case of small and medium
land holders, fragmentation of land holdings is increasing alarmingly and impedes
efficient utilization.

1983-84 official data indicate that 57% of the total number of rural households is landless
and more than 50% of their income comes from non-farm activities. Therefore, economic
development and poverty alleviation must focus on increasing intensity of farming and on
increasing non-agricultural income. Forestry could play a much more important role.
Bangladesh land use distribution

Garment Industry in Bangladesh:

Garment Industry Large-scale production of organized factories is a relatively new
phenomenon in Bangladesh. The sector rapidly attained high importance in terms of
employment, foreign exchange earnings and its contribution to GDP. In 1999, the
industry employed directly more than 1.4 million workers, about 80% of whom were
female. In 1983-84, Garment exports earned only $0.9 billion, which was 3.89% of the
total export earnings of Bangladesh. In 1998-99, the export earnings of the Garment
sector were $5.51 billion, which was 75.67% of the total export earnings of the country.
The garment industry of Bangladesh has been the key export division and a main source
of foreign exchange for the last 25 years. At present, the country generates about $5
billion worth of products each year by exporting garment. The industry provides
employment to about 3 million workers of whom 90% are women.
However, the workers are facing many problems. Most workers come from low income
families. Low wage of workers and their compliancy have enabled the industry to
compete with the world market. Even though trade unionization is banned inside the
Export processing Zones (EPZ), the working environment is better than that of the
majority of garment industry that operates outside the EPZs. But, pressure from buyers to
abide by labor codes has enabled factories to maintain satisfactory working conditions in
recent times, garment workers have protested against their low wages. The first’s protests
broke out in 2006, and since then, there have been periodic protests by the workers. This
has forced the government to increase minimum wages of workers.

Spinning & Textile Industry in Bangladesh:

Spinning is the first stage of the four major processes of the textile industry. At present,
there are 118 spinning mills in the country of which 30 units are under the public sector
and remaining 88 units are under the private sector. The important problems of the
spinning sub-sector are obsolete technology (about 45 spinning mills are aged more than
25 years), frequent failure of electricity supply, scarcity of raw materials and high import
duty on raw materials and spares, high percentage of wastage, lack of proper maintenance
of machinery and slow progress of privatization of public textile mills.

Leather Industry:
Bangladesh is capable of producing 180 million square feet of leather per year. The
Bangladeshi leather remains one of quality. There exist a number of leather industries in
Bangladesh far above the standard of cottage industry. More than 80% of the country’s
annual production is exported throughout the world. The products manufactured can
either be finished or semi-finished such as gloves, sports shoes, bags/accessories,
suitcases etc.
The country counts on 25 shoe industries being able to produce in large quantity and
another 2500 small units throughout the country.
The local leather industries export their products to 53 countries across the world, and the
declared profits in 2002-2003 were $230 million.

Jute Industry:
AT the time of every budget, proposals are floated for addressing the problems of the jute
sector. Many arguments are advanced for assisting the jute sector. The main thrust of this
proposal is on providing financial assistance to the jute sector. It is forcefully pointed out
that given the government assistance, the jute sector can stand on its on legs.

It is said that 30% loss of the jute sector is caused by power shortage and another 30% is
attributed to interest charges. Jute sector itself is responsible only for another 30% of the
losses. This is nice arithmetic. Readymade garments, ceramics, cement and many other
sectors are operating profitably inspite of power problem and high interest rate. It is
argued that coordinated initiative can solve the problem of the jute sector. But the details
of this initiative are not known.

It is true that jute industry is associated with livelihood of many people. Even if these
mills are closed, the government will have to pay to many agencies. But this will be one
time payment. Public sector jute mills are assisted by the government and no assistance is
available to the private sectors mills. Farmers lost interest in jute for not getting fair price.
There was a minimum price of jute in the past but now it is not enforced because of open
market economy policy. Bangladesh Jute Mills Corporation (BJMC) can not buy jute in
July for lack of money which becomes available in September / October. Farmers got
good prices during the last two years. It is time that India is getting the market for jute
goods and Bangladesh is losing. This is because India is competitive. Environment
friendly products are wanted by international buyers but we do not have enough research
and capability to produce such goods.

In order to have a balanced jute policy public sector mills may be privatised. This will
eliminate the loss of the government. There is no chance of improving the operational
efficiency of public sector mills. The government can adopt a uniform policy for the
private sector if all the jute mills are in the private sector.

During Pakistan time, it was argued that the then West Pakistan was being developed
with the earnings of jute products but where the money is going now. India is successful
in the jute sector but Bangladesh is unable to do the same. We may have feelings for the
jute sector but this will not help us to become competitive and without this there is no
future for jute industry.

Donors are blamed for the failure of the jute sector. This is a political statement. Donors
are not imposing jute policy on the government. In a recent seminar the following
proposals were made:
(i) to waive the interest charges of public sector jute mills, (ii) to re-open the closed mills,
(iii) to pay the due of the workers, (iv) to release money to buy raw jute, (v) to reduce
power shortage, (vi) to produce geo-textiles, (vii) to set up modern jute mills, (viii) to
nationalise the privatised jute mills and (ix) to provide assistance for jute farming and
diversification of jute products. These are all good proposals. But who will bear the cost
of implementing these proposals.
A left-oriented politician has suggested for an allocation of Tk. 3.0 billion (300 crores)
for the jute sector in the coming budget. He also said that the money spent on the closure
of Adamjee jute mills could have been utilised for making the mill viable. He did not
realise that a financial disaster was averted by closing down the Adamjee Jute Mills.
According to him, bonus voucher was given to jute goods exporters in Pakistan for
making the mills profitable. This was abolished after independence. The government may
examine the reintroduction of bonus voucher. But the amount of bonus voucher may not
be adequate to recover losses. It is alleged that there is a conspiracy to destroy the jute
sector.

It is argued that jute is part of our culture. The excuse given for loss-making jute mills is
not acceptable. But this is an emotional statement and is far from reality. Adamjee area
has been converted into an Export Processing Zone (EPZ) and a number of industrial
units are already under implementation. New jobs will be created in the Adamjee area.

The allocation of Taka 3.0 billion was proposed to purchase raw jute, spares, fuel and
other material for production. If the government is convinced about revival of the jute
sector, then only they should make this allocation. Without addressing the jute sector as a
whole, this money will go into the black hole. It has been proposed to set up a jute
commission to deal with the entire situation. I think no commission is called for. The
government has enough information for taking decision. It must take a hard decision once
for all about the jute sector. The caretaker government is in the best position to take such
a decision. Piecemeal allocation of money will go down the drain.
The government has not made any allocation for jute sector in the budget. This decision
was taken perhaps on the basis of the fact that there is no viable project in the jute sector.
Private sector may consider funding viable jute diversification projects.
Table Growth of jute industry in Bengal, 1879-1939

Year Mills Looms Spindles Employment

1879-80 22 5,000 71,000 27,000
1900-01 36 16,100 331,400 114,800
1920-21 77 41,600 869,900 288,400
1938-39 110 69,000 13,70,000 299,000

Sugar Industry:
Sugar Industry From time immemorial places in and around Bangladesh has been
growing SUGARCANE for making GUD or sucker or khandeswari. Such sweeteners are also
produced from date and palm juice. Bengal was well known for quality sugar in the 16th
century. The EAST INDIA COMPANY exported large quantities of sugar from Bengal every year
In the 1980s, the industry employed 15% of the labor force and had 30% of the fixed
assets of the food industry as a whole. With 1.5% of world production, Bangladesh
ranked 67th among the 130 sugar producing nations. In 2000, the country had 15 sugar
mills at Panchagarh, Thakurgaon, Setabganj, Rangpur, Shyampur, Rajshahi,
Mahimaganj, Jaipurhat, Darshana, Kushtia, Mobarakganj, Jamalpur, Kaliachapra,
Narsingdi, and Pabna. The estimated total annual production capacity of these mills was
about 215,000 tons but the mills did not work in full capacity and, therefore, the
production remained far less than the country's total estimated annual demand of about
400,000 tons. A major reason for the mills to work below full capacity is the shortage of
cane as farmers often find it more rewarding to use land for production of Rabi and kharif
crops.
Tea Industry:
Tea Industry was pioneered in the 19th century by the British planters. Later, some Indian
entrepreneurs purchased tea gardens from their European owners. Indian entrepreneurs
also came forward to develop new plantations
Tea industry of the country faces serious problems and the economic condition of about
80 gardens is critical. In the 1980s, some 40 gardens became sick and their workers
became 'surplus'. Sick tea gardens now number at about 48. Some have large overdue
loans of BANGLADESH KRISHI BANK and do not have adequate funds or earnings to repay or
service the debt. Average tea production in sick gardens per hectare is 274 kg, compared
to the national average of more than 1100 kg. Irregular power supply is also a major
cause of production loss. The tea sector contributes about 0.8% of the GDP in
Bangladesh. About 0.15 million people are directly employed in the tea industry, which
constitutes about 3.3 percent of the country's total employment. Many more people are
indirectly employed in other sectors related to tea.

Bangladesh ranks tenth among the ten largest tea-producing and exporting countries in
the world. In the year 2000, the country’s tea production was 1.80% of the 2,939.91
million kg produced worldwide.

Handloom Industry:
The handloom industry plays an important role in the economy of Bangladesh. It is the
second largest source of rural employment next only to agriculture. About 50 lakh people
are directly or indirectly engaged in this industry. The handloom industry accounts for
about 60 percent of the total fabric production of the country. As per the World Bank
Report of 1991, production capacity of handloom is 105.50 crore meters, but due to
various reasons actual production level ranges between 55-60 crore meters per annum.

Sericulture & Silk Industry:

Sericulture exists in wide areas in Bangladesh, particularly in the North-Western region.
About 4000 hectares of land is now under mulberry cultivation. Nearly 29,000
households having population of 1, 50,000 are engaged in it. Women of the low income
group in the village form a significant portion of manpower engaged sericulture.
This sub-sector is labor-intensive and its value addition is high. In spite of its enormous
prospect, production of cocoons, yarn and finished fabrics in this sub-sector did not
exceed 8, 00,000 kg. 39,000 kg. And 6, 47,000 meters respectively duty to various
problems. Since Bangladesh is capable of producing quality silk, the proper development
of this sub-sector in order to cater to the vast international market, has now become very
important.

Tourism Industry:
“Bangladesh tourism industry and its market have failed to grow properly not merely
because it lacks enough attractions. Its tourism appears to have suffered mostly due to
inadequate infrastructure, insufficient facilities at the destinations, and inaccessibility to
the destinations by road, rail and air transports.” Bangladesh also suffers from an image
problem. Many foreigners still know Bangladesh as country of poverty, beggars, floods,
and political unrest. Besides, the main providers of tourism services in Bangladesh like
Bangladesh Parjatan Corporation and other private sector tour operators lack in
marketing orientation in their business activities. Almost 60% of foreign tourist arrivals
are for business or official purposes, and the number of leisure tourist arrivals is
insignificant.

Foreign Investment:
The melancholy performance of the manufacturing sector is partly explained by the state
of foreign investment in the country. The net foreign investment, including foreign direct
investment (FDI), portfolio investment and foreign investments in the Export Processing
Zones (EPZs), registered as jump in FY98 recording a net flow of $ 320.82 million. This
measure took into account cash flow through bank channels as well as investments in the
form of equipment brought in, particularly in the energy sector. The figures obtained
(using the same estimation technique) recorded a fall in the flow to $ 262.61 and $ 228.68
during FY99 and FY00 respectively.
While the anarchic state of affairs in portfolio investment may be partly blamed for the
emerging situation, it is also true that there had been slowdown in the flow of FDI during
the last two years. The net FDI figures for FY98, FY99 and FY00 were $ 273 million, $
200 million and $ 184.4 million respectively.
These estimates clearly contradicts the periodic claims made by the Board of Investment
(BOI) about billions of dollars of FDI being invested in Bangladesh. The BOI has
historically tended to confuse the registered intention of investors to invest with actual
realisation of this investment.
However, one of the most worrisome developments in the foreign investment scenario
relates to the EPZs. FDI (including local investments in joint-ventures) in the EPZs in
FY00 had almost been half (about $ 35 million) of that recorded in FY99 ($ 70.6
million). The corresponding figure for the first quarter of FY01 is only $ 7.84 million.
One is inclined to believe that the prospect of introduction of traditional trade union
activities in the Bangladesh EPZs has already started to take its toll.

Import:
After, a long spell of sluggish import growth (6.6% and 4.8% in FY99 and FY00
respectively), imports seem to be picking up in FY01. Statement on opening and
settlement of letters of credit (L/Cs) during July-September, 2000 indicates an import
growth (in dollar term) of 22.2% and 25.9% over the matching figures for FY00.
However, one should not miss the strengths and weaknesses of the emerging import
composition while analysis the recent trends in import scenario.
Regarding the strengths, one may observe (as per opening of new L/Cs) the fall in
foodgrain import (by more than 45%) and increase in imports of capital machinery (more
than 52%) and “other machineries” (more than 76%). Perceptible upswing is also
observed in case of imports of intermediate goods (12.7%) and industrial raw materials
(10.4%).
The evolving pattern of imports is corroborated by the disbursement figures relating to
both term loans and industrial working capital loans which increased by 22.3% and
35.1% respectively during FY00. (Information on industrial credit disbursement for the
first quarter of FY01 was not available.)
The major weakness of the import composition relates to increase in payments by more
than 81.4% (as per fresh opening of L/Cs) on account of import of petroleum and
petroleum products subsequent to price like in the world market. Needless to mention,
given its strategic nature, the government will have to continue underwriting the import
demand of petroleum and its products, irrespective of global prices.
Whatsoever, the upsurge in imports during the first quarter of FY01 by more than 20%
has also given rise to a number of concerns. The first relates to the prospect of over-
invoicing of the imports as a conduit of capital transfer. If that really be the case, then one
is dealing with a phenomenon of “investment illusion” driven by over-priced imports.
Secondly, real imports or not, the current surge in import payments is definitely creating
a debilitating pressure on the foreign exchange reserve situation. Under the circumstances
the enhancing the inflow of foreign exchanges to the will increasingly gain in priority in
the coming months.

Exports:
During FY99 exports stood at $ 5312.86 million which grew to $ 5752.20 million in
FY00 showing an increase of 8.27%. Thankfully, in the face of robust import surge, the
growth in exports during July-September 2000 had been also impressive. During the said
period, the export target was overachieved by 10.6%, recording a growth of 25.4% over
the corresponding figure for FY00.
An analysis of the export basket reveals that apart from raw jute and jute goods, almost
all other items have registered an increase in export value during the first quarter of
FY01. While the case of tea (105%) is to be particularly noted, the recovery of frozen
food (54.6%) is also spectacular. More importantly, after a long recess, the woven-RMG
has recorded an impressive growth (20.5%) along with RMG knitwear and hosiery
(31.2%).

Foreign Remittances:
During the last couple of years, the current account balance of the economy has enjoyed
increasing flow of private transfers, particularly in the form of remittances by migrant
workers. In FY00 the country received, $ 1.95 billion on account of workers’ remittances
which was about 14.2% higher than matching figure for the preceding year.
Initial figures on FY01 indicate that a total amount of $ 460 million has been remitted by
the migrant workers during July-September 2000. This amount is 8.5% more than that of
the corresponding figure for FY00. However, one notices from the monthly data, a
declaration in the rate of growth of foreign remittances. For example, from the year
closing monthly figure of $ 196 million in FY00, the flow has subsequently declined to $
165 million, $ 148 million and $ 147 million during July, August and September
respectively.

Some Other Sectors:

Shipbuilders may change Bangladesh economy:

Shipbuilding, which is a very labor-intensive industry, has the potential for generating a
huge foreign currency and developing extraordinary skills in the field of engineering. Our
country has skilled and semi-skilled professionals as well as necessary ingredients to be a
shipbuilding nation. So the industry holds the potential for transforming Bangladesh into
a middle-income country in near future.
Some private companies are now doing ship building business. Ananda is one of them.
Earlier Ananda exported its first ship Stella Maris to another Danish company at $6
million on May 5, 2008 and six others to the Mozambique government at $6.2 million on
November 13, 2008.
Recently the company sold Stella Moon, at $7.5 million to a Danish buyer. The company
has so far secured export orders for 34 ships at $373.50 million. It has received export
proceeds and advance payments of $48.54 million. Denmark, Germany, Norway and
Mozambique have placed the orders.
This sector can be one of the most foreign currency earnable sectors of Bangladesh.

Crocodile exporting sector:

Recently Bangladesh has started exporting crocodile. A private firm started crocodile
cultivation. The firm launched crocodile cultivation on 15 acres of land at Uthura of
Valuka in Mymensing after bringing 75 salt water reptiles of crocodiles porous species
from Malaysia on Dec 2004 .As a result at present in our country we are able to produce
crocodile. Bangladesh will export the skin, bone, teeth and meat of crocodile from a
commercially run firm. The firm will export 100 crocodiles from the first batch. One
crocodile can be sold up to $ 1500.
The firm wants to grow 15,000 crocodiles by 2015 with export of 5,000 crocodiles a year.
If the firm can export such an amount of crocodile, Bangladesh government will receive a
huge amount of tax .That will help to develop our economy.

Fisheries & livestock sector of Bangladesh:

In recent years, the fisheries and livestock sector has been playing an increasingly
important role in the economy uplift efforts of Bangladesh. It is a labour-intensive and
quick-yielding sector which augments growth and alleviates poverty. Around 1.3 million
people are directly employed in the fisheries sector alone.
The country has immense natural potential for developing the fisheries sub-sector. The
sector contributes 3.3% of the GDP and 10.33% of the agriculture sector. The sector
includes open water bodies such as rivers, canals,lakes, etc. And closed water bodies such
as ponds and flood-control polders totalling 4 million hecteres. Almost 80% of the
country's protein requirement, around 70% of exports in the primary commodity category
and almost 9% of toral exports come from this sub-sector. The sub-sector marked a
continuous annual growth of 8.6% since 1996. This increase is due to both Government
and private initiatives. Fish production increased to over 1 .4 million during 1997-98.
The Government is providing various incentives to the sector like offerings infrastructure,
credit, research and extension facilities. Different NGOs are also undertaking programs to
motivate and train fishermen and thereby raise production. Hatcheries are being set up
through private initiatives. Bangladesh Fisheries Development Corporation is providing
marketing and storage facilities to the fishermen and fish traders.

With an annual growth rate of over 8% since 1993, the contribution of the livestock sub-
sector to GDP and the agriculture sector as a whole is currently 3.2% and 10.11%
respectively. Showing much potential to develop as a commercial sector with
employment and income generating opportunities both in the rural and urban areas. A
large number of enterprises-cattle, poultry and dairy farms have grown in the private
sector in recent years.