Bangladesh's Economic Transformation: Overcoming Poverty and Growth

Bangladesh, once extremely poor, overcame poverty through agricultural reform, foreign aid, and the garment industry, achieving significant economic growth.

### Bangladesh's Journey from Extreme Poverty to Economic Growth
* 🇧🇩 In the 1970s, Bangladesh faced extreme poverty, with a GDP per capita of only **$91 to $100** and an infant mortality rate **over 20%**.
* 💼 After gaining independence from Pakistan in 1971, Mujibur Rahman nationalized around 700 companies, leading to a **significant decline in productivity and income**.
* 🌾 Due to the government's policy of forcing farmers to sell agricultural products at **artificially low prices**, agricultural productivity decreased, and the 1974 flood caused a **severe food shortage**.
* 🤝 Ziaur Rahman focused on attracting **foreign aid and investment**, leading to the **rapid growth of the economy**.
* 🌾 Agricultural land reform, the introduction of high-yielding rice varieties, and the development of the Grameen Bank's microfinance system significantly contributed to **poverty reduction and increased agricultural productivity**.
* 📈 Under Ershad's rule, **export-oriented policies** and the establishment of **export processing zones** fueled **economic growth**.
* 👩 NGOs like BRAC and Grameen Bank played a crucial role in **improving public health, education, and financial services**.
* 👗 Khaleda Zia's government further promoted economic development by allowing **full foreign ownership of companies** and focusing on the garment industry, which has become a **major driver of Bangladesh's economy**.

Until recently, there was a country that lived an extremely poor and miserable life. It was Bangladesh, which gained independence from Pakistan in the 1970s. Just in the 1970s, Bangladesh's GDP per capita was only 91 to 100 dollars, not even reaching half of Pakistan's 151 dollars at that time. It was also much lower compared to India, which was a symbol of poverty. Moreover, Bangladesh had an infant mortality rate of over 20% among children under the age of 5, indicating the lack of food and resilience, making it difficult for young children to survive. However, in just 30 years, Bangladesh, which was so poor, has become a completely different country. The poverty rate, which was originally over 80%, has now plummeted to less than 19%, and the infant mortality rate...

Furthermore, not only did it decrease by 92% compared to the past, but now the GDP per capita is around $2,500, which is higher than Pakistan and India. One cannot help but wonder how such rapid growth was possible. So, in this session, we will explore together how Bangladesh, which was extremely poor, managed to overcome poverty and reach its current level. In fact, Bangladesh has faced challenges since its independence from Pakistan in 1971. They had to establish law and order immediately after independence, build various national institutions and infrastructure, and expedite economic development. Leading all these difficult issues at that time was Sheikh Mujibur Rahman.

As a leader, there was always a lot to do, but there weren't many people to help me. Many intellectuals who could work smartly lost their lives in long wars and civil wars. In such difficult circumstances, one of the first things I did was to decide how to dispose of the property and assets owned by Pakistan's elite. For 24 years under Pakistan's rule, most of the industries and businesses in Bangladesh were operated by Pakistan's elites. Therefore, these industries and businesses played a crucial role in leading the country's economy. The decision to nationalize all the country's enterprises was seen as a crucial opportunity to strengthen the country's power. After nationalizing all the country's enterprises, they would be placed under state ownership and directly operated.

In the end, about 700 companies were nationalized at that time, including almost 92% of the industries, such as all banks and insurance companies, coming under state ownership. Furthermore, as part of the policy to protect the economic independence of the country and promote internal development, measures were taken to prohibit domestic investment from overseas. However, these decisions of nationalization led by ignorance all became significant mistakes for the Bangladeshi economy. Once many industries and companies were nationalized, the government had to operate and manage them. However, the officials in charge of operations had no prior experience or knowledge in running or managing companies. As mentioned earlier, many elites and businessmen in Bangladesh had disappeared due to war and oppression. As a result, in such a crucial situation where industries and companies needed to be managed and developed, they knew nothing.

Public officials took charge of the work, so there was no way for the country's industries to function properly. Furthermore, foreign investments were completely blocked, so foreign companies couldn't come in with money to boost the economy. These ignorant and drastic decisions immediately shook the Bangladeshi economy. Just three years after the ignorant policies were implemented, the productivity of Bangladesh's industries plummeted by a whopping 66%, and the income of the citizens also dropped significantly by about 84%. This all started with the ignorant government forcing farmers to sell agricultural products at artificially low prices. By lowering the prices of agricultural products from what they originally sold for, farmers ended up earning less money. As a result, from the farmers' perspective, they had to produce more to offset the reduced prices.

There was no money for equipment investment, which eventually led to a decline in agricultural productivity. As a result, the food shortage in Bangladesh was worsening. In 1974, a record-breaking flood lasted for three months in Bangladesh. The continuous rainfall caused all crops in Bangladesh to be submerged in water, making already scarce food even more precious. The prices of agricultural products at that time skyrocketed by almost 400%, leading to starvation among the people. Despite the high expectations for emergency measures from the Bangladeshi government, they were unable to respond effectively. Consequently, people succumbed to starvation, with hundreds of thousands losing their lives within just nine months due to hunger.

Naturally, all the blame arrows were pointed towards Mujibur. As opposing forces to Mujibur began to emerge, eventually leading to a military coup, Mujibur lost his life due to the Mujibur coup faction. It was truly a very difficult time in Bangladesh. Taking advantage of the chaos in national politics and the economy, there was someone who seized power in the country; his name was Ziaur Rahman, commonly known as Zia. In order to avoid following in Mujibur's footsteps, he attempted extensive policy changes. Among these policies, the most important one probably focused on attracting foreign aid. In fact, since Bangladesh's independence, many Western countries and international organizations had tried to invest in and support Bangladesh, but foreign investments were not received.

Due to the ignorant policies of the Mujibur government, they couldn't even approach. However, President Zia was different. He was more desperate for external help due to the serious national situation. In order to attract external investors, Bangladesh had to undergo many internal changes. First, they lifted restrictions on foreign investment and even activated the stock market. Of course, they also reduced tariffs. Furthermore, they started selling off the companies that were nationalized during the Mujibur presidency one by one. By opening the door firmly closed to attract foreign investors, these efforts paid off. Bangladesh began to receive large-scale foreign investments and aid, receiving $1 billion in aid, equivalent to about 88% of GDP in 1977. This is how the country started to.

By opening up, Bangladesh has achieved one of the most important developments for its people, which is agricultural land reform. Bangladesh, which had no choice but to rely on agricultural land, made efforts to avoid repeating such a situation. First, to increase the income of farmers, they lifted the restrictions on agricultural product prices set by the previous government. Now, farmers can receive fair prices according to market trends. Additionally, by lifting the restrictions on imported machinery, facilities, and pesticides, farmers can now purchase various equipment and facilities to increase agricultural productivity based on their increased income without limitations. This naturally leads to an improvement in agricultural productivity in Bangladesh. However, there was a separate key factor that truly brought about the development of agricultural productivity, which was the introduction of new rice varieties.

Through collaboration with institutions such as research institutes, we were able to develop and introduce high-yielding rice varieties. The newly introduced varieties were not only resistant to diseases but also had a faster production cycle and higher rice yield per unit area. Moreover, there were varieties that could be cultivated even in winter. When farmers saw these new varieties, it must have felt like a revolution. As a result of introducing these new varieties, from 1971 until the relatively recent year of 2010, Bangladesh's agricultural production increased by nearly three times. After the introduction of these varieties, Bangladesh never experienced major famines again. Following the country's opening up, Bangladesh's economy nearly doubled in size in just five years. However, despite these economic achievements under the underground president's rule, the glory did not last long.

It all started when President Zia dragged the military into politics, trying to manipulate the army for political purposes. Overseas investors, concerned about the political instability, gradually reduced their investments and aid. Internally, as factions opposing President Zia's military actions emerged, there were as many as 21 attempted coups to overthrow him. In the end, after numerous coup attempts by anti-government forces, President Zia was executed by his enemies in 1981. Bangladeshis truly had a turbulent time. Following the success of these brutal coups, the next regime was taken over by General Hussain Muhammad Ershad, who was the Chief of Staff at the time. Ershad, who declared martial law upon taking power, consolidated his power through authoritarian rule, abolishing trade unions, competition from political parties, and other measures to strengthen his power.

Surprisingly, Ershad was very reform-minded and open in terms of economic development, unlike his authoritarian political operations. He is widely recognized for his significant contribution to the economic development of Bangladesh. He particularly emphasized an export-oriented economy. It is known that he was inspired by countries like Hong Kong, Singapore, South Korea, and Taiwan, which were experiencing explosive economic growth based on exports at that time. Consequently, Ershad went on to establish export processing zones in the Chittagong region in southeastern Bangladesh. Companies located in these zones were exempt from taxes when importing machinery, equipment, or raw materials for the production of export goods. This reflects President Ershad's determination to boost exports. In addition to his commitment to export development, President Ershad also envisioned a better future for the economy and the people of Bangladesh.

Making one important decision is about NGO collaboration. NGO stands for Non-Governmental Organization, which refers to independent organizations that violate non-governmental institutions. Organizations like UNICEF and Save the Children that we commonly see can be considered NGOs. However, why did President Ershad, a symbol of authoritarianism, open the country to these NGO organizations? The reason is that the country is too poor to provide services like education, finance, and healthcare to its citizens. To provide services like education and healthcare to the citizens, the government would have to raise taxes. However, at that time, the people of Bangladesh were not wealthy enough to bear higher taxes. Therefore, President Ershad allowed these NGOs to operate without constraints so that they could provide these services for free. This way, they could operate without constraints.

NGOs striving for freedom have begun to transform Bangladesh at a rapid pace. Among these organizations, Grameen Bank and BR are undoubtedly prominent. Firstly, Grameen Bank, founded in 1983 by Muhammad Yunus, who was an economics professor at the time, is famous for implementing small loans for the poor in Bangladesh. Farmers always lacked funds to improve their productivity. Furthermore, the financial industry in Bangladesh either rejected loans for these farmers or imposed exorbitant interest rates. Therefore, Yunus, pondering on how to provide funds for these common people, came up with a brilliant idea. Upon examining this method, he first formed groups of five poor farmers.

It is a method of providing small loans without collateral, and then the person who receives the loan must use that money to buy agricultural equipment, cattle, or start a small-scale business. The interesting thing here is that if the person who borrowed the loan has difficulty repaying it, the remaining members have a responsibility to support each other. In other words, if one person is unable to repay, the other members must help each other with the repayment. If that one person fails to repay the loan, the entire group may not be able to borrow in the future. This is similar to the concept of joint guarantee these days. However, this method was very effective. After the introduction of this system, the repayment rate of loans increased to a staggering 97%. This small loan system surprised the entire nation, and Gramin Bank, which properly confirmed the effectiveness of this system, later collaborated with the government of Ersha.

The system will spread nationwide, and as a result, although other external factors have also played a role, the poverty rate in the areas where Grameen Bank operates has decreased by nearly 30%. Moreover, it is said that the income of those who have taken out loans to improve productivity has increased by as much as 40% compared to those who have not. One NGO seems to have contributed to the development of the financial industry in Bangladesh. In addition to this bank, the Bangladesh Rural Advancement Committee (BRAC) focused on children's health in Bangladesh. In the late 1970s, the major cause of death among Bangladeshi children was diarrhea, which mainly results in the loss of fluids and electrolytes, which can be particularly fatal for children. Therefore, BRAC launched a large-scale promotion and distribution campaign of oral rehydration salts for these children to replenish fluids.

I started educating to always have supplements, so mothers started replenishing fluids right after their children had diarrhea. This project has been ongoing for over 10 years, supplying hydration supplements to around 75,000 villages, reaching a whopping 12 million households. As a result of this campaign, the child mortality rate in Bangladesh has decreased by a remarkable 90%. It's like one NGO organization has saved all the children in a country. In addition, in Bangladesh, NGOs have been establishing elementary schools and hospitals, leading to dramatic improvements in public safety, health, and education. It is known that there are still around 26,000 large and small NGOs active in Bangladesh. However, as we have seen before, authoritarian governance always ends up nurturing opposing forces.

The president was also the same. As the economy grew, a large-scale democratization movement criticizing the authoritarian political system within Bangladesh began. Eventually, under the pressure of the people calling for the end of the current government and the establishment of a democratic government, Ershad stepped down from the presidency in 1990. Next, a new Prime Minister emerged to lead Bangladesh, and that was Khaleda Zia. What's interesting here is that Khaleda Zia was the wife of Ziaur Rahman, who was opposed and died while ruling Bangladesh in the past. However, leaving behind such a painful past, she was dedicated to her role as Prime Minister. She first focused on economic development, allowing foreign investors to fully own Bangladeshi companies and simplifying labor laws.

We have taken measures to make it easier to hire employees. From the perspective of foreign investors looking to invest in Bangladesh, this change cannot be anything but attractive. Moreover, we have even added seven more export processing zones, which used to exist only in one place. We aim to attempt growth through exports like South Korea. However, just creating export zones won't lead to the growth of the export industry. Companies that will settle in these zones need products to manufacture and export. But in a country without adequate resources, capital, or technology, what can they export? At this point, Bangladesh chooses the garment industry. The garment industry is relatively easy to start with low initial investment compared to other industries. Additionally, due to the nature of manufacturing, having low labor costs is advantageous. Bangladesh happens to choose the garment industry.

Labor was very cheap compared to other countries, so the textile industry was the easiest industry to start in Bangladesh due to a lack of capital. Fortunately, there was a multilateral textile agreement internationally. This agreement restricts the amount that can be imported by country when developed countries import textile and clothing products from developing countries. This was to protect the clothing industry of the importing country from cheap imports from Asia. However, this situation turned into an opportunity for Bangladesh. Due to the quota system, overseas clothing manufacturers faced export disruptions, so they set up clothing factories in Bangladesh and exported from there to bypass the quota system. Because of this, clothing produced in Bangladesh could be exported to major markets like the United States and Europe. Additionally,

Following this favorable trend, numerous medical factories have entered Bangladesh, filling these factories with Bangladeshi workers. As a result, the once impoverished Bangladeshi citizens secured stable jobs, leading to a gradual increase in income. Through this process, Bangladesh's garment exports have surged since the 1980s. From 1990 to 2021, when considering the value created by the garment industry alone, it has increased from $640 million to $34.2 billion, more than 50 times. Currently, Bangladesh's national exports are dominated by the garment industry, accounting for a whopping 81%. Experts believe that the privatization of industries, foreign investment, and vibrant garment exports based on export processing zones have fueled Bangladesh's explosive economic growth.

We have looked briefly at how Bangladesh, which used to be extremely poor, has overcome all of that and achieved economic growth. Bangladesh has gone through numerous coups and changes of government in a short period, which makes its growth even more remarkable. Recently, experts have been concerned that Bangladesh's economy has been overly reliant on the garment industry and that wages for workers are increasing. It remains to be seen whether Bangladesh can continue its current trend in the future. That's all for today. Thank you for your attention.

"인도보다 1인당 GDP가 높아?" ..방글라데시가 세계 "최빈국"에서 아시아 최고 "성장국"이 될 수 있었던 이유 ㄷㄷ

지식세포

The Remarkable Transformation of Bangladesh

Bangladesh has undergone a remarkable transformation from extreme poverty to significant economic growth, with a drastic reduction in the poverty rate and infant mortality.

The country's rapid development can be attributed to efforts to establish law and order, build national institutions, and drive economic progress after gaining independence from Pakistan.

Bangladesh's decision to nationalize all its enterprises, prohibit foreign investment, and promote internal development, while well-intentioned, ultimately led to significant challenges for the country's economy.

The Impact of Government Policies on Bangladesh's Economy

Ignorant government decisions led to a 66% drop in industrial productivity and an 84% decrease in citizen income.

The agricultural sector suffered from low product prices, leading to reduced productivity and food shortages, aggravated by a record-breaking flood in 1974.

The rise to power of Ziaur Rahman, who implemented policies to attract foreign aid and investment, resulted in Bangladesh receiving a significant $1 billion in aid, equivalent to 88% of the GDP in 1977.

Bangladesh's Agricultural Land Reform and Economic Development

Bangladesh underwent agricultural land reform, lifting restrictions on product prices and imported machinery, leading to increased productivity.

The introduction of new rice varieties, resistant to diseases and with higher yields, significantly boosted agricultural production.

Despite economic growth, political instability led to a turbulent time, with President Zia's regime ending in 1981.

General Hussain Muhammad Ershad took power, implementing authoritarian rule but also driving economic development through an export-oriented approach and the establishment of export processing zones.

The Impact of NGO Collaboration on Bangladesh's Development

President Ershad allowed NGO operations in Bangladesh to provide essential services like education and healthcare, as the government couldn't afford to do so.

Grameen Bank, founded by Muhammad Yunus, revolutionized the country's financial industry by providing small loans to poor farmers with a 97% repayment rate, leading to a significant decrease in poverty.

BRAC focused on children's health by launching a campaign to distribute oral rehydration salts, addressing the major cause of death among Bangladeshi children in the late 1970s.

The Impact of NGOs and Political Change on Bangladesh's Development

A project providing hydration supplements has significantly reduced child mortality in Bangladesh.

The country has seen dramatic improvements in public safety, health, and education due to the establishment of schools, hospitals, and the efforts of numerous NGOs.

The political landscape in Bangladesh underwent a significant shift with a democratization movement leading to the resignation of President Ershad and the emergence of Khaleda Zia as the new Prime Minister, who focused on economic development and attracting foreign investors, particularly in the garment industry.

The Economic Transformation of Bangladesh Through the Garment Industry

The textile industry in Bangladesh benefited from a multilateral agreement, allowing it to bypass import quotas and attract overseas clothing manufacturers.

This led to a surge in garment exports and a significant increase in income for Bangladeshi workers.

The explosive growth of the garment industry has dominated Bangladesh's national exports, fueling the country's economic expansion, despite concerns about overreliance and increasing wages.