Session 3: BANGLADESH’S ECONOMIC TRANSFORMATION

Tuesday, Dec 7, 2021 | 6:00pm – 7:45pm | Bangladesh Time (GMT+6)

Dr Syed Akhter Mahmood
Former Lead Private Sector Specialist, World Bank

Paper Title – Synergies and Tipping Points: Policy Actions, Market Responses and Economic Growth in Bangladesh

Abstract:

This paper provides an explanation of Bangladesh’s remarkable post-independence growth performance in terms of the synergy between policy actions and market responses. Bangladesh’s economy grew at a steady rate from the early 1980s after a period of fluctuations in the 1970s when the economy was recovering from the dislocations of the 1971 war of independence. While the major economic variables such as GDP growth, agricultural and industrial production, and export earnings, largely show a steady upward trend since the early 1980s, there are several inflection points where the growth rate of the variables accelerated leading to a shift in the growth trajectory. A similar story of steady growth with inflection points can also be discerned for several variables that contribute to the overall growth story, such as irrigation coverage, private credit flows, rural road network, remittance flows, agricultural machinery imports, power generation and mobile financial services.

The paper argues that part of the explanation of Bangladesh’s remarkable growth performance lies in this sequence of inflection points and the synergy between them. It shall demonstrate that the inflection points and associated accelerations in growth of different variables have often been related in the sense that an acceleration in one variable led to a similar acceleration in another variable after a time lag. Such synergy is one part of the explanation of the remarkable growth story of Bangladesh.

These inflection points in turn resulted at least partly from some policy actions which turned out to have far-reaching impact. The paper shall present a conceptual framework to help explain the policy dynamics underpinning the growth dynamics. The framework shall make the following argument. Policy actions (including public investment projects) in different areas were responses to developments in the marketplace or economy. Such developments, often nascent in nature, created a need and demand for certain policy actions. This demand was sometimes felt by the government directly but was often articulated by policy intermediaries such as researchers, think-tanks, professionals, the business community, media, and the donors. The government response through policy actions, in turn, generated a market response, which was reflected in the growth pattern of various economic variables. These developments, in turn, generated demand for additional policy actions in the same area or a different one. Government often responded to these new demands through follow-on policy actions.

Successive governments have followed such an incremental approach to policy change throughout the post-independence period. Bangladesh does not have episodes of dramatic policy change nor of dramatic reversals. Rather the approach has been incremental and adaptive with government usually testing the market with some actions and responding with additional actions after observing the market response. This is the other part of the synergy story, i.e., between policy actions and market responses. The paper shall demonstrate such synergies through an analysis of a few policy areas such as agricultural policy, rural road expansion, trade and industrial policy, and mobile financial services. It will argue that it is the repeated playing out of such synergy between policy actions and market responses that explain a large part of the remarkable growth story of Bangladesh.