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Bangladesh: Country Analysis Report–In-depth PEST Insights Published 10/2010

© Datamonitor. This brief is a licensed product and is not to be photocopied

Catalyst

This profile analyzes the political, economic, social, and technological structures in Bangladesh.

SUMMARY

Key highlights

• Formerly East Pakistan, Bangladesh was formed after the liberation war of 1971. It was under military rule from

1975 to 1990. In 1991, the constitution was amended to restore the parliamentary system.

• In December 2008, the Awami League alliance led by Sheikh Hasina won a landslide victory in general elections.

She is currently the prime minister of the country.

• The economic growth averaged around 5.7% during 2000–07. The GDP growth rate fell from 6.14% in 2008 to

5.6% in 2009.

• The budget deficit was around 4.5% of GDP in 2009 and for the financial year 2010, the deficit is expected to rise

to 5% of GDP. The 2010–11 budget outlay is BDT1.32 trillion ($19 billion) compared with BDT1.14 trillion ($16.1

billion) in the 2009–10 fiscal year.

• The latest Doing Business Survey of the World Bank places Bangladesh in the 119th position out of 183

countries in 2010. In 2008, the FDI flow increased to $1.08 billion and decreased to around $716 million in 2009.

• Healthcare spending accounted for around 3% of GDP in Bangladesh during 2000–08, which amounted to

around over 12% of total government expenditure.

• In September 2010, the high court of Bangladesh directed the government to end child labor in a number of

industries across the country by the end of 2011.

COUNTRY ANALYSIS REPORT

Bangladesh

In-depth PEST Insights

Publication Date: October 2010



Summary



• The Bangladesh Telecommunications (Amendment) Bill 2010 was passed in July 2010, which aims at bringing

about technological improvement in telecom sector and implementing the government's Digital Bangladesh

program.



Table of Contents



TABLE OF CONTENTS

Catalyst 1 Summary 1 Key facts and geographic location 7

Key facts 7 Geographical location 8

Political landscape 9 Summary 9 Evolution 9 Structure and policies 10 Performance 13 Outlook 14

Economic landscape 15 Summary 15 Evolution 15 Structure and policies 16 Performance 17 Outlook 22

Social landscape 23 Summary 23 Evolution 23 Structure and policies 23 Performance 26 Outlook 27

Technological landscape 28 Summary 28 Evolution 28 Structure and policies 28

Performance 28 Outlook 29

APPENDIX 30 Ask the analyst 30



Table of Contents



Datamonitor consulting 30 Disclaimer 30



Table of Contents



TABLE OF FIGURES

Figure 1: Map of Bangladesh 8 Figure 2: Bangladesh– key political events timeline 9 Figure 3: Bangladesh – Head of the state and government 10 Figure 4: Distribution of seats by political parties in the 2008 elections of Bangladesh 12 Figure 5: Evolution of GDP growth in Bangladesh, 1991–2009 16 Figure 6: GDP and GDP growth rate of Bangladesh (constant prices), 2001–08 18 Figure 7: Sector specific GDP in Bangladesh 19 Figure 8: Major religions in Bangladesh 25



Table of Contents



TABLES

Table 1: Bangladesh – key facts 7 Table 2: Mid-year population by age (millions) in 2009 24



Key facts and geographic location



KEY FACTS AND GEOGRAPHIC LOCATION

Key facts

Table 1: Bangladesh – key facts

Country and capital

Full name People’s Republic of Bangladesh

Capital city Dhaka

Government

Government type Parliamentary democracy

Head of state President Zillur Rahman

Head of government Prime Minister Sheikh Hasina Wajed

Population 156 million

Currency Bangladeshi Taka (BDT)

GDP per capita (PPP) $1,500

Internet domain .bd

Demographic details

Life expectancy 60.25 years (total population)

57.57 years (men)

63.03 years (women)

Ethnic composition (2000 data) Bengali 98%, other 2% (includes tribal groups, non-Bengali Muslims)

Major religions (1995 census) Muslim – 89.5%

Hindu – 9.6%

Others– 0.9%

Country area 144,000 sq. km

Language Bengali (official language) and English

Exports Major exports include garments, jute and jute goods, leather, frozenfish and seafood.

Imports Machinery and equipment, chemicals, iron and steel, textiles,foodstuffs, petroleum products, and cement.

Source: CIA D A T A M O N I T O R



Key facts and geographic location



Geographical location

Bangladesh is located in Southern Asia, bordering the Bay of Bengal, between Burma and India.

Figure 1: Map of Bangladesh

Source: CIA The World Factbook D A T A M O N I T O R



Political landscape



POLITICAL LANDSCAPE

Summary

Formerly East Pakistan, Bangladesh was formed after the liberation war of 1971. It was under military rule from 1975 to

1990. In 1991, the Constitution was amended to restore the parliamentary system. The Bangladesh Nationalist Party, led

by Khaleda Zia and the Awami League, led by Sheikh Hasina, dominate the political landscape and frequent clashes

between supporters of these parties are common. The voting system is characterized by universal suffrage for persons

above 18 years of age. In December 2008, the Awami League alliance led by Sheikh Hasina won a landslide victory in

general elections.

The growth in religious extremism and the deteriorating law and order situation are major sources of concern for the

government. In addition, corruption allegations against several political leaders and government functionaries have troubled

successive governments.

Evolution

Figure 2: Bangladesh– key political events timeline

• In 1947, Britishcolonial rule over Indiaended. A largelyMuslim statecomprising East andWest Pakistan wasestablished, either sideof India

• In 1949, the AwamiLeague wasestablished tocampaign for EastPakistan's autonomyfrom West Pakistan

• In 1970, the AwamiLeague, under SheikhMujibur Rahman, wonan election victory inEast Pakistan. Thegovernment in WestPakistan refused torecognize the results,which led to riots


• In 1949, the Awami

League wasestablished tocampaign for EastPakistan's autonomyfrom West Pakistan


• In 1971, Sheikh Mujibwas arrested andtaken to WestPakistan. Being inexile, Awami Leagueleaders proclaimed theindependence of theprovince of EastPakistan on 26th

March. East Pakistanwas then renamed toBangladesh. Around10 millionBangladeshis fled toIndia as troops fromWest Pakistan weredefeated with Indianassistance

• In 1972, Sheikh Mujibreturned, became theprime minister andbegan a programme ofnationalizing keyindustries




• In 1975, Sheikh Mujibbecame the presidentof Bangladesh. He waslater on assassinatedin a military coup in thesame year. Martial lawwas imposed

• In 1977, General ZiaRahman assumed thepresidency. Islam wasadopted in theconstitution

• In 1979, martial lawwas lifted followingelections; Zia'sBangladesh NationalParty (BNP) won

• In 1982, GeneralErshad assumedpower in an armycoup. He suspendedthe constitution andpolitical parties

• In 1983, limitedpolitical activity waspermitted. Ershadbecame president


• In 1977, General ZiaRahman assumed the

presidency. Islam wasadopted in theconstitution




• In 1986, parliamentaryand presidentialelections were held.Ershad was elected fora five-year term. Heabolished martial lawand reinstated theconstitution

• In 1987, state ofemergency wasdeclared afteroppositiondemonstrations andstrikes

• In 1996, SheikhHasina Wajedbecameprime minister

• In 2001, 16 Indian andthree Bangladeshisoldiers were killed inborder clashes

• In 2002, IajuddinAhmed was sworn inas the president

• In 2005, around 350small bombs weredetonated in towns andcities in Bangladesh


• In 1987, state of

emergency wasdeclared afteroppositiondemonstrations andstrikes

• In 1996, SheikhHasina Wajed becameprime minister




• In January 2007, astate of emergencywas declared amidstviolence in the run upto elections

• In May 2007, interimgovernment wasestablished withmilitary support

• In December 2008, theAwami League allianceled by former SheikhHasina won a landslidevictory in generalelections

• In October 2009, thegovernment bannedthe local branch of theglobal Islamistorganization Hizb-utTahrir, as it wasalleged to be a threatto maintaining peace inthe country





Pre –1971 1971–72 1972–1994 1995–2001 2002 Onwards


• In 1949, the AwamiLeague wasestablished tocampaign for EastPakistan's autonomyfrom West Pakistan



• In 1949, the Awami

League wasestablished tocampaign for EastPakistan's autonomyfrom West Pakistan









• In 1977, General ZiaRahman assumed thepresidency. Islam wasadopted in theconstitution





• In 1977, General ZiaRahman assumed the

presidency. Islam wasadopted in theconstitution





• In 1987, state ofemergency wasdeclared afteroppositiondemonstrations andstrikes

• In 1996, SheikhHasina Wajedbecameprime minister





• In 1987, state of

emergency wasdeclared afteroppositiondemonstrations andstrikes

• In 1996, SheikhHasina Wajed becameprime minister












Pre –1971 1971–72 1972–1994 1995–2001 2002 Onwards

Source: Datamonitor D A T A M O N I T O R



Political landscape



Structure and policies

Key political figures

• Head of the state: President Zillur Rahman

• Head of the government: Prime Minister Sheikh Hasina Wajed

Figure 3: Bangladesh – Head of the state and government

Mohammad Zillur Rahman has been the president of Bangladesh since February 2009. Zillur Rahmanparticipated in the Bengali language movement of 1952. Later, as an Awami League candidate, he was electedas a member of parliament in the 1970 national elections of Pakistan. During the Bangladesh Liberation War,Rahman actively participated in the government-in-exile. Rahman served as a minister in the Awami Leaguegovernment between 1996 and 2001.

Sheikh Hasina Wajed has been the president of Bangladesh since January 2009. She is the eldest of fivechildren of Sheikh Mujibur Rahman, the f ounding father (and f irst president) of Bangladesh. Sheikh Hasina waselected president of Bangladesh Awami League in 1981. Sheikh Hasina and her party Awami Leagueparticipated in the 1986 parliamentary elections held under Lieutenant-General Hossain Mohammad Ershad. Sheserved as the leader of the opposition between 1986–87. Her party achieved a landslide victory in 2008elections. Under her leadership, the party has achieved a majority in parliament, controlling 230 seats out of 299in 2008.


Structure of government

Bangladesh is governed under a parliamentary democracy with president as the head of the state and prime minister as the

head of the government. The cabinet is appointed from the major party in the parliament. The cabinet, constituting the

heads of various ministries, is appointed by the president on the advice of the prime minister. In 1996, the 13th Amendment

to the Constitution legalized a unique system of transfer of power, whereby power is handed over to a caretaker

government for an interim period of three months at the end of the tenure of the outgoing government. The caretaker

government is headed by the Chief Adviser, who is appointed by the president. He assumes the role of the prime minister

until a regular government is formed.

Legislature

Bangladesh has a 300 member unicameral parliament called the House of Nation (Jatiyo Sangshad). The members of the

House of Nation are elected for a term of five years through universal suffrage. The constitution of Bangladesh proclaims

the president as the head of state, although the post is largely ceremonial. He is elected by the parliament for a term of five

years. The prime minister is the head of government and the cabinet and is appointed from the major party in the



Political landscape



parliament. The last parliamentary elections held in December 2008, saw the Awami League-led coalition (Grand Alliance)

emerge victorious with 230 seats out of total 200 seats in their share.

Provincial governments

Bangladesh is divided in 7 divisions; Barisal, Chittagong, Dhaka, Khulna, Rajshahi, Rangpur, and Sylhet.

Structure of legislature

Key political parties

Awami League (AL)

The Awami League is the oldest political party in Bangladesh. The party was founded in 1949 as the Awami Muslim League

but was later renamed the Awami League to secularize the party. Led by the late Sheikh Mujibur Rehman, the party played

a key role in the Liberation War of 1971. Sheikh Hasina, the daughter of Sheikh Mujibur Rehman, leads the party presently.

In the 2008 parliamentary elections, the AL secured 49% of the vote and 230 seats, thereby becoming the ruling

government. The AL has formed the government on two previous occasions. During its last term, from1996 and 2001, a

long standing dispute with India over sharing water of the river Padma was successfully settled and a peace treaty with

tribal rebels was signed.

Bangladesh Nationalist Party (BNP)

The Bangladesh Nationalist Party was founded in 1978 by General Ziaur Rahman. Since its inception, the party has formed

the government for three separate terms and is currently headed by former Prime Minister Khaleda Zia. In the 2008

parliamentary elections, the BNP emerged as the second largest party with 33% of the votes and 30 seats and became the

opposition party. The party favors pro-market economic policies and advocates a foreign policy that is aimed at promoting

friendship and cooperation between Bangladesh and both Islamic and western countries. A string of bomb attacks in

August 2005, allegedly by Islamic terrorist groups, resulted in the BNP-led government drawing severe criticism for failing

to curb militancy. Subsequently, the government banned a terrorist organization called the Harkatul Jehad Al Islami, in

October 2005. The party has also been criticized because of growing allegations of corruption within its upper echelons as

evidenced by the recent seizures of government relief materials from the private residences of several former BNP

ministers.

Composition of government

Bangladeshi parliament is dominated by two dominant parties namely AL and BNP.



Political landscape



Figure 4: Distribution of seats by political parties in the 2008 elections of Bangladesh

AL, 230

BNP, 30

Others, 40


Key economic policies

Political stability has been always a central issue historically in the country. However, the government has been trying to

promote private investment since the late 80s. The Board of Investment was created in 1989 to implement the

government’s investment policy and promote private participation in the industrial sector. In the same year, the monopoly of

Bangladesh Telephone and Telegraph Board was terminated and private service providers were allowed to operate.

Industrial Policy 2005 aims to accept private initiatives as the main driving force of economic development. Keeping this in

mind, private investment has been encouraged in several sectors. For instance, production sharing contracts have been

signed with prominent private energy companies such as Cairn Energy and Rexwood Oakland for oil and gas exploration.

The role of state-owned enterprises in the economy is being reduced gradually and privatization of enterprises in various

sectors is being encouraged. Bangladesh's government is also preparing to launch a new licensing round comprising of

onshore and offshore blocks during December 2010. Bangladesh's High Court lifted a nine-year ban on offering onshore

exploration licenses in January 2010, after lifting the ban for offshore regions in July 2006. These developments have

paved the way for the planned bidding round. Areas disputed with India or Myanmar will be excluded from the licensing

round.



Political landscape



Social

The social policies have been historically focused on alleviation of poverty and public healthcare. In May 2004, the

parliament amended the constitution and introduced a provision for reserving 45 seats for women and distributing them

among political parties in proportion to their numerical strength in the parliament. However, there was opposition from the

AL, which did not take its share of the reserved seats arguing that they did not support the indirect election or nomination of

women. The AL’s stand was supported by several women’s groups who also demanded the direct election of women to fill

the reserved seats. In September 2010, the high court in Bangladesh has directed the government to end child labor in a

number of industries across the country by the end of 2011.

Foreign and defense policies

Since independence the country required a great deal of foreign assistance in the effort to keep its social fabric intact.

Bangladesh has received substantial economic aid from international development institutions such as the IMF and the

World Bank. In June 2003 the IMF approved a three year, $490 million plan as part of the Poverty Reduction and Growth

Facility (PRGF), which was followed by $536 million of interest-free loans from the World Bank. These were aimed to

support the government's economic reform program, reduce poverty and improve the social infrastructure. Bangladesh was

admitted to the United Nations in 1974 and was elected to a Security Council term in 1978-1980 and again in 2000–02.

Until June 2008, Bangladesh was the second largest provider of UN peacekeepers. Bangladesh has served in the

chairmanship of SAARC and has participated in a wide range of ongoing South Asian Association for Regional Cooperation

(SAARC) regional activities. Relations with the European Union and its member states remain a priority in the foreign

policy. At present EU is the top export destination of Bangladesh's products (48% of the total product). The US is an aid

donor to Bangladesh and thus the government maintains close ties with the US.

Performance

Governance indicators

The World Bank report on governance uses voice and accountability, political stability and absence of violence,

government effectiveness, regulatory quality, rule of law, and control of corruption as indicators for 212 countries and

territories over the period 1996–2008. Daniel Kaufmann and Massimo Mastruzzi of the World Bank Institute and Aart Kraay

of the World Bank Development Economics Research Group carried out the study. For any country, a percentile rank of 0

puts it at the lowest rank and 100 corresponds to the highest rank.

Bangladesh ranked in the 30.8 percentile on the voice and accountability parameter in 2008. Voice and accountability

measures the extent to which a country's citizens are able to participate in selecting their government, along with freedom

of expression, freedom of association, and the availability of free media. Bangladesh has a lower rank than its neighbor

India which is at percentile rank of 58.7.

Bangladesh ranked in the 9.6 percentile on political stability and absence of violence in 2008. Political stability and absence

of violence measures perceptions of the likelihood that the government will be destabilized or overthrown by

unconstitutional or violent means, including domestic violence and terrorism. Bangladesh is at a lower rank than India and

is ranked at 16.7 percentile.



Economic landscape



Bangladesh ranked in the 22.7 percentile on government effectiveness in 2008. Government effectiveness measures the

quality of public services; the quality of the civil services and the degree of its independence from political pressures; the

quality of policy formulation and implementation; and the credibility of the government's commitment to such policies.

Bangladesh’s rank on this indicator is lower than that of India, which is ranked at the 53.6 percentile.

Bangladesh ranked in the 20.8 percentile on regulatory quality in 2008. Regulatory quality measures the ability of the

government to formulate and implement sound policies and regulations that permit and promote private sector

development. Low ranking indicates inefficient implementation of policies and regulations for the private sector. Bangladesh

rank’s lower than India which is ranked at 46.9 percentile.

Bangladesh ranked in the 27.3 percentile on the rule of law parameter in 2008. Rule of law measures the extent to which

agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, the

police, and the courts, as well as the likelihood of crime and violence. Bangladesh rank is lower than India which is ranked

at 56.5.

The country is ranked in the 10.6 percentile on the control of corruption parameter as of 2008. Control of corruption

measures the extent to which public power is exercised for private gain, including both petty and grand forms of corruption,

as well as the appropriation of the state by elite and private interests. Bangladesh stays behind India which is at 44.0

percentile.

Outlook

The key to country’s development and progress has been combination of political, economic, social and cultural changes

that complement one another. The political advances in Bangladesh can be described as commendable because in an era

salient with the menace of Islamism and terrorism, Bangladeshi government has most wisely and foresightedly chosen to

establish itself as a secular democracy. With AL winning a landslide victory in the December, 2008 elections, the

democratic constitution was reinstated in the country. One of the important initiatives taken by the government has been

prioritizing industrial development that can be profitably marketed globally. It was the apparel or garment industry that was

chosen for stimulation and expansion. As of 2009, Bangladesh was the fourth largest exporter of apparel after China, the

EU and Turkey. It exported over $ 10 billion worth of apparel goods in 2009. Such production was particularly suited to a

female workforce and thus proved to be another avenue for providing employment to women and thus empowering them.

In an act to decrease social violence and youth participation into politics, youth under 18 years of age may be banned from

political activity in Bangladesh under a draft policy for children announced in September 2010 by the government.

Furthermore, Bangladesh's High Court lifted a nine-year ban on offering onshore exploration licenses in January 2010, after

lifting the ban for offshore regions in July 2006. These developments have paved the way for the planned bidding round.

Areas disputed with India or Myanmar will be excluded from the licensing round.



Economic landscape



ECONOMIC LANDSCAPE

Summary

Bangladesh is a poor country with a low per capita GDP although it has experienced steady economic growth in the last

few years. The economy is based on agriculture, which employs the highest proportion of the labor force but contributes a

lower amount to GDP than either industry or services. The sector is also characterized by underemployment and is

vulnerable to heavy rains and floods. The industrial sector is dominated by export-oriented garment manufacturing. The jute

industry, Bangladesh’s traditional stronghold, is an important foreign exchange earner. Although foreign direct investment

into Bangladesh has increased since 2003, it still remains quite low. Political instability, corruption and infrastructural

deficiencies have weakened the country’s business environment. Higher crude oil prices have led to a widening trade

deficit. However, the current account balance has shown a surplus due to higher remittances by Bangladeshi nationals

working abroad. The economic growth averaged to 5.7% during 2000–07. The GDP growth rate fell from 6.14% in 2008 to

5.6% in 2009.

Evolution The following are some of the key events in the economic history of Bangladesh:

• During the partition of India in 1947, Bangladesh became a part of Pakistan and was a major producer of jute,

driving industrial growth till the 1960s. The subsequent decline in jute prices and exports and negligence by the

central government in West Pakistan resulted in the region becoming poorer. Economic stagnation coupled with

political discrimination triggered popular dissatisfaction leading to the Liberation War in 1971 and the

establishment of Bangladesh as a sovereign nation.

• Since then, the government has gradually allowed private investment in a number of sectors, and in recent years,

has reduced the role of the state-owned enterprises to promote economic growth.

• Bangladesh has experienced steady economic growth since 1991. Real GDP expanded by an annual average of

4.9% in the 1990s on the back of improvements in agricultural production and export-oriented garment

manufacturing.

• The global economic slowdown in 2001 and the concomitant fall in exports and domestic investment resulted in

growth declining from 5.3% in 2000 to 4.4% in 2001. However, the economy rebounded subsequently, registering

impressive growth rates of 6.3% in 2003 and 5.4% in 2004 on the back of strong agricultural production and a

recovery in export-oriented manufacturing.

• The economy kept up its strong showing in 2005 and 2006 with growth of 5.5% and 5.7% respectively. Private

consumption was the main driver of growth, bolstered by strong remittance inflows, while manufacturing

investment and production maintained their up trends. Despite this growth, Bangladesh remains a poor country inabsolute terms, with a per capita GDP of just $453 and 45% of the population living below the poverty line.

• The economic growth averaged to 5.7% during 2000–07. The GDP growth rate fell from 6.14% in 2008 to 5.6%

in 2009.



Economic landscape



Figure 5: Evolution of GDP growth in Bangladesh, 1991–2009

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

1991 1993 1995 1997 1999 2001 2003 2005 2007 2008 2009

Year

G r o w t h r a t e ( % )



Financial system

Overview

The Bangladeshi financial system is totally controlled by Bangladesh Bank. The bank is the chief authority to regulate

country’s monetary and financial system.

Financial authorities/regulators

Bangladesh Bank

The Bangladesh Bank was established in Dhaka as a body corporate vide the Bangladesh Bank Order, 1972 (P.O. No. 127

of 1972) with effect from December 16, 1971. The bank is headed by the Board of Directors, which consists of the

governor, who is also the chairman, two Deputy Governors and nine non-executive directors. The governor and the three

deputy governors are appointed for a term of four years and are eligible for re-appointment. The Board of Directors are the



Economic landscape



decision-making body of the bank, which sets the monetary and exchange rate policies, the measures relating to

authorization, regulation and prudential supervision of credit institutions in the country; The bank is also responsible for the

operation of payment systems of the country.

Dhaka stock exchange (DSE)

The DSE is the chief stock exchange of Bangladesh. Its main role is to offer a marketplace for securities transactions. It is

also responsible to ensure fair prices that suitably reflect supply-demand. The stock exchange was established in 1954 as

The East Pakistan Stock Exchange Association Ltd.; later on it became Dhaka Stock Exchange in 1964. Trading was

suspended during the liberation war but resumed in 1976 with a change in the economic policy of the government. In

August 1998 automated on-line screen-based trading began and in January 2004 the Central Depository System (CDS) for

electronic settlement of share trading was introduced in the DSE. The Dhaka Stock Exchange became a full Depository

Participant (DP) of CDBL to facilitate the trading of its non-DP members. As of end of December 2009, there were 415

listed companies and the total market capitalization was around BDT1, 903.2 billion ($26.9 billion).

Key policies

In the financial sector, the government has made a regulatory framework that put emphasis on privatization. The

government favors an open market, removal of exchange controls, free repatriation of earned income for foreign investors,

profits and dividends and reliance on market forces in allocating resources. The government also introduced banking

reforms during 2007–08, which helped increase private sector growth and investment. Furthermore, Bangladesh's

government is also preparing to launch a new licensing round comprising of onshore and offshore blocks by the end of

December 2010. Bangladesh's High Court lifted a nine-year ban on offering onshore exploration licenses in January 2010,

after lifting the ban for offshore regions in July 2006.

Performance

GDP and growth rate

Overview

Economic growth has remained strong robust during 2000–08 (i.e., around 5.8%). In 2009, the international financial

turbulence did not affect the country; however growth rate came down marginally to 5.6% compared to 6.1% recorded in

2008. The Bangladeshi economy is expected to grow at around 6.7% in 2010–11, according to the government.



Economic landscape



Figure 6: GDP and GDP growth rate of Bangladesh (constant prices), 2001–08

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

2001 2002 2003 2004 2005 2006 2007 2008

Year

$ b i l l i o n

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Gr ow t h r a t e ( % )

GDP ($billion) Real GDP growth rate


GDP composition by sector

Service sector dominates the economy, contributing to 52.8% to GDP, followed by industrial sector contributing 28.6% and

agricultural sector contributing 18.6%.



Economic landscape



Figure 7: Sector specific GDP in Bangladesh

Agriculture, 18.6%

Industry, 28.6%

Services, 52.8%


Agriculture

The economy is predominantly agriculture-oriented with the sector employing about 63% of the labor force although it

contributes only 18.6% of GDP. Over the past several years, the agricultural sector has grown steadily, helped by good

quality seeds, fertilizers, improvements in irrigation facilities and development assistance from international development

organizations such as the IMF and World Bank. Bangladesh has managed to transform from a food deficient nation to a

food surplus one. The agricultural sector grew by 4.5% in 2006 as against 2.2% in 2005. However, food grain yield,

especially that of rice and wheat, has stagnated over the last few years due to massive floods and rising cost of inputs. The

average yield of rice has remained constant at about 2.4 metric tones/hectare over 2000-05 while that of wheat has

declined from 2.2 metric tones/hectare to 1.9 metric tones/hectare over the same period.

High population growth of 2.1% means that the agricultural sector is facing a serious challenge in absorbing additional

manpower while maintaining productivity. In addition, provision of formal banking facilities for the rural poor remains a

serious challenge although Grameen Bank and other microfinance institutions have been providing financial services to

those falling outside the banking system. As of December 2005, the number of microfinance borrowers stood at 24.3 million



Economic landscape



with 90% of them being female. The agricultural output increased from BDT595 billion ($9 billion) in 2002 to over BDT1,062

billion ($22 billion) in 2008.

Industry

The industrial sector grew by a robust 9.6% in 2006 as against 8.3% a year earlier. The sector is dominated by the labor-

intensive garment industry which contributes about 75% of total export earnings and accounts for about 45% of total

industrial employment. The jute industry, Bangladesh’s traditional stronghold, remains a major foreign exchange earner.

Jute was the most important export earner and as of September 2010 jute production amounted to 1,474,777 bales.

However, synthetic fibers are posing a major challenge to the industry in the world market. The industrial sector growth rate

came down to 15.2% in 2008 from around 22% in 2007.

Services

The services sector expanded by 6.5% in 2006, which was slightly higher than the 6.4% growth registered in 2005. The

growth in the sector was driven by a better performance of wholesale & retail trade (growth of 7.3%) and the transport,

storage & communication (growth of 8.2%) sectors. In 2008, the service sector grew by 14.3%.

Fiscal situation

Fiscal deficit/surplus situation

Bangladesh’s public finance is characterized by a narrow tax base and low revenue collection, which cripples the

government’s ability to fund basic infrastructural development. The budget deficit in 2006 (ended June 2006) was 3.0% of

GDP as against 3.5% a year earlier. Total revenue collection at 10.3% of GDP remained low. Total public expenditure was

$7.4 billion (13.3% of GDP) in 2006 compared to $7.9 billion (13.8% of GDP) a year earlier. The budget deficit was around

4.5% of GDP in 2009 and for the financial year 2010, the deficit is expected to rise to 5% of GDP. The 2010–11 budget

outlay is BDT1.32 trillion ($19 billion) compared with BDT1.14 trillion in the 2009–10 fiscal year.

Current account

Supported by the slump in the country's imports amid suppressed domestic demand and lower international commodity

prices, the current-account surplus ballooned to an estimated 2.7% of GDP in FY 2009 from 1.3% of GDP in 2008.

However, as remittance inflows are likely to moderate throughout the second half of FY 2010, and as export recovery is

projected to be sluggish, the current account might experience a slight deterioration.

Foreign trade

According to Heritage Foundation’s Index of Economic Freedom 2010, weighted average tariff rate in Bangladesh was 11%

in 2007. The average customs duty on agricultural products (19.6%) remains higher than for industrial goods (14.7%). In

FY 2009, the value of Bangladesh’s total merchandise exports amounted to $15.9 billion, up from $15.4 billion over FY

2008. Garments, frozen fish and seafood, jute and leather are the most important exports. The value of total merchandise

imports was $20.2 billion in FY 2009, lower than $21.5 billion in FY 2008. Machinery and equipment, chemicals, iron and

steel, textiles, foodstuffs, petroleum products, and cement are some of the important imports. The US is Bangladesh’s chief

export partner, accounting for 20.24% of exports. Germany and the UK and are other important markets accounting for



Economic landscape



12.75% and 8.4% of exports, respectively. China’s share at 16.16% is the highest on the import side. India, Singapore and

Japan are the other major source markets contributing 12.9%, 7.5% and 4.6% of the imports respectively.

External debt

During year ended December 2009, the external debt stock increased to $23.2 billion from around $22.83 billion recorded

in 2008. Around 69% was government debt and rest was by private and public sector debt.

International investment position

Foreign investments

Foreign direct investment (FDI) fell sharply from $280 million in 2000 to $79 million in 2001 and $52 million in 2002 in the

aftermath of the global economic slowdown. It subsequently rebounded to $268 million in 2003, $460 million in 2004 and

$690 million in 2005, on the back of the global economic recovery and the government’s privatization drive. However,

Bangladesh remains a poor business destination with pervasive political violence, corruption and frequent natural disasters.

In addition, lack of adequate infrastructure is a serious constraint to economic growth. For instance, per capita electricity

generation was just 155 KWh, among the lowest in the world, and there was a massive 24.5% transmission and distribution

loss in 2004. The latest Doing Business Survey of the World Bank places Bangladesh in the 119th position out of 183

countries in 2010. In 2008, the FDI flow increased to $1.08 billion and decreased to around $716 million in 2009.

Monetary situation

Overview

The Bangladesh Bank uses monetary policy to maintain price stability as defined in the monetary policy. The bank adopts a

direct inflation targeting strategy to counter the effects of inflation in the country.

Key monetary indicators

CPI inflation

Inflation has fluctuated in the period over 2002-06. It rose sharply from 4.8% in 2002 to 18.3% in 2004. This was mainly

driven by fluctuation in food prices, the continued uptrend in prices of crude oil (a key import item) and a rapid growth in

money supply. The fluctuation in food prices depicts the seasonality of food production, which is itself a function of

prevailing weather conditions and input prices. Inflation fell to 5.9% in 2005 due to higher agricultural production, which

dampened food prices. However, prices levels shot up again to 6.5% in 2006. Data from the Policy Analysis Unit of

Bangladesh Bank shows that food inflation fell sharply from 21.88% in November 2004 to -6.75% in February 2006 and

then increased to 15.53% in June 2006. In 2007, inflation decreased to around 9% and further declined to 8.9% in 2008. In

2009, the inflation rate decreased to 7.3%. As of June 2010, the inflation again rose to 10%, due to increased commodity

prices.



Social landscape



Banking sector

The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, four state owned commercial

banks (SCB), five government owned specialized banks, 30 domestic private banks, 9 foreign banks and 29 non-bank

financial institutions. The banking system is dominated by the four state owned commercial banks, which together control

more than 30% of deposits and operates 3383 branches (50% of the total). The number of banks remained unchanged at

48 in 2008. These banks had a total number of 6886 branches as of December 2008. The number of bank branches

increased from 6717 to 6886. Total deposits of the banks in 2008 rose to BDT 2,561.4 billion from BDT2, 148.9 billion in

2007 showing an overall increase by 19.2%. Loans and advances amounted to BDT2, 108.9 billion in 2008.

Employment

The unemployment rate has increased from 4.3% in 2002 to 5.1% in 2009. Underemployment remains a major problem in

the agricultural sector, which employs 63% of the labor force but contributes just 21% of GDP. According to a Bangladesh

Country Strategy Paper of the European Commission, landless peasants account for about half the rural labor force. The

gradual restructuring and privatization of some state-owned enterprises has resulted in job losses in the industrial sector.

The percentage of women making up the labor force declined slightly from 37.7% in 2002 to 36% in 2008.

Outlook

During 2008–09, the country weathered out the global economic slowdown, mostly because of its low financial connectivity

to the world markets. However, the country has seen a deceleration in its GDP growth, which fell from around 6.1% in 2008

to around 5.6% in 2009.However, during 2010–11, the country, is expected to post an economic growth rate of over 6%. In

a bid to meet its energy needs, Bangladesh has signed a landmark 35-year power transmission deal with India in July

2010. As per the deal, India will supply 250 megawatt electricity to the energy starved nation from the latter part of 2012

onwards. As of June 2010, only 40% of Bangladesh population has access to electricity with the country facing a deficit of

1,000 to 1,500 mw, this new agreement is expected to stimulate economic activity considerably in the country.

Furthermore, Bangladesh’s potential as a reliable destination for putting in money and investing by international creditors

and investors has been positively rated by the US-based credit rating agency Standard and Poor's (S&P) in April 2010. This

is the first-ever rating given by S&P for Bangladesh. Bangladesh's scorecard with a 'BB- for a long term' is placed above Sri

Lanka and Pakistan, though below India. This first ever rating of the country is expected to boost confidence for the

international investors and creditors on country's real potential as a business partner and an investment destination.



Social landscape



SOCIAL LANDSCAPE

Summary

Bangladesh has a total population of 156 million and spans a total area of 144,000 sq. km. The population is ethnically

homogeneous with 98% of it being Bengali. Muslims and Hindus constitute 89.5% and 9.6% of the population, respectively.

Bangladesh’s population is young, having a median age of just 22.9 years and with persons aged 65 and above comprising

just 4% of the population. About 70% of the population lives in rural areas. Child labor has been historically a problem in

country however, in September 2010; the high court in Bangladesh has directed the government to end child labor in a

number of industries across the country by the end of 2011.

Evolution

Bangladesh has not had efficient administration for many decades until 1990s. Since the end of war in 1971, the World

Health Organization (WHO) and the United Nations Children's Fund (UNICEF) have provided financial and technical

assistance for the eradication of diseases and the enhancement of health standards. The government adopted a number of

policies to improve health sector during 1980s. The Rural Development and Cooperatives Division of the government is

responsible for planning, implementation, monitoring and evaluation of rural development programs. Poverty alleviation has

been a major goal of the successive governments; thrust has been being given on socio-economic development of the

underprivileged groups.


Demographic composition

Age and gender-wise composition

The registered population of Bangladesh, as of July 2010, was 156 million. The population density of the country is 875

persons per square kilometer. The birth rate in Bangladesh was as high as 28.68 per 1,000 population. The sex ratio is

even, with 1.04 males per female.



Social landscape



Table 2: Mid-year population by age (millions) in 2009

Mid-year population by age Female Male

0–4 9.1 9.2

5–9 9.1 9.2

10–14 8.7 8.6

15–19 8.3 7.3

20–24 7.4 5.7

25–29 6.8 5.3

30–34 6.6 5.6

35–39 5.7 5.2

40–44 4.6 4.6

45–49 3.8 4.0

50–54 3.1 3.2

55–59 2.4 2.5

60–64 1.8 1.9

65–69 1.4 1.4

70–74 1.0 0.9

75–79 0.6 0.5

80+ 0.4 0.3


Religious composition

Around 89.5% of the population is Muslims, 9.6% constitute Hindus and 0.9% follows other religions.



Social landscape



Figure 8: Major religions in Bangladesh

Muslims89%

Hindus10%

Others

1%


Education

System of education

The education system in Bangladesh consists of several public and private schools at the primary, secondary and higher

secondary levels. The government partially subsidizes the funding of many private schools. There are 11 government

universities and approximately 20 private universities in Bangladesh. The University Grants Commission is the apex body

of all affiliated universities. The madrasa system emphasizes Arabic medium Islam-based education. This system is

supervised by the madrasa Board.

Healthcare

Healthcare services and social welfare

The Health and Population Sector Strategy introduced in 1998 forms the basis for national health policy in Bangladesh.

Though this policy, the government seeks to encourage family and community action in healthcare delivery to provide

health coverage and accessibility, especially to the poor and vulnerable pockets of the population. A joint action plan was

framed which involved 60,000 village health volunteers, who would provide basic medical services. In addition, expenditure



Social landscape



on healthcare laid special emphasis on research and population control. Presently, about 95% of primary health and family

planning services are provided by the government sector and are free of cost. Over the past several years, favorable

government initiatives and community involvement have resulted in several improvements in the healthcare sector. The

primary care in the public sector is organized around the Upazila Health Complex (UHC) at sub-district level, which worksas a health-care hub. These units have both in- and out-patient services and care facilities. Most commonly, they have in-

patient care support with 31 beds, while some UHC have over 50 beds. Ministry of Health and Family Welfare (MOHFW) is

the regulatory authority.

Performance

Healthcare

Healthcare spending accounted for around 3% of GDP in Bangladesh during 2000–08, which amounted to around over

12% of total government expenditure. Out of the total spending on healthcare, public expenditure is equivalent to 1.8% of

GDP and private expenditure 2.9%. Life expectancy has increased to 60.25 years and infant mortality rate has fallen to 59

deaths per 1000 live births in 2010 as compared to 91 deaths per 1000 live births in 1991. However, several deficiencies in

the healthcare system remain. In spite of several years of family planning initiatives, the population growth rate and the total

fertility rate remain high at 1.2% and 2.65% children/woman respectively. There is a shortage of qualified healthcare

professionals, especially in rural areas. Their salary payment is uncertain and is subject to the availability of the

government’s development fund.

Income distribution

Standard of living

Bangladesh has not been successful in limiting disparities of income and wealth and restricting poverty in the country. On

the Gini coefficient, which ranges from 0 (perfect equality) to 1 (perfect inequality), Bangladesh was placed at 0.33 in 2005.

However, it is expected that the Gini coefficient will increase in the coming years to more than 0.40 with widening wage

income gaps, rising unemployment and increasing population.

Education

The education expenditure in the country has been low at around 2% of GDP during the period 2000–08. The literacy rate

in 2003 was just 43.1% for the total population and 53.9% for males and 31.8% for females, reflective of the gender

imbalance that exists in Bangladesh. According to UNICEF, as of 2008, gross primary school enrollment was 101% but

only 65.1% of all enrolled candidates completed primary school.



Social landscape



Outlook

Despite many internal political and economic pressures, the government has been able to provide funding to the healthcare

sector with 3% of GDP and between 1%–2% of GDP to education. Since poverty alleviation is a major goal of thegovernment, thrust is being given on socio-economic development of the underprivileged groups. The main emphasis of

government has been on adoption of integrated and comprehensive approach taking the family as the basic unit for social

services programs with emphasis on family and group development rather that individual development. As a part of the

integrated approach, child labor has been identified as the main focus since 2008, which has been a problem historically in

the country. In September 2010, the high court in Bangladesh has directed the government to end child labor in a number

of industries across the country by the end of 2011.

In March 2001, Bangladesh ratified an International Labour Organisation (ILO) convention related to the prohibition of and

immediate action for the elimination of the worst forms of child labor. According to Bangladesh Shishu Adhikar Forum,

children are involved in 430 different types of works in Bangladesh and among them 67 types are identified as the most

hazardous, and these will be banned with immediate effect from September 2010. Furthermore, the Ministry for Food and

Disaster Management has stepped up efforts to distribute 26 lakh tones more food grains under the social safety network in

the country during for the rest of 2010. The consistent effort put in by the government in all the social spheres is expected

to bring in some improvements in the lives of Bangladeshi citizens.



Technological landscape



TECHNOLOGICAL LANDSCAPE

Summary

The science and technology infrastructure in Bangladesh is in a very premature stage with government’s focus more on to

economic and social development. However, the country has made considerable efforts to bring in technology transfer

through universities and exclusive R&D centers in to the country. Currently, the country’s R&D focus is mainly into

developing infrastructural technologies and technologies useful to social development. The country is also being helped by

the World Bank to develop telecommunication infrastructure.

Evolution

During the British rule, Indian subcontinent had only a few centers where scientific research was carried out. In 1935, the

National Institute of Sciences of India was established and in 1945 the Government of India declared this institute as the

premier scientific society of the country. After partition of the subcontinent, the Pakistan Academy of Sciences was

established in 1953. After liberation of Bangladesh, the government formed the Bangladesh Academy of Sciences in 1973.

Bangladesh is dominated by two research institutes both situated in the country’s capital Dhaka: the University of Dhaka

(the capital’s main university) and the International Centre for Diarrheal Disease Research (ICDDR).


Intellectual property

Bangladesh Intellectual Property Law Office is the regulatory authority and refers patent applications there for preliminary

and substantive searches and registration.

Research and development

The science and technology matters in the country are monitored and regulated by Ministry of Science and Information &

Communication Technology. The need for faster technological development is increasingly felt in Bangladesh.

Development plans of Bangladesh have emphasized science and technological research to develop technologies through

adoption of imported technology as well as development of indigenous technologies. As the country is heavily dependent

on imported technologies, proper planning of effective transfer through acquisition, assimilation and adoption has been

government focus. A National Science and Technology Policy has been formulated and adopted by the government. The

National Council for Science and Technology (NCST) determines science and technology policies, reviews the activities of

different institutions and provides direction towards R&D activities.

Performance

Opportunity sectors

Telecommunications, broadband and internet

The telecommunication sector is underdeveloped in Bangladesh; however during 2007–09 there have been dramatic

changes. Bangladesh Telecommunication Regulatory Commission is the regulatory body for the sector. Although mobile

penetration has increased in the last few years, helped largely by low penetration levels, it still remains very low compared



APPENDIX



to other countries with similar profiles. The mobile penetration rate showed a tremendous growth of around 217% in 2005

but growth decelerated to 25% in 2008. The number of mobile phone subscribers in Bangladesh as of 2009 was 45.2

million. The number of fixed line telephones is also increasing steadily over the past few years; however its coverage is far

from adequate. The annual average growth rate for fixed-line telephones over the period 2002–08 was 13%. The number offixed line telephones was around 1.3 million as of 2009. Voice over Internet Protocol (VoIP), a technology that allows

telecom companies to route large volumes of calls very cheaply anywhere in the world by buying space on broadband

computer servers, is illegal in Bangladesh. The number of internet users in Bangladesh as of March 2009 is over 600,000

compared to 100,000 in 2000.

R&D

The share of the country’s budget allocated to science, technology and innovation has been historically low in Bangladesh.

It has hovered between 0.6% and 1% of the GDP since 1990.

Outlook

The Bangladeshi economy has increasingly moved towards a knowledge-based economy. A comprehensible shift is

prominent, away from agricultural-based industries and traditional manufacturing sectors to more R&D intensive sectors. In

March 2010, President Zillur Rahman ordered the government on expanding the education of science and technology for

transforming the country's huge population into human resources. He emphasized on making the country's education

curriculum, including the study of engineering, with a view to keeping pace with the global standard of education.

Perceiving the holistic concept, Prime Minister Sheikh Hasina has declared Vision-2021 as the guiding policy initiative

aiming to build IT infrastructure and finish it by country's golden jubilee of independence in 2021.

The Bangladesh Telecommunications (Amendment) Bill 2010 was passed in July 2010, aiming at bringing technological

improvement in telecom sector and implementing the government's Digital Bangladesh program. It also proposed for

inclusion of a provision for checking extortion through telephone and for maintaining country's integrity and solidarity.

.



APPENDIX

B l d h C t A l i R t I d th PEST I i ht P bli h d 10/2010

APPENDIX

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