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50 Years of Bangladesh: Accelerating export-led industrialisation
Fahmida Khatun
Bangladesh’s economy has experienced significant structural transformation during the last five decades. At the time of its independence, the country used to be characterised as an agrarian rural economy. In the early 1970s, the share of agriculture in the Gross Domestic Product (GDP) was around 60 percent, and the industry and services sector had only a small share. The share of agriculture in Bangladeshi economy has now declined to 13.6 percent, while that of industry and services sectors stands at 34.6 percent and 51.8 percent, respectively. Within the industry sector, the manufacturing sector plays a dominant role with a share of 23.3 percent in the GDP. This has increased from only four percent in 1972. Along with structural change, the composition of employment generation by the sectors has also changed. Though agriculture still employs about 40 percent of the total labour force, industry has become an important source of employment generation.
The rise of the export-led industrialisation is one Bangladesh’s success stories
Among the export-oriented industries, that of readymade garments (RMG) has been a forerunner which flourished in the mid-1980s thanks to enabling global and domestic policies. Since the early 2000s, a number of other potential industries were also identified by the government as thrust sectors with export potentials. These include software and information and communication technology, pharmaceuticals, leather products and footwear, and shipbuilding, among others. Export-led industries have generated employment and helped in reducing poverty. The RMG sector has also supported women’s empowerment. The newly adopted Eighth Five-Year Plan of Bangladesh for the period 2021-25 has put emphasis on export-oriented industrial development.
Industrial policies have changed focus over time
However, the industrialisation process in Bangladesh has been built on a very weak ground. In the 1970s, the country followed an import-substituting industrialisation strategy. Specifically, Bangladesh followed a public sector-led industrial development plan during 1971-1975. This was largely attributed to the existence of a number of industrial units abandoned by non-Bangladeshis after independence. Small and cottage industries and foreign enterprises were kept outside the public sector. The revised industrial policy of 1975 allowed both foreign and local private investors to set up industries in collaboration with public sector corporations, so that public enterprises would keep the major share. Following a change in government in 1975, a process of de-nationalisation was implemented. The major objective of industrial policy during this period was the development of private sector-led growth. So, private investment was encouraged through liberal credit policies. The Industrial Policy of 1978 allowed the public sector to participate in joint investment with the private sector as a minority shareholder. The private sector could be bestowed with the responsibility of management of the investment in cases where the public sector corporations had the major share in such investments.
The denationalistion of industries gained further momentum in the following decades under structural adjustment policies. The New Industrial Policy 1982 and the Revised Industrial Policy of 1986, and also Industrial Policies during the trade liberalisation phase from 1991 onwards, were crafted on the philosophy of a market-based competitive economy that emphasised export- oriented growth. The role of the public sector was downsized significantly, except for keeping its existence in a limited number of restricted areas.
The industrial policies of 1999, 2005, and 2010 devised action programmes for stimulating the involvement of the private sector, both domestic and international. Privatisation of state-owned enterprises continued to be a major focus in these policies. In addition, export orientation of the industrial sector, improved competitiveness of industries, and effective utilisation of resources for industrial development were emphasised, so that the contribution of the manufacturing sector to overall GDP could be raised substantially. The Industrial Policy of 2016 had a number of specific targets. Notably, it aims to increase the share of the industry sector in GDP to 35 percent by 2021. The policy also targeted to employ 25 percent of the total labor force by 2021.
Industrial policies during the post-1990s introduced a set of action programmes to raise the productivity of the industrial sector. The list of the thrust sectors that would be promoted through policy measures and foreign investment were expanded. These sectors, in turn, were encouraged through special incentives. The agro-based and agro-processing industries, the small and medium enterprises, and cottage industries received attention. As a continuation of earlier policies, the Industrial Policy 2016 also aimed to establish import substitution industries to cater to the local demand and promote export-oriented industries.
Industrial policies have been complemented with trade policies
Successful industrialisation is not possible without an effective trade policy. Bangladesh’s trade policy has
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The denationalistion of industries gained further momentum in the following decades under structural adjustment policies. The New Industrial Policy 1982 and the Revised Industrial Policy of 1986, and also Industrial Policies during the trade liberalisation phase from 1991 onwards, were crafted on the philosophy of a market-based competitive economy that emphasised export- oriented growth. The role of the public sector was downsized significantly, except for keeping its existence in a limited number of restricted areas. competitive economy that emphasised export- oriented growth.