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This chapter is concerned with what might broadly be subsumed under the heading of infrastructure. Infrastructure, physical and social, has many components of which we shall focus mainly on transport, energy, education and governance as the principal constraints to development in Bangladesh. Of these, we shall deal with the issues of governance in the concluding chapter.

This chapter focuses on the emerging changes in the composition of output, employment and sources of demand in Bangladesh in the next decade or two. We shall begin with a very brief account of the historical experience of the pattern of structural change during development process both in the case of the industrialization of today’s mature developed countries and in the case of more recent examples of rapid development in East and South-East Asia.

The rate of GDP growth accelerated in Bangladesh since the beginning of the 1990s. The three-year average annual growth centered around 1990/91 was 4.77 percent. Population grew at 2.18 percent per year at the time so that the annual rate of growth in per capita income was 2.53 percent. The three-year average annual growth in GDP centered around 2010/11 had risen to 6.34 percent while the rate of population growth had fallen to 1.39 percent, making the annual growth in per capita income 4.88 percent, as much as 93 percent higher than what it was two decades before! Note that the rate of growth in per capita income would have been only 4.07 percent if the population growth rate had remained the same as at the beginning of the 1990s. Thus more than a third of the acceleration in per capita growth was due to the fall in the rate of population growth.

We have examined in some depth the catalog of successes and failures which were outlined at the beginning of the book. The subject of this concluding chapter is to identify the principal actors and policies that deserve credit for the success that has been achieved; explore the reasons behind the major blemishes that characterize the performance; and ask what needs to happen to sustain and improve upon the past performance in the future.

It is useful to begin by outlining the features of a desirable and efficient trade regime. Rather than embarking on the difficult task of constructing the attributes of a desirable trade regime in the abstract, one might take the actual trade and development regime pursued by the most successful cases of development in recent history. By nearly universal consensus the East Asian development model, the one adopted by the pioneers like Japan, the Republic of Korea, Taiwan and others, is the natural candidate for an example of such a regime.1 A slightly stylized version of the system of promoting East Asia’s export-led industrialization might be described as follows. It avoided widely varying arbitrary protection that robs the economy of indicators that guide efficient allocation of resources; but it was not a free trade regime. There were widespread public intervention to provide direct incentives to worthwhile infant industries. But such incentives did not discriminate against sales in the export market vis-a-vis the domestic market. The defining characteristic of the East Asian trade regime is not free trade or near-free trade, but non-discrimination against exports.

Bangladesh is widely perceived, both domestically and externally, as an agricultural country. Almost by any measure, other than the “principal occupation of the labor force”, this has long ceased to be true. By now just over a sixth of GDP originates in agricultural activities (Table 2.2) and well below a quarter of incomes of the households is derived from farming (Table 5.1).1

Until at least the turn of the century, Bangladesh was universally perceived as a country too poor to save at a decent rate and overly dependent on the inflow of foreign assistance for its modest rate of investment.1 In the past decade or thereabout any serious observer using the official data, including those published by international agencies, had to recognize that Bangladesh had become a nation with high rates of saving. Indeed, on the basis of official data on the expenditure account of GDP and external balance, one had to conclude that Bangladesh had become independent of foreign capital inflow and that this transformation occurred quite early in the 1990s. The continuing puzzle is that the economy by all accounts still seems to have substantial dependence on external assistance. Scarcely a day goes by without some news of negotiations with foreign bilateral and multilateral donors on the financing of some domestic development project. Government budget continues to depend heavily on foreign assistance. Large infrastructural projects are rarely, if ever, conceived without foreign finance. The vast NGO sector is also reported to be dependent on foreign assistance for much of its activities. How can this be reconciled with the macroeconomic data which show that the country now saves at a higher rate than the respectable domestic investment rate? This chapter tries to analyze and untangle these issues and puzzles.

According to national accounts data, manufacturing industries have been contributing close to 18 percent of GDP in recent years, of which about 14 percent is contributed by “large and medium-scale” industries while the remainder is contributed by “small-scale” industries (Table 2.2). Together manufacturing has already become the largest sector of the economy though still substantially below its peak share in recent history of development, as demonstrated in Chapter 4. Indeed, we argue here that the share of manufacturing in GDP may already be higher than what the national accounts data show.

It has been claimed that the accelerated growth in Bangladesh since 1990 has significantly reduced poverty and improved indicators of living standard. Some of the evidence in favor of these claims is well known. Since 1991/92 the Bangladesh Bureau of Statistics (BBS) and the World Bank have collaborated in measuring the incidence of poverty.1 They have shown a steady decline in the proportion of population in poverty especially since the year 2000. There has been impressive reduction in infant mortality, increase in life expectancy, improvement in the status of women and increase in educational enrolment, especially at the primary and secondary levels. In many of these indicators Bangladesh has overtaken India, a country with nearly twice the per capita income at comparable purchasing power, inviting bemused admiration from numerous analysts.2