Factors influencing economic development of Bangladesh

Bangladesh is a country with a total area of 147,570 sq. km. and one of the densely populated country which got independence in 1971 against Pakistan. The country as we know it today came into being in 1971 after East Pakistan’s glorious and bloody nine months battle for independence. Three-fourth of the people live in the rural areas, though urbanization been expanding quickly in the last twenty years. Our’s is an agrarian based economy and still now agriculture is the main source of employment .Climate of Bangladesh is moderate which is very fruitful for our agriculture .But in the past contribution of the agriculture sector to GDP has declined from 50 percent in 1972-73 to around 15 percent in 2004-2005. Our economic development could not flourished because of political and many other constraints .In this 21st century our economic development is going on not rapidly but gradually. But unemployment, cheap rate of wages and high rate of inflation are the main reasons behind our slow economic growth. Necessary steps should be taken against these problems. Our GDP growth is comparatively too slower than that of many developed countries which is also another type of problem. About one-third of our labor force is unemployed; they can not take part in economic activities as well as GDP growth in Bangladesh. Industrial and export sector have achieved production growth in the last five years. Bangladesh is a country which exports labor force to abroad comparatively more than that of some other countries. Low rate of wages is an obstacle behind economic development in Bangladesh. Most of the people of our country live below poverty line. In search of livelihood they forced by themselves to do any work. Due to lack of enough employment they can not get job on basis of their educational qualification. So they work in any sector with low wages. Because of high inflation rate the process of price hike in Bangladesh seems unending. Because of high inflation rate the value of our savings is decreasing which reducing our investment ability. No nation can prosper without productive activities and productive activities are not possible without adequate investment.

Review of Literature:

Development processes, rather than seeing them as a future goal or inevitable outcome of economic development. This is not only a question of social justice, but also an important contributory factory to social and economic development: in many ways, labor standards and social dialogue help to enable development

( Labor Standards Forum ,January-2010)

1)Increase in female labor supply accompanied by generation of demand for female labor in new forms of production resulted in a feminization of the labor force in Bangladesh. This has affected both gender segregation and market segmentation. Women’s primary responsibility for reproductive work, however, appears to constrain both quality of employment and returns to labor by restricting women’s full participation in market work. Moreover, unchanging gender division of labor in the household and reproductive economies carries negative implications for the well-being of women and of family members dependent upon women’s care-giving labor.(Simeen Mahmud)

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2) In recent years of normal rice harvests, supply from domestic rice production in Bangladesh has essentially met domestic demand so that imports have been very small. Future supply-demand balances will be determined in part by the price-responsiveness of supply and demand, along with technical change, income growth and other factors. This paper provides estimates of the price-responsiveness of rice production (in particular, area planted to rice), and then simulates supply and demand balance for rice under alternative scenarios.(Paul A Dorosh: Quazi Shahabuddin & Muhammad Saifur Rahman2005)

3) Employment in the garment industry has definitely empowered women, increased their mobility and expanded their individual choice. But this they have achieved at the cost of their health and increased risk of harassment. Hence, the process is complex, and here is both decomposition of women’s subordination through employment in the garment industry. She suggests that on the whole there has been improvement in worker’s well-being over the period 1997. The improvement in the worker’s well-being will be sustained in future if proper policy supports are extended to the garment industry and is workers.(Salma Chawdhury Zohir:1998)

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4) An alternative multi-step formulation of the utility function is proposed, as a substitute for the Atkinson based approach, without sacrificing the premise of threshold income level which happened to be a concept strongly advocated by UNDP from 1991 to 1998 but suddenly dropped thereafter due to trivial reasons. The

proposed alternative formulation is shown to be better than the Atkinson based formulation. The impact of our proposed multi-step utility function on the previous rankings of HDRs is assessed for different countries of the world.(Ravi Kant Bhatnagar :nd)

11) Growth of urban GDP is proportionately related to urbanization growth in Bangladesh. Growth of urban GDP is mainly generated positively by the growth of urban population, urban employment, and urban industrial output” (Haque and Akbar, 1992).

Agriculture provides 78 percent of employment and is unable to provide additional employment because of technical constraints. The modern urban sector is too small to absorb additional labour. The incidence of poverty is high in Bangladesh, and it is higher in rural areas than in urban areas (Rahman and Hossain 1995)

Bangladesh is a predominantly rural economy. The labour force has been growing by 2.4 percent a year, while the agriculture, industry, and service sectors can accommodate no more than 1.7 percent annual growth of the labour force.( Shahidur R. Khandker 1998)

Although poverty has fallen in recent years more than 50 percent of the rural population still lives below the poverty line. Poverty in Bangladesh is the manifestation of increasing landlessness, high unemployment, low literacy, and high population growth.

(Ravallion and Sen 1995),

Official estimates of personal income and its inequality, based on the Household Expenditure Surveys, suffer from inaccurate definition of income and inappropriate procedure for the estimation of inequality. These results show that the level of inequality in Bangladesh is lower than the official estimates suggest while the rate of increase in inequality during the period under review has been greater than is shown by official estimates. The rising inequality has largely been due to the rising share in income of certain components that are desexualizing i.e., disproportionately concentrated among the higher income groups) as well as a rise in the extent of their desexualizing effect. For Bangladesh as a whole a good part of increased inequality has been due to the sharp increase in inequality between urban and rural areas. They conclude by considering the implications of the findings for policies for poverty-reducing growth in Bangladesh.(Azizur Rahman Khan & Binanyak Sen :nd)

6) Micro credit has positive effects on savings of the participated households. The households include both program participants and non-participants. It is statistically tested that controlling income and land-ownership influence saving and has significant effect on household savings. The policy should be continue with and formalize them beyond the land-poor. ( Muhammad Abdul Latif :nd)

participation in this group-based micro credit program substantially alters the mix of agricultural contracts chosen by participating households. In particular, both female and male participation induces a significant increase in own-cultivation through sharecropping, coupled with a complementary increase in male hours in field crop self-employment and a reduction in male hours in the wage agricultural labor market, consistent with its presumed effects in diversifying income and smoothing consumption.

(Econometric analysis of a 1991-92 Bangladesh household survey )

The Role of Rural Non-farm Sector Female credit effects are larger than male credit effects in increasing sharecropping and in reducing male wage labor which is increasing agricultural

employment Patterns , self-employment, as predicted and Income formation in rural Bangladesh. (Special Issue on RURAL NON-FARM DEVELOPMENT IN BANGLADESH)

The rural non-farm (RNF) sector in Bangladesh provides employment to a large and growing proportion of the country’s labor force. The expansion of low-productivity self-employment has been the major contributing factor in the sect oral transformation of the rural labor force. While the provision of such non-farm employment has been crucial for absorbing the growing numbers of landless rural workers, the labor shift may have created some degree of overcrowding in the low-productivity non-farm activities, thus undermining the growth of overall productivity and income levels in the RMG sector. In future, if the RNF sector is to play a more dynamic role, there will have to be probably some shift of emphasis towards relatively larger-scale and higher-productivity RNF activities which are better able to respond to income-elastic market demand. (Wahiduddin Mahmud :nd)

They examine the structure of employment in Bangladesh’s rural non-farm (RMG) sector and its potential to generate sustainable employment, especially when compared with employment opportunities in agriculture. It also considers the role of labor policies, if any, in facilitating sustainable growth of productive employment in the rural areas. The paper concludes that the RMG sector in Bangladesh has grown in importance during the late 1980s. It has been contributing a rising share of employment and value added. While the rural non-farm sector is less productive than its urban counterpart, it generates full-time, sustainable employment in small-scale industry. Productivity of a number of activities is higher than the going agricultural wage rate. The household component of the RNF sector still largely consists of low-productive activities, and continues to employ a third of the rural labor force engaged in the sector. The RNF sector has barely begun the process of generating wage employment; future potential for wage employment will depend largely on the expansion of rural industries. Labor market policies have had very little impact on the RNF sector so far, since a large part of the sector consists of household activities, which remain a part of the informal economy. The introduction of a national minimum wage may, however, adversely affect the sector by increasing the size of its informal component. With increased actualization of the labor force, Government attempts to improve the rural roads network would improve the efficiency of sub-contracting, which would benefit the country.

(Sona Varma Praveen Kumar: nd )

8)The two challenges Bangladesh faces as she enters the twenty first century are: (a) rapid transition to a market oriented private enterprise economy and (b) integration in the world economy. This article deals with a few selected issues in respect of each of these challenges. The principal issues in the first category are: the reform of the financial institutions; progress and prospects of privatization and public expenditure review illustrated by case of defense expenditure. These three measures are interrelated and significantly affect the mobilization of resources for development and therefore, the rate of growth in savings and investment.

The important challenges in the field of external economic policy relate to: (a) The process of liberalization of trade and foreign exchange regime, (b) Sustained growth of exports and implications of membership of WTO and (c) Regional/ sub regional economic cooperation. The short-term adjustment problems of the highly protected domestic industry are real and should be dealt with. Preconditions of supply in the cost effective import competing and export sectors are to be created expeditiously.(Nurul Islam :nd)

9) It analyses the factors influencing women’s employment in the formal manufacturing sector of Bangladesh and takes into account both demand and supply side determinants of gender composition of employment. On the basis of data from 100 manufacturing enterprises in Dhaka city, it has been concluded that the characteristics of enterprises and the attitude of employers towards women’s employment and male employment have emerged as significant determinants of female employment in manufacturing enterprises. Among the characteristics of enterprises, the export orientation of industries has been observed to have largest positive impact on female employment.

The experience of the enterprises with female employees does not provide an evidence of higher non-wage and/or non-financial costs of employing women. Female employees did not show either greater absenteeism or larger turnover rate compared to their male counterpart. Moreover, such non-wage costs are often converted into financial costs and are covered through adjustment of financial benefits (or negative benefits) provided to women. Even if there is no evidence that female employees take leave more frequently or require the provision of expensive physical facilities at the work place, an apprehension about these problems prevail among the employers, especially in the enterprises which have few female workers. Such apprehension acts as a deterrent to the employment of female workers.( Mrs. Rushidan Islam Rahman )

IN our country the female workers employed in the garment industry had to pay a high price in terms of ill health to acquire a socio-economic status in the society with their wage employment. A large number of female workers in our country have suffered from various illnesses after starting work in the garment industry in spite of the fact that due to wage employment they could afford to buy better food and better accommodation which have a positive impact on health. This is mainly due to overwork, uncongenial working conditions and above all because of wide-ranging labor law violation. A bi-variant analysis and a multivariate regression analysis of the determinants of workers’ health status show that gender is a significant variable in this context. The result of the regression analysis further shows that work hour exerts the largest negative influence on the relative probability of having good health. Grave concerns have also been expressed in this paper about the negative impact of garment work on female workers’ mental health. Finally, she suggests that the introduction of a two-shift working system, the implementation of labor laws regarding employing a qualified medical practitioner and installing fire fighting equipment and the introduction of health insurance and health education programmers would ease the health problems of the female garment workers.( PratimaPaul-Majumder: nd)

Analysis: For many people who are poor, work is a vital catalyst for escaping them from poverty. The majority of population of our country is poor. By keeping this major sum unemployed economic growth or development is impossible. Therefore economic growth is impossible without better employment opportunity, proper wage and a reasonable price of necessary daily goods. A large amount of poor portion of our country is already employed somewhere here or there. But the problem is in another place. These things are predominantly in the economy which is informed like ours, where the income of this portion that means poor people is inadequate. Therefore eliminating poverty indicating unemployment is not only a solely question for growing this economy but also making sure efficiency of effectiveness of work force and the quantity and quality of work available which is able to eliminate unemployment as well as poverty. The decent work is for the development of employment condition through right, representation and protection for our country. However it is applicable for both developing and developed countries.

This is not able to compete with the developed country. Bangladesh is not a developed country. As its development process is running it has not enough working sector.

Overall employment scenario in our country is not satisfactory. This is because in our country there is enough labour force but not enough vacancy. At present the total labour force of our country is 5.37 core among them 5.10 crore is employed and 0.27 core is unemployed. This is only the work force age more than 15 year. But in our country three are many other people who want to work due to poverty and due to maintain there lively hood. If we count our employment condition by the amount 5.37 crore than our employment condition is slidely satisfactory. But is we measure our employment condition through the scenario of lively hood it is out of standard.

Ours’ is an agriculture based economy. A vast portion of our national income comes from agricultural sector. But due to lack of technological improvement in agricultural sector our annual production is badly hampered. If we can increase the use of technological improvement in this sector we can increase our national production which will provide new employment facility. On the other hand demand of food crops are increasing proportionately with the high increasing rate of population. If we fail to increase our national production the balance between demand and supply would be imbalanced. In this scenario we will be forced to import food crops. So that national expenditure will be increased. Which would decrease national investment that will reduce employment . Due to population explosion fisheries sectors are badly damaging. Generally people our not much interested in fisheries because it is very risky investment. This sectors required large amount of capital supervision and a trained entrepreneur. It the unemployed persons get adequate capital and proper training they can enter in this sector which will increase employment.

The supply of natural gas is not available in Bangladesh. Due to lack of natural gas new industries can not raise. If government takes proper steps for supplying natural gas new industries will raise which will provide employment.

If we would make high raise building our accommodation capacity will be increased which will reduce consumption of land. We can run many productive activities in that land which will increase employment.

If garments sectors enhanced, proportionately the production will be increased. For that reason new employment will be increased.

Employment sectors can not keep pace with increasing population. If we can export our unemployed manpower into foreign countries it will increase remittance.

Due to lack of trained manpower many foreign organizations established in Bangladesh can not appoint their necessary manpower. So, unemployment still exists in our country.

If we can introduce duel shifting system instead of overtime working system it could increase employment facilities.

The people of Bangladesh are reluctant in saving. That’s why they cannot invest in more profitable business which is very necessary in creating new employment. We observed that most of the labour forces are working in Saudi Arabia, Kuwait, Oman, Singapore, Malaysia, U.A.E. They are also employed in Italy, Mauritius, Brunei, South Korea, Jordan, Bahrain, Qatar and other countries. If we analysis the manpower export from the beginning to 2008 we see 80% of total manpower export in Middle East country. In 2000 65% of Bangladeshi workers went in Saudi Arabia and in 2009 the rate of export workers decreased to 3%.

In 2000 15% of total employee went in UAE but in 2009 it is increased by 54%. It is increased by eight times from the year of 2000. Comparing other countries manpower export increased by 17%, where in 2000 manpower export was 2%. This statement proved that the export of manpower market enhanced itself day by day. The lion share of our remittance comes from Saudi Arabia. In 1999-2000 about 47% of the total remittance was received from Saudi Arabia which is decreased from 47% to 29.5% in 2008-2009. On the other hand in that period, remittance that comes from UAE increased significantly over the same period from UK and USA. It we explain comparative scenario of the country wise remittance inflow between 1999-2000 and 2008-2009, we can easily see the change in labour force in different countries. Here, KSA’s remittance decreased by 47% to 29.5% UAE’s remittance increased by 6.7% to 18.1%. In Quarter remittance was increase by 3.3% to 3.5%. In Oman remittance was decrease by 48% to 30%. In Bahrain remittance was 1.6% to 2.1%. In Kuwait remittance was 12.6% to 10%. In USA remittance was 12.4% to 16.3%. In UK remittance earning was increased 3.7% to 8.1%. In Malaysia remittance earning was 2.8 to 2.9%. In Singapore remittance earning was 0.6% to 1.7% and inspection from other countries it is evident that total income of remittance is increased day by day. Price is called the amount of money which is used to exchange, current value or rate demanded in market or in barter. It is used to measure the cost of something. Depending on price seller sets the value on his goods in market. Price is a major catalyst for the development of an economy. By measuring price we can determine our economic condition. The main pointer of measuring price is inflation CPI, Interest rate and some other things. The GDP growth (which is the determiner of economic condition) of an economy is largely depends on inflation as well as price.

The main reason behind our underdeveloped economy is inflation which is created for price hike. The inflation rate of Bangladesh is comparatively high than that of developed countries ever many other developing countries too. It is one of the major obstacles behind economic development of Bangladesh. We can see from the “Economic Review of 2009-10” the inflation rate in food index is 7.18% which is higher than that of non-ford index which is 5.91% where overall inflation in common is 6.66%.

The food crop production of our country is still meeting our indigenous demand in a large portion. This is why we do not import food crop from other country. In this 21st century the only one curse of our country is poverty and number one problem is population growth. As the population is increasing day by day the cultivatable land is decreasing for giving accommodation of this increasing population. If we will fail to control this rapid growth of population within very short time we will fail to meet our demand of food crop. As a result we will force to import food crop which will spoil money and will make price level high.

In urban area of our country people earn more than rural area. But here day to day expense and inflation rate is high. Due to high inflation people have to use a large portion of their income for day to day expenses. As a result the people of urban area are failed to save the amount that they should save. This is the scenario of urban area. But the scenario of rural area is more weakened. The income of the people of rural area is low. Though the inflation rate and expense in village is low they can’t save enough due to low income.

If it is the scenario of a country there is no scope of necessary investment. That means we are unable to run new and large scale economic activity which is a major constraints behind economic growth as well as economic development.

According to the chart of Bangladesh Economic Review point to point inflation . Average inflation rate from July to March increased from 6.6% to 6.89% which is 0.23% higher than that previous year. Another determiner of price level of an economy is consumer price index (CPI). Consumer price index reveals consumers cost of the goods and services bought by consumer. The price level of an economy is reflected by consumer price index. In Bangladesh CPI comparatively high in aspect of our income . If we can minimize the consumer price index, our savings would be increased. It we can reduce price level , our consumer price index would be reduced. Each month Bangladesh Bureau of statistics computes and reports the consumer price index. Consumer price index is calculated in four steps. These are (i) fixed the basket, (ii) find the prices, (iii) compute the basket cost, and (iv) choose a base year and compute the index.

Consume price index can be calculated in the following manner:

Consumer price index =

Bangladesh is a developing country in the world. This country is not able to run with the developed countries. But in this 21st century one of the most profitable sectors are trying to make our country developed. It is garment sectors. Today Bangladesh is one of the most successful countries in garment sectors. In Bangladesh job sectors were not suitable for women. But it is garments sectors which provide job for women. But problem is that women our not paid equal or paid less than that of men. In 21st century a new form of production encouraging female labour in the production. There are many sectors except garment where women are giving their labour without proper return. It seems an unending process which is giving birth a strong depression in the mind of female labour. So if we don’t take proper steps against this disparity our total labour force will badly hampered. Keeping it in mind government and private sectors has taken many steps unanimously. Recent increment of the minimum wages of garments labour is the first implementation of these steps. In our country most of the people live from hand to mouth. In most families male persons work for supporting family. But it is very difficult in Bangladesh to run a family by only the income of one person. Considering this many women forced by themselves to work outside the home. But they cannot get enough wages there. Not only women but also male labours are suffering from same problem. Most of the peoples of our country live below poverty line. So the supply of labour in Bangladesh is very available. By taking this facility many industrialists dominating our labour market within a cheap wage.

If we analyses 10 years information about real wage and general inflation than we can see that the general inflation rate is increased 3.5 times and the real labour wage is increased 1.33 tines. From this information we can say that the wage rate of our labour is not sufficient for maintaining their livelihood. Thought wage rate increased from the past time, the increasing rate is very low. Because of this low lo rate of wage in aspect of inflation the overall living standard of our country is below standard.

ON the other hand as the wage rate is not sufficient for maintaining their livelihood the poor people of our country who are now employed here or there are disable to maintain their day to day cost. As their income is insufficient they can’t buy food necessary for them. As a result they and their child are suffering from malnutrition. They can’t provide proper education facility to their child. As a result a large portion of our next generation is not built up properly.

Another word behind this problem is population problem. The rate of increasing population in lower level is higher than that of higher level. This is another major reason behind malnutrition.

Now a day’s gas and electricity supply in new industry is restricted. Bangladesh government did not give new connection of electricity and gas in new industry. This is a major problem behind new investment. The new investors who want to invest in the industry sector have to invest a huge sum of capital due to make power plant to generate power. As they expense more in capital purpose they want to reduce cost by giving low wage. On the other hand as the forming of new industry in stopped; new employment sector is not increasing, but population is increasing as well as work force is increasing day by day. Another reason of low wage rate is excess work force. Due to the excess supply of work force wage rate of our country is lower than that of any other country.

A large sector which is pulling up our economy is readymade garments sector. A vast portion of national income comes from readymade garments sector. This is the sector which had created women empowerment. Due to readymade garments sector the women of our country are now going abroad and they are now contributing to GDP as well as men. But the problem in this sector is that women’s are working in readymade garments sector instead of their ill health. They are contributing in our GDP by loosing their health. In aspect of this there, they should pay more. But the factor is that they are getting loss and in maximum cases loss than man which is a large threat to the growth of an economy.

Bangladesh governments are now taking some important steps for increasing wage. Minimum wage is a burning question now-a-days. If governments take proper steps for increasing minimum wage, this will be fruitful for our economy. But the basic problem of increasing minimum wage is that if minimum wage is increased the area of pie will be small which indicate in efficient and economy and prevent the development of economy.

Findings

If we analysis the topic of unemployment we can see that most of the people are working in agriculture, forest and fisheries sectors. But the rate of employment is decreasing day by day. They are involved in manufacturing industry, transportation and other sectors, because of low rate of wages in that sectors. We also see that there is no trained employee in our country. So that they do not get any job. Remittance earning from the abroad is lower relating to the previous period. In 1999-2000 remittance earning change in 19.63% but now a days it is 17.39%. From the beginning years remittance earning increasing continuously but in the recent years remittance earning is decreased from the previous year. Remittance earning is not increasing relating to the increasing rate of population. In the last year total manpower export decreased from the previous year. People are gradually losing interest to work in Saudi Arabia and they are going in other countries with a view to employed. Here drawing system is not developed. Government can not provide any facility to the remittance holders. After all, the monitory system is not developed in our country. In the economy of Bangladesh there is not proper regulatory framework in Bangladesh. Bangladesh government does not allow the banking sectors to provide facility about distributing remittance among the people of our country. There is not enough policy about drawing system. So we can say that there are huge amount of limitation in the employment sector of Bangladesh.

Proper wage is the most fruitful catalyst to persuade a man in work. But the minimum wage of Bangladesh is not satisfactory. Garments sector is providing lots of employment to the people but it’s not giving minimum wages to the workers, which is necessary to afford a better cost of living. The rate of normal wages index is growing gradually and 2008 to 2009 fiscal year it has increased 18.90% comparing previous fiscal year. In 2008-2009 fiscal year fishery of industrial sectors increasing rate was 15.45% to 17.9%.

High inflation rate is a major obstacle behind economic development. Here, inflation rate is 6.66% in 2008-09. This year it would be raised according to the point to point inflation rate in 2009-10. Inflation rate in urban areas is higher than that of rural areas. Huge portion of daily expenses of general people in Bangladesh is used for food that’s why our consumer price index would be high. It will hamper our savings. According to the point to point inflation rate in 2009-10, we can see that inflation rate is getting higher from July to March. Government fixed the price of necessary goods through budget. But, it is unabl