The white paper is a road map. It highlights the urgent need for Bangladesh to address corruption, inequality and inefficiency and to invest in its people and industries, writes Mostafizur Rahman
BANGLADESH鈥橲 recently released white paper on the economy provides an open and detailed examination of the nation鈥檚 economic progress and drawbacks. It is an urgent call to action for reform, accountability and inclusive development that benefits all citizens.
听
Growth: who really benefits?
FOR years, Bangladesh has been praised for its robust GDP growth, averaging 6鈥�7 per cent annually. Urban centres like Dhaka and Chattogram have seen rapid urbanisation and industries such as garment exports have bolstered national revenue. Yet, the white paper raises a key question: who is truly benefiting from this growth? Unfortunately, the data paints a troubling picture.
Despite the impressive GDP figures, real wages for agricultural workers and low-income earners have grown by less than 2 per cent annually between 2016 and 2022. Meanwhile, the richest 10 per cent of Bangladeshis control over 40 per cent of national income, while the bottom 50 per cent share less than 15 per cent. These figures mirror patterns seen in India, where the top 1 per cent of the population owns over 40 per cent of the country鈥檚 wealth.
Economic theory highlights the importance of inclusive growth. According to Simon Kuznets鈥� hypothesis, inequality tends to rise in the early stages of economic growth but should decline as a country invests in social welfare and education. Unfortunately, Bangladesh seems stuck in the first stage, with wealth concentrating at the top and limited investments in reducing inequality. Keynesian economics further explains how this imbalance smothers consumption 鈥� the primary driver of demand 鈥� when most of the population lacks sufficient purchasing power.
Learning from Vietnam, a nation with similar economic foundations, offers valuable insights. Vietnam prioritised rural development and vocational training, reducing its poverty rate from 58 per cent in 1993 to less than 6 per cent by 2022 while maintaining export-driven growth. Bangladesh must adopt similar strategies by channelling more investments into rural infrastructure, small businesses and skill development programmes to ensure that growth benefits everyone.
听
Inflation: a heavy burden on the poor
INFLATION, particularly in food prices, remains a significant challenge for Bangladesh. In 2024, rice prices in Khulna rose from Tk 45 a kilogram to Tk 65 a kilogram and cooking oil in Sylhet exceeded Tk 200 per liter. For low-income families, who spend over 60 per cent of their earnings on food, these price hikes are crippling.
While global factors like rising fuel costs have contributed to inflation, local issues such as market monopolies worsen the problem. A few large corporations dominate essential goods markets, keeping prices artificially high even when global costs stabilize. This looks like the situation in Pakistan, where sugar and wheat cartels manipulate markets, leading to frequent food crises. Inflation, combined with stagnant wages, wears away the purchasing power of millions, creating a dangerous economic environment.
Brazil, in the 1990s, tackled similar issues effectively by introducing targeted subsidies for essential goods and enforcing strict anti-monopoly laws. Bangladesh could adopt these measures, alongside price controls on critical commodities during crises, to protect vulnerable populations. Strengthening supply chains to reduce transportation and storage costs would also make goods more affordable.
听
Corruption: an obstacle to development
THE white paper highlights corruption as a persistent drain on Bangladesh鈥檚 economy. An estimated $16 billion leaves the country annually through illicit financial flows, more than double the combined foreign aid and foreign investment Bangladesh receives. Public projects often suffer from inefficiency and inflated costs, with the Rampal Power Plant being a prime example of delays and overruns. Even the Padma Bridge, now a success, faced criticism for budget mismanagement and cost and time overruns.
This aligns with principal-agent theory, which explains how public officials (agents) misuse resources entrusted to them by citizens (principals). Corruption not only wastes resources but also discourages foreign investors who demand transparency and efficiency.
Singapore, once plagued by corruption, transformed itself by creating strong anti-corruption institutions like the Corrupt Practices Investigation Bureau. Bangladesh can take similar steps by empowering its Anti-Corruption Commission with independence and resources. Adopting open contracting platforms, as seen in Ukraine, can also ensure greater transparency in public procurement.
听
Public debt: borrowing for growth or stagnation?
Bangladesh鈥檚 public debt has risen to 40 per cent of GDP, up from 34 per cent in 2019. While this level is not immediately alarming, the way the borrowed funds are spent raises concerns. Much of the debt is used to service existing loans rather than fund productive investments, with debt repayments consuming over 20 per cent of government revenue in 2023. This leaves little room for critical sectors like education and healthcare.
Large projects such as the Dhaka Metro Rail, while beneficial, often exceed their budgets, reducing their long-term economic value. According to crowding-out theory, high public debt can limit private sector investment by increasing borrowing costs, posing risks to job creation and economic stability.
Rwanda, despite its limited resources, offers a model for managing public debt wisely. By focusing on healthcare, education and infrastructure, Rwanda ensures its borrowing directly boosts productivity. Bangladesh should adopt a similar approach, prioritising high-return investments and negotiating better terms for loans from institutions like the World Bank.
听
Education and healthcare: investing in people
Bangladesh鈥檚 spending on education remains at a miserable 2.1 per cent of GDP, far below the global average of 4鈥�6 per cent. This leaves many young people, particularly in rural areas, unprepared for the modern workforce. Similarly, healthcare spending is inadequate, with rural clinics often lacking doctors, medicines and basic equipment.
Vietnam increased its education spending to 4.3 per cent of GDP, focusing on rural schools and vocational training, which helped create a skilled workforce. Cuba, known for its healthcare model, uses mobile clinics and community health workers to provide services in even the most remote areas. Bangladesh must adopt similar strategies, increasing spending and ensuring equitable access to these fundamental services.
听
Agriculture: an untapped potential
AGRICULTURE, which employs nearly 40 per cent of Bangladesh鈥檚 workforce, remains underdeveloped. Farmers in Rajshahi and Barisal rely on outdated methods, limiting productivity and income. Climate change exacerbates the problem, with floods and droughts disrupting farming cycles.
Bangladesh should provide subsidies for modern equipment, invest in agricultural research and development and establish farmers鈥� cooperatives, as seen in Denmark, to boost productivity and incomes.
听
The road ahead
THE white paper is a roadmap. It highlights the urgent need for Bangladesh to address corruption, inequality and inefficiency and to invest in its people and industries. Examples from countries like Vietnam, Brazil, Singapore and Rwanda show that these challenges are not impossible to overcome.
Bangladesh stands at a crossroads. By focusing on inclusive policies, smart investments and greater transparency, the nation can build an economy that is not only larger but also fairer and more resilient. The stakes are high, but so are the rewards. The time to act is now.
听
Mostafizur Rahman is an economist working with the North South University.