Introduction
Pakistan and Bangladesh are two South Asian countries that
together were a single nation before 1971. Previously known as East and West
Pakistan, in 1971 Pakistan was 70% richer than Bangladesh but now the tables
have turned. As of today, the economy of Bangladesh has grown by 45% more than
that of Pakistan.
After breaking up in 1971 both the countries were in a bad
state but in comparison Pakistan had more resources than Bangladesh. In fact,
Pakistan was better off than most colonial states in many terms like the
economy, Human development, and infrastructure and industrialization progress
till the mid-1980s. At the same time, Bangladesh had to start from scratch and
build the political and economic structure to stand as a country, so it was a
very slow start for them, but today when you look at these two nations you will
see a very different picture.
On one hand, Bangladesh’s remarkable performance during the
past decades transformed the country’s economy. Although Bangladesh has faced
challenges such as political volatility, inadequate infrastructure, corruption,
and insufficient power supply, its economy has managed to grow at an average
annual rate of 5.8% since 1996. Furthermore, Bangladesh's economy demonstrated
resilience during the 2008 financial crisis.
On the other hand, when you look at Pakistan in 2020 their
public debt rate past 87% of the GDP, and the country’s total external debt and
liabilities rose to 113.8 billion dollars in the fiscal year 2020. At present,
the nation allocates a significant portion of its federal budget towards
settling these loans, amounting to one-third of the total budget.
Bangladesh’s Economy
Currently, Bangladesh's exports surpass Pakistan's by a
significant margin, and the value of their currency, the "Taka," is
approximately twice that of Pakistan's Rupee. Additionally, Bangladesh's
foreign exchange reserves exceed 41 billion dollars, which is twice as much as
Pakistan's reserves of 20 billion dollars.
Now what Pakistan has more than double then that of
Bangladesh is the debt to GDP ratio. Bangladesh has a debt-to-GDP ratio of
around 35% whereas Pakistan's is 80%, and having a high debt-to-GDP ratio is
not a good thing for any developing country.
Now the question here is how a country like Bangladesh which
during its formation was predicted to fail and return to Pakistan has achieved
much more than that?
Garment Industry
Well, one of the main reasons is Bangladesh's industry. The
country has become the second-largest manufacturer of ready-made garments. It
is the main item of exports which accounts for 84% of the total exports of the
nation. This has happened because Bangladesh has a massive labor force which is
the 8th largest in the world and they are capitalizing upon low skilled labor
force in the labor incentive export industries. It’s the same strategy that
many of the other nations used for their industrial sector specifically in
manufacturing. At present, the apparel sector in the nation offers direct job
opportunities to around four million laborers and indirectly supports almost 10
million individuals. It is estimated that 80% of workers in this industry are
women and this has a good impact on women empowerment in the country. Moreover,
their garment industries benefited from custom-free access to many Western
countries, As you may be aware, Bangladesh is categorized among the least
developed nations, and several wealthy Western countries waive their export
tariffs to assist the progress of these developing countries. This makes
made-in-Bangladesh garments more competitive. You might be aware Pakistan also
tried to be an export giant in the garment industry but just despite being a
cotton-growing country, it has failed to increase the exports beyond 10 billion
dollars.
What makes this even worse is Pakistan is now importing
cotton due to a lack of innovation and policies. The country is unable to
capitalize upon its agricultural resources like cotton and increase its exports
of textiles and other products.
Human Development
Another reason behind Bangladesh’s growth is it primarily
focuses on human development and economic growth, as a result, they are ahead
of Pakistan in areas like women empowerment, passport index, literacy ratio,
and also micro-credit financing. Bangladesh’s spending is mainly focused on
human development aspects like education and health care. A significant portion
of Pakistan's budget is allocated toward military expenditures, which has
resulted in a significant disparity in the allocation of resources toward
healthcare and education. Additionally, Pakistan has frequently faced criticism
for its involvement in financing terrorism and engaging in money laundering
activities, consequently leading to its inclusion on the Financial Action Task
Force's watchlist. Because of this investors are not confident to invest here
and Bangladesh is a more investment-friendly country than Pakistan.
Conclusion
Now let’s look at some numbers again, in terms of GDP, Pakistan was superior to Bangladesh for many years but today’s numbers speak up for Bangladesh, and the same goes for GDP per capita. This shows us if you prioritize the right things that will eventually lead you to growth and that is what Bangladesh and Pakistan didn’t. Here we need to understand for Pakistan there is still an opportunity. The average age of its citizens is just 22 years and this gives Pakistan an advantage in the demographic dividend but this will be only advantageous if Pakistan prioritizes human development. When people will get good education health care and other things productivity will eventually increase. Today Pakistan isn’t exactly failed but we cannot deny that it is on the verge of failing. So they need to understand looking at Bangladesh’s development model, what is required for economic and social development.
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