Bangladesh's economy is growing fast but its big cities face a huge challenge in addressing high levels of air pollution, and the country’s weak infrastructure is buckling under the strain of this economic growth. Jason Mitchell reports. 

Bangladesh

Bangladesh recorded the highest economic expansion among a list of 26 selected countries worldwide during the past 10 years, according to The Spectator Index. Between 2009 and 2019, its gross domestic product (GDP) expanded by 188% at current prices, compared with its closest rivals Ethiopia at 180%, China at 177%, India at 117%, and Indonesia at 90%. 

The economy is forecast to grow by 8% during the fiscal year from July 2019 to June 2020 – close to the government target of 8.2% – according to the Asian Development Bank (ADB). During the previous fiscal year, the country recorded 8.13% growth. Meanwhile, India is forecast by the ADB to expand by only 6.5% in 2019, and China by 6.2%. Globally, only Ghana at 8.79% and South Sudan at 8.78% are growing faster than Bangladesh, according to the International Monetary Fund (IMF).

Economically, Bangladesh is dominated by its capital, Dhaka. Most of the country’s industries, administrative buildings, higher education institutions and high-quality medical facilities are located there. Although Dhaka only makes up 1% of the country's geographic area, it contributes 36% to its GDP and accounts for 44% of the country's total employment. 

A growth story

Bangladesh’s GDP expanded on average by 6.45% a year between 2005 and 2018, according to the IMF. Today, the country has a $315bn economy – a similar size to Colombia and the Philippines – and a population of 166 million inhabitants. “Buoyant exports, robust private consumption, higher remittances, accommodative monetary policy, ongoing reform to improve business climate and high infrastructure spending helped Bangladesh attain high growth,” the ADB said in a September 2019 report. 

The country received a record $3.61bn in foreign direct investment during 2018, up by 68% on 2017, according to Bangladesh Investment Development Authority (BIDA), the country’s main investment promotion agency. That jump was boosted by a single deal: Japan Tobacco's purchase of Bangladesh's second largest cigarette maker, United Dhaka Tobacco, an arm of conglomerate Akij Group, for $1.5bn.

Goldman Sachs ranks Bangladesh among the 'Next 11' countries – nations that are expected to become the world's largest economies. (The others are Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey and Vietnam.)

"Bangladesh is a land of opportunities," says Shah Mohammad Mahboob, director (foreign industries) at BIDA. “Foreign companies that have invested here have made very impressive returns. The country has not suffered from negative economic growth in more than 30 years.” Bangladesh has an open, market-based economy led by a vibrant and innovative private sector, which provides the main stimulus to its economic growth, according to BIDA.  

Attracting investment 

The Bangladeshi government has set the goal of the country achieving lower-middle income status by the end of 2020, and higher-middle income status by 2031. The development of more than 100 special economic zones across Bangladesh is a key part of the strategy for securing foreign investment. It has already attracted many Japanese companies, including Sumitomo, Sojitz, Nippon Steel, Shinwa and Maruhisa.

According to the Bangladesh Bureau of Statistics, the country’s general inflation rate dropped to 5.52% in June 2019 from 5.63% in May and 5.54% in June 2018 – a whisker under the central bank’s target rate of 5.6%. The country is running a fiscal deficit of less than -5%, according to ADB. The central bank’s foreign exchange reserves stand at $33bn. 

“Economic growth in Bangladesh continues to be strong,” said Daisaku Kihara, who led an IMF staff team visit to the country in June 2018. “Robust private consumption pushed real GDP growth close to 8% during the 2018 financial year, while inflation increased slightly, due mainly to higher food prices. Export growth has picked up recently, based on solid performance of the ready-made garment [RMG] sector. 

“Bangladesh has succeeded in fostering a dynamic and fast-growing economy with significant poverty reduction. To preserve and build on that achievement, diversification into more complex products would spur integration into global value chains and make exports more robust to changes in global demand patterns. Improving the business environment and strengthening frameworks to limit vulnerability to corruption would also be fundamental to the realisation of development goals.”

Hurdles to business

According to the World Bank’s Doing Business 2019: Training for Reform report, Bangladesh stood at 176th place out of 190 countries worldwide for ease of doing business. The country was 177th in the ranking the previous year.

“Bangladesh needs an all-out effort to improve the ease of doing business ranking indicators,” says Ali Reza Iftekhar, managing director and chief executive officer at Eastern Bank, a commercial bank headquartered in Dhaka. “This improvement is necessary to transform Bangladesh’s economy to a developed one by 2041. 

“RMG makes up 75% of our total exports. The country has to diversify its export base and export market. Five things are critical for Bangladesh right now: continuity of the macroeconomic policies; good debt management; increased investment in infrastructure; human capital development; and good regional connectivity.” 

Traffic and pollution 

However, fast growth comes at a high price. Dhaka tops the index of the world’s cities with the worst air quality (followed by Kabul and Delhi), according to AirVisual. The city’s air quality reading is often deemed as ‘hazardous’. Major sources of air pollution include brick kilns, vehicles run on fuel containing high sulphur levels, and extensive construction work.

With a population of more than 18 million and a population density of 47,400 people per square kilometre, Dhaka – which covers 300 square kilometres – is the planet’s most densely populated city, according to Demographia World Urban Areas. The government estimates that about 1400 people move to the city from elsewhere in the country every day. 

Traffic congestion in the capital is so bad that average traffic speed in Dhaka dropped from 21 kilometres per hour to 7 kilometres per hour between 2008 and 2018, according to the World Bank. By 2035, it could drop to 4 kilometres per hour – slower than walking speed. According to the Bangladesh Road Transport Authority, 20,304 new cars were added to the city's traffic in 2016, meaning more than 55 new cars hit the streets every day.

To ease traffic congestion, the government has embarked on several long-term infrastructure projects, including three ring roads to divert traffic from the city centre, five metro rail lines, two rapid bus routes and 1200 kilometres of new roadways. Construction of the much-hyped 47-kilometre Dhaka Elevated Expressway began formally on April 1, 2018. The 7.5-kilometre-long first section stretches from Hazrat Shahjalal International Airport to Banani, a Dhaka neighbourhood. The project’s total costs amounts to $1.6bn and the government is spending $580m on land acquisition, resettlement and the relocation of utility service lines. 

“We need to discourage migration first and then accommodate people currently residing in Dhaka in a way so that the life cycle does not get stalled,” says Dr Shamsul Haque, a professor in Bangladesh University of Engineering and Technology’s civil engineering department. “Unfortunately, we have not been able to initiate any policies in this regard.” 

Urban migration 

Mr Haque adds that the country has not implemented a coordinated transportation and land management system to tackle urban migration. “We will be deprived of the benefits of different development indicators because of mismanagement,” says Mr Haque. “Dhaka has already become a black hole, and gradually will collapse by its own gravity. If people had better schools, hospitals, and other facilities in rural areas, they would not have a fascination for moving to the megacity.”

Flooding is also a natural part of life in Bangladesh, with its location on the extensive floodplains of the Ganges and Brahmaputra rivers. However, urban areas are becoming waterlogged more frequently because of inadequate drainage systems, particularly during the monsoon period from May to October. 

At least 1400 hectares of waterbodies and lowlands across the metropolitan area of Dhaka have been filled up in the past nine years, greatly contributing to the perennial problem of waterlogging, according to Bangladesh Institute of Planners. The city used to have 65 natural canals running throughout but today there are only 26, as many have become clogged up by rubbish or illegal occupiers have taken them over. In Dhaka, the drainage system, water pumps, canals, and rivers are maintained by a total of seven government agencies, rendering strategic planning difficult. 

So while Bangladesh's headline economic growth is undoubtedly impressive, when the surface is scratched a number of urgent challenges emerge.

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