T N Ninan: A tale of two countries

Bangladesh has raced past Pakistan by shunning religious fundamentalism and focusing on its economy

In 1971, Bangladesh won independence from Pakistan after years of treatment as a poor relative and its culmination in a bloody war whose after-effects were felt for many years. Eight years later, the new country’s per capita income was a miserable $90; the World Bank ranked it as the world’s fourth poorest country, out of 124. Henry Kissinger’s dismissal of the place as a basket case seemed apt. At the time, Pakistan’s per capita income was almost three times as high, at $260. What is more, Bangladesh had seen no growth in its per capita income since 1960, while Pakistan’s had grown annually at 2.9 per cent.

The 1980s decade saw the script continue broadly unchanged. Though Bangladesh’s rate of economic growth improved, Pakistan’s economy continued to grow faster. In 1990, Bangladesh’s per capita consumption of commercial energy was a miserable one-fourth of Pakistan’s. Eventually, though, the pattern changed; after 1990, it is Bangladesh’s economy that has been growing faster. That change mirrored changes in social indicators. Bangladesh’s score on the human development index had been worse than Pakistan’s in 1990, but was better by 2000. The country has continued to outpace Pakistan since. On life expectancy, for instance, while Pakistan’s improved by 10 years (from 56 years to 66 years) in the quarter-century to 2015, Bangladesh improved by 20 years, from 52 years to 72 years. The dramatic improvement in Bangladesh’s social indicators is well known, having been written and talked about by Amartya Sen. What is not so well known is the scale of the economic turnaround.

In the decade leading up to the western financial crisis of 2008, Bangladesh outpaced Pakistan on the rate of economic growth; the relative scores were 5.8 per cent and 5.1 per cent. Since then, Bangladesh has accelerated while Pakistan has slowed down. In the eight-year period 2009-16, Bangladesh’s economic growth rate has averaged a very creditable 6.3 per cent, close to double Pakistan’s 3.4 per cent. The gap between the two countries’ income levels has therefore been sharply compressed.

Back in 1979, Pakistan’s GDP was 133 per cent bigger than Bangladesh’s. Now, in 2016, it is only 15 per cent bigger. What is more, Bangladesh’s investment rate is close to 30 per cent of GDP, about twice Pakistan’s. This makes it likely that Bangladesh will continue on a high-growth trajectory, something that Pakistan can achieve only with a lot of luck. It is plausible that, by 2020 or shortly after, Bangladesh’s GDP will have become bigger than Pakistan’s.

Meanwhile, because of Pakistan’s slightly larger population, the gap in the two countries’ per capita income is only 4 per cent. Expect this gap to close and the average Bangladeshi to become better off than the average Pakistani in another couple of years. The unthinkable in 1971 should be the reality in less than half a century from then. Having already outdone Pakistan on schooling and life expectancy, reduction in the population growth rate, and the rate of economic growth, Bangladesh will soon outdo Pakistan on per capita income and the over-all size of its economy.

What is it that has put these two countries on such divergent paths? There could be many explanations. Here are some: Pakistan has had to deal with endless attrition on its western border and an influx of Afghan refugees, while Bangladesh has seen out-migration. In its determination to square off against India, Pakistan has spent much more on its defence than Bangladesh. In manufacturing and exports, Bangladesh has made a success of its garments business; Pakistan is not even in the game. Many more Bangladeshi women are in the workforce, compared to Pakistan. Bangladesh has experienced more years of democratic rule. It has played host to hundreds of civil society organisations that have helped it tackle socio-economic challenges, while Pakistan’s leading non-government organisations have been jihadist. Finally, Bangladesh’s politics has turned away from religious fundamentalism and focused on its economy and society; Pakistan has done the opposite.