Wannaphong Durongkaveroj
Department of Development
Economics, Faculty of Economics
Ramkhamhaeng University, Bangkok, Thailand
(E-mail Address: Wannaphongd@gmail.com)
After
partition, the living standard of Bangladesh, overall, seems to be better off.
According to the World Bank, in 1990, Gross Domestic Product (GDP) measured by
PPP (Current international $) of Bangladesh was around 74.26 billion while of
Pakistan was around 213.09 billion. The economy of Pakistan was bigger than
Bangladesh around 2.87 times. By ten years later, namely 2000, the gap of
national income between Pakistan and Bangladesh got closer to 2.64 times
revealing the more increasing rate in economic growth of Bangladesh. From 1990 to 2000, GDP grew around 95.77 and 80.30 for
Bangladesh and Pakistan, respectively. In 2013, the gap got smaller to 2.13
times. Bangladesh’s output was at 400.48 billion while 855.87 billion for
Pakistan. GDP of Bangladesh grew over 439.31 percent over the last 23 years
which relatively bigger than Pakistan enjoyed the economic growth merely for
301.63 percent. For Compound Annual Growth Rate (CAGR), CAGR for Bangladesh
over the past 23 years is 7.60 percent while for Pakistan is only 6.23 percent.
Another important thing is that the economy of Bangladesh and Pakistan did not
receive the critical impacts from the 2008 Hamburger Crisis which almost
developing countries around the world experienced with a reduction in its GDP[1].
Moreover, unlike many countries in Asia, both countries did not have any severe
economic crisis in the last 25 years even though International Monetary Fund
(IMF) has ever warned the financial risk in Pakistan in 2013.
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Source:
Compiled by author and obtained the data from the World Bank
Notes: B POV1.25
and B POV2 stands for poverty headcount ratio of Bangladesh at $1.25 and $2 a
day while
P POV1.25 and P POV2 are for Pakistan. B POVN and P POVN stands for poverty headcount ratio at Bangladesh and Pakistan national poverty line, respectively. B GDP denotes Bangladesh’s GDP at PPP while P GDP is for Pakistan. |
According
to the figure above, it represents the possible relationship between GDP and
poverty. The blue line denotes for Pakistan’s GDP while the brown line for
Bangladesh’s GDP. To analyze poverty in both countries, the three poverty
indicators including poverty ratio at $1.25, $2, and national poverty are
shown.
For
the first one, $1.25 poverty line, the yellow triangle represents Pakistan’s
poverty rate and the yellow square represents Bangladesh’s poverty rate.
Unfortunately, the data from the World Bank is imperfect because they are
issued in the different year. However, it is useful for policy implementation. In
1991, 64.71 percent of population in Pakistan lived below $1.25 poverty line
which means that more than they spent money for living per day less than $1.25.
For Bangladesh, in 1992, the poverty rate was at 70.22 percent of its
population. As you seen, the rate of both countries is likely to indifferent
because almost one third of its population experienced with the destitute.
However, the gap got bigger after that. In 1999, poverty rate in Pakistan
decreased to 29.05 percent of its population while the poverty rate in Bangladesh,
in 2000, was still relatively higher – around 59 percent of its population
lived under $1.25 poverty line. And for the latest information, Poverty in
Pakistan has dramatically reduced from 64.71 percent of its population in 1991
to only 12.74 percent of its population in 2011. Nevertheless, the process in
eradicating poverty was slower
in Bangladesh which poverty rate was still high in 2010 around 43.25 percent of its population. Thus, the first implementation for this paper is that “Even though a rate of economic growth becomes bigger, nation may be not able to take advantage of it”.
in Bangladesh which poverty rate was still high in 2010 around 43.25 percent of its population. Thus, the first implementation for this paper is that “Even though a rate of economic growth becomes bigger, nation may be not able to take advantage of it”.
For
the second poverty index, $2 poverty line, the red triangle represents poverty
rate for Bangladesh while the red square is for Pakistan. Increasing the criteria
from $1.25 per day to $2 per day normally results in a higher poverty rate because it will cover
more people at different level of income under the benchmark, for example, people who spend
their money $1.75 per day will become the poor under this situation. Under this
poverty line, 88.18 percent of Pakistan’s population was the poor in 1991 while
92.99 percent of Bangladesh’s population was the poor at 1992. The important
thing is that there are 23.47 percent added for Pakistan when using $2 poverty
line but it is 22.77 percent added for Bangladesh which means that the number
of people who live around $1.25 and $2 in Pakistan is greater than in Bangladesh. This statement is confirmed by a small difference between the
difference of the poor under $1.25 poverty line and $2 poverty line. Simply
put, at $1.25 poverty line, the proportion of the poor in Bangladesh is greater
than in Pakistan around 5.51 percent but at $2 poverty line, the difference
becomes closer to 4.81 percent. However, at latest data, Pakistan was better
than Bangladesh in reducing its poverty. But the more important thing is that,
under $2 poverty line, more than half of population in Pakistan spent money for
living per day less than $2 which critically greater than only 12.74 percent of its
population measured at $1.25 poverty line. The question has raised that which
more proper poverty line is but it is difficult to answer - $1.25 is too low
for some economist but $2 is too high for other academicians. Then, we turn our
interest to poverty line at an average national income, namely national poverty
line.
For
adaptation of CAGR for economic growth in poverty analysis, between 1992 to
2010, poverty in Bangladesh reduced 2.66 percent per year (over 18 years)
while, between 1991 to 2011, poverty in Pakistan decreased around 3 times more
than Bangladesh with 7.80 percent per year (over 20 years). Thus, it would be
indicated that a higher growth rate of Bangladesh does not efficiently and
effectively in reducing poverty in Bangladesh.
National
poverty line is able to tell us the relative poverty because it defines the
poor by the society’s average – poorer compared to friends. Unfortunately,
there are no any data for Pakistan until 1999 which its poverty rate was 30.60
percent of its population. However, it is likely to be that the poverty rates at national poverty line yields the
most preferable outcome in measuring poverty. For example, in 2005, poverty
rate of Bangladesh under this method is only 40 percent compared to $2 poverty
line which results in 80 percent of its population.
For
considering a change for two countries, there is only a year, 2005, a data on
poverty was issued for two countries. For $1.25 poverty line, poverty in 50.47
percent of its population in Bangladesh while 22.59 percent of its population
in Pakistan. However, in 2010, poverty in Bangladesh declined by 14.31 percent while 43.60 percent
for Pakistan in 2011. And for another two poverty lines, a rate of change of poverty in
Pakistan was better than Bangladesh. Comparing GDP growth rate between 2005 and
2010, at that time, GDP for Bangladesh increased by 38.52 percent while GDP for
Pakistan increased by only 26.54 percent which confirms the statement above
that a rate of growth of Bangladesh
contributes to poverty reduction less than Pakistan. Country got more
output and money but they are concentrated to only the rich, not flow to other
tiers of society.
From
current situation, it is considered to moderately tough Bangladesh can outpace
Pakistan due to Pakistan’s economic policies nowadays. Now, Pakistan has
already signed four Free Trade Agreements (FTAs) in bilateral
pattern with Malaysia, China, and Sri Lanka and in regional pattern as SAFTA.
Additionally, there is preferential agreement aimed at boosting trade with
Iran, Mauritius, and Indonesia and in the step of negotiation with Afghanistan,
Japan, Lao, New Zealand, Mexico, South Africa, and Tunisia. However, Bangladesh
has not signed bilateral trade agreement with any countries but it is the
member of BIMSTEC and SAFTA. So, an economic motivator of Bangladesh is
relative inactive compared with Pakistan. For 2013 structure of economy,
collected data from the World Bank, 53 percent of Pakistan’s GDP is borne by
service sector, followed by agriculture and manufacture while 56 percent of Bangladesh’s
economy is borne by service sector as well but it is followed by manufacture
(28 percent) and agriculture (16 percent). For main obstacle in development,
Pakistan always face with three issues including low quality and quantity of
labor force, terrorism, and energy while the concern toward Bangladesh is
inequality, low skilled labor, and infrastructure. So, the main task of
Bangladesh government would be the efficient way to raise citizen’s living
standard beginning with infrastructure, followed by education and political
right among people.
New
Hub New Hope
Even
though Bangladesh’s economy has relied on the export for only 23 percent of its
GDP in 2013 but its importance, revealed by the World Bank, has increased by
64.29 percent over the past ten years which indicates the necessity for special
economic zone aimed at facilitating trade. Port of Karachi is currently the main external engine of
country’s income but it is not enough for today that we, all, are in the age of
internationally economic interdependence. Thus, through the advantage of
geography, the countries located around the Bay of Bengal should take this opportunity.
Even though there is the Bay of Bengal Initiative for Multi-Sectoral Technical
and Economic Cooperation (BIMSTEC) connected a group of countries in South Asia and Southeast Asia, its progress was too slow to
encourage the prosperity due to a large and complicated model of integration.
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Source:
Revised byAuthor and obtained map from Map data 2014 AutoNavi, Google
The
BMT (namely Bangladesh, Myanmar, and Thailand) model states the regional hub in
a group of countries located in the corridor of Bengal’s Bay. With BMT,
transportation cost is able to be reduced because no need for cargo ship to go
to Singapore. China can benefit this model because it can use this route to be
the gateway to the South Asia. When the transportation cost is low, everything
is possible. Myanmar has a good relationship, politically, with China. Investment
in infrastructure from China created Myanmar to be more competitive in the very
near future. However, there is still the border tension between Myanmar and
Bangladesh which may be the challenge for this model. To enhance trade and take this advantage aimed at regional development, three
countries should realize this chance and start cooperating by setting the Joint
Trade Committee (JTC) to figure out the possibility of this model.
References
Bangladesh Ministry of Commerce. (n.d.).
Regional and Multilateral Trade Agreement.
Retrieved December 22, 2014 from http://www.mincom.gov.bd/reg_bil_trade.php
International
Monetary Fund (IMF). (2013). IMF says Pakistan at high risk of economic crisis.
Retrieved December 11, 2014 from http://uk.reuters.com
Pakistan Ministry of Commerce. (n.d.). Trade
Agreements. Retrieved December 22, 2014
from
http://www.commerce.gov.pk
World Bank. (2014). World Development
Indicators. The World Bank.
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[1] The
economy of Pakistan and Bangladesh relied on the export, in 2013, to only 13
and 23 percent of its GDP, respectively, which may be the reason for small negative
impact on both economies from crisis.
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