Emerging Economies: Lessons from Bangladesh

Meenu Sethi writes on the impact of women’s labour force participation on the economy

Emerging Economies: Lessons from Bangladesh
Pakistan’s recent austerity budget with an ambitious tax revenue target of $36.5 billion is hardly surprising. It is an attempt to meet the conditions of the International Monetary Fund’s $6 billion bailout which is Pakistan’s 13 in the last three decades. The bailout came with the usual strings attached: reforming tax regime to improve public finances; weaning state-owned enterprises off subsidies; reducing inflation; and exchange rate liberalisation. None of these are easy and will hurt living standards in the short-term. The IMF’s official hope of “an ambitious structural reform agenda will supplement economic policies to rekindle economic growth and improve living standards” belies the deep-rooted economic malaise of Pakistan.

There are many reasons that pushed Pakistan on the edge of the economic precipice. On one hand, fiscal mismanagement has driven government debt to alarmingly high levels, and on the other, the current account is being squeezed because of an export base enervated by decades of underinvestment and lack of a coherent export strategy.

One reason, however, that remains hidden in plain sight is the marginalized role women have been allowed to play in its economy. According to the IMF, Pakistani women face inequalities in inheritance rights, which need to be addressed along with the reforms of gender-discriminatory tax policies and laws. Apart from this, other measures required are enhancement of financial inclusion, increase in female education and training, expansion of after-school programs and child care services. It is also recognized by the IMF that closing the gender gap could boost Pakistan’s gross domestic product by 30 percent. Despite this clear knowledge, surprisingly enough, neither the IMF nor the Pakistani government have alluded to enhancing women’s economic role in their so-called, ambitious structural reform agenda.

According to the World Bank, out of an estimated 200 million population of Pakistan, 97 million are women, but only 14 million of them are working.
According to the World Bank, out of an estimated 200 million population of Pakistan, 97 million are women, but only 14 million of them are working

The contrast with Bangladesh – a country with a shared long religious and cultural heritage as a part of undivided India dating back to 9th century CE, known as East Pakistan till 1971 – is sharp and instructive. In Bangladesh, 22 million out of the 83 million women are economically active.

The independence of Bangladesh came after a bloody armed conflict in 1971 with huge economic cost to the extent that gross domestic product plummeted by 19 percent during 1971-72. The country was extremely poor with per capita GDP of mere $93 in 1972. A major famine occurred in 1974, followed by military rule which continued until 1990. It was only in the early 90s that the economy started to grow in earnest.

Today while Pakistan is in a dire economic predicament, Bangladesh is transitioning from a low-income to low middle-income economy. Bangladesh’s economy grew by 7.7 percent in 2018 and is expected to grow by 7.3 percent this year, one of the fastest in the world. The economy has doubled in size in the last six years alone. In the past decade, Bangladesh’s real economic growth has been consistently above 6 percent every year.

In 2017, Bangladesh exported merchandize and services worth $38 billion, up from $27 billion in 2012: an increase of 41 percent. By contrast, Pakistan’s exports in 2017 were $25 billion, down from $28 billion in 2012.

Unsurprisingly, Pakistan’s current account has been in deficit for the last 10 years, one of the main reasons for the current crisis and, as of this writing, its foreign exchange reserves barely enough to cover two months of imports. Bangladesh’s foreign exchange reserves, on the other hand, stand at $31 billion having increased by almost 450 percent in the last 10 years.

Bangladesh’s consistent economic growth can be attributed to many factors like moderate public debt, stable rate of inflation, and sound economic policy, but one that stands out is the role its women have played in diversifying away from an agrarian to a more manufacturing-based economy. At 36 percent, Bangladesh’s female labour force participation is 11 percentage points ahead of Pakistan’s 25 percent. In terms of financial inclusion, 36 percent of women in Bangladesh have a bank or mobile-money account; the corresponding figure for Pakistan is only 7 percent.

The sector that has driven Bangladesh’s economic transformation while bringing a significant number of women in the labour force is garment manufacturing. It accounts for 84 percent of Bangladesh’s total exports. Garment exports grew from a mere $32 million in 1984 to $31 billion in 2018, making Bangladesh the second biggest apparel exporter in the world.

International Labour Organisation estimates that around 80 to 85 percent of workers in the sector are women and it employs 15 percent of all Bangladeshi women in the age bracket of 16 to 30 years. In addition to providing financial independence to women, garment manufacturing has benefitted women in many other ways. A study by Rachel Heath of University of Washington and Mushfiq Mubarak of Yale university found that as a result of growth in garment manufacturing in Bangladesh, parents tend to keep younger girls in school for longer and older girls are more inclined to work. Both of these factors allowed women to postpone marriage and childbirth. In the political sphere, too, women’s capabilities have increased as a result of participation in garment industry and they have greater awareness of their rights.

Bangladesh holds a valuable lesson on how economic participation of women, along with a coherent industrial policy can be transformational for a country, both for economic growth and gender equality.

Based on data from the World Bank, Pakistan has around 63 million women over the age of 15, out of whom an estimated 49 million are not employed. This is a huge missed opportunity. Inclusion of young working-age women in the labour force – close to 85 percent of workers in garment factories being women – was the foundation of Bangladesh’s on-going economic transformation. It is not that Pakistani women lag behind Bangladesh in terms of education required to participate in manufacturing industry. In both countries, around 28 percent of women above the age of 25 have at least completed upper secondary.

According to IMF’s World Economic Outlook 2019, Pakistan’s per capita GDP in US$ is expected to drop by 13 percent this year, placing it at 188 out of 192 in terms of economic growth. Also, Pakistan currently ranks 148 out of 149 countries on World Economic Forum’s Gender Gap Index, compared to Bangladesh’s rank of 48. And at a time when the country  is in a dire economic crisis, I draw upon the words of Sylvia Walby from her book ‘Crisis’  which is on economic crises and gender : “The best route for economic growth out of recession is through the full utilization of women’s labour, effective policies for full employment, removal of labour market discrimination, and the enhancement of policies to facilitate combining employment and care-work. An increase in employment and improvement in its quality would provide a significant boost to the economy”

Surely, Pakistan has a long way to go and there is a clear need for systematically reformulating the entire economy so that it can accommodate a larger workforce but the government could take the current crisis as an opportunity to make some real changes especially in improving the labour force participation of women, which translates not only to economic and social empowerment of women but – as Bangladesh has shown – wider economic growth and prosperity. Taking a leaf out of Bangladesh’s book could be a good start.