The Myth of Bangladesh's Economic Miracle

Recall the great brouhaha about it crossing India in per capita GDP terms in 2020. The comparison was meaningless.

The Bangladeshi garment outsourcing miracle was built on fragile foundations.

(Photo: iStock)

On a cold and windy, rain-lashed day, in the summer of 2013, I took shelter inside a poncy boutique in New York and eyed a cream-white linen shirt, that was way beyond my credit limit. Pretending to be a genuine buyer, I took the shirt off its haute bamboo hanger and looked at the label.

Made in Bangladesh, it said.

And suddenly, I thought a little less of every piece of clothing around me.

For it reminded me of a haunting photograph that I had seen in the papers just a month earlier. An image of a dead man holding on to the wilted body of a woman, still half buried under the rubble of a collapsed building.

That building was the infamous Rana Plaza in the industrial suburb of Dhaka. It had been built over a hastily filled-in pond. The last few stories had been raised illegally, without any supporting pillars. Five garment factories ran out of that shaky building, making clothes to adorn the svelte bodies of the global rich.

One day before Rana Plaza came crashing down, large cracks had developed in some of the floors. Several shops were evacuated and shut down. The garment factory workers were told they had to continue working.

On 24 April 2013, the entire building collapsed, killing some 1,100 workers. More would have died had ill-equipped rescuers not braved possible injury to drag people out. Sheikh Hasina’s government preferred pride over its people, choosing to decline international offers of help.

The Bangladeshi garment outsourcing miracle was built on such fragile foundations.

The 'Bangladesh Shining' Story

It is true that after the Rana Plaza disaster, rules were tightened across the world. Big global apparel brands were expected to take responsibility for the working conditions in the companies they outsourced to.

But nothing really changed for workers in Bangladesh’s garments industry, which continues to earn almost all of its foreign exchange.

In May this year, Amnesty International reported how 35 criminal cases have been filed against some 40,000 garment workers who had protested against inhuman conditions at work. Most of them have been left ‘unnamed’ so that the threat of prosecution could be used against anyone who complains.

Such things are endemic to police states and that is precisely what Bangladesh had become under Sheikh Hasina. If you were close to Hasina’s Awami League, then you could expect to do well. Villages that were loyal to the ruling party got government grants and aid from NGOs. Those who were opposed to Hasina were persecuted.

A peculiar quota system ensured that the bureaucracy would always be dominated by the Awami League’s supporters. One-third of all positions were reserved for descendants of ‘freedom fighters,’ fellow travellers of Hasina’s legendary father, Bangabandhu Sheikh Mujibur Rehman, who led Bangladesh’s independence movement. These people were bound to be ideologically close to the regime.

A complete, ruthless, clampdown on the press allowed the government to control all narratives. What it built was a Bangladesh Shining story, based, like all good fiction, on some elementary truths. Bangladesh did have a good record with hygiene, it had saved the lives of countless children who used to die of diarrhoea. Stunting and wasting are reduced. What was not publicised was that much of this has been achieved through ground-level work by foreign-funded NGOs.

The government signed contracts to build mega infrastructure projects. A large number of them cost many times more than what similar projects had cost in neighbouring India. Foreign loans piled up as the Hasina government tried to make Bangladesh look glitzy.

Above all stood Bangladesh’s successful hard sell about its economic growth. Recall the great brouhaha about Bangladesh crossing India in per capita GDP terms in the year 2020. At that time, I had pointed out that the comparison was meaningless because it had been done in nominal dollar terms, without taking real purchasing power into account. Once adjusted for inflation, how much an average Bangladeshi could buy, turned out to be 20 percent less than what an average Indian could purchase in a year.

This wouldn’t surprise anyone who looks for the pathologies that economic data try to suppress, but which show up as so many symptoms within unrelated numbers.

The Biggest Money-earning Industry Has Come to a Grinding Halt

A nation where four out of 10 workers are farmers, but get only about one-tenth of the national income. A nation where the biggest industry is garment exports, which hires less educated workers at highly depressed wages. A nation where one in every nine job seekers with a degree is unemployed. When you add these up, you get a nation whose impressive GDP figures hide more than they reveal.

Yet, it would be naïve to see the popular revolt in Bangladesh as a spontaneous democratic upsurge.

It was an open secret that Hasina’s Bangladesh consisted of a shadowy elite, which made money from corrupt government contracts, an exploitative garment export industry, and untold graft. That meant, for most of Hasina’s rule, the top one percent of people cornered about 16 percent of the country’s income, while the top 10 percent took 45 percent.

This changed when COVID-19 hit Bangladesh. Estimates by the Paris-based World Inequality Database suggest, that after 2020 the share of the richest 10 percent of Bangladeshis’ fell to about 36 percent, while that of the richest one percent dropped to less than 12 percent.

If these estimates are correct, then the Bangladeshi elite has every reason to be miffed with Sheikh Hasina. It will not be surprising if, one day, we find out that the popular coup against Hasina was orchestrated by certain powerful sections of the country, who no longer backed the former PM.

The desecration of portraits and statues of the hitherto revered Mujibur Rehman has all the characteristics of quasi-military psychological operations, the kind that we saw in Iraq when US Marines rolled into Baghdad. That there are major geopolitical forces at play here is fairly obvious to anyone who tracks international realpolitik.

Yet, there can be no doubt that Hasina’s sudden ouster is equally a result of her own myth-making about how well Bangladesh was doing as an economy and a nation. She not only sold it to the world but also believed it herself. That is why she failed to read the writing on the wall before it was too late.

The immediate result of the insurrection in Dhaka is that the country’s biggest money-earning industry – garment exports – has come to a grinding halt. Factories have shut down fearing arson. Workers are either on the streets or have gone to their villages to escape the violence. Some of the world’s biggest clothing brands, like Zara and H&M, are expected to be hit as supplies will be disrupted.

Bangladesh’s loss could be India’s gain. While Bangladesh exports garments for nearly $40 billion per year, India’s garment exports are worth around $16-18 billion. Industry experts say we have the capacity to immediately absorb orders worth $300-400 million.

But getting a larger slice of Bangladesh’s garment export pie is easier said than done. Bangladesh has mega factories that can handle bulk orders from global clothing giants. Our garment companies are much smaller.

Bangladesh’s cost advantage in the global market is built on cheap textile imports from China. Indian garment manufacturers say they too will need to buy Chinese textiles to capture Bangladesh’s market share.

It is very likely that the Nobel laureate Muhammad Yunus who will head Bangladesh’s interim government, will make it his first task to salvage the garment industry. But it won’t be easy to turn the clock back to where it was when Hasina was in power. The long-suffering workers of the country’s garment factories will want higher wages and better working conditions.

If Yunus tries to give them that, he won’t endear himself to Bangladesh’s industrial elite.

(The author was Senior Managing Editor, NDTV India, and NDTV Profit. He now runs the independent YouTube channel ‘Desi Democracy’. He tweets @Aunindyo2023. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)