Economy 

Drying and sifting rice, Bangladesh's main staple

IN THE LATE 1980s, Bangladesh continued to be called the "largest poorest" country and to be singled out as "the test case for development." A great deal that had happened in the economy since independence in 1971 supported the hope that the country would eventually overcome its dependence on foreign aid and would approach relative self-sufficiency. In the meantime, success was measured in more limited and immediate accomplishments: greater production of food grains year by year, greater vigor shown by the private sector in generating investment capital and using it productively, and measurable growth and diversification of exports. The government continued to depend on the donor community to provide the bulk of the resources needed to promote human development in the form of nutrition, health, and education programs. The most active donors continued to give Bangladesh good marks for its economic performance.

In 1971, the year Bangladesh achieved independence from Pakistan, the new nation was referred to in foreign circles as an "international basket case," a wounded combatant almost beyond hope of recovery. Bangladeshis themselves, recalling the "international basket case" characterization, often choose the metaphor "bottomless basket," implying that no matter how much assistance is given to the economy, there will always be a need for more. It is a tribute to the Bangladeshi people, to the constructiveness and generosity of other nations, and to the strength of the human spirit that the gloomiest fears have not materialized. The firsttime observer of Bangladesh may still perceive the country as poverty stricken, overpopulated, and with little prospect for a sunnier future. In its first seventeen years of independence, Bangladesh did not prosper, nor was it able to improve substantially the quality of life for its huge population, but it did not lose ground either. If the prospects for rapid economic development were not noticeably better in 1988 than they were in 1972, it was encouraging that Bangladesh was active in economic fields that were not foreseen even a few years earlier--e.g., as a major producer and exporter of ready-made garments and frozen seafood. And if the economy still seemed dangerously poised on the brink of disaster--a drought, a typhoon, or excessive flooding threatens every year--the government, the people, and the international community had combined to limit the scope of disasters, and the economy of Bangladesh had continued to struggle upward.

ECONOMIC CONTEXT

Historical Perspective

East Bengal--the region that was to become East Pakistan and later Bangladesh -- was a prosperous region of South Asia until modern times. It had the advantages of a mild, almost tropical climate, fertile soil, ample water, and an abundance of fish, wildlife, and fruit. The standard of living compared favorably with other parts of South Asia. As early as the thirteenth century, the region was developing as an agrarian economy. It was not entirely without commercial centers, and Dhaka in particular grew into an important entrepôt during the Mughal Empire (see Islamization of Bengal, 1202-1757 , ch. 1). The British, however, on their arrival in the early seventeenth century, chose to develop Calcutta as their commercial and administrative center in South Asia. The development of East Bengal was thereafter limited to agriculture. The colonial infrastructure of the eighteenth and nineteenth centuries reinforced East Bengal's function as the primary producer--chiefly of rice and jute--for processors and traders in Calcutta and beyond.

Some of the same factors that had made East Bengal a prosperous region became disadvantages during the nineteenth and twentieth centuries. As life expectancy increased, the limitations of land and the annual floods increasingly became constraints on economic growth. Traditional agricultural methods became obstacles to the modernization of agriculture. Geography severely limited the development and maintenance of a modern transportation and communications system.

The partition of British India and the emergence of India and Pakistan in 1947 severely disrupted the former colonial economic system that had preserved East Bengal (now East Pakistan) as a producer of jute and rice for the urban industrial economy around Calcutta. East Pakistan had to build a new industrial base and modernize agriculture in the midst of a population explosion. The united government of Pakistan expanded the cultivated area and some irrigation facilities, but the rural population generally became poorer between 1947 and 1971 because improvements did not keep pace with rural population increase. Pakistan's five-year plans opted for a development strategy based on industrialization, but the major share of the development budget went to West Pakistan, that is, contemporary Pakistan. The lack of natural resources meant that East Pakistan was heavily dependent on imports, creating a balance of payments problem. Without a substantial industrialization program or adequate agrarian expansion, the economy of East Pakistan steadily declined. Blame was placed by various observers, but especially those in East Pakistan, on the West Pakistani leaders who not only dominated the government but also most of the fledgling industries in East Pakistan.

MANAGING THE ECONOMY

Economic Policy and Planning

After West Pakistani owners of industrial enterprises fled in 1971, the government of Bangladesh seized their plants as abandoned properties. The government suddenly found itself managing and operating more than 300 medium- and large-scale industrial plants, which represented nearly 90 percent of the value of all such enterprises in the new nation. It organized public corporations to oversee the major industries: jute, textiles, sugar, steel, paper and paperboard, fertilizer, chemicals, pharmaceuticals, engineering and shipbuilding, minerals, oil and gas, food and allied products, and forest products. With government control over major industries and massive inputs of foreign aid, the economy gradually returned to the levels of the late 1960s, but it was still among the world's poorest and least developed countries.

The main government institution responsible for coordinating national rehabilitation and development was the Planning Commission. Sheikh Mujibur Rahman (Mujib), the first president of Bangladesh, led the formation of the national-level Planning Commission, which prepared plans that directed economic priorities for five-year periods. The First Five-Year Plan covered the period July 1973 to June 1978. It was succeeded by a two-year plan, covering the period July 1978 to June 1980, which was followed by a year-long hiatus. The Second Five-Year Plan (1981-85) and the Third Five-Year Plan (1985-90) put the planning process back on track. The broad objectives of the Third Five-Year Plan were to reduce poverty, bring down the rate of population growth to 1.8 percent annually, increase exports by 5.9 percent and domestic savings by 10 percent, attain self-sufficiency in food production, and realize an annual growth of the gross domestic product (GDP-- see Glossary) of 5.4 percent. These ambitious goals went well beyond the previous actual performance of the economy.

Five-year plans are financed through the development, or capital budget, which was separate from the government's revenue, or administrative, budget. The Third Five-Year Plan envisaged a total outlay of more than US$12 billion, approximately 65 percent of which was destined for public sector projects. About 55 percent of the needed funds were to come from foreign sources, including private investment, the aid programs of international financial institutions, and bilateral donor nations. Foreign commitments in the early and mid-1980s were around US$1.7 billion per year (exclusive of external private investment, which in any case was not significant). The portion of the development budget to come from domestic sources (45 percent) represented a substantial increase from the 15 to 20 percent of earlier development budgets.

The Planning Commission translates the multiyear development plan into public investment through the Annual Development Programme. The commission also ensures that public programs and policies are in conformity with its long-term strategy through its project approval process and through its advisory position on the country's highest economic decision-making bodies, the National Economic Council and its Executive Committee. The National Economic Council in the late 1980s was chaired by the president of Bangladesh and included all government ministers plus the governor of the Bangladesh Bank and the deputy chairman and members of the Planning Commission. The Executive Committee of the National Economic Council made most of the decisions on major development projects and development issues in general. The committee included the ministers of key economic sectors (finance, planning, industries, commerce, and public works) and, according to the agenda, any other sectors concerned. A third organization involved in the planning mechanism is the Project Evaluation Committee, which monitors the progress of five-year-plan programs.

FOREIGN ASSISTANCE

Test Case for Development

Independent Bangladesh, from the beginning, has been regarded as a test case for development by economists, policymakers, and program administrators of donor countries and international financial institutions. Interest in the area predated political independence, as East Pakistan represented the world's most extreme case of population growth outstripping resources. Because Pakistan was a single country, project design and approval processes occurred at the national level. West Pakistan, also poor, appropriated most commodity aid, capital, and technical and project assistance. The people of East Pakistan considered the attention they received to be inadequate and inequitable.

In October 1974, the Bangladesh Aid Group was established under the aegis of the World Bank, with twenty-six participating governments and institutions. Commitments of the aid group were US$551 million in FY 1974 and US$1.2 billion the following year. Aid to Bangladesh has remained at a high level since the consortium came into existence, although with substantial fluctuations in new commitments from year to year. After the high initial commitments, the figure fell to US$964 million in FY 1976 and to US$744 million the following year, before turning upward again. Fiscal year 1979 was another breakthrough period, with new commitments of nearly US$1.8 billion, a figure surpassed 3 years later when the level reached US$1.9 billion, the all-time high through FY 1987.

In the 1980s, the value of food aid declined to around 11 to 18 percent of new aid commitments, most of it given on a grant basis. Commodity aid--about 25 percent of aid commitments to Bangladesh -- included key items for increasing productivity, such as fertilizer, cement, steel, pumps, and other equipment. Project assistance accounted for more than 50 percent of new commitments. This form of aid was preferred by the largest donors because their funds are put to work in well-defined ways that can be related to policy objectives. From the beginning, the Bangladesh government has been unable to use project funds at the same rate as they are authorized. As a result, a pipeline of authorized but undisbursed project funds has grown bigger every year. The undisbursed project assistance pipeline was expected to exceed US$5 billion in 1988 and to continue to grow after that. Not until the 1990s at the earliest could Bangladesh hope to begin reducing the backlog of undisbursed funds.

Disbursement figures did not account for Bangladeshi repayments of principal and interest on previous loans. In FY 1986, for example, Bangladesh paid out US$117 million against principal and US$72 million in interest in connection with earlier aid disbursements. Thus the gross US$1.3 billion in disbursement of foreign aid that year netted an inflow of US$1.1 billion. Although these funds were equal to almost 10 percent of Bangladesh's GDP, they averaged only about US$12 per person, hardly a scale to bring about dramatic improvement in the economy's performance.

Because much of the funding for the development budget in the mid-1980s was financed by external donors, the Bangladesh government had to attract financing for high-priority sectors and projects. Coordination was carried on at all times between the government and individual donors, but the keynote each year was a meeting organized by the World Bank as leader of the Bangladesh Aid Group. At these meetings Bangladesh's finance minister presented his government's development plans for the coming year and sought pledges from the major donors for as much of the Annual Development Programme as possible. The donors also made presentations at the meeting, including assessments of the performance of the Bangladesh economy in general and of the development plans of the government in particular, as background to their views on the realism and appropriateness of the priorities adopted in the five-year plan. These meetings, alternating between Washington and Paris, were the formal culmination of a process that went on year-round. In the late 1980s, the main coordination point with foreign donors was the External Resources Division of the Ministry of Finance, which monitored development projects and administrative and management aspects of planning.

AGRICULTURE

Structure of Agricultural Production

Despite progress toward greater industrialization, in the late 1980s agriculture still accounted for nearly 50 percent of the value of Bangladesh's GDP. Approximately 82 percent of the country's population lived in rural areas, virtually all of them making their living exclusively or substantially from agriculture (see Rural Society , ch. 2). Domestic production increased at a relatively steady rate in the years following independence, but not fast enough to close the gap created by the continued rapid growth in population. According to official statistics, the real value of all crops and of agricultural production rose every year in the 1980s, but except for a 6.1-percent surge in FY 1981, the gains did not exceed 3.8 percent, and in 3 of the years it was less than 1 percent. The goal of food self-sufficiency by 1990 was asserted as part of the Third Five-Year Plan, but it could be achieved only under optimal conditions. Bangladesh was still importing an average of 2 million tons of food grains each year to meet minimum needs for the subsistence of the population. Most of the imports were on a grant or concessional basis from the United States, the World Food Programme, or other food aid donors.

The agricultural year begins in late February, when the weather is dry and getting warmer. Over a period of several weeks each field is plowed three or four times; using a wooden plow and two oxen, one man can plow 0.02 hectares in an eight-to ten-hour workday. In addition to plowing, field preparation for irrigation involves construction and maintenance of plot boundaries half a meter high, using earth and weeds from the field. These boundaries also serve to retain water in the plots when the rains come a few months later. Traditional methods of irrigation include pitcher, swing basket, and a hollowed-out log fixed on a pivot and fitted with a counterbalance. These methods have a natural grace and beauty and are still practiced in rural areas throughout Bangladesh. They offer the dual advantages of depending entirely on locally available materials and on human power for their operation. In those rural areas where electricity is available, tube wells with electric pumps are becoming an important irrigation device.

Absolute production has increased, and there has been an impressive diversification into a wide variety of seeds and new crops, such as wheat and vegetables. In fact, the patterns of agriculture have been virtually transformed. A previously self-contained and self-reliant subsistence economy has given way to one dependent on inputs, credit, markets, and administrative support from outside. But the price has been high--literally--and in the late 1980s was getting higher. Abu Muhammad Shajaat Ali, in his study of the agricultural village of Shyampur, describes the local economy as a "near-saturated agroecosystem." Continued population pressure has led in many areas to increases in output- per-unit area, but at very high rates of diminishing returns to inputs.

Shyampur exemplified the transformation going on in parts of the rural countryside affected by a modern market economy. The income of farmers in Shyampur, because of its proximity to Dhaka's high-demand urban markets, was greater than in more typical villages of Bangladesh. According to Ali, 31 percent of Shyampur's families in 1980 had a farm income greater than US$278 (Tk7,500) per year; 40 percent earned between US$93 and US$278; and the remaining 29 percent earned less than US$93. Eighty-four percent of farmers were also engaged for at least 100 days per year in off- farm work in small businesses or industrial occupations, with 70 percent of them earning between US$75 and US$295 and 23 percent receiving more than that. Virtually all of this employment was for males. As of 1980, it was rare for village females to be employed outside the household. The work they did in raising poultry, cultivating kitchen gardens, husking paddy, collecting fuel, and assisting neighboring families was not figured into calculations of income.

The ownership of agricultural land remained one of the most difficult problems in the Bangladesh countryside. During British rule, elite large landowners (zamindars--see Glossary), many of them absentee landowners, owned most of the land in East Bengal. After 1947 new laws abolished large estates and set limits on the amount of land one person could own. Many big Hindu landlords moved to India, but the wealthy Muslims who bought up their holdings became a new landlord elite. Legal ceilings on landownership resulted in little extra land for distribution to the poor because landlords arranged ways to vest ownership in the names of relatives. As a result, in most villages a few families controlled enough land to live comfortably and market a surplus for cash, while a large percentage of families had either no land or not enough to support themselves. Studies have suggested that in the mid-1980s the richest 10 percent of the village population controlled between 25 and 50 percent of the land, while the bottom 60 percent of the population controlled less than 25 percent. The disparities between the richest and poorest villagers appeared to be widening over time. The large number of landless or nearly landless peasants reduced the average landholding to only less than one hectare, down more than a third since 1971. Because Islamic inheritance law as practiced in Bangladesh calls for equal division of assets among all the sons, the large population increases led to increased fragmentation of landholdings and further impoverishment. Inheritance, purchase, and sale left the land of many families subdivided into a number of separate plots located in different areas of the village.

The ready availability of large numbers of poor laborers and the fragmented character of many landholdings has perpetuated a labor- intensive style of agriculture and unequal tenancy relations. At least a third of the households in most villages rent land. The renting households range from those without any land of their own to those middle-level peasants who try to supplement the produce grown on their own land with income from produce grown on additional land. Sharecropping is the most common form of tenancy agreement. Traditional sharecropping arrangements heavily favored the landlord over the sharecropper, with a fifty-fifty split of the produce and the tenant providing all inputs of labor and fertilizer. After decades of rural agitation, the 1984 Land Reforms Ordinance finally established the rule of three shares--one-third of the produce for the owner, one-third for the sharecropper, and one-third split according to the costs of cultivation. Poor peasants who could not obtain land as tenants had to work as agricultural laborers or find nonagricultural jobs. The 1984 Agricultural Labour Ordinance set the minimum daily wage for agricultural labor at 3.28 kilograms of rice or its cash equivalent. Employers who broke this rule could be brought to village courts and forced to pay compensation twice the amount of back wages. However, because village courts were dominated by landowners, there was still little official redress for the grievances of agricultural laborers. In fact, the structure of rural land control kept a great deal of power in the hands of relatively small groups of landlords.

The Comilla Model, which began in 1959, has been the most successful and influential example of cooperative agricultural development in Bangladesh. Projects in Comilla District provided more modern technologies to farmers: low-lift water pumps; low-cost hand-dug six-inch tube wells; pilot research on adapting thirty- five-horsepower tractors for rice cultivation; new crop and animal varieties; testing and introduction of such inputs as chemical fertilizers, pesticides, and high-yield varieties of seeds; and new storage and processing technology. These innovations attracted resources to local rural institutions, against the prevailing urban orientation of the leadership elite. They provided some counterweight to the trend of ambitious village people seeking to leave the countryside in favor of the cities or foreign countries. Comilla, which received substantial assistance from Michigan State University and the Ford Foundation, remains a widely admired accomplishment, and the Bangladesh Academy of Rural Development, which gave broad dissemination to published reports on Comilla's progress, is world-renowned because of it.

INDUSTRY

Traditional Sectors

The industrial sector produces around 10 percent of GDP, and long-term national strategies in the late 1980s did not anticipate a major increase in that percentage. The greatest need and the greatest opportunities remained predominantly in the agricultural sector.

Eastern Bengal was known for its fine muslin and silk fabric before the British period. The dyes, yarn, and cloth were the envy of much of the premodern world. Bengali muslin, silk, and brocade were worn by the aristocracy of Asia and Europe. The introduction of machine-made textiles from England in the late eighteenth century spelled doom for the costly and time-consuming handloom process. Cotton growing died out in East Bengal, and the textile industry became dependent on imported yarn. Those who had earned their living in the textile industry were forced to rely more completely on farming. Only the smallest vestiges of a once-thriving cottage industry survived.

At independence Bangladesh was one of the least industrially developed of the populous nations. Annual per capita consumption of steel and cement was only about one-third that of India, for example, and electric power consumption per capita was less than one-fifth.

FOREIGN TRADE

Export Sectors

Jute

Jute has long been Bangladesh's major foreign exchange earner, and although other products have become important, in 1987 jute still accounted for more than 50 percent of export revenue, with manufactures accouting for an increasing portion of the total (as compared with raw jute).

Since independence, Bangladesh's largest customer for jute products has been the United States; the bulk of sales has been divided fairly evenly between burlap and carpet backing. But, consistent with the global pattern, the United States market has eroded fairly steadily over the years. Sales to the United States reached a low of US$81.8 million in 1986 but increased again to US$104.5 million in 1987, when both prices and volume rose. The market for jute sacking was assisted by the fact that some recipient countries of American food aid specified burlap for their United States imports because they had a secondary market for the bags.

Seafood

In the 1980s, Bangladesh emerged suddenly and dramatically as a major producer of shrimp, frog legs, and fish for export. The seafood industry's sudden success resulted primarily from private entrepreneurial initiatives, in response to a hospitable international market. The natural resources to support a growing fisheries sector are abundant, including enormous potential to develop inland water bodies, as well as even greater productive areas of coastal and offshore waters. Coastal brackish-water shrimp farming was more developed and was likely to grow further as investment increased, higher technology was brought to the activity, and the world market continued buoyant.

The pace of fishery development was impressive in the 1980s. At the beginning of the 1970s, frozen seafood was responsible for less than 1 percent of exports or US$3.4 million per year. The figure rose to US$40 million in FY 1981, US$113 million in FY 1986, and US$86 million in the first 6 months of FY 1987. At that point, it was suddenly second only to jute as Bangladesh's most valuable export.

Fresh and frozen shrimp accounted for two-thirds of Bangladesh's seafood exports in the mid-1980s; Japan purchased more than half. The United States, Belgium, and Britain were the other major buyers; the United States was the prime customer for frog legs, the largest category after shrimp.

Garments

The first ready-made garment factories in Bangladesh aimed at the export market were opened in the late 1970s by investors from other Asian countries whose exports had been restrained by quotas imposed by importing nations. By the mid-1980s, the ready-made garment industry had become a strong export earner. Garment exports brought receipts of only US$3 million in FY 1981, but by 1984 exports had risen to US$32 million, and the following year revenue soared to US$116 million. For FY 1985 and FY 1986, ready-made garments were the second biggest foreign exchange earner for Bangladesh after jute.

The surge in Bangladeshi exports eventually caused a reaction among some industrial nations. Canada, the European Economic Community, and the United States expressed concern that inexpensive Bangladeshi garments were flooding their markets. In 1985, after a series of notices as called for by multilateral agreements, the United States--which was the destination of about 25 percent of Bangladesh's garment exports--began imposing quotas on Bangladeshi garments, one category at a time.

Bangladeshi manufacturers, working with the government, organized with remarkable speed and efficiency to adapt to changing conditions. They policed themselves to stay within quotas, allocating production quotas according to equitable criteria, and began diversifying their production into categories where there were not yet quotas: for example, cotton trousers, knitwear, dresses, and gloves. After a period of adjustment, during which some of the least well-established firms closed and workers were laid off, the industry began stabilizing, and growth continued at a more moderate pace. Exports in FY 1986 rose another 14 percent, to US$131 million, and prospects were good for continued growth at about that rate.

Other Export Industries

The quality of Bangladesh's tea, grown in the Sylhet hills area, is not competitive with tea grown elsewhere in Asia, and during the Pakistan period sales were increasingly restricted to West Pakistan. The war of independence raised a question about whether alternative markets could be found for Bangladesh's tea. Production in FY 1973 was 24 million kilograms, down from 31 million kilograms in FY 1970. Pakistan remained interested in Bangladeshi tea and again became the chief customer, followed by several Arab countries. In the 1980s, production returned to the pre-1971 level and was relatively stable from year to year, but prices were not. Bangladesh received less than half the value in FY 1986 for virtually the same amount sold in FY 1984 (US$33 million versus US$69 million). As with jute, Bangladesh could hope for little more than to preserve--but not expand--its small niche in the world's tea trade.

Bangladesh also holds a small place in the international leather trade. World prices were somewhat less volatile than for tea, and in the 1980s Bangladesh could count on annual earnings of between US$56 million and US$90 million, primarily because of the high quality and premium prices of skins from Bangladesh. There was little scope for increasing production because competition over land and feed kept down the population of cattle and goats.

In the mid-1980s, fruits, vegetables, and spices also began to become important export items. Previously negligible in export accounts, in FY 1986 this category brought in nearly US$15 million, chiefly from Middle Eastern and British customers. Prospects were bright for continued growth of this diversification of Bangladeshi agriculture, as external demand was expected to remain lively.

Balance and Terms of Trade

Bangladesh has had a negative trade balance since independence in 1971. In the mid-1980s, the annual pattern was for exports to cover only around 30 percent of the cost of imports.  Merchandise exports reached the value of US$1 billion in FY 1987 for the first time, and in that year import payments were US$2.6 billion, leaving a trade deficit of over US$1.5 billion, about average throughout the 1980s. The annual deficit was limited by government controls to between US$600 and US$700 million on capital goods and US$500 million on nonagricultural industrial commodities. The largest component in the latter category was crude oil and petroleum products. In addition, Bangladesh incurred a debt each year for grain and other food needs, always higher than US$200 million, and sometimes going to double or even more (at least US$607 million in FY 1985). The country had a positive balance on nonfood agricultural production, because jute and ready-made garment exports eliminated the deficit in fibers, textiles, and garments.

One way the society has been able to turn its economic problems and overpopulation to some advantage is by exporting workers to wealthy, Islamic countries, chiefly in the Persian Gulf. The remittances from these workers have come to constitute one of Bangladesh's greatest sources of foreign exchange. In FY 1986 remittances were nearly US$575 million, covering 23.5 percent of import financing requirements and substantially exceeding the total receipts from jute, the chief export. The government maintained records only of new recruits working abroad each year--a peak of 77,694 in 1985--but knowledgeable observers believed that possibly as many as 450,000 were overseas at any one time. Throughout the 1980s, more than a third went annually to Saudi Arabia with a peak of 39,350 new recruits in 1987. Other countries receiving large number of Bangladeshi workers in 1987 included the United Arab Emirates (9,953), Kuwait (9,559), Qatar (5,831), and Iraq (3,847). Such workers normally contracted to remain abroad three years and often stayed several years longer. They worked as laborers, under terms negotiated government to government, and generally lived under segregated conditions that effectively prevented Bangladeshi men (who cannot bring their families with them) from assimilating with the local population or experiencing non-Bangladeshi ways of life. When they have returned to Bangladesh with savings and material acquisitions, they generally have had no difficulty fitting back into their society.

Other remittances have come from the more highly educated elite who are able to take advantage of educational resources at home or overseas and who advance to high positions in business, the professions, the civil service, or even the military. Some have gone abroad--mostly to Britain, the United States, and Canada--and many remit savings to relatives in Bangladesh. The government extends incentives to all expatriate Bangladeshis to send back some of their savings. They are granted a preferential exchange rate, and a portion of their remittances can be turned back into foreign currency for purchases from abroad.

Including remittances as a form of export revenue still left Bangladesh with a deficit ranging between US$1.5 billion and US$1.8 billion each year during the 1980s. Foreign aid was the essential element allowing Bangladesh to steer clear of a critical shortage of foreign exchange.

In FY 1986, the United States was the leading buyer of Bangladeshi exports, taking some 25 percent of the total. The American portion had increased from 16 percent the year before and 12 percent the year before that. The dynamic new element was readymade garments; the United States purchased over 80 percent of this new industry's production, adding to Bangladesh's traditional base of jute manufactures (mostly carpet backing) and seafood. The next biggest customer for Bangladesh (but with only 28 percent of the American volume) was Japan, which chiefly purchased frozen seafood. Other important customers in FY 1986 were Britain, Italy, Pakistan, Singapore, and Belgium. Trade with communist countries was also significant. Almost 10 percent of exports were under barter terms with the Soviet Union, China, Bulgaria, Hungary, and Czechoslovakia.

The list of suppliers to Bangladesh is eclectic. In FY 1986, Singapore was the leading supplier, with 14 percent of the total (up from 12 percent the previous year). Major supplies were petroleum and petroleum products and also vegetable oils and fats. Next was Japan, with 13 percent of the total, selling iron and steel, transportation equipment, and machinery. In third place was the United States with 8 percent (food grains and machinery), followed by South Korea (textiles), the United Arab Emirates (petroleum), India (textiles and machinery), West Germany (machinery and transportation equipment), China (assorted products), and Britain (machinery, equipment, and sugar products). Other major suppliers were Canada, Pakistan, Saudi Arabia, Malaysia, the Netherlands, and Iran.

TRANSPORTATION AND COMMUNICATIONS

Inland Waterways and Ports

The primary transportation system of Bangladesh is its extensive inland waterways. Some 18.9 million tons of cargo (about 21 percent of the total) were moved by water transportation in FY 1986. As of early 1988, the country had 8,430 kilometers of navigable waterways, of which up to 3,058 were main cargo routes. There are seasonal difficulties in the navigability of rivers and canals for the traditional country boats that constitute the great bulk of the merchant fleet, but geography and history have made these craft the preferred means of moving goods between the ports on the Bay of Bengal and the interior and between surplus and shortage regions of the country. As of 1987, the Bangladesh Inland Water Transport Corporation operated a fleet of more than 480 vessels; about half were inland and river barges, and the rest were used for coastal trade. The size of the corporation's fleet had been steadily declining over the years, but they still represented a substantial portion of the registered watercraft.

The total number of passenger- and cargo-carrying country boats plying the vast river system was nearly 300,000 and was increasing in the mid-1980s. Some of the larger boats use a single sail to supplement manpower. The larger boats carry loads up to thirty-five tons and operate with crews of three or more. Generally, they are built with a raised platform at the stern of the vessel, on which a man patiently walks back and forth with a large-paddled oar, while others may pole in the shallow water or row from the sides. At times, the boats are pulled with ropes from along the shore. These boats have a shallow draft, necessary for navigating in the extensive but very shallow river system. When loaded, the boats sit low in the water. Cargoes of raw jute or logs from the mangrove forest of the Sundarbans may fill all the interior space and project beyond the gunwales of the boat itself. Other cargoes may be bagged or covered with cloth or bamboo meshwork. Country boats are estimated to move more than 17 million tons of cargo yearly, on a system of at least 1,400 launch landings and the major river ports of Dhaka, Narayanganj, Chandpur, Barisal, and Khulna. Country boats are unsuited for the Bay of Bengal or the broad Padma-Meghna estuary. Thus coastal traffic of bulk agricultural goods is much smaller than inland waterway traffic.

Traditional and modern means of water transportation meet at the seaports of Chittagong and Chalna, where most of Bangladesh's imports and exports are transferred between dramatically different kinds of vessels. The government-owned Bangladesh Shipping Corporation reportedly had twenty-one oceangoing ships in its inventory in 1986, and the ships of many other nations called at the major ports. Chittagong, the principal port, has an excellent natural harbor and anchorage on the Karnaphuli River, about five kilometers from the Bay of Bengal. The port facilities were developed after 1947, and by 1970 Chittagong could berth 20 ships at a time and handle 4 million tons of cargo annually. In FY 1985, the port at Chittagong handled some 1,086 vessels and 6.2 million tons of cargo. Chalna is on the Pusur River about sixty-four kilometers south of the river port city of Khulna. Chalna was still being developed in the late 1980s, but it was rapidly gaining on Chittagong in capacity and in traffic, particularly as land and inland waterway connections also were being improved to reorient the distribution system of the west and northwest areas of the country to the newer port. The port at Chalna handled 545 vessels and 2.3 million tons of cargo in FY 1985.

Tourism

Despite its poor-country status, increasing numbers of tourists have visited Bangladesh, a new but minor source of foreign exchange earning. Tourism in the early 1980s amounted to some 49,000 visitors per year, but by 1986 more than 129,000 tourists--mostly from India, the United States, Britain, and Japan--visited Bangladesh. According to the Bangladesh Parjaton Corporation (Bangladesh Tourism Corporation), some Tk44.6 million in foreign exchange was earned in 1986 from the tourism industry.

PROBLEMS AND PROSPECTS

The Bangladesh government and the Bangladesh Aid Group have taken seriously the idea that Bangladesh is the test case for development. In the late 1980s, it was possible to say, in the somewhat patronizing tone sometimes adopted by representatives of donor organizations, that Bangladesh had generally been a "good performer." Even in straitened times for the industrialized countries, Bangladesh remained a favored country for substantial commitments of new aid resources from a strikingly broad range of donors. The total estimated disbursement for FY 1988 was estimated at US$1.7 billion, an impressive total but just US$16 per capita. Half of that total was for food aid and other commodities of limited significance for economic growth. Even with the greatest imaginable efficiency in planning and administration, resource-poor and overpopulated Bangladesh cannot achieve significant economic improvements on the basis of that level of assistance.

In examining the economy of Bangladesh, wherever one turns the problems crowd in and threaten to overwhelm the analysis. Underlying problems that have threatened the young nation remain unsolved. These problems include overpopulation and inadequate nutrition, health, and education resources; a low standard of living, land scarcity, and vulnerability to natural disaster; virtual absence of valuable metals; and inadequate government and bureaucratic structures. Yet the brief history of independent Bangladesh offers much that is encouraging and satisfying. The World Bank, leader of the Bangladesh Aid Group, described the country in 1987 as a success story for economic development and expressed optimism that the goals of the Third Five-Year Plan, and longer term development goals as well, could be attained. Government policies had been effective in stimulating the economy. The private sector had benefited from an environment of greater economic freedom and had improved performance in banking and production of jute, fertilizer, ready-made garments, and frozen seafood. The average growth rate of economy had been a steady, if unspectacular, 4 percent since the beginning of the 1980s, close to the world average for developing countries.

The picture of day-to-day and even year-to-year performance of the economy of Bangladesh is a mixture of accomplishment and failure, not significantly different from that of the majority of poor Third World countries. The government and people of Bangladesh are entitled to take some pride in the degree of success they have achieved since independence, especially when one contrasts their success with the gloomy forecasts of economists and international experts. The international donor community, led by the World Bank, similarly can be proud of the role it has played in assisting this "largest poorest" nation to become a respected member of the family of nations.

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Works that are useful for gaining a basic understanding of the Bangladesh economy include Bangladesh: Emergence of a Nation by A.M.A. Muhith and The Political Economy of Development by Just Faaland and J.R. Parkinson. Rehman Sobhan's The Crisis of External Dependence provides an insightful critique of the foreign aid sector. Kirsten Westergaard's State and Rural Society in Bangladesh provides information on agricultural development in the context of the relationship between the state and rural society. Articles by Abu Muhammad Shajaat Ali and Akhter Hameed Khan provide agricultural case studies on the village of Shyampur and the Comilla Model, respectively. The Far Eastern Economic Review and Economist both carry timely reports on the state of the economy. Among the most important sources of information on the economy, however, is the documentation provided by various agencies of the governments of Bangladesh and the United States and the World Bank. Important among these is the annual Statistical Yearbook of Bangladesh published by the Ministry of Planning. The Bibliography of Asian Studies each year carries numerous reports on the macroeconomy of Bangladesh and should be consulted for details.