What needs to be done in next 5 years to chase high-income dreams of Bangladesh

Infograph: TBS

Despite many key goals of the current five-year plan far from being achieved, the next one, already in development, will set the bar even higher for the government to make its upper-middle and high-income missions possible in the next 15 years or so.

While setting higher growth targets and doubling per capita income between July 2025 and June 2030, it stresses long-overdue reforms to enhance institutional efficiency, elevating Bangladesh to a high-income country both economically and in citizens' quality of life.

On top of drawbacks such as slow growth, poor revenue and inadequate investment, the concept note on the ninth five-year plan (9FYP), recognises "a critical mismatch" between the skills of the labour force and the demand of a middle-income country.

To address the skills gap and poor quality of learning, it calls for ramping up public investment in education with a focus on science, maths and technology.

"Introducing a mandatory 12-year education system for all would lay a solid foundation for a high-income country," reads the concept note, which will be discussed on 4 July at the first meeting of the steering committee on the 9FYP.

It also notes that per capita health spending is high in Bangladesh and aims to introduce a "universal health care system" and offer free healthcare for all under the age of 5 and over 65.

The next FYP envisions 8% plus GDP growth to propel Bangladesh to an upper-middle income country by 2031 requiring Bangladeshis to have per capita income raised to $4,466 from $2,784 now.

The plan also aligns with the government's Smart Bangladesh agenda and long-term vision to reach a developed nation status – with a per capita income of $13,846 or more in the World Bank's definition – by 2041.

Robust and effective institutions are pivotal for good governance and a foundation for propelling Bangladesh towards high-income status, it says, prioritising a broad spectrum of reforms spanning public administration, the judiciary, law enforcement agencies, parliamentary democracy, and economic and social systems.

"These reforms will seek to streamline bureaucratic processes, enhance the rule of law, ensure transparent governance and promote economic freedom," it hopes.

In parallel to the blue economy, it identifies the space economy as another potential area and plans to harness the benefit of the country's own satellite in the new frontier of the Fourth Industrial Revolution.

The 9FYP will align with the government's long-term Perspective Plan 2041 as well as transition to LDC graduation while incorporating UN's SDG – making it different from previous FYPs.

Much of the reforms, stressed for years and ignored, have been repeated in the concept note for the next FYP, which finds those reforms imperative to attract much-needed investment to attain higher, equitable and inclusive growth.

With still a year left of the current 8FYP, the planning ministry has drafted the concept note for the next FYP to spur private and foreign investment and domestic resources.

It seeks to focus on macroeconomic stability and transform economic structure to raise overall investments to 41% of GDP by FY31 and 47% by FY41 and push the GDP growth rate above 8%, as envisaged in the Perspective Plan. The current benchmark of overall investment rate is 31.3%.

The private sector investment including foreign direct investment, which plays a crucial role in driving growth and job creation, remains sluggish at around 24% of GDP.

"Although public investment has contributed to filling the gap, the overall investment efforts are still falling short of the required level to achieve the targeted GDP growth rate," says the concept note "Promoting sustainable and equitable growth for achieving upper middle-income Bangladesh".

By fostering citizen-centric, transparent, accountable, knowledge-based, integrated and efficient smart administration, Bangladesh aims to cultivate an environment conducive to investment, innovation and social progress, it says, suggesting incorporation of chapters in educational curriculum reflecting the government's zero-tolerance policy against corruption.

Bangladesh exhibited sustained and robust economic performance halfway through the 8FYP, ending in June next year, despite the impact of the Covid-19 pandemic and global economic crisis.

The GDP grew quickly from 3.4% in FY20 to 6.94% in FY21 and 7.10% in FY22, it says, referring to the government's stimulus loans that helped the economy rebound quickly from the pandemic before being struck again by the Ukraine and Gaza wars.

Due to some obvious reasons including global conflicts, the original target of achieving an 8% growth rate over the five years in the 8FYP period could not be fully utilised, it argues.

"Therefore, the primary objective of the 9FYP will be to accelerate the pace of growth to regain momentum, strengthen macroeconomic stability, reduce poverty and make significant strides towards attaining upper-middle-income country status while containing the high inflation," the concept note says.

The next FYP will prioritise strategies to accelerate private and total investment rates with special attention on FDI and create an enabling environment for investors, it says.

"The plan aims to further reduce the poverty rate to 11% by 2028, end extreme poverty (less than 3%) by 2031 and end poverty (less than 3%) by 2041," reads the concept note.

The 8FYP has made very significant strides towards reducing poverty thus far, it points out, citing BBS data about moderate poverty dropping to 18.7% and extreme poverty to 5.6% in 2022.

The 9FYP will capitalise on the successes of the 8FYP and integrate with the government's PP2041, Smart Bangladesh and climate visions.

"It will focus on streamlining Bangladesh's transition away from LDC status, attainment of SDGs by 2030 and expediting Bangladesh's journey towards becoming an upper middle-income economy by 2031," reads the document.

To create employment and facilitate a smooth transition from LDC graduation, the next five-year plan will focus on diversifying export products beyond RMG, finding new markets and exploring export potentials of services such as shipping, aviation and information technology.

Bangladesh's tax-GDP ratio remains one of the lowest in the world, making public resources inadequate for funding infrastructures and social sectors, it says. To meet the country's growing financing need, the new FYP will emphasise implementation of the new VAT act, tax policy reforms, alternative dispute resolutions and automation of tax management systems.

The 9FYP will prioritise financial sector reform to restore the health of the banking sector through improved monitoring, redefining loan classification (treating a loan "overdue" three months after the expiry of the instalment date instead of six months now) and implementing the Money Loan Court Act.

Some major infrastructures such as the Padma rail-road bridge, metro rail in Dhaka, and tunnel under the Karnaphuli in Chattogram were built during the 8FYP period when 100% electricity coverage was reached with generation capacity increased to 28,134MW in FY23 from 23,548MW in FY20.

Yet, the country's infrastructural landscape stands far short of meeting the demands of a burgeoning upper-income economy, the concept paper says, explaining why the next FYP needs to focus more on nationwide connectivity and secure energy resources.

The plan will include constructing 12 expressways by 2041, converting all roads and highways to four lanes gradually and completing various Mass Rapid Transit projects by 2030. Additionally, Dhaka-Chattogram Expressway and Bagerhat Khan Jahan Ali Airport are also among the priorities of the next FYP. It looks to raise electricity generation capacity to 30,000MW by 2030 and 40,000MW by 2041 expecting 10,000MW from renewables.

To secure future energy supplies, the government also plans to explore hydropower imports from Nepal and Bhutan as well as augmentation of state-owned Eastern Refinery's fuel processing capacity and transmission lines under public-private partnerships.

In social sectors, the 9FYP envisages mandatory 12-year education for all and free healthcare services for all under-5 and over-65 population.

The 9th plan aims to strengthen the government's efforts to provide basic healthcare and nutrition services to all citizens under a strategy which includes digital health services and unique health IDs.

"These initiatives are pivotal for enhancing the populace's health and well-being and are in line with the overarching aspiration of elevating Bangladesh to an upper-middle-income status," reads the note on 9FYP.

The plan recognises the significance of institutional reforms to ensure good governance and create an environment conducive to investment, innovation and social progress matching high-income status Bangladesh is aspiring.

"The plan will prioritise a broad spectrum of reforms spanning public administration, judiciary, law enforcement agencies, parliamentary democracy, and economic and social systems," says the note, hoping that the reforms, if implemented, will streamline bureaucracy, enhance rule of law, ensure transparent governance and promote economic freedom.