Creating a middle income country

Bangladesh is at presently implementing its Sixth Five-year Plan (FY 2011  FY 2015). It has been prepared in the context of the long-term development vision incorporated in the Perspective Plan (2010  2021) which seeks to transform Bangladesh into a middle income country by 2021.
Perhaps the most widely used method of determining a country's economic status is to follow the classification of the World Bank, which divides countries into four categories  low income, lower middle income, upper middle income and high income countries. Obviously Bangladesh seeks to achieve lower middle income status by 2021 as reaching the upper middle income stage within this time would be beyond the realm of possibility. The determination of the status is based on estimation of per capita gross national income (GNI) by the World Bank following a well-established methodology called the Atlas methodology.
It is well known that per capita income is not a perfect indicator of a country's welfare. There are several considerations that lend support to this statement. Per capita income does not include many welfare  enhancing activities which are not transacted through the market mechanism, does not take into account the negative externalities imposed on a society in the pursuit of higher income and, perhaps most importantly, ignores the distribution of income and the state of human development of the population as a whole. Nevertheless, per capita income remains a widely accepted development goal. It is a reasonably good, admittedly imperfect, measure of economic status, provides a quantitatively measurable goal, and is usually positively correlated with various other indicators of social and human development.
In light of the above, whether or not Bangladesh can achieve its cherished goal of becoming a lower middle income country by 2021 is of immense interest. A.T. Rafiqur Rahman, a retired senior official of the United Nations, investigates this question in his recently published book, Can Bangladesh be a Middle Income Country within a Decade? The author examines the per capita GNI level of ten countries (China, India, Pakistan, Sri Lanka, Vietnam, Ghana, Guyana, Mauritania, Sudan and Zambia) relative to the cut off level about ten years prior to their attaining lower middle income status and their growth performance over this period and compares the situation of Bangladesh with those countries. Based on this comparison, the author is optimistic about Bangladesh attaining the status by 2021, if not before. The optimism is based on the assumption of sustained high growth (not falling below 6.7 percent achieved in FY 2011), increasingly confident private sector, further diversification of exports, improvements in education and skill, dynamism of the youth and an energetic and enlightened civil society able to overcome political tensions and conflicts and keep the country focused on economic and social growth.
However, the author also notes that Bangladesh advanced only 18 percentage points during the last eleven years (2000 to 2010) from 46% in 2000 to 64% in 2010 of the per capita GNI required for entry into the middle income status. If this result is projected in a linear manner, it would be 2032 when the country can move into the lower middle income group. This finding underscores the need for acceleration of growth and a number of specific recommendations are offered to accomplish this. Those include massive support for human development anchored on broad-based education and training plans geared to realistic employment opportunities at home and abroad and entrepreneurial support; creative use of the Bangladeshi diaspora equipped with considerable financial resources, professional expertise and experience; simplified and shortening regulatory processes and building political consensus on national issues. The author also cautions that ominous political conflicts generating violence and instability can cause regression of the country's economic growth and may delay achievement of middle- income status by many years.
All analysts may not necessarily agree with the methodological approach of the author, but I am convinced that the conclusions reached and the recommendations offered will receive wide acceptance. The book, written without extensive use of technical jargon, should be immensely useful to development practitioners, researchers, academics and others interested in sustained economic growth of Bangladesh.
It may also be noted in this context that the World Bank has recently undertaken a study which, inter alia, examines the prospect of Bangladesh to achieve lower middle income status by 2021 following a different methodology. According to this study, Bangladesh would have to sustain GDP growth rate of 6.6 percent under the best possible scenario of remittance growth and likely increase of the threshold per capita GNI. We already fell short of this rate in FY 2012 and will also definitely fall short in FY 2013. The required GDP growth rate in the remaining years up to 2021 will thus have to be higher than 6.6 percent. Achieving and maintaining a GDP growth rate of about 7 percent is not impossible, but it is not going to be easy in view of the continuing challenges to investment (See my paper in the Daily Star dated 29 November 2012) aggravated by regular cycles of political discord, general strikes and street violence.

Mirza Azizul Islam, former Adviser to the Caretaker Government, is at present a visiting Professor, BRAC University .