Of economic hopes and aspirations

IN the 1950s and 1960s, a group of Bengali economists demonstrated how a 'two-economy' system was increasing the economic inequality between East and West Pakistan. The Six-Point Programme was a frontal assault on the foundation of Pakistan's colonial exploitation and authoritarian mode of governance. The general election in 1970 was fought on the basis of economic and political autonomy and inclusiveness, which reflected the legitimate demands of the people of the then East Pakistan. Bangladesh emerged out of a quest for economic and political emancipation -- where people's participation would be the key to development.

With the acceleration in the growth of per capita income, Bangladesh has made considerable progress in poverty reduction. During the 1990s, the national incidence of poverty declined from nearly 60% to about 50%, which came down to about 40% in the following five-year period.

Bangladesh has achieved robust and sustained growth of export earnings, and exports have become an ever more important part of the economy. While exports accounted for around 5% of the economy in the post-war years, they account for over 20% now. Remittances from migrant workers have emerged as a major factor, amounting to over 10% of the economy in recent years. During the same period, Bangladesh moved from aid dependency to self sufficiency as total exports of goods and services were more than six times the foreign aid it received in recent years. However, to what extent has such growth in national earnings added to human welfare?

Experience suggests that if our economy grows faster, more people will flock to the cities. Dhaka in particular has gone from being home to 2% of Bangladeshis to 10% in the past four decades. Lack of decentralisation is causing increasing inequality in income earning, where residents of Dhaka and Chittagong are earning way more than those living elsewhere. If we are to adequately address the triple challenge of poverty, unemployment and inequality, we have to generate meaningful economic activity in villages and rural towns. Boosting small business in these areas is a way of achieving this goal.

Bangladesh should focus on enterprises in tourism, construction, agriculture and cultural industries, as well as information and communications technology. The enterprises that are owned by medium and small scale entrepreneurs, disabled persons, women as well as the youth should be supported. There has been increasing involvement of the corporate sector, organised business, labour, private financing institutions, NGOs, universities as well as our international partners. They all spread the same message of the need to nurture small business, which is the engine of growth and development.

There are three key pillars in our small business strategy. These are financial and business development support services, procurement support, and improved regulatory environment. A key factor is access to finance. There has to be improved service to small businesses, and a one-stop shop for funding. The availability and cost of funding to small businesses is vital but not sufficient. More needs to be done to strengthen technical skills and promote market access. They will support small businesses and establish a business hub to provide technical assistance to small and medium enterprises, which could be extended to export promotion.

Amidst all these achievements, the rise in inequality in the distribution of income is a concern. After all, the dream of economic emancipation through alleviation of economic inequality was one of the driving forces of our independence. Regrettably, there has been an increase in inequality in income distribution from the mid-1980s. Gini coefficient, a measure of the inequality of wealth or income distribution, stood at 33.12 in 2010 from 33.22 in 2005. It was 25.88 in 1984 and went up to 33.46 in 1996. A small section of the society enjoys most of the country's wealth, depriving the larger section. Income share held by the highest 10% increased from 21% in 1984 to 27% in 2010. Income share held by the lowest 10% decreased from 4.13% to 3.99%.

The pattern of distribution of income can be perceived from percentage share of income of household by docile groups. The gap between the poorest (bottom 5%) and the richest (top 5%) is extremely high. In 2005, the income accruing to top 5% of the households was 26.93%, whereas it was 0 .77% for the bottom 5% households. In 2000, income accruing to top 5% of the households was 28.34%, whereas it was .93% for the bottom 5%. It decreased from .93% in 2000 to .77% in 2005, while the share of income of the top 5% decreased from 28.34% to 26.93% over the same period, indicating that income was accruing at the middle level.

Though macroeconomic and social indicators show that Bangladesh has been better off in some sectors as an independent nation, it is far behind in achieving its primary goal of alleviating economic and political inequality. Macroeconomic growth contributed to higher national income, but growing income inequality needs to be addressed. Geographically centralised industrialisation has contributed to a higher flow of domestic migration and export of goods and services, helping the national economy gain self-sufficiency. It is essential to safeguard rights of the workers, the ordinary people and the marginal poor as well. The economy cannot gain independence with the growing income inequality, or the suffering of the industrial workers and of the farmer who does not get good price for his produce.

The writer is a retired Secretary and former Chairman, NBR.