Kissinger's ‘Basket Case’ Bangladesh Targets 8% Growth

[CaPtAiN_pLaNeT]

Kissinger's ‘Basket Case’ Bangladesh Targets 8% Growth

Kissinger's

By Unni Krishnan - Apr 17, 2011 10:40 PM MT


Kissinger's 'Basket Case' Bangladesh Targets Record Growth

Highrise buildings surround a poor neighborhood of northern Dhaka. Photographer: David Greedy/Bloomberg
Kissinger's 'Basket Case' Bangladesh Targets Record Growth

Traffic on the streets of Dhaka. Photographer: David Greedy/Bloomberg
Kissinger's 'Basket Case' Bangladesh Targets Record Growth

Buildings rise across the river from the slums of northern Dhaka. Photographer: David Greedy/Bloomberg
Bangladesh's Finance Minister Abul Maal Abdul Muhith

Bangladesh's Finance Minister Abul Maal Abdul Muhith. Photographer: Andrew Harrer/Bloomberg
Kissinger's 'Basket Case' Bangladesh Targets Record Growth

Laundry workers labor along a polluted river in Dhaka. Photographer: David Greedy/Bloomberg
Kissinger's 'Basket Case' Bangladesh Targets Record Growth

Tannery workers sort and salt cowhides in Dhaka. Photographer: David Greedy/Bloomberg

Bangladesh, once dubbed the world’s “basket case” by former U.S. Secretary of State Henry Kissinger, may boost growth to a record 8 percent within three years, according to the governor of the nation’s central bank.

“Bangladesh is an unsung hero,” Atiur Rahman said in an interview in his office in Dhaka. “If we could get some additional help in terms of infrastructure development and connectivity, we will do far better. We are in a buoyant mood.”

The South Asian nation, where more than half of the 166 million people don’t have access to electricity, plans to spend $10 billion, or 11 percent of its gross domestic product, in a decade to increase power capacity and leverage on cheap labor costs to attract investment from abroad. Bangladesh, often ravaged by cyclones and rocked by political unrest, boasts lower labor costs than India and China, drawing companies such as General Electric Co. (GE) and International Business Machines Corp.

Prime Minister Sheikh Hasina is banking on the cost advantage and energy projects to spur the economy, which expanded 5.8 percent in the year ended June 30. The paucity of power slows growth by one percentage point every year, according to the central bank.

“The only thing that is constraining is power,” said Rahman, speaking in his office in Dhaka’s Motijheel business district, where cycle rickshaws vie for road space with second- hand Mitsubishi Pajeoros. “We were a bit late but we have started addressing this infrastructural issue.”

$1.25 a Day

Per capita power consumption in Bangladesh is 144 kilowatt hour per capita, according to the World Bank. That lags war- ravaged Ivory Coast, which consumes 178 kilowatt hour per capita. The Asian Development Bank estimates more than half Bangladesh’s population live on less than $1.25 a day.

The government plans to attract companies from overseas to build infrastructure and boost investment to 30 percent of gross domestic product annually from 24 percent, and has set up a $700 million fund for building roads, ports and power plants, according to Finance Minister Abul Maal Abdul Muhith.

“Energy is the Achilles heel of this country,” Harvard- educated Muhith, 77, said in an interview at his office in Dhaka, where authorities resort to rolling blackouts. “We should be over the hump in the next year when more power will be available.”

Help is also at hand from Asian neighbors. India’s NTPC Ltd. (NATP), the region’s biggest power generator by value, plans to invest as much as 140 billion rupees ($3.2 billion) to build two plants in Bangladesh. Malaysia’s Genting Bhd. may also bid to build power plants, the Daily Star reported last year.
Behind Burundi

“Bangladesh’s rating could move up if sustained increases in economic growth were to be supported by infrastructure improvements,” Moody’s Investor Service said in a statement today keeping its outlook “stable.” Bangladesh is rated Ba3, the third non-investment grade rating.

Bangladesh, which has seen three major coups and two dozen smaller rebellions since the nation gained independence from Pakistan in 1971, ranks 130 out of 139 countries for its network of roads, power and ports, behind East Timor and Burundi, according to the World Economic Forum’s Global Competitiveness Report 2010.

The country, which shares a 4,023 kilometer border with India, has an installed capacity of 6,760 megawatts of power. That compares with 171,926 megawatts of capacity in India. China added 91,270 megawatts of capability last year, according to the China Electricity Council.

Hasina’s government is setting up small power plants to run diesel and furnace oil to add about 1,300 megawatts of power this year, according to the Dhaka-based independent think-tank Centre for Policy Dialogue.
Power Outages

Until the projects start generating electricity the government has stopped giving new power connections, said Mustafa Mujeri, director general of the Bangladesh Institute of Development Studies. “The situation needs to be fixed soon otherwise foreign investors may go to alternate countries.”

Bangladesh’s garment exports, Asia’s second-largest, account for 75 percent of the nation’s total and are the country’s biggest foreign-exchange earner. Still, manufacturers complain that the power outages hold them back.

“We are struggling due to the power shortage and the cost of production is getting higher,” said Shafiul Islam, president of the Bangladesh Garment Manufacturers & Exporters Association, whose members run diesel generators to ensure supply. “Our profit margin has gone down.”

Even so, the government’s pledge to provide uninterrupted electricity and cheap labor costs prompted Gerry Weber International AG (GWI1), Germany’s second-largest maker of women’s clothing, to move production from China to countries such as Bangladesh, Chief Executive Officer Gerhard Weber said in a Dec. 7 interview. Similarly, Florida-based women’s clothier Chico’s FAS Inc. (CHS) has permanently moved some sourcing into Bangladesh, it said last month.
Monthly Pay

“There are very few places in the world, if any, which are as cheap for light manufacturing,” said Mark Matthews, a strategist at Macquarie Group Ltd. “What’s absolutely critical is infrastructure and unfortunately it just has not happened at the pace as it should.”

Average monthly pay in 2009 for workers in Dhaka was $47 compared with $235 in Shenzhen, $100 in Hanoi and $888 in Taipei, according to data compiled by the Japan External Trade Organization.

“From Kissinger’s basket case, Bangladesh has come a very, very long way,” said Sanjay Kathuria, Dhaka-based country economist at the World Bank. “Despite all the natural calamities and political turbulence in recent years, growth over the last decade has averaged around 6 percent.”
‘Factory for the World’

Bangladesh in 2005 was included in a list of 11 developing countries that according to Goldman Sachs Group Inc. analysts, have the greatest potential to emulate the long-term economic success expected from China, India, Brazil and Russia. JPMorgan Chase & Co. named Bangladesh one of the “Frontier Five” markets worth investigating in an April 2007 note, along with Kazakhstan, Kenya, Nigeria and Vietnam.

“Bangladesh could be the factory for the world,” said Khalid Quadir, chief executive officer of Brummer & Partners Asset Management (Bangladesh) Ltd. That’s “if the government addresses some of the bottlenecks and can facilitate some of the solutions in a speedy manner.”

To contact the reporters on this story: Unni Krishnan at ukrishnan2@bloomberg.net;

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

 

[lonelyone]

yes, 8% growth, but 40 years after independence.

 

[Tiki Tam Tam]

8% is pretty good given the global recession and BD's infrastructure.

Years of Independence does not matter.

What matter is the global economic climate!

And BD is doing rather well.

 

[Urbanized Greyhound]

BD is doing quite well . It faces the same problem of weak infrastructure so common to all of South Asia. A strong trade link with South -East Asian countries Indonesia , Thailand , The ASEAN can attract enormous amounts of investment .Plus going by the current situation if the political scene is stable , Bangladesh's prospects are very bright.

They have a large number of emigrating high skilled professionals like engineers etc . With rapid investment and growth of the private sector ,the talent would be retained in-house and Bangladesh would make enormous economic progress.

 

[TopCat]

yes, 8% growth, but 40 years after independence.

In 1975 we had 12% growth but that meant nothing as was not sustainable. The growth was the direct result of investment in reconstruction of infrastructure after the war. But to achieve a sustainable high growth of 8% requires time and groundwork so that every organ of state have its participation in it.