Saturday, December 17, 2011

Economic Comparison Between Bangladesh & Pakistan

Economic gap between East and West Pakistan in 1960s is often cited as a key reason for the secessionist movement led by Shaikh Mujib's Awami League and the creation of Bangladesh in 1971. This disparity has grown over the last 40 years, and the per capita income in Pakistan now stands at 1.7 times Bangladesh's in 2011, slightly higher than 1.6 as it was in 1971.

Pakistan-Bangladesh GDP Comparison (Source: World Bank)


Forty years after the Fall of Dhaka and the creation of Bangladesh on Dec 16, 1971, there's still much talk about it. The Daily Star, a Bangladeshi newspaper, has published a piece on the subject by Akbar Ali Khan marking the 40th anniversary of Bangladeshi independence. In his Op ED, Mr. Khan argues that "political independence provided much more conducive environment for growth in Bangladesh than united Pakistan. Though economic growth in East Pakistan was revived during Ayub Khan's so-called decade of reforms, growth rate in erstwhile East Pakistan was much lower than that of West Pakistan".

Agriculture Value Added Per Worker in Constant 2000 US$ (Source: World Bank)


In his zeal to rationalize independence based on the economic argument, Mr. Khan has clearly ignored the following facts:

1. In 1969-70, the ratio of per capita incomes between West and East Pakistan was 1.6, as detailed by Mr. Khan. In 2011, however, this ratio has increased to 1.7, according to the IMF data.

2. Bangladesh is still categorized by the World Bank among low income and least developed countries of the world, while Pakistan is a middle income country and classified well above the list of least developed countries of the world.



3. Bangladesh is ranked as 11th poorest country in the world by the World Bank in terms of the percentage of population living on $1.25 or less a day. Neighboring India is the 14th poorest on this list, while Pakistan does not show up on it. The rest of the nations on this list are all in sub-Saharan Africa.

3. In 1947, East Pakistan started with a lower economic base than West Pakistan, and the loss of its Hindu Bengali business elite in 1947 left it worse off. It also didn't have the benefit of the large number of Muslim businessmen who migrated to West Pakistan, particularly Karachi, after partition of India in 1947.

4. Pakistani economist Dr. Ishrat Husain explains it well when he says that "although East Pakistan benefited from Ayub’s economic reforms in 1960s, the fact that these benefits were perceived as a dispensation from a quasi-colonial military regime to its colony—East Pakistan—proved to be lethal."

It must, however, be acknowledged that Bangladeshi economy has been outperforming Pakistan's in the last few years, particularly since President Musharraf's departure in 2008. Bangladesh has also made significant strides on various social indicators and it now ranks just one notch below Pakistan on human development index 2011. Bangladesh's family planning efforts have been remarkably successful in lowering the fertility rate of Bangladeshi women, an area where Pakistan significantly lags behind the rest of South Asia.

Related Links:

Haq's Musings

Comparing India and Pakistan in 2011

Is This a 1971 Moment in Pakistan's History?

Pakistan Ahead of India in Graduation Rates

Pakistan Tops Job Growth in South Asia

Pakistan Needs More Gujaratis?

President Musharraf's Legacy

12 comments:

Riaz Haq said...

Here are parts of a Daily Times Op Ed by Javed Jabbar on 40th anniversary of the Fall of Dhaka:

In the narrative adopted by Bangladesh and echoed by India and most of global discourse, about three million Bengalis were killed and about 300,000 women were allegedly raped by the Pakistan Army during the nine-month conflict resulting in the secession of Bangladesh. These numbers fail spectacularly on the anvil of factual scrutiny, documentation and rationality. In the 262 days between March 26 and December 16, 1971, Pakistan’s armed forces did not exceed 45,000 troops at optimal levels. The 90,000 prisoners-of-war held by India included over 50,000 non-combatant, unarmed West Pakistani civilians.

Spread out in small, embattled formations across East Pakistan, facing a newly unfriendly or uneasy population, an India-supported insurgency, preparing for an Indian invasion, constantly under-supplied and under-equipped, the Pakistani forces would have had to kill 11,450 Bengalis and rape 1,145 women every single day for 262 days to reach the levels claimed. Not a single credible document has been cited in 40 years to substantiate such absurd allegations of scale.

By unverified frequent repetition of the grotesque figures, the names of Pakistan and Pakistan’s armed forces have become synonymous with the charge of a ‘genocide’ in East Pakistan, which actually never took place. The unfounded charge amounts to the character assassination of a nation’s armed forces.

The Pakistani version is diametrically different. The official Commission of Inquiry headed by a former chief justice could only estimate 36,000 dead. Other estimates go between 100,000 to 200,000 killed. To contrast the two claims is not to demean the gravity of the catastrophe by cold statistics. Every human life is sacred. Every human being’s dignity is sacrosanct. Any violation of either is reprehensible.

Some atrocities by Pakistani troops did take place. Several eye-witness accounts state that the targets were almost always adult males, that women and children were spared. The killings were not one-sided. Many thousands of non-Bengalis and West Pakistanis, including women and children, were brutally slaughtered by Bengalis between 1st March and March 26, 1971, and subsequently as well, as also after December 16, 1971. About 4,000 Pakistani troops also perished in the conflict.

The need to revisit this facet of history to conclusively establish the truth is superbly highlighted by the meticulous research recorded by a scholar who is neither a Pakistani nor a Bangladeshi. In her unusually sensitive and remarkably balanced book, Dead Reckoning: Memories of the 1971 Bangladesh War, Sarmila Bose — an Indian Bengali Hindu by birth, a senior Research Fellow at Oxford University — powerfully and persuasively presents the case for a rigorous, evidence-based search for the truth.


http://www.dailytimes.com.pk/default.asp?page=2011\12\17\story_17-12-2011_pg3_5

Riaz Haq said...

Here's a mid-year economic performance summary by Finance Minister Dr. Hafeez Shaikh as reported by APP:

ISLAMABAD, Dec 19 (APP): Federal Minister for Finance, Dr Abdul Hafeez Shaikh here on Monday said economic indicators were showing positive results due to prudent economic policies initiated by the government.Briefing a newsmen, here at the Ministry of Finance, the Minister said the government wanted to improve the workings, efficiency and performance of State Owned Enterprises like Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM) and Pakistan Railways through introducing efficient management and operating through the professionals in order to make them profitable entities for the economic development of the country.
He added that government has fulfilled the minimum financial requirements of the PSM in order to help the organization improve its working capacity.
He informed the media that large scale manufacturing sector has registered growth of 3.6 percent during the first quarter of current financial year which was a health sign for national economy.
He added that revenue collection up to December 16 stood at Rs. 715 billion which was realized at Rs. 555 billion during the same period of last financial year.
Besides, the governmental expenditures were fixed at 42.5 percent during first five months of current financial year which was recorded at 38 percent, he added.
He further informed that government expenditure had targeted to 50 percent of the total expenditures by December this year which would reach up to 42 percent.
However , he said that it would spent about 40 percent of (PSDP) by December.Secretary Finance, Dr Waqar Masood said that export grew by 11.5 percent against the expected targets of 5 percent,while imports grew by 20 percent as against the expected targets of 10 percent.
He informed that inflation rate was recorded at 10.2 percent during the period under review which was recorded at 14 percent during the last year.
Foreign remittances in the country were increased by 18 percent which crossed US $ 5 billion mark during last five months of current financial year.
Secretary Finance said that Federal Board of Revenue (FBR) was determined to achieve its revenue targets of Rs. 1952 billion as revenue collection has registered 28 percent growth as compared to same period last year.


http://app.com.pk/en_/index.php?option=com_content&task=view&id=171141&Itemid=1

Sami said...

Well some of the fact needs to be mentioned here. The 1971 virtually destroyed all the infrastructure of Bangladesh and almost everything was needed to be rebuilt from top to bottom. As a result Bangladesh lost 2 decades mainly 1970s and 1980s. This are the 2 decades where Pakistan has done most of the development.

However Bangladesh started to picking up from 1990s and 2000s. If you see the development in this 2 decades is much more then that of Pakistan. In the coming decades this trends will continue where Bangladesh is expecting to get a 7-8% GDP growth within 2-3 year, Pakistan got only 2% gdp growth last year. The internal chaos will hinder the growth more.

Now lets come to the GDP or per capita GDP. The GDP of Bangladesh is a hugely underestimated one that people usually quote mainly due to the fact that it is based on 1995 economic base year. Since then economic structure of Bangladesh has changed completely. Most of the new emerging industries are not counted in the total economy such as private banks, trading companies, private universities, cellular companies, tv stations etc but they contribute to a great extent. Other part is that economic activities at the villages. Due to receiving of high amount of reminiscences economic activities that occur there is huge. On top of it in Bangladesh provide only less then 1% of the people pays taxes with mostly fake information. That actually helped to create a shadow economy. Recently finance ministry indicated that 37-81% economy is shadow economy and size is 50-100 billion usd. Even though other country's also have shadow economy but this size is massive for Bangladesh where as other have only in between 6-20% where as for Bangladesh it is 37-81%.

If we sum up all we will find that at present there is not much difference between the per capita gdp of Pakistan and Bangladesh. This year Bangladesh will publish updated GDP based on 2005 economic baser year. This will give a clear picture what is the present status of the economy though it will not count shadow or black economy.

Lastly Bangladesh has done so far really well after getting independence from Pakistan even better then Pakistan. It will continue at more faster scale in the coming year. But still has some challenges such as corruption, political instability, poor infrastructure, load shedding etc. Bangladesh needs to focus on these stuff if we want to attain more faster growth or 10% GDP growth within the next couple of years.

Anonymous said...

Pakistan fighting the war of terror for entire world. Despite
this still pakistan economy is growing. Bandladesh is enjoying prefential treatment being a poor and low income country where as in the case of Pakistan it is not so. Pakistan is oblige to maintain a huge army because of its big enemy India where in case of Bangldesh, the country is ruling as a part of India and not obliged to maintain a big and advance army. Pakistan is hosting 3 million refugees from Afghanistan Iran and African countries where as Bangladesh pushed back to their country a very little refugees from Burma when they tried to take shelter and save their live from Budhist terrorists.
Quality of life is much better in Pakistan as compared to Bangladesh and even India. There is no long term investment in Big projects in Bangladesh while in case of Pakistan the case is reverse

Riaz Haq said...

Here's a Bloomberg story titled "Pakistan, Land of Entrepreneurs":

On a warm Sunday morning in November, Arif Habib leaves his posh home near the seafront in southern Karachi and drives across town in a silver Toyota Prado SUV. About half an hour later, he arrives to check up on his latest project: a 2,100-acre residential development at the northern tip of this city of 20 million. He hops out, shakes hands with young company call-center workers who are dressed for a cricket match, and joins them at the edge of the playing field for a traditional Pakistani breakfast of curried chickpeas and semolina pudding. After a quick tour of the construction site, he straps on his leg pads, grabs his bat, and heads onto the field. “The principles of cricket are very effective in business,” says Habib, 59. “The goal is to stay at the wicket, hit the right balls, leave the balls that don’t quite work, and keep an eye on the scoreboard. I feel that my childhood association with cricket has contributed to my success.”

Habib, who started as a stockbroker more than four decades ago, has expanded his Arif Habib Group into a 13-company business that has invested $2 billion in financial services, cement, fertilizer, and steel factories since 2004. His group and a clutch of others have become conglomerates of a kind that went out of fashion in the West but seem suited to the often chaotic conditions in Pakistan. Engro (ENGRO), a maker of fertilizer, has moved into packaged foods and coal mining. Billionaire Mian Muhammad Mansha, one of Pakistan’s richest men, is importing 2,500 milk cows from Australia to start a dairy business after running MCB Bank, Nishat Mills, and D.G. Khan Cement.

These companies have prospered in a country that, since joining the U.S. in the war on terror after Sept. 11, has lost more than 40,000 people to retaliatory bombings by the Taliban. Political violence in Karachi has killed 2,000 Pakistanis this year, and an energy crisis—power outages last as long as 18 hours a day—has led to social unrest. Foreign direct investment declined 24 percent to $244 million in the four months ended Oct. 31, according to the central bank.

At the same time, some 70 million Pakistanis—40 percent of the population—have become middle-class, says Sakib Sherani, chief executive of Macro Economic Insights, a research firm in Islamabad. A boom in agriculture and residential property, as well as jobs in hot sectors such as telecom and media, have helped Pakistanis prosper. “Just go to the malls and see the number of customers who are actually buying in upscale stores and that shows you how robust the demand is,” says Azfer Naseem, head of research for Elixir Securities in Karachi. “Despite the energy crisis, we have growth of 3 percent.”

Sherani of Macro Economic Insights estimates the middle class doubled in size between 2002 and 2012. “Those who understand the difference between the perception of Pakistan and the reality have made a killing,” Habib says. “Foreigners don’t come here, so the field is wide open.” The KSE100, the benchmark index of the Karachi Exchange, has risen elevenfold since mid-2001. Shares in the index are up 43 percent this year alone. Over the past decade, stocks have been buoyed by corporate earnings, which were bolstered in turn by rising consumer spending.
---------
Today, Habib has 11,000 employees and annual revenue of 100 billion rupees. He plans to expand into commodities trading and warehousing. “I’ve created all my wealth in Pakistan and reinvested all of it here,” says Habib, who drives himself to his cricket matches and is never accompanied by security guards. In 1998, when Pakistan’s share index fell to a record low after the government tested nuclear weapons, Habib bought shares even though “people thought I was mad.”...


http://www.businessweek.com/articles/2012-11-29/pakistan-land-of-entrepreneurs

Riaz Haq said...

Here are some figures from Economist magazine's EIU 2013:

Bangladesh GDP per head: $695 (PPP: $1,830)

http://www.economist.com/news/21566450-bangladesh

Pakistan GDP per head: $1,410 (PPP: $2,960)

http://www.economist.com/news/21566503-pakistan

Pakistan-Bangladesh GDP per head Ratio: 2.03 ( PPP: 1.62)

Riaz Haq said...

Here's interesting data on GDP of Indian states...look at the per capita incomes of Chadigarh, Punjab and Haryana and compare with West Bengal:

Chadigarh Rs. 140,073

Punjab Rs. 78,594

Haryana Rs. 109,064

West Bengal Rs. 55,222

http://unidow.com/india%20home%20eng/statewise_gdp.html

Riaz Haq said...

Here's NY Times on a company locating sweatshops for cheap garments:

Li & Fung — the most important company that most American shoppers have never heard of — has long been on the cutting edge of globalization, chasing cheap labor to garment factories first in China, then elsewhere in Asia, including Bangladesh.
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In Bangladesh, Li & Fung has been tied to several calamities. It arranged the production of clothing for Kohl’s at one factory where 29 workers died in a fire in 2010. It brokered some work at another in 2011 where more than 50 workers who made Tommy Hilfiger clothing were injured and at least 2 died in an explosion and a stampede.

And last year, Li & Fung was responsible for some garments produced at the Tazreen Fashions factory, when 112 workers died in November in a fire after many of them were ordered to continue working even though alarms had sounded.

Such episodes highlight the often hidden role played by sourcing companies in trying to feed the West’s seemingly insatiable demands for ever cheaper merchandise. Worker advocates say that Li & Fung and others make accountability more difficult by adding a layer of insulation between reputation-conscious retailers and often poorly treated workers, allowing businesses to avoid bad publicity and legal liability when things go wrong.

Sourcing companies face an inherent conflict: they are expected to find low-cost factories for clients, but also to blow the whistle if the factories violate safety standards. Some critics say that the scale of Li & Fung’s operations and the speed at which it shifts production from one site to another give owners less incentive to improve their factories and make it difficult for Li & Fung to deliver on its pledges of carefully vetting its suppliers.

“We make our best effort to weed out bad factories,” said Bruce Rockowitz, chief executive of Li & Fung. “But we don’t always succeed.”

Mr. Rockowitz added that Li & Fung employees conduct rigorous on-site audits — unlike many competitors — to ensure that the company does business only with factories that adhere to safety regulations. In the case of Tazreen, Li & Fung had acquired a new subsidiary that placed orders at the factory, but the changes sought by Li & Fung had not been made 11 weeks later when the fatal fire occurred, a company spokesman said....


http://www.nytimes.com/2013/08/08/world/linking-factories-to-the-malls-middleman-pushes-low-costs.html?pagewanted=all&_r=0

Riaz Haq said...

People often compare Balochistan with East Pakistan. Balochistan has nothing in common with East Pakistan.

1. Only a third of the population of Balochistan is Balochi speaking. The Baloch Nationalists are too few number, highly disorganized and deeply divided among themselves. They are no more than a nuisance that Pak military can effectively handle. Besides, almost as many ethnic Baloch people live outside of Balochistan province (in Sindh and Southern Punjab) as in Balochistan, according to Anatol Lieven(Pakistan-A Hard Country)....and they are quite well integrated with the rest of the population in Pakistan. Asif Zardari, the current president of Pakistan, is an ethnic Baloch, as was former President Farooq Laghari and recent interim Prime Minister Mir Hazar Khan Khoso. Pakistan's COAS Gen Musa was a Hazara from Balochistan.

2. In East Pakistan, there was an election won by Sheikh Mujib with heavy mandate. Nothing like that has happened nor likely happen with a bunch of fractious Baloch tribesmen who represent only a few districts in Balochistan.

3. East Pakistan was split by an outright foreign invasion which is highly unlikely to happen to nuclear-armed Pakistan.

4. Retired US Army Col Ralph Peters is a CIA guy who knows a lot of Balochistan. Here's an excerpt of a Huffington Post Op Ed on Baloch insurgents:

According to Peters, one of the most serious issues with the Baloch independence movement is "deeply troubling" infighting. In fact, he is emphatic in his condemnation of such bickering; going so far as to assert: "they are quickly becoming their own worse enemies."

In his view, individual Baloch simply don't understand that their personal feuding undermines the larger movement: "Certain Baloch fail to understand that their only hope in gaining independence is if they put their own egos and vanity aside and work together. This is the cold hard fact. They are already outgunned and outmanned. Pakistan will continue to to exploit their differences until they realize this."

So long as the Baloch continue to engage in "petty infighting," including "savaging each other in emails," (Ralph) Peters is pessimistic they can garner widespread support in the West. In fact, he warns that such infighting could eventually put off even their staunchest supporters.

As a result, he recommends that the Baloch leadership and activists set the example and halt their public bickering: "The Baloch leaders need to stop their severe personal attacks on each other and others. In the military, we say that you don't let an entire attack get bogged down by a single sniper. But, there are individuals out there who are causing divisions and attacking people. They tend to look at the debate as if you don't agree with me completely then you're my enemy. This undermines their cause."

Until these leaders and activists "support the big picture," Peters offers little hope that the broader Baloch nation will be able to "work together, put aside their deep divide, and unify." This troubles Peters as he confides: "At this point, do I believe they have a good chance of achieving independence? No. But, it would be much higher in the future if they just start working together. It's frustrating that the leaders can't unite."

Peters is also bothered by the Baloch tendancy to blame such infighting on covert operations by Pakistan's military and security services: "The region as a whole tends to blame conspiracy theories. But, I have come to believe that you never accept conspiracies when something can be explained by incompetence..."

http://www.huffingtonpost.com/eddie-walsh/baloch-pakistan_b_1326421.html

Riaz Haq said...

Feb 1962 @dawn_com news report: East Pakistan (#Bangladesh) (21.5%) beats West #Pakistan (16.3%) in #literacy rate
http://www.dawn.com/news/753508/east-wing-beats-west-wing-in-literacy-rate …

Riaz Haq said...

World Bank's 2012 data show Bangladesh's PPP GDP is $372 billion and Pakistan's PPP GDP at $795 billion is more than twice Bangladesh's.

http://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD/countries/1W?order=wbapi_data_value_2012%20wbapi_data_value%20wbapi_data_value-last&sort=desc&display=default

Riaz Haq said...

World Bank's 2012 data show Bangladesh's PPP GDP is $372 billion and Pakistan's PPP GDP at $795 billion is more than twice Bangladesh's.

http://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD/countries/1W?order=wbapi_data_value_2012%20wbapi_data_value%20wbapi_data_value-last&sort=desc&display=default