After becoming independent in december 1971 the prospects for development of the new nation looked all but promising. Plagued by constant food shortages and recurrent famines, devastating floods and cyclones, a high population density and high population growth, a weak government and administration, Bangladesh seemed like a permanent disaster to the rest of the world.
The majority of people survived on a diet of a minimal amount of rice and consumption of pulses and animal products, mainly fish, was totally inadequate. 80% of the population was illiterate. Child mortality was high with a quarter of children dying before the age of 5.
In addition, the War of Independence had resulted in substantial war damage. Of fixed physical investment an estimated half was affected which led to a reduction in productive capacity and there were losses in food production and destruction of housing.
The country had insufficient capacity to generate resources for development while maintaining minimum consumption levels and was therefore highly dependent on funding by foreign donors.
1950-1960 union with West-Pakistan
The union with West-Pakistan had been an unhappy one, both politically and economically. The central government left hardly any room for independent action by the local East-Pakistan government and there was a considerable outflow of resources from East to West, though at a reduced rate at the end of the 1960s.
The East did not receive a fair share of the foreign aid Pakistan received. Though from an economic point of view it might have been justified to concentrate resources on West-Pakistan because of its better economic prospects, in terms of equitable development and political wisdom it certainly was not. To many people in East-Pakistan it felt as a time of exploitation by West-Pakistan.
At the beginning of the 1950s regional incomes in the West were about 20% higher than in the East, increasing to more than 30% ten years later. At the end of the 1960s per capita income in the West was estimated at twice that of the East.
At independence Bangladesh was an overwhelmingly agricultural society with rice as the main food crop and jute the most important cash crop. The industrial base of the country was very poor. The contribution of agriculture to GDP was almost 60% while that of large and medium industry was around 4%.
In the rural economy land was the most important earning asset but due to the high population density it was also extremely scarce. In 1960 35% of rural households were classified as functionally landless (owning less than 0.5 acres), increasing to more than 45% in 1970. Another 30% were classified as marginal landowners (owning 0.5 - 2.5 acres). Therefore the majority of rural households depended for their subsistence on various other sources of income, agricultural as well as non-agricultural. Renting in land through various tenancy arrangements, working as agricultural day labourer, homestead vegetable gardening, livestock keeping and fishing were possibilities in agriculture. Outside agriculture cottage industries were important, for example handloom weaving but also beedi (traditional cigarettes) making. In the 1970’s there were an estimated 100,000 handloom enterprises with 350,000 full and parttime workers.
1980-1990
In the 1980’s a growing concern was felt amongst donors about the lack of improvement in the poverty situation in the country. This let an informal group of bilateral donors, the so called likeminded (Canada, Denmark, the Netherlands, Norway and Sweden) to support local research into the poverty situation in rural Bangladesh: Rural Poverty in Bangladesh by the Universities Research Centre (January 1986) and Re-Thinking Rural Poverty by the Bangladesh Institute of Development Studies (January 1992).
Lack of good data and the use of different methodological approaches make it not easy to come to reliable conclusions about the trends in rural poverty. The main source of information are the Household Income and Expenditure Surveys (HIES) conducted by the Bangladesh Bureau of Statistics. The poverty line is based on a narrow definition of poverty, a daily intake of less than 2122 calories per person; an intake of less than 1740 calories means extreme poverty. The calorie intake is then converted into the cost of the food bundle plus an allowance for non-food basic needs and compared with the data from the expenditure surveys. The following trends emerged.
Based on per capita expenditure in 1963/64 44% of the rural population was classified as poor, increasing to 71% in 1973/74, then going down to 65% in 1981/82 and further declining to 50% in 1983/84, 41% in 1985/86, 44% in 1988/89 (a year of severe flooding) and 38% in 1989/90. However, though the incidence of poverty declined, in absolute terms the number of poor increased from roughly 38 million in 1974 to 43 million in 1990.
Based on another approach, by taking an intake of less than 2112 calories as poverty line, 55% of the rural poor (61 million) lived in absolute poverty in 1989/90, of which half were hardcore poor and half moderately poor.
Another finding was that the average food intake had continuously declined from the early 1960’s to the early 1980’s and by 1990 had only slightly increased.
Compared to the 1970’s improvements were made but serious poverty still existed in 1990. Illiteracy was high with 67% of adults illiterate. Infant mortality was also high and in rural areas almost 44% of the children under five suffered from moderate and severe malnutrition. Enrollment figures for primary education were 65% for boys and 60% for girls. Only 40% of the rural population had access to primary health care and 44% of the rural population had no access to sanitary toilet facilities. Only with the provision of drinking water progress was made, 87% of rural households had access to safe drinking water.
Therefore, at the beginning of the nineties the prospects for improving the poverty situation were still bleak. But against all expectations the situation gradually improved. Economic growth averaged 5% per annum since 1990 and further grew to more than 6% per annum after 2004. The Family Planning program contributed to a reduction of the population growth from 2.8% in 1983 to 2.1% in 1990 and further declining to around 1.5% per annum from 2000 to 2010. The governments efforts to increase agricultural production by promoting irrigation (shallow tube wells), the introduction of high yielding varieties (HYV) as well as increased use of fertilizer and pesticides gradually paid off. Food grain production grew from 15 to 16 million tons per annum in the eighties to more than 38 million tons per annum in the period from 2014 till 2017.
Though impressive, the increase in food production could not absorb the growth in rural labour supply and also contributed to a further fragmentation of landownership and a worsening of an already highly unequal distribution of land. Some relief to the poor was provided by programs like Food for Work and the Rural Works Program which had as objectives the provision of seasonal employment in the lean season and the maintenance and improvement of rural infrastructure. Another program to support the poorest was the Vulnerable Group Feeding program to ensure food security to poor and destitute people. In addition, a large number of NGO’s implemented a broad scala of activities to assist the rural poor, from empowerment programs, in particular for women, to primary health care and basic education. And lastly the growth of microcredit programs which began at the end of the eighties helped the poor to better cope with financial insecurity and create opportunities to invest in small scale income earning activities.
In addition to the impressive growth of the agricultural sector two other developments boosted the economy: the export of labour and the production of ready made garments. The export of labour, mainly to the Middle East, resulted in an increasing flow of remittances from US $ 379.1 million in 1980/81 to US $ 836 million in 1988/89 and further US $ 18.3 billion in 2019.
The Ready Made Garments sector started with an export volume of only US $ 3.2 million in 1980/81 but it grew spectacular to US $ 471.1 in 1988/89 and further to US $ 1.18 billion in 1991/92, US $ 2.55 billion in 1995/96 and US $ 4.86 billion in 2000/2001, employing 1.8 million people that year and providing 75% of Bangladesh’ total export volume. In 2016/17 the export volume of ready made garments reached US $ 28.15 billion (81% of total exports) and the sector employed 4 million people, mainly women.
These positive developments contributed to an impressive decline in poverty since the early nineties. According to a paper of the Ministry of Finance, based on data from the Household Income and Expenditure Surveys, the percentage of the poor went down from 57% in 1992 to 51% in 1996, 50% in 2000, 41% in 2005, 32% in 2010 and 25% in 2014. Likewise the percentage of extreme poor went down from 41% in 1992, 36% in 1996, 35% in 2000, 26% in 2005, 18% in 2010 to 10% in 2014.
In 2022 5% of the population were living below the international extreme poverty rate (PPP $2.15) and 30 percent were poor with less to spend than PPP $3.65 per day according to Worldbank figures.
(Note that the data presented here are based on somewhat different methodologies. For example, the increase in percentage of the poor in 2022 compared to the number for 2014 might be explained by the use of a different calculation for the poverty line of the poor).
It should also be noted that after the resignation of prime minister Sheikh Hasina in August 2024 strong indications emerged that economic growth figures had been tampered with under 15 years of continuous Awami League rule. A committee was formed by the interim government to draft a comprehensive White Paper on the state of the country’s economy. It is said that Bangladesh’s per capita income could stand at $ 2200 in FY24, not $ 2784 as claimed under the Awami League government.
At the moment it is unclear if and how much these overstated income figures will affect the figures on the poverty situation.
The improvement of Bangladesh economic situation affected the focus of the Netherlands’ Development Cooperation program. In the Multi-annual Policy Plan 1992-1995 the main objective of the Dutch assistance was still structural poverty alleviation, in line with the Policy Paper ‘Een Wereld van Verschil’ (1990) by minister Jan Pronk. The focus of the Dutch assistance was on (1) rural development including water management and agriculture, on (2) social infrastructure, improving drinking water supply, health and family planning and education and to a lesser extent on (3) physical infrastructure including water transport, industry and energy. In addition, the possibility of support to private sector development, in particular small scale industries, was explored. Most of these activities were a continuation of the programs that had so far been developed under the cooperation program. In particular rural development including water management was in line with the main objective of the Bangladesh Government, to improve food security and increase productivity, particularly in agriculture, to reduce poverty.
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