Bangladesh has made noteworthy progress from a socio-economic standpoint, and is now known as the new "Asian Tiger" for its remarkable development.
GDP growth of Bangladesh has increased from around 3% in the 1970s to 7% in the 2010s and has crossed 8% right before the Covid-19 pandemic. Given the uncertainty and economic downturn from the pandemic, the World Bank predicted Bangladesh's economic growth in 2020 would be between 2-3%. However, statistics from the BBS shows growth rate is 3.51% with a "V" shaped recovery to 5.47% in 2021, considerably higher than the earlier prediction. As Bangladesh is slowly bouncing back to the old trajectory, isn't it the perfect time to design the next stage of economic development? Put differently, shouldn't we bring changes in the sectoral export market shares given the recent structural changes?
One of the main reasons for the observed change in the growth trajectory after independence is the result of a notable structural transformation from an agrarian to an industry-based economy over the past three decades or so. Apparel, popularly known as readymade garment (RMG), being the flagship export product (accounting for more than 80%), is now considered the lifeline for the Bangladeshi economy. Bangladesh has exhibited dramatic shifts in its export composition in which the share of the so-called traditional exports has fallen from more than three quarters to just about 10%. Many scholars believe that Bangladesh needs export diversification since the country has been on track to graduate from the LDC club and aspires to earn the tag of high income country by 2041.
Tourism industry can be seen as one of the promising alternatives for export diversification, government revenue generation and maintaining a healthy fiscal balance in Bangladesh to reduce the risk of overdependence on RMG industry for foreign currency inflow. With relatively high and distinct backward and forward linkages, it is now considered as one of the sectors that can lift sectoral output of other sectors, generate employment as well as increase aggregate welfare (i.e. direct and indirect positive externalities on SDGs). Recently the government has taken some commendable initiatives; but a more rigorous and systematic approach is needed. In this regard, a revision of the tourism and hospitality policy is needed that will advocate development of different types of tourism in which Bangladesh has comparative advantages (like sea-side tourism and ecotourism). Besides, an expansionary fiscal policy to increase government expenditure (e.g. increase ADP share), revenue neutral subsidy diversification strategies, as well as institutional reforms are needed to increase the tourism industry's share in export earnings up to a judicious level from the present situation.
Farhan Khan is a graduate student of Economics and working as Graduate Assistant at the School of Business and Economics, North South University, Dhaka. He can be reached at firstname.lastname@example.org