Escaping India’s shadow

Posted in development, economics, India, macro by jrahman on September 11, 2012

A few weeks ago, I wrote about Bangladesh’s place in India’s shadow — the idea that Bangladesh is just too small relative to India, meaning that even a friendly and well meaning government in Dhaka is likely to be ignored in New Delhi (arguably what’s happening now).  Is Bangladesh forever doomed to be in India’s shadow?  Will it always be ignored in New Delhi?

Well, one way Bangladesh could matter to India is by being a threat to India — you know, by vowing to fight a 1,000 year jihad, and exporting insurgency and revolution and such like.  Let’s ignore that path — no one wants to re-create East Pakistan.  So, what else can Bangladesh do?

What if Bangladesh was an economic powerhouse?  Surely that would have made a difference, in a good way. 

Let’s give this possibility some concrete shape by looking at the G20 group of major economies.

Who are the G20? 

There are the old G7 large capitalist countries — US, Japan, Germany, UK, France, Italy and Canada.  Then there are the four BRICs — Brazil, Russia, India and China.  Then there is the European Union.  That’s 12. 

Then comes the regional ‘middle powers’: Mexico, Argentina and Brazil from the western hemisphere; South Africa from sub-Saharan Africa; Turkey and Saudi Arabia from Middle East and North Africa; Korea, Indonesia and Australia from the Asia-Pacific. 

If Bangladesh were to be a big enough economic powerhouse to make it into this group, whom would it have replaced?   A large Muslim democracy with regional heft that can serve as a model development success story — Indonesia seems like a good candidate.  How big would Bangladesh have to be to replace Indonesia in G20. 

In PPP terms, Indonesia’s GDP was $1231 billion in 2011, compared with Bangladesh’s $285 billion.  That is, Bangladesh would have needed to have an economy that is over four times as big as it was in 2011.  That would have meant per capita GDP in 2011 of around $8,000 (compared with the actual of around $1800, and similar to those of China or Thailand). 

Would this have been possible?

For Bangladesh to have an economy as big as Indonesia’s in 2011, year average growth since 1972 would have to be 8.65%. 

This is not beyond the realms of possibility.  Asian tigers — Korea, Taiwan, Hong Kong and Singapore grew at that pace in the 1960s to 1980s, China has maintained that pace in more recent decades, and India, Thailand and Vietnam has had periods of growth at that pace.  But it’s also pretty damn rare.  In fact, these are pretty much all large economies you can think of that have maintained that pace for that long. 

Perhaps a chart can illustrate the point.  (Of course, it can.  :))

In this chart, the horizontal axis shows the number of years since ‘take off’, while the vertical axis shows the size of the economy relative to the first year.  It shows that for Bangladesh to be as big as Indonesia in 2011, it would have had to grow faster since 1972 than Korea or China during their take off years (since 1961 and 1979 respectively).

I’ve thrown in India (since 2000), Thailand (since 1957) and Vietnam (since 1994) for comparison.  The big take away from the chart — Bangladesh would have been among the greatest development miracles in history if it could have maintained growth of 8.65% a year for the past four decades. 

Was this impossible?  No, nothing is impossible.  But arguably it was very improbable. 

Can we grow by 8.65% a year for next four decades?  Possible.  But I wouldn’t bet on it.

Can we escape India’s shadows?  Doesn’t seem likely in the near future. 

Source: Groningen Growth and Development Centre.

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4 Responses

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  1. fugstar said, on September 13, 2012 at 3:29 am

    i think that was very much a west pakistan military aspiration. This post is fascinating though because youre searching for what the country could be but end with developmentia.

  2. Diganta said, on September 13, 2012 at 5:10 am

    Through economic development, it’s tough. Asian Tigers all started with high literacy to propel their growth. For example, Korea started with 90%+ literacy in 1966. Bangladesh/India are still behind that. So, if there’s 8% annualized growth from here, it would be caused by a major mineral find (lick Qatar/Kuwait) or some other natural resources.

  3. kgazi said, on September 13, 2012 at 9:49 am

    No nation can develop into economic independence, if their CORE culture & governance is infested in corruption – whether its Bdesh, China, India, Singapore or whichever.

    Until they rid themselves of corrupt governance, all dreams of development are mere fantasy.

  4. BDAF said, on November 11, 2012 at 8:30 pm

    What’s interesting to note here is that South Korea is a resource-poor country, and Bangladesh is 50% larger than it (in terms of land area). Of course S Korea was taken over militarily by Japan, and developed rapidly like many former Japanese colonies (e.g. Taiwan). Human resource development is crucial for Bangladesh, which means basic literacy/numeracy MUST be improved (it’s current status is no-where near good enough). It’s basically got to become a high-skill worker producer in the long-run. At the moment the real worry I have for BD is lack of diversification in the economy (far too reliant on garments), to produce forward-backward linkages in supporting industries.

    There was a paper by 2 physicists, Cesar Hidalgo and Albert-László Barabási, and two economists, Bailey Klinger and Ricardo Hausmann which covered this. It measured the degree of diversification in the economy for different countries (it was related to answering the question of why some countries are rich and others poor). Broadly speaking, I think it supports the “Big Push” by government – a co-ordinated effort to develop multiple supporting industries. I really do feel it would be possible in a small, homogeneous country like Bangladesh, though clearly not in the current political climate.

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