Bangladesh, by the numbers (with video footage!)

Let’s dig into the numbers. As the old adage says, the numbers don’t lie, it’s very interesting to compare Bangladesh with the four comparison countries. Here are some of my thoughts and observations on the numbers, feel free to comment and share your opinions.

Population & Population/Sq Km

Bangladesh is the most population dense country in the world and the 7^th most populated country. With over 144,000 sq km of land, Bangladesh is slightly smaller than the state of Iowa,  but has a population of over 156 Milllion with a population density of 1,083 people per sq km! Check out the videos to see the population density first hand! Severe overpopulation is undoubtedly a hindrance for the country, but lower fertility rates (discussed below) are an encouraging sign as Bangladesh moves forward.

Population Density Video #1:

popo-density-2

Urbanization

According to Sachs, a world renowned economist from Columbia and special advisor to the UN, modern economic growth is “first and foremost accompanied by urbanization.” Urbanization measures the proportion of the population that lives in urban areas. Economic growth and urbanization are directly related; as farmer productivity increases, less and less farmers are needed in the fields. Because productivity has increased, supply of food has therefore increased. This increased availability of food decreases market prices for food, and many are forced to seek different occupations (usually higher paying) in nonfarm activities in densely populated cities. Most non-farm activities take place in urban areas, which accommodate many commerce related activities. With only a marginal 27% of the population urbanized, it is clear that most of the Bangladeshi poor are agricultural workers, which is why modern economic growth has been so elusive for this country between 1970-1995. (Bangladesh has grown between 5% to 6% in the past decade or so). Developed economies such as France and the US have urbanization rates of over 75%.

Infant Mortality Rate/Fertility Rates

The infant mortality rate is measured as the number of infant deaths per 1,000 live births. Bangladesh has an infant mortality rate of 59.02 deaths, which is a significant improvement from 145 deaths per 1,000 live births in 1970. What has caused this improvement? The answer is not so clear, but the empowerment of women through microfinance and the large number of young women employed in garment factories in urban city centers such as Dhaka has certainly played a role.  Previously, a women’s main task was to give birth and raise children. With new gender roles in society, women are now able to focus their time on their microenterprises and jobs. Their newfound economic opportunities, along with slow yet progressive urbanization, better public health, and the availability of family planning have contributed to the lowering of infant mortalities, as well as lower fertility rates. By having fewer children, Bangladeshi families are now able to increase investment in each child, which has consequently led to better nutrition, education,  and health (improved infant mortality rates can be seen as a product of lower fertility rates). The fertility rate per woman in Bangladesh has dramatically decreased from 6.6 in 1975, to 3.1 in 2000 to 2.74 in 2009. THIS IS SPECTACULAR. Microfinance certainly improves the economic livelihood of the poor, but the second hand effects are just as important. (please understand that I am not attributing this decrease in fertility rates wholly to microfinance, but as one of the powerful forces behind this phenomenon). With fewer children, they can be treated for disease which increases their life expectancy, which means parents will have fewer children, knowing that their children are more likely to survive and take care of them in their old age. The life expectancy is still not acceptable, but with the promising demographic shift, life expectancy should continue to spiral upward in the coming years as per capita investment in health increases.

School life expectancy/Education Expenditure/Median Age

This statistic measures the average years of schooling from primary to tertiary education. I’ve always been a huge proponent of education (See my post on the Dhaka slum schools) and this number is bothersome. Education empowers people- to be value added members in a dynamic, 21^st century technology-centric and driven economy. The Bangladeshi government can clearly do more for their children. By spending only 2.7% of the total GDP on education, they are neglecting what I like to call the greatest asset on any balance sheet, the minds of their young people. It’s hard to put the blame on government, as I understand the hard realities of their circumstances. This country is disaster prone and faces severe overpopulation, but this country spends only  $6 Billion on education (2.7%), whereas countries such as the US spend $750 billion (5.3%) on education expenditures yearly. What good is a country, lavish with bridges, ports, roads, and highways-but an illiterate, uneducated agrarian population with a weak skill set and low purchasing power? I’m sure that will attract a lot of foreign investment. I apologize for my sarcasm, but this country has a literacy rate of 48%, which is 20% lower than Nigeria. Because basic dietary and medical needs are being met, the next step is to address education.  If the country had a larger educated and skilled labor force, foreign direct investment could be a huge growth driver. This would create millions of jobs and greater technology and information sharing. The country has a young population with just a median age of 23.3, an impact in the area of education can still be made for the current generation! Overall, visiting the Dhaka 4^th grade slum school had a few bright spots. English was not the primary medium of the classroom, but the students were still able to speak a few lines of broken English. Although the lines may have been scripted to the students (as each student had unusually the same 4 sentences to say), it’s a baby step in the right direction.

Economy

The Bangladeshi economy has grown between 5-6% since the mid 1990s despite severe overpopulation and a weak government. Half of the GDP is generated through the service sector, however, nearly 2/3 of Bangladeshis are employed in the agriculture sector. The size of Bangladeshi’s GDP is $224 billion, or about 1.5% of the United States GDP. The Bangladesh population is ½ the size of the US, but their GDP is only 1.5% of US GDP. At the very least, the country is experiencing economic growth (I wouldn’t call it strong growth, given their small base). The benefits of economic growth are well known: increased urbanization, more non-farm activities, increased social mobility, improved gender roles, enhanced family structures, division of labor and increased specialization, trade, and technology and innovation, which ultimately lead to increased to per capita income and a higher standard of living. However, it’s easy to mistake the idea that just because a countries GDP is growing, that the poor are increasing their incomes. This wealth distribution is rarely ever disturbed uniformly, so this number is misleading at times.

Public Debt/Investment

The Bangladeshi government has debt that is equivalent to 34% of GDP. Many times a government may be in poverty due to poor fiscal management and policy, and due to the burden of debt repayment, they are unable to invest in roads, airports, health care services, power grids, police force, etc for their people. This concept is identical in corporate finance and stock valuation. Leverage ratios (such as Debt/equity) are a common metric used in stock analysis for the same reason. It is hard to grow a corporation or a country when you are engulfed in debt, or in other words, over levered. The Bangladeshi government has been able to allocate 24.30% of GDP in investment, so I don’t think their debt position is hurting them.

Imports/Exports

As Adam Smith explained centuries ago, the benefits of division of labor and specialization are vital. Specialization can only occur in the presence of a market, where they can trade their inputs for various outputs. (this is why infrastructure is important, goods need to be transported quickly and efficiently for trade) A country is best positioned to succeed when they are engaged in trade with other countries who can produce certain goods and services at a lower opportunity cost than them (called comparative advantage). Closing an economy means a country gets lost in the advance of technology and innovation. By attempting to produce everything domestically, a country may have many high cost local industries that cannot compete internationally (where trade would be better). By having minimal competition from various players overseas, these domestic businesses are protected from foreign competition, and thus have a monopoly where corrupt practices are rampant, all which put a huge risk on a countries growth. Open economies and trade benefit all parties, and trade is still a minor part of the Bangladeshi economy (6.24% exports, 9% imports), . Hopefully over time, with public investment in infrastructure and human capital, more liberal trade can occur between Bangladesh and other countries.

Corruption Index

Transparency International ­­­­­­­­­­­­­­­­­­­­is a research organization that publishes annual reports on perceived corruption in over 180 countries. The Corruption Perception Index (CPI), ranks countries from one to one hundred eighty based on perceived level of corruption that exists among public officials and politicians. The organization uses surveys of business people and assessments by country analysts in addition to fourteen different polls and surveys from 12 different independent institutions. Clearly, this is an area where Bangladesh is struggling with. Economic development requires a strong hand from the government because they have many roles to play by investing in the necessary infrastructure projects, and providing the essential services to the population. They must also maintain order and peace, provide national security, and well enforce all laws judiciously. When governments fail in their basic responsibilities, an economic crisis as well a government failure is sure to occur and lead to political instability. A corrupt government is not serving on behalf of the people and this can hamper a country for decades. Parliamentary elections were held in Bangladesh in December 2008, in countrywide efforts to reform the dysfunctional political regime and root out corruption. This is an area where Bangladesh has so much room to improve and improve quickly.

Overall, careful diagnosis is necessary when analyzing a country. The countries severe overpopulation, weak government, and disaster prone nature pose huge threats to growth and poverty elimination. However, Bangladesh is an improving country, as evidenced by their inclusion on Goldman Sachs “Next Eleven” list of countries that present promising countries with investment potential. The N 11, are not quite the BRIC’s (which GS first published in 2003), but they could rival the G7 countries (US, France, Germany, Italy, Japan, Canada, UK) over time.