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Introduction
Pakistan economic environment is affected by intensification of war on terror and deepening of the global financial crisis which penetrated into domestic economy through the route of substantial decline in Pakistans exports and a visible slowdown in foreign direct inflows. Pakistan economy continues to remain exposed to the vagaries of international developments as well as internal security environment. The intensity of the global financial crisis has further added to Pakistan predicament. Despite support from the IMF and other bilateral and multilateral donors, Pakistan external account remains exposed to a host of uncertainties.
Agriculture
In spite of structural shift towards industrialization, agriculture sector is still the largest sector of the economy with deep impact on socio-economic set up. It is the source of the livelihood of almost 44.7 percent of the total employed labor force in the country. With the present contribution to GDP at 21.8 percent,agriculture sector is the mainstay of the rural economy around which socio-economic privileges and deprivations resolve.
Manufacturing
The manufacturing being the second largest sector of the economy bears significant importance 18.4 percent contribution to GDP. Overall manufacturing sector posted a negative growth rate of 3.3 percent during the current fiscal year against the target of 6.1 percent and 4.8 percent of last year. However, production in large scale manufacturing during July-Mar 2008-09 witnessed a broad-based decline of 7.7 percent against the revised growth target of negative 5.0 percent.
Inflation
The rate of inflation is an important macroeconomic indicator and one of the key variables most central banks around the world scrutinize when setting their main policy rate. Pakistan is one of only a handful of countries that is still experiencing double-digit inflation. The surge in food and commodity prices witnessed during the start of fiscal year 2008-09 pushed the Consumer Prices Index (CPI) in Pakistan to a record level of 25.3 percent in August 2008, remaining above the 20 percent level up until February 2009. Now a days its roundabout 18 percent.
BANGLADESH ECONOMY
Some Consequences
1)
In 1948 there were 11 textile mills in the East and only 9 in the West.
2)
3)
Name
Populati on
Litera cy
122.7
2.2%
21%
56
36.6%
380.0 170.5
2,100
90
21.2
1.9%
19%
44
31.6% 7,358
390.0 114.4
1,710
164
7% 26% 31%
49 61 64
-23.6 33.3
126 79 55
Nepal
21.6
2.3%
14%
54
27.0%
174.0 354.8
2,246
88
Pakistan
132.2
2.9%
35%
62
35.7% 2,000
68.5
47.7
2,377
88
Sri_Lanka
18.2
1.2%
22%
72
89.3% 5,888
88.1
19.2
2,286
14
Comparative Economics
Per Per Curren Export Reserv GDP Saving Inflati Capita GDP Capit t AC s : 12 es excl. Growt s as % on GDP (PPP) a Balanc month Gold h of GDP (CPI) (PPP) GNP e s $53b. $0.3b. $635 $470 $2.1b. -$0.6b. $0.04b. $0.05b. 5.7% 5.5% 16% 11% $3.6b. $0.1b.
Name
Debt
$440
$2.3b. -$1.5b.
4.7%
14%
$7.8b.
8.9%
India $1,280
$310
$16.4b. -$2.7b.
5.3%
24% $26.2b.
8.2%
$2.6b.
$0.2b.
7% 10% 10%
6.4%
Population:
164.7 million
GDP (PPP):
$241.3 billion 5.4% growth 6.1% 5-year compound annual growth $1,465 per capita
Unemployment:
5.1%
Inflation (CPI):
6.1%
FDI Inflow:
$716.0 million
INTRODUCTION
Bangladeshs economic freedom score is 53, making its economy the 130th freest in the 2011 Index. Its overall score is 1.9 points better than last year, mainly reflecting improvements in business freedom and investment freedom. Bangladesh is ranked 27th out of 41 countries in the AsiaPacific region. Bangladeshs economy remains overly dependent on agriculture, which accounts for almost 20 percent of GDP and employs more than half of the labor force. State-owned enterprises are a significant presence in most productive sectors, including those that are usually dominated by the private sector in other economies. Weak governance and structural problems continue to constrain Bangladeshs development. The inefficient regulatory regime is often heavily politicized, and the substantial presence of state-owned enterprises crowds out private investment. Corruption, coupled with onerous bureaucracy, is still perceived as pervasive, and the underdeveloped financial sector impedes the growth of a more dynamic private sector.
BACKGROUND
After nearly two years of military-backed rule, the Peoples Republic of Bangladesh returned to democracy in December 2008. The secular Awami League won over twothirds of the 300 parliamentary seats, reinstalling Sheikh Hasina Wajed as prime minister, a post she had held from 19962001. Bangladesh is one of the worlds poorest and most densely populated nations, and the majority of its people work in agriculture, though service industries now account for over half of GDP. Weak institutions, poverty, and corruption undermine economic development and fuel social and political unrest despite relatively large inflows of remittances and around $100 million a year in aid from the United States. Sheikh Hasina faced the most serious challenge to her leadership in February 2009 when a mutiny broke out within the Bangladesh Rifles, part of the armed forces. Islamist extremist groups also threaten Bangladeshs democracy and pluralist traditions, although the government has taken steps to curb their activities.
BUSINESS FREEDOM
Existing commercial regulations are not enforced effectively. The entrepreneurial environment is hampered by regulatory uncertainty that raises start-up and operational costs. Other institutional weaknesses such as pervasive petty corruption continue to impede private production and investment.
TRADE FREEDOM
Bangladeshs weighted average tariff rate was 11 percent in 2007. Import and export restrictions, numerous border taxes and fees, restrictive labeling requirements, burdensome import licensing rules, export subsidies and other support programs, government monopolies and state trading boards, complex and non-transparent government procurement, inefficient and corrupt customs administration, and weak
enforcement of intellectual property rights also add to the cost of trade. Twenty points were deducted from Bangladeshs trade freedom score to account for non-tariff barriers.
FISCAL FREEDOM
Bangladesh has a moderate income tax rate and a high corporate tax rate. The top income tax rate is 25 percent, and the top corporate tax rate is 45 percent. Other taxes include a value-added tax (VAT) and a tax on interest. In the most recent year, overall tax revenue as a percentage of GDP was 8.8 percent.
GOVERNMENT SPENDING
In the most recent year, total government expenditures, including consumption and transfer payments, equaled 15.9 percent of GDP. Expenditures on welfare spending increased as a response to the global crisis, but budget reallocation kept the total fiscal stimulus relatively low. Underimplementation of the Annual Development Plan kept the fiscal balance steady despite revenue shortfalls. Cash flow from the treasury to independent ministries is poorly managed.
MONETARY FREEDOM
Inflation is on pace to average 8 percent in 2010, compared with 5.4 percent in 2009, because of global commodity price increases. Subsidies and other government assistance to agriculture have doubled since 2005. Public finances are further strained by the governments determination to continue subsidies for electricity. Fifteen points were deducted from Bangladeshs monetary freedom score to account for measures that distort domestic prices for petroleum products, some pharmaceuticals, and goods produced in state-owned enterprises
GDP Projection
In the present GDP estimation exercise three types of growth scenarios have been developed. First, the optimistic scenario is targeting 8% consistent annual growth of the GDP; Second, the business as usual scenario implying steady 6% growth rate of the GDP; and Finally, the base case scenario with 4% growth rate.
Year
Projected GDP (million US$) at 4% GDP Growth 6% GDP Growth 8% GDP Growth 46934 49186 51154 53200 55328 57541 59843 62237 64726 67315 70008 72808 75720 78749 81899 85175 88582 92125 95810 99643 46934 49186 52138 55266 58582 62097 65823 69772 73958 78396 83099 88085 93371 98973 104911 111206 117878 124951 132448 140395 46934 49186 53121 57371 61961 66918 72271 78053 84297 91041 98324 106190 114685 123860 133769 144470 156028 168510 181991 196550
Projected Per Capita GDP (US$) at 4% GDP Growth 6% GDP Growth 8% GDP Growth 363 375 385 394 404 415 426 437 449 461 474 487 500 514 529 544 560 576 593 611 363 375 392 410 428 448 468 490 513 537 562 589 617 646 677 710 745 781 820 860 363 375 399 425 453 483 514 548 585 623 665 710 758 809 864 923 986 1054 1126 1204
FY2001(Actual) FY2002(IPRSP) FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
CONCLUDING REMARKS
Bangladesh has made the first transition! That is, she has been able to transform herself from a predominantly aid dependent country to a trade dependent country. Now, the country is poised for the second transition! That is, Bangladesh needs a steady growth based on foreign investment, service income and trade. This will evidently require a breakthrough in the performance of the external sector.
IMRAN KHAN
BBA VIII