Bangladesh frequently garners attention as an example of development success, with extensive literature exploring its poverty dynamics and underlying drivers. In just over half a century since gaining independence, the nation has managed to more than halve its poverty rate and sustain almost consistent year-on-year growth. Building on its success, the country is now increasing investment in energy, connectivity, and transport whilst prioritising climate change action as it endeavours to continue its growth sustainably.
But what impact have recent world events had on this growth, and what does it look like for people at a household level?
In recent weeks, multiple GDI researchers have shared their work on Bangladesh’s poverty dynamics. In this blog, we take a look at some of the key ideas put forward by PhD researcher Isaac López-Moreno Flores and Prof David Fielding and Dr Upasak Das, respectively.
Exploring the literature
In March 2024, Isaac López-Moreno Flores presented his working paper ‘Poverty Dynamics in Bangladesh’, written in collaboration with Oxford Policy Management, in a webinar at GDI. During the session, Isaac explored the key ideas gathered through a comprehensive literature review of research around poverty in Bangladesh.
In preliminary studies, one of the main takeaways Isaac highlighted was that much of the population is vulnerable to slipping beneath the poverty line each year. Gautam & Faruqee (2016) state that 39% of Bangladeshi households churned in and out of poverty during a period of otherwise stable growth between 2000 and 2013, suggesting a high level of vulnerability to poverty even in times of overall reduction.
In his webinar, Isaac took time to explore central statistics around the incidence of poverty in households that rely on different sectors, applying these figures to theories surrounding the relationship between agriculture vs industry when it comes to poverty alleviation.
The industrial boom
As a result of structural transformation between 1991 and 2021, there has been a shift from agricultural activities in Bangladesh to the growing industrial and service sectors. In his webinar, Isaac showed that in 1991, 12% of the labour force in Bangladesh worked in industrial activities, compared to more than 21% in 2021 (World Bank – Report Page 7).
Ready-made garments (RMG) are by far the biggest industrial output, making up a huge 84.58% of Bangladesh’s total exports in FY23, with the US, Germany, the UK, Spain, France, Italy, Canada, The Netherlands, and Belgium accounting for 70.95% of total RMG exports in April-June of FY23 (Bangladesh Bank). As Isaac highlights, Traverso (2016) concludes that the expansion of the garment industry in Bangladesh contributed to three-quarters of the total growth of income per capita between 1974 and 2011.
So how does this enormous growth impact household poverty reduction? Sen (2019) states that between 2010 and 2016, 90% of poverty reduction in Bangladesh occurred in rural areas, driven by the non-agricultural sectors (industry and services). Many theorists such as Diwakar & Shepherd (2021) believe that a diversification of income beyond agriculture, or in supplement to it, reduces risk and increases overall income.
What about agriculture?
However, Isaac also took time to highlight research that explores the positive relationship between agricultural activity and poverty alleviation, challenging common assumptions that this sector is not a key driver of growth.
Isaac once more turned to Gautam & Faruqee (2016), who insist that agriculture is becoming overall more capital-intensive, and that technological innovation within the sector is not only increasing productivity but also generating higher earnings. They found that in 2010, 87% of households relied on agriculture for at least part of their income, and infer that reliance at least in part on agriculture is a common strategy for households to escape poverty, even with a parallel increase in industrial and service work.
In accordance, Hill & Cevallos (2019) used weather data for each district and year in Bangladesh to show a causal relationship between growth in agricultural output and poverty reduction.
This further outlines the argument that while the growth of the economy in Bangladesh may still be largely down to industry and service, and the garment export boom especially, the agricultural sector is still relevant to household efforts to escape poverty.
Surveying household poverty between 2018 and 2023
Over the last 12 months, researchers at GDI and the South Asian Network for Economic Modelling (SANEM) have explored some of the effects of “twin crises” in Bangladesh: the Covid-19 pandemic and the recent rise in the cost of living. This project is part of the Covid-19 Learning, Evidence and Research Programme in Bangladesh, which is managed by the IDS and funded by the FCDO.
SANEM is a non-profit research organisation and network of economists and policy makers in South Asia. It conducted a survey in Bangladesh in 2018, covering 10,500 households from across the country using a stratified sampling design. Toward the end of 2023, Prof David Fielding, Prof Upasak Das, and colleagues revisited 9,065 of these households to conduct follow-up surveys and discover how things had changed over the five years.
Their insights on how poverty changed over this five-year period are intensely relevant to many of the ideas presented in Isaac’s webinar, and the importance of these results is evidenced by the media interest that has followed the preliminary reporting. After the publication of our initial GDI blog on these findings, the research was picked up by Bangladesh newspaper The Daily Star as well as The Business Standard.
What can we learn from the SANEM survey?
The researchers approached poverty not only as a monetary dimension, but also with consideration of factors such as education and health. This wide-lensed approach to poverty analysis links to several key talking points in Isaac’s webinar, where he explored the concept of an ‘enabling environment’ (Diwakar & Shepherd 2022), which includes factors from gender norms to the availability of infrastructure.
The team found an overall small reduction in the incidence of household poverty over the five-year period in question. Digging deeper, they found that poverty dropped more in rural areas, while it rose in urban areas.
This corroborates the statistic given by Sen (2019) in Isaac’s presentation, which highlighted that 90% of poverty reduction in Bangladesh occurred in rural areas between 2010 and 2016. Between the key ideas put forward in Isaac’s literature and the findings by Fielding and Das, there is a strong suggestion that a new ‘urban poor’ is emerging. The latter attribute this to the dual crises of the rising cost of living and the Covid-19 pandemic.
The Covid-19 Pandemic
The impact of the Covid-19 pandemic on Bangladesh was, and still is, significant, with 2022 being the first year that the country did not experience GDP growth of at least 5% since 2004 (World Bank).
In his webinar, Isaac discusses the idea of ‘shocks’ at different levels (Azam & Imai 2012), which refer to events that impair a household’s ability to escape or avoid poverty. For example, idiosyncratic/household level shocks could refer to the death of a primary income earner, while covariate/community shocks could be a natural disaster. Whilst idiosyncratic shocks supposedly have a greater effect on household consumption vulnerability, to what extent did the covariate and national-level ‘shock’ of the pandemic have?
This is one of the questions that the full report from Fielding, Das and colleagues will address, but we can already see evidence within the increased male unemployment rate, the rise in the proportion of children who do not attend school, and the increase in a class of ‘urban poor’ related in part to food insecurity that the preliminary findings outline.
Rising Food Prices
Fielding and Das state that these twin crises have caused a slowing in Bangladesh’s ability to reduce poverty, despite overall growth, and highlight rising food prices as one of the main factors contributing to this burden.
Food insecurity being a driver of poverty among the new ‘urban poor’ is an interesting idea to set side by side with the literature highlighted by Isaac on agricultural reliance. In Isaac’s presentation it is shown that from 2004 to 2008 there was a food crisis in Bangladesh that pushed around 13 million people into poverty due to higher food prices (p. 9). However, the likelihood of rural households falling into poverty in 2008 was far less than in 2004, as a reliance on agricultural production led to higher earnings and an organic food source (Balagtas et al. 2014). These facts give an interesting insight into how urban and rural households cope differently with rising prices, and could contribute to the disparity between poverty reduction in these areas.
Not only does this reflect the disparate impact that a cost-of-living crisis could have, but it could also speak to a broader argument as to the maintenance and increase of agricultural productivity.
“In the absence of increasing agricultural productivity, the withdrawal of labour from agriculture would eventually or immediately reduce food supply and increase food prices” states Isaac.
What can we learn next?
May 27 – Is the Bangladesh paradox sustainable?
Speaking to the Daily Star, Dr Selim Raihan, Professor at the Department of Economics at Dhaka University, stated:
“The economic growth we have experienced in the last two decades will be quite challenging to sustain in the same way going forward. There has been little success in economic or export diversification, large scale foreign direct investment has not been attracted either. We have to find ways to make our economic growth broader based and find new sources of growth”
Isaac, David, and Upasak’s research offers valuable insights into these questions, as well as new dimensions to consider as world events impact Bangladesh’s poverty alleviation efforts.
On May 27, Dr Selim Raihan and Dr Umar Salam (senior economist at Oxford Policy Management and supervisor of Isaac’s working paper) will visit The University of Manchester to present their book “Is the Bangladesh Paradox Sustainable?”.
In this book, the authors develop the “Institutional Diagnosis Project”, which helps to identify institutional factors that have facilitated Bangladesh’s poverty reduction and the political economy behind their economic performance.
May 28 – Presenting results of the SANEM-collaborated research
Following on from the previous day’s events, on May 28th there will be a presentation of the results relating to the survey project conducted by David Fielding, Selim Raihan, Upasak Das, Katsushi Imai, and Mahtab Uddin. Stay posted for further details.
BRAC: 50 years of development knowledge
In a new special issue, GDI’s Nicola Banks and BRAC colleagues Nusrat Jahan & Imran Matin reflect on 50 years of BRAC’s contributions to development knowledge and practice. As a Global South NGO from Bangladesh, the report is incredibly interesting and relevant to many of the themes discussed here. You can read it in full here.
You can also read Isaac’s full working paper here, watch his webinar here, and find more statistics and graphs from the SANEM-collaborated research here whilst we anticipate further detailed analysis.
Header image: Asiqur Rahman/Unsplash
Central image: MD SHAHADAT RAFI/Unsplash
Note: This article gives the views of the author/academic featured and does not represent the views of the Global Development Institute as a whole.
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