Bangladesh - Managing the Economy

Managing the economy

After West Pakistani owners of industrial enterprises fled in 1971, the government of Bangladesh seized their plants as abandoned properties. The government suddenly found itself managing and operating more than 300 medium- and large-scale industrial plants, which represented nearly 90 percent of the value of all such enterprises in the new nation. It organized public corporations to oversee the major industries: jute, textiles, sugar, steel, paper and paperboard, fertilizer, chemicals, pharmaceuticals, engineering and shipbuilding, minerals, oil and gas, food and allied products, and forest products. With government control over major industries and massive inputs of foreign aid, the economy gradually returned to the levels of the late 1960s, but it was still among the world's poorest and least developed countries.

The main government institution responsible for coordinating national rehabilitation and development was the Planning Commission. Sheikh Mujibur Rahman (Mujib), the first president of Bangladesh, led the formation of the national-level Planning Commission, which prepared plans that directed economic priorities for five-year periods. The First Five-Year Plan covered the period July 1973 to June 1978. It was succeeded by a two-year plan, covering the period July 1978 to June 1980, which was followed by a year-long hiatus. The Second Five-Year Plan (1981-85) and the Third Five-Year Plan (1985-90) put the planning process back on track. The broad objectives of the Third Five-Year Plan were to reduce poverty, bring down the rate of population growth to 1.8 percent annually, increase exports by 5.9 percent and domestic savings by 10 percent, attain self-sufficiency in food production, and realize an annual growth of the gross domestic product of 5.4 percent. These ambitious goals went well beyond the previous actual performance of the economy.

Five-year plans are financed through the development, or capital budget, which was separate from the government's revenue, or administrative, budget. The Third Five-Year Plan envisaged a total outlay of more than US$12 billion, approximately 65 percent of which was destined for public sector projects. About 55 percent of the needed funds were to come from foreign sources, including private investment, the aid programs of international financial institutions, and bilateral donor nations. Foreign commitments in the early and mid-1980s were around US$1.7 billion per year (exclusive of external private investment, which in any case was not significant). The portion of the development budget to come from domestic sources (45 percent) represented a substantial increase from the 15 to 20 percent of earlier development budgets.

The Planning Commission translates the multiyear development plan into public investment through the Annual Development Programme. The commission also ensures that public programs and policies are in conformity with its long-term strategy through its project approval process and through its advisory position on the country's highest economic decision-making bodies, the National Economic Council and its Executive Committee. The National Economic Council in the late 1980s was chaired by the president of Bangladesh and included all government ministers plus the governor of the Bangladesh Bank and the deputy chairman and members of the Planning Commission. The Executive Committee of the National Economic Council made most of the decisions on major development projects and development issues in general. The committee included the ministers of key economic sectors (finance, planning, industries, commerce, and public works) and, according to the agenda, any other sectors concerned. A third organization involved in the planning mechanism is the Project Evaluation Committee, which monitors the progress of five-year-plan programs.

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