Saturday, December 17, 2011

Economic Disparity Between Bangladesh & Pakistan

Economic gap between East and West Pakistan in 1960s is often cited as a key reason for the secessionist movement led by Shaikh Mujib's Awami League and the creation of Bangladesh in 1971. This disparity has grown over the last 40 years, and the per capita income in Pakistan now stands at 1.7 times Bangladesh's in 2011, slightly higher than 1.6 as it was in 1971.

Forty years after the Fall of Dhaka and the creation of Bangladesh on Dec 16, 1971, there's still much talk about it. The Daily Star, a Bangladeshi newspaper, has published a piece on the subject by Akbar Ali Khan marking the 40th anniversary of Bangladeshi independence. In his Op ED, Mr. Khan argues that "political independence provided much more conducive environment for growth in Bangladesh than united Pakistan. Though economic growth in East Pakistan was revived during Ayub Khan's so-called decade of reforms, growth rate in erstwhile East Pakistan was much lower than that of West Pakistan".

In his zeal to rationalize independence based on the economic argument, Mr. Khan has clearly ignored the following facts:

1. In 1969-70, the ratio of per capita incomes between West and East Pakistan was 1.6, as detailed by Mr. Khan. In 2011, however, this ratio has increased to 1.7, according to the IMF data.

2. Bangladesh is still categorized by the World Bank among low income and least developed countries of the world, while Pakistan is a middle income country and classified well above the list of least developed countries of the world.

3. Bangladesh is ranked as 11th poorest country in the world by the World Bank in terms of the percentage of population living on $1.25 or less a day. Neighboring India is the 14th poorest on this list, while Pakistan does not show up on it. The rest of the nations on this list are all in sub-Saharan Africa.

3. In 1947, East Pakistan started with a lower economic base than West Pakistan, and the loss of its Hindu Bengali business elite in 1947 left it worse off. It also didn't have the benefit of the large number of Muslim businessmen who migrated to West Pakistan, particularly Karachi, after partition of India in 1947.

4. Pakistani economist Dr. Ishrat Husain explains it well when he says that "although East Pakistan benefited from Ayub’s economic reforms in 1960s, the fact that these benefits were perceived as a dispensation from a quasi-colonial military regime to its colony—East Pakistan—proved to be lethal."

It must, however, be acknowledged that Bangladeshi economy has been outperforming Pakistan's in the last few years, particularly since President Musharraf's departure in 2008. Bangladesh has also made significant strides on various social indicators and it now ranks just one notch below Pakistan on human development index 2011. Bangladesh's family planning efforts have been remarkably successful in lowering the fertility rate of Bangladeshi women, an area where Pakistan significantly lags behind the rest of South Asia.

Related Links:

Haq's Musings

Comparing India and Pakistan in 2011

Is This a 1971 Moment in Pakistan's History?

Pakistan Ahead of India in Graduation Rates

Pakistan Tops Job Growth in South Asia

Pakistan Needs More Gujaratis?

President Musharraf's Legacy

Demolishing Indian War Myths


Riaz Haq said...

Bangladesh Financial Express reported that BD's per capita income increased to $818 from $751 a year earlier:

The Bangladesh's per capita income (gross national income) has swelled to US$818 in the outgoing fiscal 2010-2011, a $67 year-on-year rise compared to $751 in the last fiscal 2009-10, official data showed. According to Bangladesh Economic Survey 2011 report, the per capita GDP (gross domestic product) at the constant market price also rose by $68 to $755 in the outgoing fiscal from US$687 in the last FY2009. Based on total 147.90 million population in the country, the per head GNI (gross national income) has increased significantly to $818 in the outgoing fiscal as the remittance flow was buoyant, said the survey report, released Thursday at the budget session. On the constant market price, the per capita GNI (total income including the remittance sent by the non-resident Bangladeshis abroad) has stood at US$818, up by $67 from $755 in the last FY2009, the report said quoting the Bangladesh Bureau of Statistics (BBS) survey data. According to economic survey report, the growth in manufacturing and service sectors and the remittance flow have attributed the per head income though the global economic recession affected the global economy in the last few years. The GDP growth in the country has also performed satisfactorily in the outgoing fiscal as the BBS estimates 6.66 per cent economic growth. Bangladesh government has set the target to become a middle-income country by 2021. It is going to frame a "Perspective Plan 2021" to achieve double digit growth by FY 2018 and cut the extreme poverty line below 15 per cent by 2011.

Pakistan’s nominal per capita income rose 16.9 percent to $1,254 in 2010-11 from $1,073 in 2009-2010, according to the Economic Survey of Pakistan.

Ratio of $1254 to $818 is 1.53

Anonymous said...

This human development index seems to be a sham. Everyone uses it to further their own agenda. Strangely in South Asia countries, media are self critical to show how their own country sucks and neighbors are better.

Shows Pak worse than India and just one spot better than Bangladesh.
this one shows India worse than Bangladesh but better than Pakistan.

I live in west and I know that out in West, India is perceived in a different class than Pakistan and Bangladesh. Anti muslim sentiment, so prevalent (for which muslims are responsible too) in US, makes it only worse.

Moin said...

Punjab has been very selfish all along and has thereby impoverished other Provinces at the expense of ruining the entire Nation. This needs to corrected. But instead of fighting Punjab we have to think about how to change the situation legally and fairly without breaking up the country like we did in 1971. The Bengalis did a stupid thing by breaking away from Pakistan when they had the golden opportunity to get maximum Provincial autonomy which they would have gotten if they had the far sight to stay united.

Riaz Haq said...


Regional differences in development and income exist everywhere, including the United States. For example, southern states of Louisiana and Missisippi are far behind New York and California on all social and economic indicators. There are even bigger differences in India.

I think blaming Punjabis for all of Pakistan's ills is just scapegoating.

The fact is that Punjabis in both India and Pakistan are more prosperous and have lower levels of poverty than the rest, including Bengalis in West Bengal, because they are hard working people endowed with fertile land.

In spite of recent poverty declines with its rapid economic expansion, India still has higher poverty rates than Pakistan, according to a 2011 World Bank report titled "Perspectives on poverty in India : stylized facts from survey data" released in 2011.

Overall, the latest World Bank data shows that India's poverty rate of 27.5%, based on India's current poverty line of $1.03 per person per day, is more than 10 percentage points higher than Pakistan's 17.2%. Assam (urban), Punjab and Himachal Pradesh are the only three Indian states with lower poverty rates than Pakistan's.

Back in 1971, the per capita income of West Pakistanis was 1.6 times that of East Pakistanis, and the West Pakistanis, particularly Punjabis, were accused of colonial exploitation of Bengalis. After 40 years of Bangladesh's Independence, guess what the ratio is? It's still 1.6+.

satwa gunam said...

Interesting article on pakistan economy by the central bank

Riaz Haq said...

Here's an interesting account in Dawn newspaper of Sashi Tharoor's visit to Pakistan and discussion at Jinnah Institute:

...It was only his third day in Pakistan, yet it was surprising for him and his wife to see “how much we have in common and how much we differ”. He is visiting on the invitation of Jinnah Institute (JI) to be the first in its Distinguished Speakers series, which is part of the Track-II engagement between the civil societies of the two countries.

Dr Tharoor started by saying that as a member of Lok Sabha he sees the foreign policy in the perspective of improving the life of the poor and the marginalised – for which peace is essential.

“Peace is indivisible and so is freedom and prosperity,” he said.

In the age of globalisation it has become more so and that was why Prime Minister Manmohan Singh agreed to resume the dialogue process that India had halted after the 26/11 terrorist attack in Mumbai.

Since the technological tools that benign forces used to bring the world together are used by the malign forces to disrupt the process, nations need to cooperate to fight terrorism, he said, bluntly charging the ISI and Pakistan army with using terrorism as a strategy.

“Pakistan defines itself in opposition to India and the “previously benign forces of religion and culture have become causes of conflict”, he said and decried its `Kashmir solution first` policy.

While other states have army, Pakistan army is said to have a state to itself.

As a consequence the civilian governments live in awe of the army and the few steps they took to improve relations with India were torpedoed by the military, he surmised.

But he welcomed the present government`s decision to grant Most Favoured Nation (MFN) status to India because it reflected how important it was for Pakistan to normalise relations with India after ignoring India`s grant of Most Favoured Nation to Pakistan for 16 years.

Dr Tharoor forcefully rejected “the notion that India is a threat to Pakistan and dismissed the Indian military action in support of Mukti Bahini in East Pakistan in 1971 that created Bangladesh as “a very special case”.

Otherwise, according to him, India had been magnanimous to Pakistan, like when it returned the strategic Hajipir Pass in Kashmir after 1965 war and had given up “first strike” in a nuclear conflict.

His discourse seem to hold Pakistan polity responsible for all the troubles and invited riposte from the panelists Nasim Zehra and Ejaz Haider and sharp questions from the audience comprising Pakistani diplomats, academia and some commoners.

“I am disappointed,” blurted out Nasim Zehra, a current affairs presenter on a private TV channel. “Whether it is fact or fiction depends on the narratives. The distinguished speaker has been selective.”

“I too believe India-Pakistan is a must. Here we have been pushing for a new vision. You have to change the narrative,” she said to applause from the audience.

Ejaz Haider, executive director of Jinnah Institute, was more subtle.

“I agree with your poetry but what about the prose,” he told Dr Shashi Tharoor, who is the author of several fiction and non-fiction books. How India has behaved and been doing in the last 60 years should be kept in mind also.

India`s military intervention in East Pakistan is a special case because stronger states use humanitarian and other international laws for their real politik, he said.

As for Hajipir Pass, he noted that post-1965 India had to chose between that pass and Kargil and “chose correctly”.

Dr Tharoor replied to the points raised and questions that followed on the same lines, more as a diplomat than a politician.

“Once trust is built, everything would be solved,” he said....

Riaz Haq said...

Here are excepts of an interview of Elliot Theorist Mark Galasiewski who's bullish on Pakistan:

To answer your question, there are various ways to make long-term investment decisions. For example, Warren Buffett has shown that picking individual stocks can provide good returns over time. But it's a very labor-intensive and time-consuming process, to research companies thoroughly enough to have the kind of conviction that he does. And his “buy and hold” strategy means that he suffers significant drawdowns in his portfolio at times -- like during the 2007-2009 crash.

Elliott wave analysis gives you the opportunity to make long-term bets with a similar conviction -- but with a fraction of the elbow grease. Instead of pouring over hundreds of quarterly reports and legal documents, you look for Elliott wave patterns in the charts of market indexes. Those patterns reflect investors' collective bias, bullish or bearish. (I won't go into details of why this is so; our Club EWI has tons of free reports explaining the mechanics of the Elliott Wave Principle.)

So, knowing what part of the Elliott wave pattern your market is in, you know how the pattern should progress from there, ideally. And that gives you a probabilistic forecast for the trend. It doesn't work 100% of the time (what does), but our subscribers remember more than one successful forecast we've made using Elliott waves.

For example, on March 23, 2009 -- at the time when almost no one felt bullish -- we issued a special report to our subscribers forecasting a multi-year bull market in Indian stocks. Two weeks later, we identified three more markets in the region -- Pakistan, Sri Lanka, and Indonesia -- that we believed were also likely to enjoy an "Indian Ocean Renaissance."

India, Pakistan, Sri Lanka, Indonesia have all since generated some of the best returns among global stock markets. Without knowledge of the Elliott Wave Principle, it would have been difficult to forecast the boom -- especially given the dismal news events at the time. Do you remember the headlines in early 2009?

The world was engulfed by the global financial crisis, and most people believed the worst was still ahead. The currencies of India, Pakistan, Sri Lanka, and Indonesia had collapsed. Pakistan and India were on the brink of conflict over the Mumbai terrorist attacks of late 2008. A civil war was still raging in Sri Lanka. Who would turn bullish on stock under those "fundamental" conditions? We did, and only because Elliott wave patterns in the price charts of those four markets told us to "buy."

And by the way, the terrible conditions in India, Pakistan and Sri Lanka mostly reversed along with the market rally over the next year.
The Wave Principle is how the market works. Financial markets are non-rational and counter-intuitive. Investing according to conventional assumptions eventually leads to financial ruin, since the market too often does the opposite of what most people expect.

Even thinking contrarily is insufficient, because sometimes it’s necessary to run with the herd. But Elliott wave analysis helps you to determine which psychological stance is most appropriate at any given time. Often, the news at the time would be suggesting you do the opposite.,-Pakistan,-Sri-Lanka,-Indonesia-How-Elliott-Wave-Analysis-Turned-BULLISH-When-Few-Dared.-Part-.aspx

Hopewins said...

Dr. Haq,

Here are the internal (domestic) savings that are being invested in Bangladesh, India and Pakistan:!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gds_totl_cd&scale_y=lin&ind_y=false&rdim=country&idim=country:IND:BGD:PAK&ifdim=country:region:SAS&hl=en_US&dl=en_US&ind=false!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gds_totl_zs&scale_y=lin&ind_y=false&rdim=country&idim=country:IND:BGD:PAK&ifdim=country:region:SAS&hl=en_US&dl=en_US&ind=false

Note the following:

1) In 1992, approximately, India has 70 Billion $ savings to invest, Bangladesh had 5 Billion $, and our country had 10 Billion $.

India/Pak: 7.0
Pak/Ban: 2.0

2) In 2002, approximately, India had 120 Billion $ savings to invest, Bangladesh had 9 Billion $, and our country had 12 Billion $.

India/Pak: 10.0
Pak/Ban: 1.33

3) In 2011, approximately, India had 560 Billion $ savings to invest, Bangladesh had 18 Billion $, and our country had 20 Billion $.

India/Pak: 28.0
Pak/Ban: 1.11


In other words, allowing for a 7-times population ratio between India and Pakistan today, the per capita internal savings available for investment is **4 times** higher in India than in our country.

The point here is that we must look "under the hood" of an economy to determine its future potential. The task is not as superficially simple as tracking current sales of Nestle products, Nokia phones, Chinese motorcycles etcetera. Consumer & Market Confidence is an excellent thing, but only as long as it stands upon a robust foundation of strong Economic Fundamentals.

No amount of optimism can help if the foundation itself is weak.

As it turns out, 1992-93 was the period when Bangladesh & India began to clearly move ahead and have since left us behind:!ctype=l&strail=false&bcs=d&nselm=h&met_y=gdp_expenditure_of_gdp&fdim_y=gdp_expenditure_component:9&scale_y=lin&ind_y=false&rdim=region&idim=country:IND:PAK:BGD&ifdim=region&hl=en_US&dl=en_US&ind=false

I will leave you to reflect on what effect this will have on future growth in Bangladesh, India and Pakistan....

Thank you.

Hopewins said...

You say: "Bangladesh has also made significant strides on various social indicators and it now ranks just one notch below Pakistan on human development index 2011"

But it is not Bangladesh that is doing exceptionally well; rather it is our country that is doing exceptionally badly.

As you can see in the HDI data (1980-2011) graph below, the *slope* of the trend-lines (quantum of improvement per unit time) for Bangladesh and India are the same. So there is nothing particularly exceptional or outstanding about Bangladesh's performance.

On the other hand, our country clearly shows a much less steep slope. This indicates that our HDI is not improving with time as much as the others.

Therefore, *we* are the *exception*. And not in a good way at that….

Hopewins said...

Dr. Haq,

I am worried. I know that Allah will provide, but I am still worried.

Our Population Counter seems to be operating on Energizer Batteries. It just keeps going and going and going.....UP!

Bangladesh, on the other hand, is expected to stabilize at a peak of about 210 million.

Our population peak is projected at 420 Million people in Year 2080, compared to Bangladesh's 210 Milion peak in Year 2050.

This is scary. What can we do to slow this population growth? How did Bangladesh manage to slow down theirs so well?

Thank you.



Pakistan Arable Land: 190,319
Pakistan Renewable Water: 1,500 cu-m per person in 2005
Pakistan Cereal Yield: 2,500 kg/Hectare in 2005
Pakistan Cereal Export: 2.5 Billion USD in 2010

Bangladesh Arable Land: 74,173
Bangladesh Renewable Water: 8,000 cu-m per person in 2005
Bangladesh Cereal Yield: 4,000 kg/Hectare in 2005
Bangladesh Cereal Export: NIL in 2010


Riaz Haq said...

HWJ: "This is scary. What can we do to slow this population growth? How did Bangladesh manage to slow down theirs so well?"

This is the old Malthusian vs Cornucopian debate.

Population will be an asset rather than a liability in a world moving to sub-replacement levels of fertility.

History tells us that tfr and population always declines with development and there is a clear trend of that in Pakistan. This trend will only accelerate with urbanization and upward mobility which is happening at a faster rate in Pakistan than the rest of South Asia.

And technology solutions will be found to take care of more people in a country like Pakistan which has much lower pop densities than the region as a whole and tremendous untapped resources.

I suggest you read "Abundance" by Peter Diamandis.

Also watch this video:

Hopewins said...

Dr. Haq,

In the table you show as "Table-4" in this blog article, the data indicate that Bangladesh received ODA Foreign Aid of 13$ per capita in 2008. This does seem to be approximately the correct figure for 2008 as per the multi-year World Bank data shown below.

However, I am a little unsure as to *why* you picked 2008?

Why not 2005 or 2006 or 2007? Why not 2009 or 2010?

Why 2008 in particular? Is there anything special about 2008?

Apart from the 2008 figure you have published, can you tell us where we can we get the relative Pakistan & Bangladesh ODA Foreign Aid data for 2005, 2006, 2007, 2009, and 2010?

It would be good to do a comparison between Bangladesh & our country in terms of the same ODA Foreign Aid received per capita over the last 5-6 years (i.e. 2005-2010)....

Thank you.

Hopewins said...

"...Population will be an asset rather than a liability in a world moving to sub-replacement levels of fertility.."

I don't know whether this is unconditionally true or whether it needs some sort of qualifier(s). However, I do hope this is true, because that would mean that our country is on the right-track.

Bangladeshis, on the other hand, are screwed. They are not accumulating these assets as fast as we are. They are falling behind, even as we surge ahead.

Bangladesh is going straight to hell in a hand-basket.

Riaz Haq said...

HWJ: "Bangladesh is going straight to hell in a hand-basket."


Bangladesh will be one of the largest countries and a significant economy as predicted by Goldman Sachs' Jim O'Neill as part of his N-11 group.

Hopewins said...

" predicted by Goldman Sachs' Jim O'Neill as part of his N-11 group...."

Here is the forecast from International Futures of per capita GDP (PPP) in our neighboring countries PLUS the developing countries listed by O'Neil as "part of this N-11 group".

Riaz Haq said...

HWJ:"Here is the forecast from International Futures of per capita GDP (PPP) in our neighboring countries PLUS the developing countries listed by O'Neil as "part of this N-11 group"."

It makes no sense as obvious from the fact that it's just a straight line extrapolated out from the current gdp growth performance.

It completely ignores Pakistan's historical CAGR of 5-6% per year since 1947.

Hopewins said...

"....Pakistan which has much lower pop densities than the region as a whole..."


NOMINAL Population Density can be a very misleading figure for countries which have vast areas that are inhospitable (deserts, high mountains) like Egypt, Iraq & Pakistan et cetera.

Look at the Satellite Images of Night-Lights (below) for Egypt, Iraq & Pakistan.

Can you the massive concentration of population along the main river banks? Can't you CLEARLY see the Nile, the Bifurcation of Tigris-Euphrates, and the Lone-Indus (downstream in Janobi Punjab & Sindh) and the Punjab Plains (upstream)?

This is why most P&D professors always talk about the EFFECTIVE population density, rather than NOMINAL one...

Hopewins said...

"It completely ignores Pakistan's historical CAGR of 5-6% per year since 1947.."

The EVOLVING CAGR from 1961-2011 (World Bank Data Availability) is presented below.

The CAGR was 7% in the sixties.

It came down to 6% in the eighties.

It kept falling in the nineties.

Even after the Aughties-Boom, it is now at around 5.2%.

If we go through another "lost-decade", it looks like it may go down to 4-4.5% by 2022.

Hopewins said...

"Back in 1971, the per capita income of West Pakistanis was 1.6 times that of East Pakistanis, and the West Pakistanis, particularly Punjabis, were accused of colonial exploitation of Bengalis. After 40 years of Bangladesh's Independence, guess what the ratio is? It's still 1.6+..."


Said the Punjabi.


Using just the end-points is of little help if we want to really understand the fundamental long-term trends. We must also look at the data-points in between.

The Pak/Bangla ratio of per capita GDP PPP from the World Bank data is shown in the graph below.

Yes, the 2010 ratio is 1.6 and the 1971 ratio may also have been 1.6 (WB does not have the data for 1971). However, 4 interesting periods are seen in between.

1) In the eighties, Pakistan had an unusual oil-remittance & US-Aid boom that lead to a rising ratio that peaked in 1992 at about 2.2

2) After that, as the US walked away and the oil-bust killed remittances, Pakistan went into a decade of stagnation while Bangladesh kept growing. The ratio consequently dropped to 1.8 by 2002.

3) Rising Oil remittances in the Aughties & US post-911 aid led to another Pakistani boom. The ratio stabilized at about 1.8 as Pakistan and Bangladesh grew together from 2003-2007

4) After the 2008 financial crisis in Pakistan, growth collapsed as savings declines drastically. Bangladesh, however, kept growing with its higher savings rates. This led the ratio to fall to 1.6 by 2010.

Since then Bangladesh's growth has consistently outperformed Pakistan's. And this is unlikely to change for the next 8-10 years. At the current trend rates, it is possible that the ratio will hit the critical 1.0 by 2020-2022...

Riaz Haq said...

HWJ: "NOMINAL Population Density can be a very misleading figure for countries which have vast areas that are inhospitable (deserts, high mountains) like Egypt, Iraq & Pakistan et cetera."

People in America now live routinely in areas such as Arizona desert that were once considered un-inhabitable.

Besides, population density is the least uniform in western urban societies. Most people live in or close to major cities.

Riaz Haq said...

Here's NY Times on a company locating sweatshops for cheap garments:

Li & Fung — the most important company that most American shoppers have never heard of — has long been on the cutting edge of globalization, chasing cheap labor to garment factories first in China, then elsewhere in Asia, including Bangladesh.
In Bangladesh, Li & Fung has been tied to several calamities. It arranged the production of clothing for Kohl’s at one factory where 29 workers died in a fire in 2010. It brokered some work at another in 2011 where more than 50 workers who made Tommy Hilfiger clothing were injured and at least 2 died in an explosion and a stampede.

And last year, Li & Fung was responsible for some garments produced at the Tazreen Fashions factory, when 112 workers died in November in a fire after many of them were ordered to continue working even though alarms had sounded.

Such episodes highlight the often hidden role played by sourcing companies in trying to feed the West’s seemingly insatiable demands for ever cheaper merchandise. Worker advocates say that Li & Fung and others make accountability more difficult by adding a layer of insulation between reputation-conscious retailers and often poorly treated workers, allowing businesses to avoid bad publicity and legal liability when things go wrong.

Sourcing companies face an inherent conflict: they are expected to find low-cost factories for clients, but also to blow the whistle if the factories violate safety standards. Some critics say that the scale of Li & Fung’s operations and the speed at which it shifts production from one site to another give owners less incentive to improve their factories and make it difficult for Li & Fung to deliver on its pledges of carefully vetting its suppliers.

“We make our best effort to weed out bad factories,” said Bruce Rockowitz, chief executive of Li & Fung. “But we don’t always succeed.”

Mr. Rockowitz added that Li & Fung employees conduct rigorous on-site audits — unlike many competitors — to ensure that the company does business only with factories that adhere to safety regulations. In the case of Tazreen, Li & Fung had acquired a new subsidiary that placed orders at the factory, but the changes sought by Li & Fung had not been made 11 weeks later when the fatal fire occurred, a company spokesman said....

Farhat said...

The military crackdown in EP on March 25 was undertaken to stop the slaughter and rape of non-Bengalis and pro-government Bengalis undertaken by AL militants and to save the federation from breaking apart. While it achieved its short-term objectives, in reality it lost the first battle of united Pakistan. Thereon, it was a downhill journey. Had the military action not been undertaken, the AL with the help of East Bengal Regiments and East Pakistan Rifles and Police together with ex servicemen and armed infiltrators from India would have unleashed its battle plan which was to go into effect on the morning of 26 March to forcibly takeover EP.
Besides addressing political grievances, Yahya Khan went a step ahead of Ayub Khan to address inter-wing economic disparities and gave out categorical orders to narrow down the gap between the two wings. 52.5% resources were allotted to the eastern wing as against 47.5% to West Pakistan. Capital inflow in East Pakistan increased from 40 to 75%, while the investments grew from 39 to 54%. Rs. 231 crores was allocated for development in public sector as against Rs. 190 crores for West Pakistan. The development loans to East Pakistan that stood at Rs. 28.77 crore in 1957-58 increased to Rs. 210.41 crore in 1970-71, that is, an increase of 631%. West Pakistan received only Rs. 126.07 crore loans in that year. Grants in aid from the government to East Pakistan grew from Rs. 7140 crore in 1948-49 to 1958-9 to that of Rs. 293.89 during 1958-59 to 1970-71; that is, an increase of 312%. In case of western wing, the increase was only 202%.
By 1971, East Pakistan had 600 major industries. These included 77 jute mills, 4 paper mills, 2 paper-board/newsprint mills, 20 sugar mills, 42 cotton mills, one huge steel mill, a petroleum refinery, one oil refinery, 2 Rayon mills, about 30 match factories, several oil and vegetable ghee mills, two fertiliser factories, leather tanning factories and a cement plant. Tea production had shot up considerably to the extent that East Pakistan met the needs of West Pakistan at a higher rate. East Pakistan became self-sufficient in sugar, fertiliser and tea and started exporting tea, jute items, tanned leather, paper and newsprint. Sugar production increased from 23000 tons to over one lakh tons in 1970. Out of 23 match factories in the country, 20 were in East Pakistan. Consequently, West Pakistan had become a captive market instead of East Pakistan. In the field of education, there were five universities, three colleges and six schools of engineering, eight polytechnics, five colleges and several schools of medicine, dozens of hospitals and more than 200 degree colleges for arts and science. It had more than 3000 miles of metalled road and its power capacity exceeded 100,000 KW.
Two modern ports were built at Chittagong and Chalna. Besides, a welfare-oriented scheme was put into operation in East Pakistan in middle 1970 by virtue of which commercial banks provided loans to the depressed class. Head offices of the House Building Finance Corporation, Refugee Rehabilitation Finance Corporation and IDBP were shifted to Dacca in 1970. With this kind of development in all the fields at a massive scale, it was indeed preposterous on part of the vested groups within East Pakistan to sing the song of exploitation by West Pakistan. Having laid a sufficiently strong economic base, it would have achieved greater political strength with improved degree of provincial autonomy. By all standards, East Pakistan would have gained by keeping within the federation of Pakistan. Bangladesh’s prosperity owes a great deal to Ayub Khan’s reforms. Barring the hard core Awami League members, even to this day the people of Bangladesh hold Ayub Khan in high esteem.
The falsehood of the manipulated grievances was exposed within the first two years of creation of Bangladesh. The agonising truth dawned upon the people of Bangladesh that they had been cheated and duped by Mujib and AL.

Enamul said...

World Development Indicators-Google Public Data Explorer

And in 1975 we had better per capita income than both India and Pakistan

Riaz Haq said...

Enamul: " And in 1975 we had better per capita income than both India and Pakistan"

Sharp spike in 1975 BD per capita income doesn't seem right. It appears to be an error. Per incomes usually don't change so dramatically for just one year.

Riaz Haq said...

What Happened in East Pakistan (Yuri Bezmenov Former KGB Psychological Warfare Expert)

Yuri Bezmenov ex KGB Psychological Warfare Expert Explains What Happened in East Pakistan (Now Bangladesh) in This Video

Riaz Haq said...

Drifting apart: The gap between #India’s richer and poorer states is widening. #Inequality #Modi … via @TheEconomist

COUNTRIES find it easier to get rich once their neighbours already are. East Asia’s growth pattern has for decades been likened to a skein of geese, from Japan at the vanguard to laggards such as Myanmar at the rear. The same pattern can often be seen within big countries. Over the past decade, for example, China’s poorer provinces have grown faster than their wealthier peers. India is different. Far from converging, its states are getting ever more unequal. A recent shake-up in the tax system might even make matters worse.

Bar a few Mumbai penthouses and Bangalore startup offices, all parts of India are relatively poor by global standards. Taken together, its 1.3bn people make up roughly the third and fourth decile of the world’s population, with an income per person (adjusted for purchasing power) of $6,600 dollars. But that average conceals a vast gap. In Kerala, a southern state, the average resident has an annual income per person of $9,300, higher than Ukraine, and near the global median. With just $2,000 or so, an Indian in Bihar, a landlocked state of 120m people, is closer to a citizen of Mali or Chad, in the bottom decile globally.

The gap has been widening. In 1990, point out Praveen Chakravarty and Vivek Dehejia of the IDFC Institute, a think-tank, India’s three richest large states had incomes just 50% higher than the three poorest—roughly the same divergence as in America or the EU today, and more equal than in China. Now the trio is three times richer (see chart).

In some rich parts of the world, income gaps between regions have in recent decades been widening. But India’s experience still puzzles economists. Poor regions benefit from technology developed in richer ones—from trains to mobile phones. Workers in poorer places accept lower wages, so firms build new factories there.

The catch-up process ought to be all the faster if barriers to the movement of goods or people are lower. Regions within China have converged rapidly, partly owing to the market, as factories move production inland where wages are cheaper, and partly to government attempts to lift poorer regions by investing heavily in their infrastructure.

Arvind Subramanian, chief economic adviser to India’s government, earlier this year wrote that its states’ divergence is “a deep puzzle”. The brief bout of liberalisation in 1991 probably played a part initially, by unevenly distributing the spoils of more rapid overall economic growth. But that burst of inequality should have self-corrected by now.

One theory blames the states’ divergence on their isolation even in the Indian domestic market, as a result of lousy infrastructure, red tape and cultural barriers. Moving stuff from state to state can be as tiresome as exporting. Internal migration that would generate catch-up growth is stymied by cultural and linguistic barriers: poor northern states are Hindi-speaking, unlike the richer south. Cuisines differ enough for internal migrants to grumble. It is harder to have access to benefits and state subsidies outside your home state.

Mr Subramanian thinks such arguments are overdone. India may not have mass migration on the scale that transformed China, but it is still sizeable, he argues, and has been rising as a share of the population even as convergence has gone into reverse. Inter-state trade is healthy, suggesting suitably porous borders.

Another theory looks at India’s development model. Growth has relied more on skill-intensive sectors such as IT than on labour-intensive manufacturing. This may have stymied the forces of convergence seen elsewhere, Mr Subramanian posits. Perhaps, however low their labour costs, the poorer places lack the skills base to poach jobs from richer rivals.