Introduction to International Business MGT-321

Cases

629

Economic Development in Bangladesh
When Bangladesh gained independence from Pakistan in
1971 after a brutal civil war that may have left as many as
3 million dead, the U.S. National Security Adviser, Henry
Kissinger, referred to the country as a “basket case.”
Kissinger’s assessment was accurate enough. At the time,
Bangladesh was one of the world’s poorest nations.
Although most of the country is dominated by the fertile
Ganges-Brahmaputra delta, a lack of other natural
resources, coupled with poor infrastructure, political
instability, and high levels of corruption, long held the
country back. To compound matters, Bangladesh is prone
to natural disasters. Most of Bangladesh is less than
12 meters above sea level. The extensive low-lying areas
are vulnerable to tropical cyclones, floods, and tidal bores.
Beginning in the mid-1990s, however, Bangladesh began
to climb the ladder of economic progress. From the early
2000s onward, the country grew its economy at around
6 percent per annum compounded. Today, this Muslim
majority country of 160 million people has joined the
ranks of lower-middle-income nations. Poverty reduction
has been dramatic, with the percentage of the population
living in poverty falling from 44.2 percent in 1991 to
18.5 percent in 2010, an achievement that raised 20.5 million people out of abject poverty. Today, the country ranks
64th out of the 154 countries included in the World Bank’s
global poverty database. It has a considerable way to go,
but it is no longer one of the world’s poorest countries.
Several reasons underlie Bangladesh’s relative economic success. In its initial post-independence period,
Bangladesh adopted socialist policies, nationalizing many
companies and subsidizing the costs of agricultural production and basic food products. These policies failed to
deliver the anticipated gains. Policy reforms in the 1980s
were directed toward the withdrawal of food and agricultural subsidies, the privatization of state-owned companies, financial liberalization, and the withdrawal of some
import restrictions. Further reforms aimed at liberalizing
the economy were launched in the 1990s. These included
making the currency convertible (which led to a floating
exchange rate in 2003), reducing import duties to much
lower levels, and removing most of the controls on the
movement of foreign private capital (which allowed for
more foreign direct investment). The reforms of the
1990s coincided with the transition to a parliamentary
democracy from semi-autocratic rule.
Bangladesh’s private sector has expanded rapidly since
then. Leading the growth has been the country’s vibrant
textile sector, which is now the second-largest exporter of
ready-made garments in the world after China. Textiles
account for 80 percent of Bangladesh’s exports. The
development of the textile industry has been helped by

the availability of low-cost labor, managerial skills, favorable trade agreements, and government policies that
eliminated import duties on inputs for the textile business, such as raw materials. The Bangladesh economy has
also benefited from its productive agricultural sector and
remittances from more than 10 million Bangladesh citizens who work in other nations. Bangladesh is also the
home of the microfinance movement, which has enabled
entrepreneurs with no prior access to the banking system
to borrow small amounts of capital to start businesses.
This being said, the country still faces considerable
impediments to sustaining its growth. Infrastructure
remains poor; corruption continues to be a major problem; and the political system is, at best, an imperfect
democracy where opposition is stifled. The country is too
dependent upon its booming textile sector and needs to
diversify its industrial base. Bangladesh is also one of the
countries most prone to the adverse affects of climate
change. A one-meter rise in sea level would leave an
estimated 10 percent of the country under water and
increase the potential for damaging floods in much of the
remainder. Nevertheless, according to the U.S. investment
bank Goldman Sachs, Bangladesh is one of the 11 lowermiddle-income nations poised for sustained growth.

Sources
W. Mahmud, S. Ahmed, and S. Mahajan, “Economic Reforms,
Growth, and Governance: The Political Economy Aspects of
Bangladesh’s Development Surprise,” World Bank Commission
on Development and Growth, 2008; “Freedom in the World
2016,” Freedom House; “Tiger in the Night,” The Economist,
October 15, 2016; Sanjay Kathuria, “How Will Bangladesh
Reach High Levels of Prosperity?” World Bank blog, January 5,
2017; and Qimiao Fan, “Bangladesh: Setting a Global Standard
in Ending Poverty,” World Bank blog, October 5, 2016.

Case Discussion Questions
1.

What were the principal reasons for the economic
stagnation of Bangladesh after its war for
independence?
2. Explain how the liberalization program in the 1990s
enabled Bangladesh to start climbing the ladder of
economic progress. What are the main lessons here
that can be applied to economic development in
other nations?
3. Bangladesh is dependent for its prosperity upon
agriculture and textile exports. What are the risks
here? How might Bangladesh diversify its industrial
and commercial base?

‫المملكة العربية السعودية‬
‫وزارة التعليم‬
‫الجامعة السعودية اإللكترونية‬

Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University

College of Administrative and Financial Sciences

Assignment 2
Introduction to International Business (MGT 321)
Due Date: 11/11/2023 @ 23:59
Course Name: Introduction to International
Business
Course Code: MGT-321

Student’s Name: SEU ELITE

Semester: First

CRN:

Student’s ID Number:

Academic Year:2023-24-1st

For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
Marks Obtained/Out of 10

Level of Marks: High/Middle/Low

General Instructions – PLEASE READ THEM CAREFULLY
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•
•
•
•
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The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be reduced
for poor presentation. This includes filling your information on the cover page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced) font. No
pictures containing text will be accepted and will be considered plagiarism).
Submissions without this cover page will NOT be accepted.

Learning Outcomes:
Knowledge:
1.1: Identify and evaluate the significant trade agreements affecting global commerce
Skills:
2.1: Analyse the effects of culture, politics and economic systems in the context of
international business
Values:
3.1 : Carry out effective self-evaluation through discussing economic systems in the
international business context

Case study
Please read Case 3: “Economic Development in Bangladesh” available in your ebook (International business: Competing in the global marketplace (13th ed.), at
page no.629, and answer the following questions:

Case study Question(s):
1. What were the principal reasons for the economic stagnation of Bangladesh after
its war for independence? Discuss.
(Minimum words: 400, marks: 2)
2. Explain how the liberalization program in the 1990s enabled Bangladesh to start
climbing the ladder of economic progress. What are the main lessons here that can
be applied to economic development in other nations?
(Minimum words: 500,
marks: 4)
3. Bangladesh is dependent for its prosperity upon agriculture and textile exports.
What are the risks here? How might Bangladesh diversify its industrial and
commercial base?
(Minimum words: 500, marks: 4)

Important Notes:
• This is an individual assignment.
• All references must be cited using APA format. This includes both in-text
citations and the reference list at the end of the document.
• Originality, Similarity and Plagiarism Check: Your work must be original. All
papers will be submitted through SafeAssign software to check for similarity and
plagiarism. Any instance of academic dishonesty will result in a grade of zero for
the assignment. No exceptions and no second chances!

Answers

Answer Q1. The principal reasons for the economic stagnation of Bangladesh after its
war for independence can be attributed to several factors. These include poor
infrastructure, political instability, high levels of corruption, a lack of natural resources,
and vulnerability to natural disasters.
The inadequate infrastructure of Bangladesh was one of the main things impeding its
economic development. The absence of sufficient ports, railroads, and road networks was
a problem for the nation. This hampered trade both domestically and globally and made it
harder for companies to transfer goods. Inadequate power supplies and restricted access
to dependable electricity also impeded economic growth and industrial expansion.
Bangladesh’s economic stagnation was also significantly influenced by political unrest.
Following its separation from Pakistan in 1971, the nation went through several periods
of dictatorial leadership and military takeovers. Foreign direct investment (FDI) was
inhibited by the negative investment climate generated by this political uncertainty. The
execution of long-term planning and the implementation of economic changes required
for sustained growth were hampered by a lack of continuity in policy and governance.
Bangladesh’s economic stagnation was partly caused by high levels of corruption.
There was widespread corruption in both industry and government, which resulted in
inefficient use of resources, low productivity, and few business prospects. The
pervasiveness of corruption weakened public confidence, deterred investment, and

impeded economic expansion. Bangladesh’s dearth of natural resources was another
important aspect. The Ganges-Brahmaputra delta is a boon to the nation, but it is devoid
of other important resources like minerals, gas, and oil. This made it more difficult for the
nation to diversify its economy and make money. Bangladesh’s economy is prone to
swings in crop production due to its heavy reliance on agriculture, which is sensitive to
exogenous shocks like floods and cyclones. Furthermore, Bangladesh’s economic
difficulties were made worse by the country’s susceptibility to natural calamities. The
majority of the nation is below sea level, making its low-lying topography vulnerable to
cyclones, floods, and tidal bores. These catastrophes severely damaged human lives,
crops, and infrastructure, which had a negative impact on the economy and long-term
development. Bangladesh first embraced socialist post-independence policies,
nationalising businesses and providing subsidies for basic food items and agricultural
produce.
These measures, however, did not produce the expected benefits and instead exacerbated
the state of economic stagnation. Growth in the private sector was impeded and
innovation was inhibited by the inefficiencies of state-owned firms and distorted market
procedures. In the 1980s and later decades, Bangladesh carried out policy changes to
address these issues and promote economic growth. The goals of these reforms were to
encourage growth driven by the private sector, draw in foreign investment, and liberalises
the economy. Financial liberalisation, the elimination of import restrictions, the
privatisation of state-owned businesses, and the removal of agricultural subsidies were all
important steps taken to foster a favourable business environment. The thriving textile
industry in Bangladesh has been one of the major forces behind the country’s economic

progress. Its expansion has been facilitated by the availability of cheap labor,
advantageous trade agreements, and government initiatives that removed import taxes on
textile industry inputs. The textile industry has grown to be the world’s second-largest
exporter of ready-made clothing, creating jobs and increasing exports. Additionally, the
productive agricultural sector and remittances from Bangladeshi citizens working abroad
have played a crucial role in supporting the country’s economy. The agricultural sector
has provided food security and a source of income for a significant portion of the
population. Remittances have also contributed to improving living standards and
stimulating domestic consumption.

Answer Q2. The liberalization program implemented in the 1990 played a crucial role in
enabling Bangladesh to start climbing the ladder of economic progress. This program
involved a series of policy reforms aimed at liberalizing the economy, attracting foreign
investment, and promoting private sector growth. These reforms had a significant impact
on various sectors of the economy, including trade, finance, and governance. The main
lessons that can be applied to economic development in other nations are the importance
of market-oriented policies, the need for institutional reforms, and the benefits of
promoting export-oriented industries. An important component of the liberalization
program was the 2003 implementation of a floating exchange rate. This promoted foreign
investment and made it easier for the taka, the currency of Bangladesh, to find its market
value. Bangladesh was able to increase its competitiveness in the international market by
implementing a flexible exchange rate regime, which allowed it to modify the value of its

currency in response to outside shocks. Because of its adaptability, the nation was able to
weather economic downturns and preserve a macroeconomic environment that was
favorable to growth. Another significant aspect of the liberalization program was the
reduction of import duties to much lower levels. This policy change made it easier for
businesses to import raw materials and capital goods at a lower cost, stimulating
industrial growth and enhancing productivity. The lower import duties also encouraged
foreign investment by reducing the cost of importing machinery and equipment. As a
result, many multinational corporations established their operations in Bangladesh,
contributing to job creation, technology transfer, and export expansion. Furthermore, the
liberalization program aimed at removing most of the controls on the movement of
foreign private capital, which allowed for more foreign direct investment (FDI). This
policy change attracted foreign investors who were previously discouraged by restrictions
on capital flows. The influx of FDI brought in new technologies, managerial expertise,
and access to international markets, which helped to upgrade the capabilities of domestic
industries and enhance their competitiveness. The liberalization of capital flows also
facilitated the flow of remittances from Bangladeshi citizens working abroad, which
became an important source of foreign exchange and contributed to poverty reduction.
The 1990s liberalization drive also prioritized institutional changes, such as the shift from
semi-autocratic to parliamentary democracy. A better policy-making process, increased
accountability, and increased political stability resulted from this shift in the governance
structure. An atmosphere that was favorable to investment and corporate expansion was
produced by the establishment of democratic institutions and the defense of property
rights. Moreover, attempts to lessen corruption through measures of accountability and

transparency were made in tandem with the liberalization of the economy. These
institutional changes promoted investment, enhanced the business environment, and
promoted economic growth. The main lessons that can be applied to economic
development in other nations from Bangladesh’s experience with liberalization include
the importance of market-oriented policies, institutional reforms, and export-oriented
industries. Firstly, market-oriented policies, such as a flexible exchange rate, lower
import duties, and liberalization of capital flows, can create a conducive environment for
economic growth by promoting competitiveness, attracting foreign investment, and
facilitating trade. Secondly, institutional reforms, including the establishment of
democratic governance structures, protection of property rights, and anti-corruption
measures, are crucial for creating a transparent and accountable business environment
that encourages investment and fosters economic development. Finally, promoting
export-oriented industries, such as the textile sector in Bangladesh, can generate foreign
exchange earnings, create employment opportunities, and contribute to poverty reduction.

Answer Q3. Bangladesh’s Reliance on Textile Exports and Agriculture: Risks and
Diversification Over the past few decades, Bangladesh has made significant economic
progress, mostly due to its textile and agriculture industries. However, there are risks and
difficulties for the long-term growth and sustainability of the nation associated with this
heavy reliance on these two sectors. In order to guarantee a more varied industrial and
commercial foundation, Bangladesh must confront these hazards and investigate novel

paths for economic advancement. Dangers Associated with Reliance on Agriculture and
Textile Exports sensitivity to shocks from the outside: Bangladesh’s heavy reliance on
textiles and agriculture exposes it to a range of external factors, including shifts in
consumer preferences, international trade policies, and fluctuations in the global market.
Any negative changes to these variables could have a big effect on the nation’s export
earnings and stability of the economy. Climate change and natural disasters: Bangladesh
is highly vulnerable to the adverse effects of climate change, including rising sea levels,
increased frequency and intensity of cyclones, and floods. These environmental risks
pose a significant threat to both agricultural production and textile manufacturing, as they
can disrupt supply chains, damage infrastructure, and result in substantial economic
losses.
Low value addition and limited technological innovation: While the textile sector has
been successful in terms of export volume, it largely relies on low-cost labor and low
value-added activities. This limits the sector’s potential for higher profitability and
technological innovation. Similarly, in agriculture, there is a need to move beyond
traditional farming practices and invest in research and development to enhance
productivity, value addition, and product diversification. Social and environmental
sustainability: The textile industry, despite its economic contribution, has faced criticism
for poor labor conditions, limited worker rights, and environmental degradation. These
issues can tarnish Bangladesh’s international reputation, lead to trade restrictions, and
negatively impact the long-term sustainability of the sector:
Bangladesh’s Diversification Strategies

Bangladesh should concentrate on broadening its industrial and commercial base in order
to reduce the risks brought about by its excessive reliance on textile and agricultural
exports. Several crucial tactics to accomplish this include:
Encouraging manufacturing sectors with added value: Bangladesh ought to give top
priority to the growth of sectors that enhance its current production of textiles and
agriculture. This could entail making investments in industries like engineering goods,
electronics, pharmaceuticals, and food processing. Productivity, competitiveness, and
export potential will all be increased in these industries by promoting technological
innovation, R&D, and skill development. Encouraging services sector growth: The
services sector, particularly knowledge-intensive industries such as information
technology (IT), business process outsourcing (BPO), and financial services, offers
significant potential for diversification. Bangladesh has a young and educated workforce,
making it well-suited for these industries.
Government initiatives to attract foreign investment, improve digital infrastructure, and
provide training and support for entrepreneurship can help drive the growth of the
services sector.
Investing in the development of infrastructure: Diversification efforts require addressing
the infrastructure deficit. To stimulate the development of new industries and draw
foreign direct investment, it will be necessary to improve transportation networks,
increase the capacity of power generation, and improve logistics and connectivity.
International cooperation and public-private partnerships can be extremely important for
funding and carrying out infrastructure projects. Encouraging inclusive and sustainable
industries: Bangladesh should place a high priority on the growth of environmentally and

socially sustainable industries. This covers organic farming, ecotourism, renewable
energy, and sustainable manufacturing techniques. The nation’s competitiveness will
increase and responsible investors will be drawn in by placing a strong emphasis on
corporate social responsibility and guaranteeing adherence to international labor and
environmental standards. Increasing market access through regional and international
trade agreements can help Bangladesh’s industries grow and create new opportunities for
trade integration on both a regional and global scale. Market diversification and less
reliance on a small number of export destinations can be achieved by fostering stronger
economic ties with nearby nations like India and Myanmar and actively engaging in
regional trade blocs like the South Asian Association for Regional Cooperation (SAARC)
and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation
(BIMSTEC).

References:

World

Bank.

(2019).Bangladesh.

Retrieved

from

• Bangladesh Bank. (2020).

Bangladesh Economic Review. Retrieved from

• Popiman Sachs (207, BRICs and Beyond Goliman fiels Giotal Economics

and-Beyond-chapter-6.pdf
• Rahman, M. M., & Kazal, M. M. (2012). Economic Development of Bangladesh:
A Review. Journal of Business and Technology (Dhaka), 7(1), 31-50.
• Khatun, F., & Rashid, M. M. (2017). Economic Growth and Diversification in
Bangladesh: A Review of Literature. Journal of Business and Technology (Dhaka), 12(1),
25-45.

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