Dec 28, 2018 | 10:00 GMT

6 mins read

Economic Issues Overshadow Bangladesh's Fraught Elections

Supporters of Bangladesh's Awami League march during a general election campaign procession in the capital of Dhaka on Dec. 10, 2018.
  • Irrespective of who wins the elections on Dec. 30, the next administration in Dhaka will largely need to create jobs, develop infrastructure and advance the country's industrialization.
  • An expanding economy will create greater demand for energy and infrastructure, creating opportunities for India and China to fund regional projects.
  • In the lead-up to the elections, violence between supporters of the Awami League and the Bangladesh Nationalist Party is likely, heightening political risk to the fast-growing economy.

Bangladesh will cap off a year of eventful elections in South Asia with parliamentary polls on Dec. 30. The center-left Awami League, which has spent the past decade in power under Prime Minister Sheikh Hasina, is seeking to win another five-year term at the head of a 12-party alliance. Arrayed against it is the center-right Bangladesh Nationalist Party (BNP), the country's main — if sidelined — opposition outfit, which is leading the Jatiya Oikya Front, an 18-member alliance. At stake are 300 of the 350 seats in the Jatiya Sangsad, the country's unicameral parliament (the remaining 50 seats are reserved for women and appointed on a proportional basis). But irrespective of the outcome, the economic goals of whoever assumes power in the capital of Dhaka will be largely the same: focus on job creation and infrastructure development, and accelerate efforts to industrialize.

The Big Picture

Few world economies can match Bangladesh's 7 percent growth rate. But the South Asian country's ability to foster sufficient growth to further reduce poverty and achieve upper-middle income status by 2021 will require the next government to focus on advancing industrialization, attracting greater foreign investment for energy and infrastructure, and diversifying exports beyond the ready-made garment industry.  

From Military Rule to Democracy

Bangladesh is situated on the southeastern edge of the Indo-Gangetic plain, which sweeps across the Indian subcontinent for more than 1,600 kilometers (1,000 miles) before the Ganges River empties into the Bay of Bengal. With the exception of a small southeastern border with Myanmar, Bangladesh is surrounded by India (explaining why Dhaka's most important external partner is New Delhi). Comprising the historical region of Bengal, which includes the neighboring Indian state of West Bengal, Bangladesh is the world's most densely populated country among states with a population of 10 million or greater. 

Bangladesh emerged as Pakistan's eastern wing during the partition of British India in 1947 before achieving independence in 1971 after a war with Islamabad. In 1975, Sheikh Mujibur Rahman, the leader of the Bengali independence movement — as well as the father of the current prime minister — was assassinated by rogue army officers, triggering 15 years of military rule. Maj. Gen. Ziaur Rahman — the founder of the BNP and husband of the party's currently imprisoned leader, Begum Khaleda Zia — ruled from 1975 until his assassination in 1981. His successor, Lt. Gen. Hossain Mohammad Ershad, ruled until he was forced to resign in 1990. 

It's All About the Economy

The restoration of democracy in 1991 ushered in an enduring political rivalry between the country's two most powerful women: Hasina and Zia, each of whom has had multiple stints in power. Although the Awami League and the BNP are nominally liberal and conservative, respectively, the categorization is more relevant to their positions on national identity than to their economic policies. Regardless of who takes power on Dec. 30, the new government will need to focus on similar economic goals: advancing the country's industrialization, diversifying exports beyond the ready-made garment industry, attracting more foreign investment for infrastructure and the energy sector, expanding the tax revenue base beyond 11.7 percent of the gross domestic product, maintaining a stable inflation rate, improving corporate governance and addressing the growing problem of nonperforming loans, which now account for 11 percent of all loans in the banking sector.

Bangladesh has one of the world's fastest-growing economies. After an impressive decade of growth that averaged over 6 percent, the economy grew by even more — 7.2 percent — in the last fiscal year thanks to a strong performance in manufacturing and construction. Consumption accounts for three-quarters of GDP, while textiles form the most dynamic sector of the economy, producing 80 percent of the country's exports, meaning that only China exports more ready-made garments. The services sector accounts for 53 percent of economic output, with industry and agriculture accounting for 32 percent and 15 percent, respectively. Nevertheless, infrastructure constraints, such as limited road, rail and port capacity, are a major impediment to further economic expansion. As a result, giant neighbors such as India and China will seek to lavish money on Dhaka over the next several years; the country is already a signatory to China's vast Belt and Road Initiative and is also the largest recipient of India's external lines of credit.  

By 2021, Bangladesh hopes to become an upper-middle income country, which would give it a gross national income (GNI) per capita of $3,896 and put it among countries such as Jordan, Armenia and Guatemala. Bangladesh, however, has a long way to go. According to the World Bank, its GNI per capita is just $1,140 (Pakistan stands at $1,290 and India at $1,890). The numbers mean Bangladesh must triple its GNI per capita in the next two years — a daunting task for whoever leads the next government — if it wishes to achieve its goal. Accordingly, the next administration will focus on creating jobs for the 2 million Bangladeshis who enter the labor market every year, as well as industrialization. 

As the world's eighth-most populous country goes to the polls, both the Awami League and the BNP have a great responsibility in minimizing election-related violence and ensuring a smooth transition for whoever emerges victorious on Dec. 30.

Toward Election Day

Elections inevitably raise tensions in the country. In 2011, Hasina used her parliamentary majority to pass a 15th amendment to the constitution, outlawing the establishment of caretaker governments, which have previously helped oversee free and fair elections and minimized the possibility that the incumbent administration could use the advantages of government to unduly sway voters, after the Supreme Court declared such administrations unconstitutional. The issue came to a head during elections three years later, when the BNP boycotted the polls in protest over the neutral caretaker issue (the BNP, incidentally, has also faced accusations that it refused to appoint neutral caretaker governments in past elections). In the end, the January 2014 polls descended into violence, and clashes between protesters and police left 18 dead. 

But without parliamentary representation as a result of its boycott, the BNP has found it difficult to effectively challenge the Awami League, prompting it to compete in the Dec. 30 polls. But because Zia is in prison on corruption charges, Kamal Hossain of the Gano Forum party will lead the alliance.

Hasina and Hossain kicked off their election campaigns on Dec. 12. Immediately, however, violence put its mark on the contest. A 24-year-old member of the Jubo League, the Awami League's youth wing, was killed in southeastern Bangladesh's Noakhali district. The attack was just one of several altercations between Awami and BNP members that have occurred across the country.

As the world's eighth-most populous country goes to the polls, both the Awami League and the BNP have a great responsibility in minimizing election-related violence and ensuring a smooth transition for whoever emerges victorious on Dec. 30. If recriminations over the elections continue, questions will rise about the legitimacy of the new administration — and its ability to allay the worries of much-needed investors.

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