State action needed to harness demographic dividend

In the 1980s, the then military dictator General HM Ershad described uncontrolled population growth as the "number one national problem." Although his statement created a stir at the time, it was a completely misleading comment. Population growth, whether planned or unplanned, can never be the number one national problem for a country. Population is an irreplaceable resource. The progress of the world cannot be imagined without it. If population is systematically trained and transformed into a skilled and productive workforce, it becomes the nation's greatest asset. However, if population growth is unmanaged, it becomes a burden for the country. The responsibility of turning the population into human capital lies solely with the state. The state cannot escape the blame for its failure to do so.

Looking at Bangladesh, we can see that there has been a glaring failure on the part of the state in converting its population into human capital. This responsibility is something the state cannot avoid.

It has been 53 years since our independence, yet the state has not implemented any national plan to use the population effectively or transform it into human capital. Bangladesh's education system has effectively turned into a "factory for producing unemployed individuals with self-esteem." Even after completing their education at the highest institutions, students are not sure whether they will be able to secure suitable employment. The reason is that those who receive education lack technical skills, which could enable them to either create suitable employment opportunities in an organization or become self-employed. To transform the population into a skilled and capable workforce, it is crucial to adopt long-term plans and initiatives.

Bangladesh is currently experiencing a demographic dividend phase, but there seems to be no national strategy or consideration on how to capitalize on this opportunity. During the 15-and-a-half years of autocratic rule in the previous government, the nation became almost fade up to development narratives. However, the true purpose of that so-called development was the plundering of state resources. While talking about visible infrastructural improvements, they essentially overlooked the need to transform the population into human capital. Bangladesh entered the demographic dividend phase more than a decade ago (in 2012), but no initiative has been taken at the national level to reap the benefits of this dividend. Economists and demographers believe that a country’s demographic dividend phase comes only once in its lifetime. Some even argue that it happens once in a thousand years.

A country's population can be considered to be in a demographic dividend phase if the age structure of the population plays a supportive role in growth. Population is generally divided into two categories: the working-age population and the dependent population. If the proportion of the working-age population exceeds the dependent population, it can be considered a demographic dividend phase. When discussing the demographic dividend issue, Professor Sahadat Hossain Siddiquee of the Department of Economics at Dhaka University stated, “If the working-age population of a country constitutes more than 50% of the total population, it is considered to be in a demographic dividend phase.” Globally, the demographic dividend is regarded as a blessing for a country’s economic and social development. Countries that are able to harness the benefits of the demographic dividend in a well-planned way can rise to the top of development. The developed countries we know today have been able to capitalize on the demographic dividend’s benefits in a structured manner, which is why they have reached the pinnacle of development. On the other hand, countries that have failed to make the most of this phase have not been able to achieve the desired level of development. Therefore, while the creation of a demographic dividend phase may offer a country the potential to rise to the top of development, this is not always the case.

Bangladesh is currently in the final stage of the demographic dividend phase. In 1972, the country's total fertility rate was an average of 6.7 points, meaning that each woman had an average of seven children during her childbearing years. Currently, the fertility rate per woman is 1.9 per cent. After a child is born, it must wait until it reaches a certain age to become part of the working-age population, and similarly, it takes time for the dependent population to increase. By 2040, the proportion of the working-age population will begin to decline, and the demographic dividend phase will end by 2050.

In economic terms, the working-age population refers to those between the ages of 15 and 64. A country is considered to be in a demographic dividend phase if the proportion of the working-age population exceeds 50 per cent of the total population. Currently, 68 per cent or two-thirds of Bangladesh's population is in the working-age group. The dependent population is divided into two categories: the younger dependent population and the older dependent population. The younger dependent population eventually reaches adulthood and enters the workforce, while the older dependent population becomes increasingly dependent. The younger dependent population consists of individuals aged 0 to 14 years, and the older dependent population includes individuals aged 65 and above. While 68 per cent of Bangladesh's population is in the working-age group, there has been no national initiative to transform this workforce into human capital through appropriate education and training.

A shining example of how to effectively harness the opportunities of the demographic dividend for economic and social development is Japan. After World War II, Japan entered the demographic dividend phase, and by utilizing this opportunity, it became the second-largest economy in the world. However, as the demographic dividend phase ended, Japan's population began aging, and the proportion of non-working, elderly individuals increased. This shift led to Japan's gradual decline in the global economy. Meanwhile, China, by capitalizing on its own demographic dividend, surpassed Japan’s 44-year dominance and ascended to the second position in the global economic ranking. However, like Japan, China’s demographic dividend phase is also nearing its end. Similarly, its neighboring country India is approaching the tail end of its demographic dividend phase, yet it is becoming increasingly significant in the global economy.

When a country has a large proportion of working-age individuals, it can ensure a relatively cheap labor supply. With lower wages for workers, it becomes easier to attract foreign investment. If the 68 per cent of Bangladesh's population that is in the working-age group is provided with appropriate employment opportunities, it can play a pivotal role in driving the country’s high economic growth. As the growth rate increases, the income of the country’s people rises, and so does their saving capacity. There is a strong correlation between income growth and the ability to save. In 2017, Bangladesh was classified as a lower-middle-income country according to the World Bank. The country is committed to becoming an upper-middle-income nation by 2031 and a developed country by 2041. The United Nations has included Bangladesh in the list of developing countries.

By strategically utilizing the demographic dividend, Bangladesh can create the right conditions for its economic ascent, leading to improved living standards and prosperity for its people.

In 2026, Bangladesh is expected to officially graduate to a developing country status. However, a pertinent question arises regarding how sincere the country is in achieving these targets. If Bangladesh aims for sustainable development, it must increase private sector investment. This requires securing financing for development activities from internal sources, but the country has faced significant failures in this regard. For many years, the rate of private sector investment has hovered between 22-23 per cent of GDP. During the Seventh Five-Year Plan, a target was set to increase private sector investment to 28 per cent of GDP, but this target remains unachieved. To boost private sector investment, the savings rate must also be increased. If Bangladesh is to achieve the desired level of development, it needs to raise its savings rate. Currently, the national savings rate is around 24 per cent, which needs to be increased to at least 36 per cent.

A significant limitation to Bangladesh's economy is its failure to collect taxes at the desired level. Bangladesh's tax-to-GDP ratio is among the lowest in South Asia, only ahead of Sri Lanka. For comparison, Japan's tax-to-GDP ratio stands at 34.1 per cent, South Korea's is 32 per cent, and China’s is 20.1 per cent. In Vietnam, it is 19 per cent, in Malaysia 12.2 per cent, in Thailand 16.7 per cent, in Bhutan 11.3 per cent, and in Pakistan 10 per cent. In contrast, Bangladesh’s tax-to-GDP ratio is just 7.5 per cent, while Sri Lanka's is 7.4 per cent. The tax collection system in Bangladesh is extremely complex and plagued by corruption, further hindering the country's progress towards achieving its economic goals.

In order to meet its development targets and move towards sustainable growth, Bangladesh must address these fundamental challenges—boosting savings, improving tax collection efficiency, and fostering an environment conducive to private sector investment.

In this context, the critical question is how Bangladesh can fully capitalize on the benefits of the demographic dividend. The previous government did not take significant initiatives to harness the potential of the demographic dividend. Their primary focus seemed to be on implementing large infrastructure projects to gain commissions and benefits, rather than on addressing the core issue of transforming the population into productive human capital. Throughout Bangladesh’s history, many leaders and government heads have faced corruption allegations; however, the involvement of former Prime Minister Sheikh Hasina’s family in corruption scandals has reached unprecedented levels.

If Bangladesh wishes to take full advantage of the demographic dividend, urgent steps must be taken to enhance the skills and productivity of the population through training and development. Without a focused effort to develop human capital, the future of the nation will be fraught with challenges.

MA Khaleque: Retired General Manager, Bangladesh Development Bank PLC, and writer on economic affairs.