Report No. 67991
Bangladesh:
Towards Accelerated, Inclusive and Sustainable Growth—Opportunities and Challenges
(In Two Volumes) Volume II: Main Report
June, 2012
Poverty Reduction and Economic Management Sector Unit
South Asia Region, World Bank

Document of the World Bank
ACKNOWLEDGEMENTS
This report was prepared by Zahid Hussain and Lalita Moorty (Task Team leaders, SASEP). The core team included Faizuddin Ahmed, Sanjana Zaman, Diepak Elmer, and Nadeem Rizwan (SASEP).
The Climate Change chapter was prepared by Emmanuel Skoufias, Syud Amer Ahmed, Sushenjit Bandyopadhyay, Nobuo Yoshida, Meera Mahadevan, and Shinya Takamatsu (PRMPR). James Thurlow (UNU-WIDER) provided valuable guidance. This report has also benefited from helpful feedback from Winston Yu (SASDA), Terrie Walmsley, Angel Aguiar (Purdue University), and Csilla Lakatos (US ITC). The team gratefully acknowledges funding from JOTAP (funded by DFID).
The Urban chapter was prepared by Elisa Muzzini, Pedro Amaral, Gabriela Aparicio, Richard Clifford, Mario Di Filippo, Wietze Lindeboom, and Mark Roberts (SASDU). The garment survey for the study was undertaken by NIELSEN (Dhaka). The team would like to thank the Bangladesh Bureau of Statistics, the Bangladesh Garments Manufacturers and Exporters Associations, the Bangladesh Knitwear Manufactures & Exporters Association, and the Bangladesh Export Processing Zones Authority for their support to the survey team and the managers and workers of the garment firms that participated in the survey. The team would like to thank Thomas Farole (PRMTR), Songsu Choi, Zahed Khan, Bill Kingdom, Bala Menon (SASDU), Martin Norman, Shihab Ansari Azhar (CSABI) for their valuable contributions. Tony Venables, Professor of Economics, University of Oxford, provided technical inputs to the team on the survey questionnaire. The team thanks Cities Alliance and AusAID for the funding for this work.
The team would like to thank the peer reviewers- Dr. A.B.M. Md. Mirza Azizul Islam (Former Finance Adviser to the caretaker government), Jorge Araujo (Lead Economist, LCSPE), Steve Karam (Lead Urban Specialist, ECSS6), Winston Yu (Senior Water Resources Specialist, SASDA) Andras Horvai (Country Program Coordinator, Bangladesh and Nepal) and Luis Alberto Andres (Senior Economist, SASSD)) for valuable comments and suggestions. The team would like to thank all participants of the stakeholder consultations held in Dhaka (see Annex – A for a list of all participants). We benefitted immensely from their comments and guidance.
The team also thanks the Government of Bangladesh for the cooperation extended in the preparation of the report and for their participation in stakeholder consultations. At the same time the team would like to acknowledge that the views expressed in this report are those of the World Bank and may not necessarily be the views of the Government of Bangladesh.
The team gratefully acknowledges guidance from Sanjay Kathuria and Vinaya Swaroop (SASEP). Ellen Goldstein (Country Director, Bangladesh and Nepal) and Ernesto May (Sector Director, SASPM) helped shape the strategic directions of this report.
Finally, the team thanks Mehar Akhtar Khan for formatting the document.
GOVERNMENT FISCAL YEAR
July 1 – June 30
CURRENT EQUIVALENTS
Currency Unit = Bangladeshi Taka (Tk)
US$1 = Tk 81.8 (June, 2012)
ACRONYMS AND ABBREVIATIONS
ACC
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Anti-corruption Commission
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IDA
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International Development Agency
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AGOA
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African Growth and Opportunity Act
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IGS
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Institute of Governmental Studies
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BASIS
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Bangladesh Association of Software and Information Services
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ILO
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International Labour Organization
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BBS
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Bangladesh Bureau of Statistics
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IMF
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International Monetary Fund
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BCCRF
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Bangladesh Climate Change Resilience Fund
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IOM
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International Organization for Migration
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BERC
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Bangladesh Energy Regulatory Commission
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IT
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Information Technology
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BIDS
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Bangladesh Institute of Development Studies
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ITES-BPO
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Information Technology Enabled Services and Business Process
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BMET
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Bureau of Manpower, Employment and Training
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KSA
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Kingdom of Saudi Arabia
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BTCL
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Bangladesh Telecommunications Company Ltd.
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L/C
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Letters of Credit
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BTTB
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Bangladesh Telegraph and Telephone Board
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LDC
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Least-Developed Country
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CAGR
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Compound Annual Growth Rate
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LF
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Labor Force
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CBN
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Cost of Basic Needs
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LMIC
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Lower Middle Income Country
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CCTF
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Climate Change Task Force
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LTU
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Large Taxpayers Unit
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CD
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Custom Duty
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MFA
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Multi-Fiber Arrangement
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CIB
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Credit Information Bureau
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MIC
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Middle Income Country
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CPI
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Consumer Price Index
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MLT
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Medium Long-Term
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CPRC
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Chronic Poverty Research Centre
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MOEF
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Ministry of Environment and Forests
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DCI
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Direct Calorie Intake
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MoEWOE
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Ministry of Expatriates’ Welfare and Overseas Employment
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EPZ
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Export Processing Zone
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MPI
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Multidimensional Poverty Index
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EU
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European Union
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MPRA
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Munich Personal RePEc Archive
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FDI
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Foreign Direct Investment
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NBR
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National Board of Revenue
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FY
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Fiscal Year
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NGO
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Non-Governmental Organization
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GATS
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General Agreement on Trade in Services
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OECD
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Organisation for Economic Co-operation and Development
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GCC
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Gulf Corporation Council
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OI
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Opportunity Index
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GDP
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Gross Domestic Product
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OLS
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Ordinary Least Squares
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GED
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General Economics Division
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PKSF
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Palli Karma Sahayak Foundation
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GIC
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Growth Incidence Curve
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PPP
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Purchasing power parity
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GNI
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Gross National Income
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PREM
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Poverty Reduction and Economic Management
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GNP
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Gross National Product
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P-SD
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Protective Supplementary Duty
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GoB
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Government of Bangladesh
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PSM
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Propensity Score Matching
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GSP
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Generalized System of Preferences
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P-VAT
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Protective VAT
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HDI
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Human Development Index
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RD
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Regulatory Duty
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HIES
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Household and Income Expenditure Survey
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RMG
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Ready-Made Garment
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HRD
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Human Resource Development
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SDR
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Special Drawing Right
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HSC
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High School Certificate
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SFYP
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Sixth Five Year Plan
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IC
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Investment Climate
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SIMA
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Shore Intermediate Maintenance Activity
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ICA
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Investment Climate Assessments
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SMA
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Statistical Metropolitan Area
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ICRG
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International Country Risk Guide
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SOE
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State-Owned Enterprise
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ICT
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Information and Communication Technology
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SSC
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Secondary School Certificate
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SSNP
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Social Safety Net Program
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VAT
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Value Added Tax
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TFP
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Total Factor Productivity
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WDI
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World Development Indicators
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UAE
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United Arab Emirates
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WDR
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World Development Report
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UNDP
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United Nations Development Programme
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WTI
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World Trade Indicators
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USA
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United States of America
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Vice President:
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Isabel M. Guerrero, SARVP
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Country Director:
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Ellen A. Goldstein, SACBD
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Sector Director:
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Ernesto May, SASPM
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Sector Manager:
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Vinaya Swaroop, SASEP
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Task Team Leaders:
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Zahid Hussain, SASEP
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Lalita M. Moorty, SASEP
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TABLE OF CONTENTS
I.Overall Growth Trends and Patterns 9
II.Sources of Growth 16
III.Bangladesh’s Growth Enablers 23
IV.Can Bangladesh Maintain Current Growth Rates? 32
V.The Prospects of Achieving Middle-Income Status by 2021 39
VI.The Challenge of Accelerating Growth 42
VII.The Way Forward 59
Appendix 1A: Methodology used in the Sources of Growth Analysis 61
Appendix 1B: Construction of the Variable ”Reform Period” 63
ITrends and Significance 71
VIII.Determinants of Remittances 71
IX.Impact of Remittances at Household Level: From Direct to Indirect Contribution 95
X. Remittance-Growth Nexus 98
XI.Migration Outlook and Policy Agenda 102
Appendix 2A 108
Appendix 2B: Methodology for Estimating Impact of 111
Remittances on per capita GDP Growth 111
Appendix 2C: Regression Results 115
I. Has Growth Been Pro-Poor? 127
II. How Has Growth Been Distributed Across the Population? 133
III. What Has Happened to the Distribution of Economic Opportunities? 137
IV. Labor Market Dynamics and Challenges 141
V. Policy Implications 146
Appendix 3A: Measuring Inclusiveness of Growth 149
IEx-Post Impacts of Climate Change on Growth 159
IA Micro Study of Household Adaptation to Climate 169
I. Introduction 186
II. Bangladesh’s Urban Space: Features and Implications of the Urban Growth Agenda 187
XII.City Competitiveness: Drivers and Obstacles Through a Private Sector Lens 210
XIII.Dhaka City Corporation 215
XIV.Dhaka Peri-Urban Areas 225
XV.Chittagong City Corporation 227
XVI.Medium and Small Cities 243
XVII.Building a Competitive Urban Space in a Global Economy: Strategic Directions 245
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