Over the past four decades, Turkey and Bangladesh have undergone transformative economic journeys that have reshaped their economic landscapes. Both nations have embraced economic liberalization and export-led growth strategies to fuel development and achieve remarkable milestones.
This writer has tried to examine the economic transitions of Turkey and Bangladesh, exploring their paths to liberalization, export-oriented strategies, labor force dynamics, infrastructure development, and the role of remittances in shaping their economies.
Economic liberalization paradigm shift
Turkey’s economic evolution over the last 40 years represents a significant milestone marked by a radical shift towards liberalization. Initiated through a series of decisions on January 24, 1980, this transformative step aimed to reshape the nation’s economy through comprehensive structural reforms. The paradigm shift underpinned adopting a free market economy approach, enlivening the economic landscape with newfound vitality.
Spearheaded by Suleyman Demirel, who later held the presidency and orchestrated by Turgut Ozal, the then-Prime Ministry Undersecretary, this economic transition bore witness to a stability package meticulously formulated on January 24, 1980. While recognized as a landmark moment in Turkey’s economic trajectory, scholars assert that the subsequent endeavors failed to realize long-term aspirations despite yielding immediate advancements.
In Bangladesh, the administration unveiled a new industrial policy around the middle of the 1980s. By the late 1980s, Bangladesh had begun liberalizing its commerce, gradually moving away from the earlier emphasis on import substitution. Although the public sector has continued to dominate the economy, over time, the state has also taken advantage of the natural entrepreneurial spirit seen in rural areas and among private producers.
Economic diversification and growth
Turkey’s economic evolution during the examined period has encompassed a shift from an agricultural to an industrial framework post-1982. Turkey has maintained an impressive average annual growth rate of 5% in gross national production since 1983, positioning it prominently within the ranks of OECD countries. However, this growth trajectory has been marked by intermittent patterns. Noteworthy is the linkage between recent economic expansion and the privatization of public enterprises, a trend aligned with global economic currents. Turkey’s burgeoning energy demands have also corresponded to social and economic advancements. As the country’s energy consumption surged since the early 1980s, the government proactively engaged both foreign and domestic investors to establish new generation power plants, aligning with a projected growth trajectory anticipating a $55 billion energy sector by 2015.
With domestic coal, geothermal, and hydropower resources amounting to only 1% of the global total, Turkey’s dependence on energy imports remains pronounced. They now focus on a reliable, economically viable, and environmentally sustainable energy supply to bolster growth and social development. Turkey’s progress in wind energy is evident, exemplified by reaching a cumulative wind energy capacity of 10,000 MW, a substantial accomplishment within a decade.
In the case of Bangladesh, the country still relies heavily on agriculture for internal consumption, but the foreign currency has its unique feature of the garments industry. Bangladesh has wrapped up another fiscal year, and the recently published export figures for FY2021-22 indicate a significant achievement in the Ready-Made Garments (RMG) sector. The RMG exports have surged to USD 42.61 billion, marking a momentous milestone. This accomplishment is historic for Bangladesh’s RMG manufacturing, surpassing the 40 billion dollar mark and representing four decades of remarkable journey.
In 2022, Bangladesh achieved complete electrification, a remarkable feat considering its population of 164 million. The power sector has thrived, with maximum power production increasing from 3,268 MW to 13,792 MW over the 13 years and installed capacity growing from 4,942 MW to 25,514 MW. Bangladesh’s strategic diplomacy has ensured energy stability through pacts and MoUs with Saudi Arabia, India, Qatar, Japan, Russia, and more. Ongoing efforts towards renewable energy promise a sustainable energy mix for the future. Therefore, the energy sector showcases a notable diversity in its import sources and production methods.
Export-led growth strategy
Bangladesh’s economic journey has been notably characterized by its strategic emphasis on export-led growth. Bangladesh rapidly became a global textile and apparel manufacturing hub by leveraging its low-cost labor advantage. This approach enabled the country to tap into international markets, create millions of jobs, and significantly contribute to its GDP. The textile sector’s growth has uplifted Bangladesh’s economy and played a crucial role in empowering women through employment opportunities. After China, Bangladesh is the world’s second-largest exporter of textile and apparel products. The Ready-made Garments (RMG) industry plays a crucial role, contributing approximately 80% to Bangladesh’s overall export earnings and accounting for around 10.5% of the nation’s GDP.
In the fiscal year 2014-15, Bangladesh generated a revenue of approximately US$25 billion from the export of ready-made garments. Knitwear products from domestically knitted fabrics enjoy privileged access to duty-free or zero-tariff markets in the EU, Japan, Australia, Norway, and Canada. Bangladesh is a major supplier of knit items to the European Union.
Turkey, too, adopted an export-oriented growth strategy that helped transform its economy. Like Bangladesh, the country focused on its manufacturing sector, particularly textiles and automotive manufacturing. Turkey’s strategic location bridging Europe and Asia and its skilled labor force contributed to its success in exporting goods to global markets. The automotive sector, in particular, witnessed remarkable growth, with Turkish-made vehicles gaining prominence in international markets. The export-led strategy enhanced Turkey’s economic resilience and created a solid foundation for sustained growth.
Like Bangladesh’s RMG industry, Turkey gradually made a significant footprint over the last 40 years. Turkey, a pivotal source of raw materials for the textile industry, assumed an increasingly substantive role in the advancement of the textile sector during subsequent years. Until 1972, the sector witnessed enhanced vigor attributed to finalizing the initial planned development phase, and the period spanning from 1980 to 1989 marked an epoch of international market penetration.
In the 1990s, the textile sector’s contribution to the aggregate Turkish exports surged, attaining 9.3% while displaying a pronounced export performance. Presently, the textile industry is a pivotal constituent of the Turkish economic framework, garnering eminence through its export valuation, reaching an appreciable sum of 5.4 billion dollars.
Diverse sectors of advancement
Remittances have emerged as a substantial contributor to Bangladesh’s economy. With a gradual increase in Bangladeshi emigrant workers, the annual influx of remittances to the country has shown remarkable growth. The initiation of the Wage Earners’ Scheme in 1974 aimed to facilitate legitimate remittance channels for Non-resident Bangladeshis, garnering popularity among those working abroad. In the fiscal year 1974–75, remittances totaling $11.8 million were received in Bangladesh. This figure surged to exceed $350 million in the fiscal year 1980-81 and surpassed $750 million in the fiscal year 1990–91. Remittances in Bangladesh observed an uptick, rising to 2199.01 USD Million in June from the preceding figure of 1691.66 USD Million recorded in May 2023.
On the other hand, It has been over four decades since the commencement of extensive migration from Turkey to various regions across the globe. Originating with a small number in the early 1960s, the movement burgeoned significantly. By the early 2000s, even as Turkey’s population approached approximately 70 million, the number of Turkish workers and their families in Europe exceeded three million. There were more than 100,000 Turkish laborers (excluding dependents due to restrictions) in Arab nations, nearly 300,000 settlers distributed across Australia, Canada, and the USA, and an additional approximately 50,000 workers positioned in the CIS countries.
Consequently, throughout these years, a substantial fraction—approximately 6%—of Turkey’s populace resided abroad at any given time. Central Bank of Turkey statistics reveal that a cumulative amount exceeding $75 billion has been remitted to Turkey since the inception of the 1960s, yielding an average annual sum of $1.9 billion. Nonetheless, the yearly remittance inflow exhibited fluctuations.
However, a consistent upward trajectory becomes apparent when assessing the broader trend. In the 1970s, the yearly average remittance figure stood at approximately $1.5 billion, which escalated to $2.3 billion in the 1980s and further elevated to $3.3 billion in the 1990s. Over the preceding thirty years, remittances collectively emerged as a pivotal and substantial contribution to the Turkish economy. It has been a key component for both countries. Bangladesh’s diaspora sent remittances, stabilizing the balance of payments and enhancing household incomes. Turkey’s expatriates contributed to foreign exchange reserves, supporting families and bolstering consumer spending.
Both Bangladesh and Turkey have acknowledged the pivotal role of Foreign Direct Investment (FDI) in driving economic growth. In Bangladesh, FDI has been instrumental in expanding industries, developing infrastructure, and creating jobs. Competitive labor costs and investment-friendly policies have attracted foreign investors, particularly in the ready-made garment sector, ushering in capital, technology, and expertise for overall modernization.
Turkey, too, leveraged FDI to enhance its economic landscape. A substantial consumer base, skilled workforce, and strategic location enticed foreign investors aiming to access European and Middle Eastern markets. FDI flowed into textiles, automotive, electronics, and energy sectors, boosting production capacity, product quality, and global supply chains through domestic-foreign partnerships.
Both nations recognized infrastructure as pivotal for growth. Bangladesh invested in transportation, energy, and communication, facilitating connectivity and efficient trade. Turkey’s infrastructure projects, including highways and airports, improved domestic and global connectivity, attracting foreign investment and boosting tourism.
Bangladesh and Turkey share a youthful labor force that fueled labor-intensive sectors. Bangladesh’s available workforce facilitated production escalation, meeting global demand and driving economic growth. Turkey harnessed its manufacturing, construction, and services labor force, aiding industry expansion and economic diversification.
Stable economic growth
In retrospect, the economic narratives of Turkey and Bangladesh reveal remarkable parallelisms and distinct trajectories. Both nations have shifted towards economic liberalization, engaging in strategic export-led growth to propel development.
Turkey’s diversified approach, marked by its transition from an agrarian to an industrial economy, mirrors Bangladesh’s focus on becoming a textile and apparel manufacturing powerhouse. Remittances have played pivotal roles in both economies, supporting financial stability and driving consumption. While Turkey’s liberalization yielded impressive growth rates and energy sector expansion, Bangladesh’s dedication to the ready-made garments industry transformed its export landscape.
Despite unique contexts, these two nations serve as valuable case studies for nations seeking sustainable growth through economic liberalization and export-focused strategies.
Syed Raiyan Amir is a Research Associate at The KRF Center for Bangladesh and Global Affairs (CBGA)