This document discusses how Bangladesh can capitalize on its demographic dividend through economic growth. It examines Bangladesh's declining fertility and mortality rates, which have led to a shift in its age structure with more people in working ages. This creates a window of opportunity similar to those seen in East Asian countries. However, Bangladesh must implement policies to properly utilize this opportunity through increasing savings, investment, education and female labor participation as East Asian nations did to experience substantial economic growth during their demographic transitions. The document analyzes lessons Bangladesh can learn from East Asia's experiences in capitalizing on their own demographic dividends.

1. [Pls. do not quote without author’s permission]
Will Bangladesh seize or squander
economic opportunity offered by
demographic dividend?
Rafiqul Huda Chaudhury

2. 1.0 Introduction
• The paper examines the implications of age structural
transition, associated with fertility and mortality
decline, on economic growth.
• The effect of age-structural transition on economic
growth is expected to be transitional.

3. • The effect would be sizeable in the short and
medium terms when decline in fertility
produces a period during which working age
population grows more rapidly relative to the
younger and older dependants (i.e., there are
more workers per dependant).
• However, this effect would be negligible or
negative when both fertility and mortality reach
it’s lowest and fewer people enter productive
ages and the old age population rises both in
number and proportion.

4. • There is a considerable time lag between decline in child
dependency ratio and increase in the working aged
population on one hand and the rise in old aged
population on the other.
• This time lag creates one time opportunity for about two
to five decades to boost living standards of the
population.
• Bangladesh experienced a dramatic decline in fertility
and mortality during last four decades. Children per
woman declined by 63.5% to 2.3 in 2010 during 1970-
2010. During the same period contraceptive prevalence
rate has increased by 695 % to 61.2 percent in 2011 in
2010 (See Figure 1).

5. • During 1970-2010 mortality has also declined
significantly. Infant mortality rate and under-five
mortality declined by at least 74% to 38 and 78.7% to 47
in 2010 per 1000 live births respectively, while maternal
mortality ratio declined by 63 % to 240 per 100000 live
births in 2010 (see Figure 2).
• During the same period life expectancy at birth
increased by 33.6% to 70.2 years in 2010 ( see Figure 2).
• This has produced a huge shift in age- structure of the
population, with more population in working ages than
in dependent ages. Dependents per 100 working
population declined from over 100 in 1961 to 60 in 2010.
This has created a window of economic opportunity (
see Figure 3 and Table 1).

6. Figure 1: Trends in Total fertility and contraceptive prevalence rates in Bangladesh (1975-2011)
6.3
5.1
4.3
3.4
3.3 3.3
3
2.7
2.3
7.7
30.8
39.9
44.6
49.2
53.8
58.1
55.8
61.2
0
10
20
30
40
50
60
70
0
1
2
3
4
5
6
7
8
ContraceptivePrevalenceRate
TotalFertilityRate(ChildrenPerWomen)
TFR CPR
Source- Bangladesh Demographic and Health Survey-2011

7. Figure 2: Life Expectancy at Birth and Various Other Mortality Rates in Bangladesh (1970-2010)
650
560 570
500
340
300
240
147 145 133
117
100
81 64 51 38
220.6 217
197.8
173.3
144
114
88 68
47
46.6
48.2
54.2
56.9 59.7
62.7
65.6
68
70.2
0
10
20
30
40
50
60
70
80
0
100
200
300
400
500
600
700
1970 1975 1980 1985 1990 1995 2000 2005 2010
LifeExpectancyatBirth
MortalityRate
MMR IMR U5MR Life expectancy at birth
Source: Lancet

8. a. ESCAP- Population of Bangladesh-1981
b. BBS-Population Census-1991
c. BBS- Bangladesh population census-2001
d. BBS- Bangladesh Population Census-201
* BBS projection
Figure 3: Percentage of population by age groups (BBS)
19.4
60.4
42.1
46 48 46.5 45.1
39
34.6
24.6
23.4
20.6
53.5
48.8 46.3 47.4
49.4
54.7
57.9
67.2 65 64
4.4
5.2 5.7 6.1 5.4 6.2 7.5
8.2
11.6
15.4
20.2
0
10
20
30
40
50
60
70
80
1951(a)
1961(a)
1974(a)
1981(a)
1991(b)
2001( c)
2011(d)
2021(c
)*
2031(c
)*
2041(c
)*
2051(c
)*
Year
Percentage
0-14
15-59
60+

9. • Table 1. Population by major age group: Bangladesh
•
• Age-group 1951(a) 1961(a) 1974(a) 1981(a) 1991(b) 2001(c) 2010(d) 2020(d) 2030(d) 2040(d) 2050 (d)
•
• in thousand
• 0-14 17654 23386 34310 40510 47998 48570 46544 42545 39113 34375 30665
•
• 15-59 22433 24810 33095 41294 52614 68055 92268 11323 121036 124774 120106
•
• 60+ 1845 2644 4074 5314 5703 7729 9881 1338 1714 31784 43582
•
• All ages 41932 50840 71479 87118 106315 124354 148692 167256 181863 190934 194353
•
• in percent
• 0-14 42.1 46.0 48.0 46.5 45.1 39.0 31.3 25.4 21.5 18.0 15.8
•
• 15-59 53.5 48.8 46.3 47.4 49.4 54.7 62.1 66.6 66.6 65.3 61.8
•
• 60+ 4.4 5.2 5.7 6.1 5.4 6.2 6.6 8.0 11.9 16.6 22.4
•
• Growth Rate
• 1951-1961 1961-1974 1974-1981 1981-1991 1991-2001 2001-2010 2010-2020 2020-2030 2030-2040 2040-2050
•
• 0-14 2.81 2.94 2.37 1.69 0 .12 -0.47 -0.90 -0.84 -1.29 -1.14
•
• 15-59 1.00 2.21 3.16 2.42 2.57 3.38 1.88 0.84 0.30 -0.38
•
• 60+ 3.68 3.32 2.82 1.99 3.03 2.73 3.04 4.83 3.81 3.16
•
• All ages 1.93 2.62 2.83 1.99 1.57 1.98 1.18 0.84 0.49 0.18
•
• Source: a. ESCAP- Population of Bangladesh-1981
• b. BBS-Population census-1991
• c. BBS- Bangladesh population census-2001
• d. UN-World Population prospects, The 2010 revision
•

10. Figure 4: Trends in growth rate of working age population (15-59) and the growth rate
of dependent population (0-14 & 60 Years), 1951-61- 2040-50
2.89
2.99
2.53
1.59
0.47
0.75
-0.91
0.84 0.84
1.16
1
2.21
3.16
2.42
2.57
2.02
2.89
0.84
0.3
-0.38
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
1951-1961 1961-1974 1974-1981 1981-1991 1991-2001 2001-2011 2011-2020 2020-2030 2030-2040 2040-2050
Less than 15 & 60+ 15-59
Source: a. ESCAP- Population of Bangladesh-1981
b. BBS-Population census-1991
c. BBS- Bangladesh population census-2001
d. UN-World Population prospects, The 2010 revision
e. BBS- Bangladesh Population and Housing Census-2011

11. Figure 5: Dependency Ratio
0
10
20
30
40
50
60
70
80
90
100
110
120
1951(a)
1961(a)
1974(a)
1981(a)
1991(b)
2001(c)
2010(d)
2020(d)
2030(d)
2040(d)
2050(d)
Year
Percentage
Young
Old
Total

12. 2.0 Linkages between Demographic
Dividend and Economic Growth
• Demographic dividend helps improving living
standards of the population through: increased
• (i) capital formulation,
• (ii) savings and investment,
• (iii) female participation in labor force,
• (iv) improved quality of labor force,
• (v) slowing unsustainable fractionalizing of holding &
releasing pressure of absorbing growing labor force
on limited agricultural land and
• (vi) increased demand of goods & services.

13. • The period of window of opportunity can be
characterized as (i) more workers producing more
total output if they are productivity employed, (ii)
greater accumulation of wealth, if savings occur and
more productively invested, and (iii) a large supply of
quality human capital, if appropriate investments are
made in its formation .

14. • The underlying message that emanates from the
above preconditions clearly points out to the fact
that demographic bonus can contribute to economic
growth, if congenial environment is created through
appropriate policy regimes to capitalize on it.

15. • The era of window of opportunity is likely to be
followed by a period of economic stagnation,
• This was found in many West European countries,
such as Germany and Italy, due to rise in elderly
population, both in terms of number and proportion,
and fall in working aged population.
• The economic gift evaporates as the elderly share in
the total population rises.

16. 3.0 Capitalizing on Demographic
Dividend: Lessons Learnt from East
Asia.
• Although economy of many countries benefited from
Demographic Dividend, this benefit was the largest for
the following East Asian countries: Japan, South Korea,
Indonesia, Singapore, Thailand and the Province of
Taiwan, even compared with the rest of the world.
• The countries of East Asia were the first outside the west
to complete the transition from high to low fertility. It
calls for closer examination of East Asian experience in
capitalizing on Demographic Dividend, as this will be very
instructive for other countries to follow.

17. • East Asian countries experienced a spectacular
decline in fertility and mortality during the last
three decades (1960-90).
• Total fertility rate of many East Asian countries
(Japan, South Korea, Indonesia, Singapore,
Thailand and the province of Taiwan) declined
from 6.7 to 6.4 children per woman in 1960, to
replacement level fertility and below in 1990s.
• Total fertility rate of Bangladesh declined from
about 7 children per woman in 1970 to about
replacement level of 2.3 in 2011- two decades
later than East Asian countries.

18. • Regarding mortality transition, life expectancy at
birth of these countries increased dramatically over
10-15 years to 63-76 years during the last three
decades (1960-90). In Bangladesh Life expectancy at
birth has increased over 40 years to 67 years in last
four decades
• This dramatic demographic transition resulted in
huge shift in age-structure, characterized by decline
in share of young aged population and rise in share
of the working aged population.

19. • Working aged population grew by 2.4 percent per
year, compared to 1.6 percent for the entire
population during 1960-90. A similar pattern is also
observed for Bangladesh during 1981-2001 and this
is expected to continue until 2011.
• This age-structural transition created window of
opportunity for economic growth as seen in
extraordinary economic growth overlapping
demographic transition.

20. • One percent increase in the growth of working age
population was associated with 1.46 percent increase in
the growth of GDP per capita.
• Bangladesh data also shows positive association between
increase in growth of working age population and growth
of GDP per capita (See Graph 6)
• Age-structural transition accounted for one-third to one-
fourth of East Asian’s average growth per capita income
during 1970-90 .

21. 4.0 How did East Asian Countries
Capitalize on the Demographic Dividend
• Quality human resource base
• High rates of savings and investment
• Successful employment growth rate
• Open economy and favourable investment
• Quality public institutions
• Increase in female participation in labour force.

22. Chart 1: Quality of Human Capital
• East Asia
% Year
72-90% 1985
20% 1960
Bangladesh
Year
20.33 1990
High
% Year
53.4% 2011
13.4% 2001
Year
44 2010
Suspect
Mortality Year
Life expectancy at
birth increased over
40 years to 67 in
last four decades.
(1960-
2010)
Level of Education
•Literacy Rate
•Secondary Education
Quality of Education
•Pupil-Teacher
Ratio(Primary Level)
•Overall Quality
Mortality Year
Life expectancy at
birth increased
over 10-15 years to
63-76 during last
three decades.
(1960-
1990)
Mortality
Life Expectancy
East Asia

23. 4.1 Quality Human Resource Base
• East Asian countries started with high quality human
resource base characterized by high level of literacy,
emphasis on primary and secondary education,
quality education and low level of mortality, an index
of good health and quality of life.

24. Good health and quality human capital had several
advantages:
• A healthier and more productive labour force
• High quality human capital also helped East Asian
countries attracting foreign investment and adopting
superior technology imported from developed
countries.
• This has also helped boosting production and labour
productivity.

25. FDI in Bangladesh
• East Asia has successfully attracted foreign investment.
• Bangladesh score card on attracting FDI is still far from
satisfactory, although some progress is made. “so far,
FDI attraction has been dismal even by the standards
of least –developed countries” (UNCTAD, 2013).
• Inward FDI volumes in relation to population and ratio
of GDP, were consistently 80 percent less than the
average for all LDCs and 50% below the inflows to
other populous low-income countries such as India
and Indonesia.

26. 4.2 High Rate of Savings and Increase in
Capital Formulation and Investment
• Changes in age-structure produced a very large swing in
savings in East Asian countries and saving rate reached its
historical proportion.
• Domestic saving rates increased from near zero in 1950s
and 1960s to very high level (40-60% of GDP) during 1960-
1970s.
• Savings/income ratio increased by double from 4.0 percent
in pre-transition to 8.3 percent in post-transition. Decline
in child dependency ratio accounted for 13.6 percentage
points of the total rise in savings.
• Increase in the rate of savings led to a corresponding
increase in capital and rise in labor productivity and
economic growth

27. • Changes in age-structure also has had boosting effect
on savings in Bangladesh but way below than that of
the level achieved by East Asian countries.
• In Bangladesh domestic savings as percentage of
GDP stood at 20.31% in 2007-08, which is 49% to
66% lower than that was achieved by East Asian
countries in 1960-70.
• National savings as percentage of GDP rose from 20%
in 1995-96 to 30.2% in 2007-08.
• Increase in the rate of savings led to a corresponding
increase, albeit modestly, in capital and rise in labor
productivity and economic growth

28. 4.3 Increase in capital per worker
• Annual growth rate in capital per worker from 1965 to circa
1990 ranged from lowest 6.6 percent in Taiwan to highest 8.7
percent in Thailand, compared to 2.7 percent in the USA
during the comparable period.
• Higher savings and capital per worker contributed to high
level of income by financing higher investment and boosting
higher productivity per worker. High quality human capital
base has also contributed to higher labour productivity.
• Increased savings and capital not only helped these countries
to finance its own economic development but also economic
development of many other developing countries in the
region.
• East Asian countries evolved from foreign capital dependence
to independence between 1965 and 1990. This can be also
explained by evolution from high youth dependency to low.

29. Prudent Macro Economic Policy
• The most important of which was “Open Market
Policy”. East Asian countries could be adjudged as
highly open .
• Foreign and local investments were also attracted by
quality public institutions of East Asian countries.
• “ Open market policy” is also pursued by
Government of Bangladesh but it needs further
rationalization.

30. Agricultural Research
• East Asian countries had also excelled in agricultural
research that had contributed to boosting
agricultural productivity enormously and enabled
these countries to feed larger populations with fewer
farmers.
• Bangladesh has also done remarkably well in
agricultural research and contributed significantly to
agricultural productivity

31. Gender gap in education and wage
• Gender gap in education, labour force participation
and wage differentials reduced significantly since
1960 and women now constitute a huge proportion
of the labor force in these countries .
• East Asian countries by removing many gender
disparities and providing women opportunity to
participate in labour force in increasing numbers
effectively capitalized demographic dividend.
• Bangladesh has also removed many gender
disparities in education and other fields(see figure 7)

32. 4.4 Rapid Growth in Employment
• Between 1960 and 1990, labour force increased by
2.7 percent per annum compared to 1.9 percent
population growth.
• Increased savings and capital per worker helped
these countries to absorb the growing labour force
and maintain growth in labour productivity by
investing in health, education and creation of new
jobs in manufacturing and service sectors.
• These countries could also successfully attract
foreign capital to expand manufacturing capacity to
absorb the growing labour force.

33. • Between 1981 and 2011, labour force in Bangladesh
increased by 2.42 to 2.02 percent per annum
compared to 1.99 to 1.47 percent population
growth.
• This increase in working age population and dramatic
decline in dependency ratio contributed to rise of
GDP per capita, GDP/savings ratio , greater
investment in education (e.g. capital formulation)
and huge reduction in poverty, see figure 6, 7, 8 & 9)

34. Figure 6: Trends in GDP, Savings, Poverty Rate and Working Age Population in
Bangladesh, 1995/96-2010/2011
4.62 5.27 6.63
6.71
14.9
18
20.25
19.29
20.17
22.41
27.67
28.78
50.1
48.9
40
31.2
53.9
56.6
59.3
62.1
0
10
20
30
40
50
60
70
1995-96 2000-2001 2005-06 2010-11
GDP
Domestic savings as percentage of
GDP
National savings as percentage of
GDP
Poverty rate
Working age Population(15-59)
Source: GDP- National wings, BBS
Poverty rate- The Millennium Development Goals, Bangladesh Progress Report-2008
Savings- Statistical Pocketbook Bangladesh-2012
Working age population-World Population Prospects 2010-UN

35. Figure7: Literacy Rate of Persons for 7 Years and Over by Sex, 1961-2011
25.5
56.1
58.8
59.4
50.3
38.9
33.836.6
31.4
53.452.7
41.8
17.5
16.4
10.7
56.1
46.2
32.4
26
26.8
21.5
0
10
20
30
40
50
60
70
1961(a) 1974(a) 1981(a) 1991(a) 2001(a) 2007(b) 2011(c )
Male
Female
Total
Percentage
Year
Sources: a. BBS- Population Census-2001.
b. BBS- Statistical Pocket Book Bangladesh-2010.
c. BBS-Bangladesh Population and Housing Census-2011

36. Figure 8: Trends in Total Fertility Rate and Female Literacy, 1981-2011
0
10
20
30
40
50
60
1981 1991 2001 2002 2003 2004 2005 2006 2011
TFR
Female
Literacy
Sources: i) BBS- Statistical Yearbook of Bangladesh, 2008.
ii) BBS-Population Census, 2001.
iii) BBS- Bangladesh Population and Housing Census-2011

37. Figure 9: Labor Force Participation (Refined Activity Rate), Bangladesh 1981 to 2010
59.3
9.9
36
58.5
57.3
54.9
64.869.6
74.7
45.6
43.1
82.5
86.8
87.4
84
78.379.6
79.6
81.4
78.2
29.2
26.1
23.9
50.6
58.2
85.3
5.1
0
10
20
30
40
50
60
70
80
90
100
1981 1985-86 1989 1990-91 1995-96 1999-00 2002-03 2005-06 2010
Total
Male
Female
Sources: a. BBS- Statistical Pocket Book 2010.
b. BBS- Statistical Pocket Book-2009
c. BBS- Statistical Pocket Book-1999
d. BBS- Statistical Year Book- 1998

38. • However, this economic dividend would have been
much more greater if Bangladesh could further i)
improve quality of human capital, ii) create favorable
climate for savings, capital accumulation and
investment, iii) create more employment in
productive activities, iv) ensure good governance and
v) further strengthen open market policy.

39. • Bangladesh faces a herculean task of absorbing
rising working age population. This will increase by
1.13 to 1.53 million per annum between 1991-2011
and further increasing to 3.10 million per year during
2011-2020 over and above the current backlog.
• A greater proportion of the increased labour force is
absorbed in low productive jobs (e.g in informal
sector) although modest increase is also seen in
manufacturing and service sectors from 4.81 % in
19.61 to 12.29% in 2010. During the same period
employment in trade hotels and restaurants
increased from 3.68% in 1961 to 14.68% in 2010.

40. • To ensure greater absorption of rising labor force in
productive jobs will call for creation of more jobs in
this sector which will require, among other things,
increased savings, greater investment in new
technology and job creation, (currently investment
accounts for only 24-25% of GDP, which must be
raised to at least 30-35%) and attracting foreign
capital to expand manufacturing capacity.
• UNCTAD identified few bottlenecks to FDI. These
include: lack of coherent laws, too decentralized and
complicated industrial policy; congested roads,
unreliable electricity, poor transport access to
remote areas; lack of access to land; corruption,
weak public governance and lack of skilled
manpower.

41. 5.0 What Lessons are there
for Bangladesh?
• A strong human resource base
• Favourable climate for savings, capital accumulation and
investment.
• Creation of more jobs in the extractive industries.
• Good Governance and political stability
• Improved infrastructure and uninterrupted power supply
• Open market policy
• Quality public institutions
• Elimination of gender disparity in higher education and
wage and higher level decision making.