How beneficial is globalization for low income Asian countries?

A comparison between Bangladesh, Pakistan and Myanmar

Globalization in Asia

Today, perhaps more than ever, globalization is very controversially discussed especially in regard to Asian countries which are often cited as being the most important beneficiaries of globalization. Globalization is a rather vague term that generally refers to the increasing world-wide economic integration, particularly through increasing trade and financial flows.^[1] Thus globalization is also tightly linked to economic liberalization, which facilitates these flows and can thus be a measure of the „willingness to globalize“. Additionally globalization contains political, social, cultural, technological, scientific components, such as the increase in political cooperation, the interaction between people of different states, the dissemination of cultural assets, the access to communication technology or the transfer of knowledge. In contrast to the wide-spread public opinion, according to international organizations like the World Bank or WTO and also many economists globalization is a very beneficial process. The successful globalized examples in South East Asia and especially East Asia are well-known. However, there are also countries in Asia that have embraced globalization and are still very poor such as the South Asian states Pakistan and Bangladesh. A few others like for example Myanmar have tried to resist globalization. A comparison of these countries can help us to better understand the impact of globalization on poor Asian economies.

Globalization stories of Pakistan and Bangladesh

Bangladesh and Pakistan that had formed a single state until 1971 have had a globalization story which is typical for many countries all over Asia with remittances and manufacturing relocation, especially the textile industry playing a particularly important role. Both have liberalized their economies in the mid-1980s.[2] Today, textile products account for respectively almost 80% and 60% of their total exports[3] and are the symbol for both the benefits and the horrors of globalization. On the one hand the industry created a lot of new employment opportunities and thus generated economic growth and also an increase in income for the poor low-skilled labour.

On the other hand labour conditions are doubtlessly very bad with very long working hours, no safety measures, no social protection, still very low salaries etc. Only recently there has been a series of severe accidents in several Bangladeshi and Pakistani garment factories that caused many hundred deaths.[4] These sad incidences have just once again drawn attention on the cost paid by the population for their cheap exporting industries. Also, the strong external dependence which is a part of globalization can sometimes be very harmful. For example, the increase in poverty and the slowing down of economic growth in Pakistan in the 1990s is partially attributed to the decrease of remittances that was caused by the Gulf war.² Or recently, in 2008 and 2010/11 the increase of the world food prices was especially problematic for the poor in Bangladesh who could not afford to buy enough food for their survival anymore.^[5]

Resistance to globalization in Myanmar

Myanmar had a socialist regime until 1988 when after the military coup d’état the government decided to retreat from totalitarian socialism.[6] Myanmar however has liberalized its economy comparatively only very little and the scope and impact of the recent economic and political liberalization that is going on in the country are not yet clear. According to several indexes Myanmar is the world’s least globalized country.^[7] This means that the country has very weak social and political relations with other states; and it has increased much more slowly its international economic and financial transactions than Pakistan and especially Bangladesh⁷ by imposing for instance restrictive measures against investments and foreign business but also because of the country’s strong instability and international sanctions.⁶ The export and import 

to GDP ratio has even constantly declined and is one of the lowest in the world.[8] Therefore its growth has been compared to Pakistan and Bangladesh less dependent on external remittances, foreign assistance, exports, world prices, etc.

Myanmar has hardly taken the chance to profit from globalization, and therefore did not have to suffer from its adverse effects but from its isolation. For example, it has one the lowest foreign aid assistance per capita rate in the world[9] ; consequently people were very little helped even during natural disasters. Or there have been little FDI and manufacturing industry that could have generated more income and new jobs.

Successful globalizers, unsuccessful globalizers and non-globalizers

Pakistan and Bangladesh have had similar and quite high average growth rates per capita in the last three decades. And as West Pakistan was already richer in 1971 (the ratio was even worsened by the devastating independence war) Pakistan today has a much higher income per capita than Bangladesh.⁸ However, Bangladesh has made relatively better progress than Pakistan on social development[10]. Despite the large differences before 1971 and the handicaps at independence, Bangladesh today has the same human development index (HDI) and multidimensional poverty index (MPI) as Pakistan[11]. The HDI tries to measure not only the real income per capita but the actual well-being of the people by including socioeconomic factors such as health and education and the MPI takes into account the multiple deprivations of poor families. Therefore Bangladesh is today sometimes referred to as belonging to the group of the new “successful globalizers” while Pakistan is an “unsuccessful globalizer”[12] that in William Easterly words “grows without development”^[13]. Globalization in Pakistan has largely failed to bring benefits to its poor while in Bangladesh larger parts of the population benefitted. According to Dollar and Kraay from the World Bank Bangladesh developed better because its trade increase had been stronger and it thus globalized more than Pakistan.[14] Even though this might be one component, we have seen that the globalizations stories of both countries are rather similar. Therefore the real difference lies in the social development policies and projects.

After independence Bangladesh did a lot to improve the status of women and the situation of its rural population. It maintained its basic social spending throughout military coups and political fighting.[15] One might argue that this is also because of globalization, as more open economies tend to have higher government consumption.[16] However, the government expenditures in Bangladesh are clearly lower than in Pakistan. Consequently the main factor is not the level of government spending but the way it is spent! For example Bangladesh’s per capita expenditure for defence is three times lower than that of Pakistan. Bangladesh’s comparatively less militarized geographical position but also its stronger civil society (with very active and powerful NGOs) have contributed to this.¹⁵

For economists like Dollar and Kraay the only losers in the process of globalization are the countries who did not globalize. Myanmar has so far been one of the world’s strongest non-globalizer. However, its growth rate has been even higher than Bangladesh‘s and Pakistan‘s in the last decade. It is usually assumed that Myanmar totally stagnated because of its repressive regime or that poverty even increased in the former rich “rise bowl of Asia” due to its isolation.[17] If this is true for the repressive totalitarian Burmese way to socialism it cannot necessarily be affirmed for the last two decades. One might think that at least in terms of HDI the country must have scored worse than its often praised neighbour. But its level of human development is also quite similar to Pakistan and Bangladesh and it increased much faster since its very low level in the end of the 1980s.^{8, 11} One might probably rightly argue that the comparison with Myanmar is not meaningful as the country could have done much better by opening its economy.¹⁴

Moreover, we have to be really careful with the data on Myanmar as there are often attempts by the government to falsify them.[18] Also, even if Myanmar strongly resisted globalization it also depends to on international transactions and therefore its strong growth rate can also be linked to the stronger influx of Asian FDI or to emigration to Thailand in the 1990s that were made possible because of a few liberalization measures. And finally Myanmar is still very poor, highly corrupt, with very low social expenditure, strong inequalities between the elite and the population etc.¹⁸ Nevertheless, even if Myanmar’s strategy is of course in no way a model for other countries, the comparison with Myanmar illustrates the limits of the gains from globalization for a poor Asian country like Bangladesh.

Globalization - just an opportunity

Globalization has not always been beneficial and especially not necessarily for everybody. Also, we have seen that the difference between globalizers and non-globalizers might be smaller than expected. However, how much an Asian country benefits from globalization and how fairly distributed these benefits are does not depend on the level of globalization but on the country’s policies. Globalization in Asia is a possibility to reduce poverty; and only one between many other useful measures. Its benefits in fighting these fundamental problems of the region are obvious and undoubtable, but it is hardly anything more than one opportunity.

Lina Ghosh is a Master student of International Develoment at the Sciences Po Paris.