Why is Bangladesh Outperforming Kenya? A Comparative Study of Growth and its Causes since the 1960s

ESAU Working Paper 5 examines the contrasting growth experiences of Kenya and Bangladesh since the 1960s. The paper finds that, before 1980, Kenya grew strongly, and the economy diversified. Factors behind its subsequent deterioration in the 1990s were the government’s erratic, inflation-prone macroeconomic management, the overexpansion of the public sector, domestic and external indebtedness, its uncertain conduct of structural reforms, worsening cronyism and corruption, a high-cost, non-competitive, environment for the private sector and disappointing export performance. Bangladesh’s recent relative success was built on policies of macroeconomic stability, low public expenditure and taxation, the avoidance of non-concessional debt and a competitive real exchange rate. Savings and investment, once very low, rose steadily after 1990. Agriculture revived with investment in Green Revolution technology. An indigenous private sector emerged, operating in competitive conditions, out of which emerged a very successful export-oriented garment manufacturing sector.