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Rising middle class in Bangladesh
http://www.thefinancialexpress-bd.com/more.php?news_id=139310&date=2012-08-07
Mamun Rashid
All the restaurants located in 'star' hotels, in residential areas or the ones along city roads are having brisk business this Ramadan as far as the sale of ifter items is concerned. Shopping malls are already awake. Be it Agora, Nandan, Dhali, Lavender, Meena Bazar or Shawpno, all superstores are packed with stuff and there are increasing number of people flocking in. The expansion of `KFC', Pizza Hut, Nandoo's or Movenpick are visible clearly. More and more students trying to get themselves admitted to English medium schools, private colleges and universities. Banks are coming up with more `millionaire' like products. There are around four thousand ATMs (Automated Teller Machines) put up by the banks. Move is underway to put up another 200 thousand ATMs in next 10/15 year by a foreign operator. Around 30 million people are using internet per day. I don't want to talk about cell phone here, as it is being used by everyone now and the number has increased to beyond 90 million. Going out for `vacation' is increasingly becoming a usual exercise. More and more ladies are visiting the 'beauty parlours' even in the sub-district levels, more young people are joining the 'fitness' club and all the parks or playgrounds are full in the morning with 'health freak' people. Eating out at least once a month is becoming a regular scene in the urban places. Be it 'Apollo', United, Square or Labaid- all these hospitals' outpatient departments are full, so are their inpatient cabins or emergency rooms. Who are these people? Off the cuff answer is - they all belong to the `middle class'- the fast moving citizenry in Bangladesh. What is their size in the economy, if it is 15 percent of the populace, you are talking of almost 22 million people. With an average family size of 5, you are talking of more than 4 million families. What could be their earning per capita? Our primary estimates put it in the range of USD 10 to 15 thousand a year. What is their source of income? - Salary, small or medium sized businesses, earnings from land sales or real estate rents, or investment in capital market.
Shopping in the `posh' malls, going out to `Kolkata', Bangkok or Kuala Lumpur or Singapore, eating out in the costly restaurants, their sons and daughters owning a PC and hanging out in the lounges, getting admitted in costly private schools, colleges or universities-these seem to be common scenes now a days. Increasing number of people own more than one car or even one apartment.
The middle class has risen and said "yes" to the good life. There has been a definite shift in the financial capacity as well as attitude towards life in the people of the capital and maybe a couple of other major cities during the last couple of years.
Economic definition of demand suggests that you have to have ability plus willingness to call it demand for a product or service. As for the ability part, Gross National Income (GNI) converted to international dollars using purchasing power parity rates is a reasonable measure of real purchasing power of a population.
Bangladesh's PPP(purchasing power parity) GNI per capita has steadily increased. In 2009, the number reached 1,580 in current international dollar with 5-year Compound Annual Growth Rate (CAGR) at about 9%. Polarization has been a part of our economy for a long time, so not everyone can be judged by this number. Besides, there are numbers beyond statistics also.
Call it a layman's approach or a more practical one; let us look at the number of private cars in town. From June 2003 to June 2011, about 400,000 motor cars, jeeps and micro-buses were registered with Bangladesh Road Transport Authority (BRTA) in Dhaka. Fast rising fuel cost, grid-locked roads and import duties could not limit the number of privately owned vehicles despite the government's implicit discouragement toward private transport sector.
People are increasingly spending more for food, clothes and life style management. USD 6.0 billion equivalent reportedly change hands during the month of Ramadan alone. This time, the spending spree was observed even in remote northern or southern districts. Multi-storied shopping malls are coming up at upazila (sub district) level.
"The rise in overseas spending by the middle class and cash transfer to foreign countries have listened the supply-demand gap in the green-back to an all-time high," said a recent newspaper article. Statistics and reasonable estimates suggest that there are more than 1.5 million people in the capital city who fall under the annual income bracket of $10,000 to $15,000.
Although the number of people with greater than Tk.10 million wealth has been reported at 35,000 plus, the real number could be much larger. The flourishing number of private schools, private universities, private medical facilities, expensive restaurants and parlours all support the assumption.
What is the profile of this segment? The popular misconception is that they are the multinational corporation (MNC) crowd -- freshly coming out of business schools -- forming a joint-income family, and purchasing a car and a small apartment within 5 years of graduation.
In reality, the MNC crowd is being marginalized by the new entrants in the Gulshan/Banani/Baridhara area in Dhaka. The segment I am talking about are the proprietors of small and medium businesses, who had a piece of land in a good location in mainly Dhaka, Chittagong Sylhet , Khulna or even Mymensingh or made huge profits in the stock market and decided to lead a comfortable life using the profit generated from real estate price hike and share market boost-up. They are moving from other areas of the city or other cities to live near their children's schools. Owning a car is a must now for the children's and the earning members' transport. They are the rising middle class of the country.
A generation-wise upward shift has taken place as well. The 2nd generation of many lower-middle income households has shifted to middle-income or upper-middle income bracket.
The psychological shift has taken place somewhat silently. "I have to live for others and not for myself: that's middle-class morality" -- George Bernard Shaw's definition holds no more. From a savings-oriented and conservative culture, we have moved towards a more life-style oriented culture. Birthdays, seeing each other days for the girl or the boy, anniversaries- people just wait for an `excuse' to go for a big event or `halla -kalla' to be organized.
Just to clarify here, I am basing the profile more on the expenditure structure than on the earnings structure. As long as the positive attitude towards materialism is not putting pressure on the corruption index, why feel bad in leading a comfortable life. While we have not exactly made significant progress in the corruption indices, we have not gone down in the score either.
A sizeable middle class with strong purchasing power and appetite for amenities is good news for business. It is one of the indicators that say an economy will flourish. The business houses get the signal that there is a viable target market for their product, which makes it worthwhile to penetrate the market. This segment is much higher than the entire population of some African or East European countries in terms of purchasing power and expenditure pattern or nearer to the percapita income of `Dubai or Singapore' city dwellers. KFC and Pizza Hut in Dhaka are much larger than the same franchises in our neighbouring countries in South Asia. Starbucks, Seven Eleven and Carrefour are reportedly mulling entering Bangladesh.
How far these `middle- class' can protect or carry forward the age old social fabric of the nation may be a big question mark and the answer may even and up as "who cares?". They may not be the `Himu' of Humayun Ahmed, or may not take arms if a `1971' like necessity comes up or stand up to protect Bengali language or culture like 1952, they must however represent the `face' of an emerging country like Bangladesh and increasingly a `digital' and responsive Bangladesh.
(Mamun Rashid is a banker and economic analyst. E mail: mamun1961@gmail.com)
Rising middle class in Bangladesh
http://www.thefinancialexpress-bd.com/more.php?news_id=139310&date=2012-08-07
Mamun Rashid
All the restaurants located in 'star' hotels, in residential areas or the ones along city roads are having brisk business this Ramadan as far as the sale of ifter items is concerned. Shopping malls are already awake. Be it Agora, Nandan, Dhali, Lavender, Meena Bazar or Shawpno, all superstores are packed with stuff and there are increasing number of people flocking in. The expansion of `KFC', Pizza Hut, Nandoo's or Movenpick are visible clearly. More and more students trying to get themselves admitted to English medium schools, private colleges and universities. Banks are coming up with more `millionaire' like products. There are around four thousand ATMs (Automated Teller Machines) put up by the banks. Move is underway to put up another 200 thousand ATMs in next 10/15 year by a foreign operator. Around 30 million people are using internet per day. I don't want to talk about cell phone here, as it is being used by everyone now and the number has increased to beyond 90 million. Going out for `vacation' is increasingly becoming a usual exercise. More and more ladies are visiting the 'beauty parlours' even in the sub-district levels, more young people are joining the 'fitness' club and all the parks or playgrounds are full in the morning with 'health freak' people. Eating out at least once a month is becoming a regular scene in the urban places. Be it 'Apollo', United, Square or Labaid- all these hospitals' outpatient departments are full, so are their inpatient cabins or emergency rooms. Who are these people? Off the cuff answer is - they all belong to the `middle class'- the fast moving citizenry in Bangladesh. What is their size in the economy, if it is 15 percent of the populace, you are talking of almost 22 million people. With an average family size of 5, you are talking of more than 4 million families. What could be their earning per capita? Our primary estimates put it in the range of USD 10 to 15 thousand a year. What is their source of income? - Salary, small or medium sized businesses, earnings from land sales or real estate rents, or investment in capital market.
Shopping in the `posh' malls, going out to `Kolkata', Bangkok or Kuala Lumpur or Singapore, eating out in the costly restaurants, their sons and daughters owning a PC and hanging out in the lounges, getting admitted in costly private schools, colleges or universities-these seem to be common scenes now a days. Increasing number of people own more than one car or even one apartment.
The middle class has risen and said "yes" to the good life. There has been a definite shift in the financial capacity as well as attitude towards life in the people of the capital and maybe a couple of other major cities during the last couple of years.
Economic definition of demand suggests that you have to have ability plus willingness to call it demand for a product or service. As for the ability part, Gross National Income (GNI) converted to international dollars using purchasing power parity rates is a reasonable measure of real purchasing power of a population.
Bangladesh's PPP(purchasing power parity) GNI per capita has steadily increased. In 2009, the number reached 1,580 in current international dollar with 5-year Compound Annual Growth Rate (CAGR) at about 9%. Polarization has been a part of our economy for a long time, so not everyone can be judged by this number. Besides, there are numbers beyond statistics also.
Call it a layman's approach or a more practical one; let us look at the number of private cars in town. From June 2003 to June 2011, about 400,000 motor cars, jeeps and micro-buses were registered with Bangladesh Road Transport Authority (BRTA) in Dhaka. Fast rising fuel cost, grid-locked roads and import duties could not limit the number of privately owned vehicles despite the government's implicit discouragement toward private transport sector.
People are increasingly spending more for food, clothes and life style management. USD 6.0 billion equivalent reportedly change hands during the month of Ramadan alone. This time, the spending spree was observed even in remote northern or southern districts. Multi-storied shopping malls are coming up at upazila (sub district) level.
"The rise in overseas spending by the middle class and cash transfer to foreign countries have listened the supply-demand gap in the green-back to an all-time high," said a recent newspaper article. Statistics and reasonable estimates suggest that there are more than 1.5 million people in the capital city who fall under the annual income bracket of $10,000 to $15,000.
Although the number of people with greater than Tk.10 million wealth has been reported at 35,000 plus, the real number could be much larger. The flourishing number of private schools, private universities, private medical facilities, expensive restaurants and parlours all support the assumption.
What is the profile of this segment? The popular misconception is that they are the multinational corporation (MNC) crowd -- freshly coming out of business schools -- forming a joint-income family, and purchasing a car and a small apartment within 5 years of graduation.
In reality, the MNC crowd is being marginalized by the new entrants in the Gulshan/Banani/Baridhara area in Dhaka. The segment I am talking about are the proprietors of small and medium businesses, who had a piece of land in a good location in mainly Dhaka, Chittagong Sylhet , Khulna or even Mymensingh or made huge profits in the stock market and decided to lead a comfortable life using the profit generated from real estate price hike and share market boost-up. They are moving from other areas of the city or other cities to live near their children's schools. Owning a car is a must now for the children's and the earning members' transport. They are the rising middle class of the country.
A generation-wise upward shift has taken place as well. The 2nd generation of many lower-middle income households has shifted to middle-income or upper-middle income bracket.
The psychological shift has taken place somewhat silently. "I have to live for others and not for myself: that's middle-class morality" -- George Bernard Shaw's definition holds no more. From a savings-oriented and conservative culture, we have moved towards a more life-style oriented culture. Birthdays, seeing each other days for the girl or the boy, anniversaries- people just wait for an `excuse' to go for a big event or `halla -kalla' to be organized.
Just to clarify here, I am basing the profile more on the expenditure structure than on the earnings structure. As long as the positive attitude towards materialism is not putting pressure on the corruption index, why feel bad in leading a comfortable life. While we have not exactly made significant progress in the corruption indices, we have not gone down in the score either.
A sizeable middle class with strong purchasing power and appetite for amenities is good news for business. It is one of the indicators that say an economy will flourish. The business houses get the signal that there is a viable target market for their product, which makes it worthwhile to penetrate the market. This segment is much higher than the entire population of some African or East European countries in terms of purchasing power and expenditure pattern or nearer to the percapita income of `Dubai or Singapore' city dwellers. KFC and Pizza Hut in Dhaka are much larger than the same franchises in our neighbouring countries in South Asia. Starbucks, Seven Eleven and Carrefour are reportedly mulling entering Bangladesh.
How far these `middle- class' can protect or carry forward the age old social fabric of the nation may be a big question mark and the answer may even and up as "who cares?". They may not be the `Himu' of Humayun Ahmed, or may not take arms if a `1971' like necessity comes up or stand up to protect Bengali language or culture like 1952, they must however represent the `face' of an emerging country like Bangladesh and increasingly a `digital' and responsive Bangladesh.
(Mamun Rashid is a banker and economic analyst. E mail: mamun1961@gmail.com)
