For decades after 1971 the development of the Bangladeshi national economy has been hindered by political instability, poor economic performance, pressure on scarce natural resources by the rapidly growing population, and an ineffective bureaucracy. The major changes introduced during the 1990s included more flexible economic policies, export-oriented industrialization, and inflow of foreign direct investments. Inflation remains low and is under control. The Bangladeshi currency exchange managed to avoid any spectacular failures similar to Indonesia or South Korea during the Asian financial crisis of 1997, and it is still stable, tightly regulated and pegged to the basket of the regional currencies. In 1999 and 2000 Bangladesh achieved strong economic recovery after the devastating floods of 1998, and if the regional and global economic environment remains positive, the Bangladeshi economic annual growth rate of 5 to 6 percent might continue. This development may ease the poverty, low standards of living, underemployment, and unemployment problems.
Nevertheless, there are several issues to be addressed. There is strong potential for all the problems, including political instability and recession, to return if the government fails to improve the economic situation in the country or if global recession or global competition negatively affect the country's exports. Both the border clashes with Indian border guards in early 2001, which led to heavy casualties, and confrontations along the border with Burma (Myanmar) show how fragile regional stability is. Meanwhile, although the changes brought some positive results to the national economy and some level of prosperity to some groups of the population (often limited to the educated urban population of the large metropolitan areas), they also brought new social ills such as growing criminality and drug usage among youth. The government has often been criticized for its intervention in economic development and its inability to improve economic management or to conduct further reforms, including privatization. There is also a serious problem with widespread corruption, with some political groups accused of wasting public resources. The experience of Indonesia shows how dangerous corruption and political instability are. It remains to be seen whether economic liberalization combined with the force of globalization measures will strengthen the performance of the national economy.
In the longer term, Bangladesh will need to maintain its international competitiveness, since the current globalization trend eliminates borders for international trade and brings growing competition from emerging markets for FDIs and for the transfer of modern technologies. Political and social unrest in neighboring Burma might affect Bangladesh, threatening and undermining regional stability and thus scaring off potential investors. Environmental issues are also very important for Bangladesh in the longer term, as global climate change and the rise of the surface level in the world's seas may undermine the country's agriculture, which still plays a dominant role in the national economy. In fact, a warmer Earth could well witness sizeable areas of the country covered by water, or it might increase salinization of the currently arable land, making it impossible to continue agricultural activities.