Strong foundations of economic reform were laid under Khaleda Zia’s leadership

Before the 1990s, Bangladesh's economy followed a Soviet-style model that was inward-looking, domestically focused and centrally managed by the state, with little exposure to international markets. As globalisation gathered pace worldwide in the 1990s, Khaleda Zia moved swiftly after taking office in 1991 to position Bangladesh to benefit from the shift.

She appointed capable individuals to key cabinet positions, gave them operational freedom, placed political trust in them, and backed reform initiatives at the highest level. To ensure coordination, she personally mobilised the cabinet so that other ministries supported reform-driven departments, allowing policy changes to move beyond paper into implementation.

This period marked the beginning of structural reforms needed to open Bangladesh's economy, both externally and internally. A central role was played by finance minister M Saifur Rahman, who pursued bold initiatives to liberalise the economy, enjoying Khaleda Zia's full confidence and political backing.

Broad-based trade liberalisation began after 1991, dismantling the quota system under which the government had determined how much of each product could be imported. Previously, quotas applied to all imported goods, including essentials such as cloth, sugar and salt, but the Khaleda Zia government abolished the system entirely.

Tariff liberalisation followed as part of the reform package, reducing import duties across the board rather than selectively cutting tariffs on specific products. The aim was to allow markets to operate on the basis of demand and supply while encouraging domestic producers to improve competitiveness in response to imported goods.

In 1991, state-owned banks controlled around 75% of total financial sector assets, reflecting the dominance of the public sector in banking. While keeping state-owned banks intact, the government opened the financial sector to private banks, creating space for private capital and competition. From the outset, private banks were licensed within an internationally aligned regulatory framework, reflecting modern global banking practices.

Before Khaleda Zia took office, investment licensing posed a major obstacle, rooted in the legacy of centralised planning. Her government opened the door to large-scale deregulation by dismantling licensing systems that had constrained private investment, although limited attempts had been made during the Ershad era.

Recognising that loss-making state-owned enterprises were a growing fiscal burden, the government initiated the first serious efforts to reform them. A monitoring cell was established in the finance ministry to oversee state-owned enterprises, marking a shift towards accountability and performance oversight. While retaining public ownership, the government granted these enterprises greater autonomy, enabling them to operate along commercial lines rather than relying entirely on budgetary support.

This transition allowed state-owned enterprises to function with their own budgets, leading to the formation and restructuring of corporations such as Bangladesh Chemical Industries Corporation and Bangladesh Sugar and Food Industries Corporation.

One of Khaleda Zia's most significant social achievements was making primary education free and compulsory. At a time when countries such as Pakistan and Afghanistan discouraged female education, her government took bold steps to expand educational access for girls. Female stipend programmes were launched through pilot projects, later expanded nationwide, significantly boosting girls' school enrolment. This expansion of female education played a crucial role in Bangladesh's industrialisation, particularly the growth of the garments sector.

Garment factories typically required workers to have completed at least Grade Eight, a workforce that would not have been available without earlier investments in girls' education. During Khaleda Zia's first term, government–NGO collaboration in education, health and local infrastructure development also took institutional shape.

The bureaucracy was encouraged to work constructively with NGOs, enabling partnerships that delivered support in agriculture, education and other rural sectors. Although NGOs such as Grameen Bank had been active since the post-1974 famine period, it was under Khaleda Zia that formal government–NGO collaboration was institutionalised.

Overall, the period from 1991 to 2004 is often described as Bangladesh's golden age of reform. The foundations of these reforms were laid decisively in 1991, following the formation of Khaleda Zia's government.

Macroeconomic stability was prioritised, and although a fully market-based exchange rate was not introduced, foreign exchange regulations were modernised. Bangladesh Bank was granted greater autonomy over inflation management and balance of payments assessments, shifting decision-making away from direct government control. By transferring these responsibilities to the central bank, the Khaleda Zia government set an important precedent in ensuring separation of authority and institutional independence.

The write-up is based on a conversation with the author over the phone.