DHAKA: How badly is the world financial crisis hurting the world's poorest countries?

The view from Bangladesh, one of the more successful low-income countries, is so far un-alarming. There was little loose foreign capital to flee when the crisis hit, no dodgy derivatives to collapse its banks.

However, events are signaling that for the medium- to long-term the nation must look for new motors if it is to maintain its record of 5-to-6 percent annual economic growth, let alone move it to the 8-percent level needed to get into the middle-income ranks within a decade.

Bangladesh may be a predominantly agricultural country with attention focused on growing enough food for 150 million people in a country the size of Iowa that is subject to natural disasters. But its growth impetus for the past decade has been its increased integration in the global economy through exports of garments and people. The former now bring in up to $15 billion a year, while remittances from Bangladeshis overseas are worth $9 billion. Taken together, these sources create many of the jobs for a population that is now 40 percent urbanized.

Until December, garment exports had been growing at 20 percent, thanks largely to Bangladesh's gains from sharply rising costs in China. The outlook has suddenly deteriorated with exports down 10 percent in December. Even so, this is better than most Asian exporters. Local industry and the World Bank are reasonably confident that with its focus on low-end items, duty-free access to some markets and formidable labor-cost advantages, Bangladesh will come through the recession relatively unscathed.

Remittances have so far continued to rise, although that is unlikely to last as tens of thousands of workers on Gulf construction sites look set to lose their jobs as projects stall. Forecasts suggest that for 2009 remittances could fall 10 percent. That would crimp remittance-dependent families but is unlikely to cause a foreign-exchange crisis.

In any event, several positive factors have been offsetting these external hits. The fall of the price of oil should cut the oil-import bill in half. Harvests have recovered strongly from the previous year's cyclone and flood damage, slashing grain import needs. Import prices have also fallen sharply from their 2008 peak. Fertilizer prices are lower, too, which should sustain grain output increases. So although overall economic growth is likely to fall from the recent 6 percent level, it is not wishful thinking to imagine that Bangladesh can keep growing at 5 percent through this year.

But then what? Bangladesh has clearly become dependent on garment sales to a West where growth will be slow for a sustained period, and on remittances from oil exporters who may have to live with low prices for a long time.

The nation's leaders do have options but they have been hostage to domestic politics and to fears of Indian domination. The country has vast gas and coal reserves that cannot be properly exploited if nationalist sentiment continues to prevent sales to India. As it is, power is short and gas supplies for Bangladesh itself inadequate to feed planned power stations. Likewise, Bangladesh can attract multilateral capital for transport systems and ports if it is willing to let India use them for access to its northeastern states.

Bangladesh needs capital and know-how to broaden its industrial base but will not get it while Indian and other foreign investment is impeded by nationalism and layers of government corruption. In turn, India must remove many of its barriers to Bangladeshi imports. In other words, enhanced regional cooperation and resource investments are vital. Better governance is needed for a country where growth has been driven by private and NGO initiatives, and where large sums in project aid remain unused because of official inaction.

There are now signs of a more realistic attitude on the part of the government. A Trade and Investment Framework Agreement with the U.S. now in the works should improve sentiment and help, but action is needed soon if growth is to be sustained. Without it there will be insufficient money to sustain food output increases and give new impetus to education and health.

Bangladesh has been very successful by several measures of social progress, such as improving gender equality in education. But much more needs to be done to stabilize the population and raise educational and nutritional levels.

With luck, today's global gloom will spur Bangladesh to seize the opportunities that lie closer to home.