DHAKA, Bangladesh Bangladesh is a paradox. It lacks natural resources and good governance and is beset by natural calamities, corruption and self-destructive political infighting. Yet its gross national product persistently maintains a growth rate of 5 percent, well above average for developing countries, it has overtaken India on several social indicators Its aid dependence has fallen from 6 percent to 1.8 percent of gross domestic product. The answer to the puzzle seems to lie in the triumph of individual and local group initiative over both the elements and institutional failings. The frustration for many Bangladeshis is that their nation could be doing so much better. Bangladesh's attractions for foreign investors - low labor costs and stable fiscal and macro-economic policies - are countered by politically motivated strikes that paralyze the urban economy, vested trade union interests that choke its main port, inefficient textile business interests that impede its dynamic garment industry, and corrupt politicians and officials who hold up infrastructure development. As it is, over the past year the nation has weathered two crises. Last summer, the worst floods in decades put more than half the country under water. But no one died, relief was effective, farmers adjusted and the economy still grew at nearly 5 percent. And this year, according to many a foreign forecast, Bangladesh's garment industry, which employs hundreds of thousands, was supposed to have been devastated by the end of textile quotas and China's export juggernaut. It is too early to make a final judgment, but so far at least the local industry appears to have maintained its share of the global market, albeit with lower profits. Of course this is still a desperately poor, overpopulated country, where 50 percent of children are underweight. But India is no better on that score; Bangladesh has made much more progress than its neighbors over the past 10 years, becoming self-sufficient in food. There are doubts about how much longer the farmers can continue to get additional output from their tiny plots of land of 3 percent a year. But do not be surprised if they do. Social progress has been even more marked. Educational standards may be poor, but primary school enrollment is on a par with India, and completions even higher. Gender equality in education is even more striking: There are now more girls than boys at secondary level. Gender equality also seems reflected in the fall in the fertility rate, which has halved from 6.0 to 3.0 in two decades - the steepest fall almost anywhere other than China. It is now below India's and far below Pakistan's. The lower birth rate is linked to a steep fall in child mortality, and to the enhanced economic role of women as small-scale village entrepreneurs and as garment workers. The conservative religious reaction to the advance of women seems unlikely to succeed in the face of educational and employment progress. Economic advance has been underpinned by the individual initiative of hundreds of thousands of Bangladeshis working overseas. Their remittances exceed the net earnings of the garment industry, amounting to more than $3.5 billion a year, mostly from Britain, the United States and the Middle East. The military earns another $2 billion from UN peacekeeping missions. Bangladesh is likely to remain an exporter of people for years to come. But further economic progress - including effective use of the billions earned overseas - now requires more effective governance and a freer rein for the private sector. The economy has become much more integrated with the world over the past decade but needs to move further to attract investment and exploit its only abundant resource - labor. The issue now is whether Bangladesh can combine social progress with a higher level of economic growth while combating the problems of rapid urbanization and pollution in an already overcrowded land. India and Sri Lanka both suggest that in South Asia, social and economic progress do not always go hand in hand. Will Bangladesh continue as a paradox, or can it combine enterprise and a homogenous population to overcome natural adversity and set its sights on a standard of living akin to its neighbors in Southeast Asia?