Bangladesh is changing, and changing fast. In its early years of existence post-1971, the war-ravaged country suffered from geophysical, economic and demographic conditions that were extremely hostile to development. A country that was first dismissed as a ‘basket case’ has now emerged as a ‘development wonder’. Today, international pundits list Bangladesh among the ‘Frontier 5’ and ‘Next 11’ countries with the potential to become major economies in the near future.
Evidently, the Honourable Prime Minister Sheikh Hasina’s ‘Vision 2021’ set quantified goals for Bangladesh to become a middle-income country by the year 2021. Sustained economic growth and resilience, inclusive human development, buoyant domestic demand, robust exports and remittances, supported by a ‘population dividend’ and IT revolution, have transformed these goals into reality. Happily, the March meeting of the UN Committee for Development Policy has declared that Bangladesh has met the criteria for graduation, and it now looks ahead to the next leg of its journey towards a knowledge-based affluent nation by 2041 (‘Vision 2041’).
Strong economic fundamentals
Ranked 31st amongst the world’s largest economies in 2016 (PwC), Bangladesh has maintained stable growth through every decade. What is perhaps unique is that in each decade the average growth rate has surpassed that of the previous. The 2010s are particularly fascinating as it was then that the country attained the highest ever average growth of 6.4 per cent. Again, for the first time in Financial Year 17, economic growth rate exceeded the 7 per cent mark and currently stands at 7.86 per cent. Defying popular notions, Bangladesh has benefitted from its great population and density by pursuing prudent and home grown socio-economic policies. It has the highest per square kilometre GDP in the region, outstripping countries such as China, Indonesia, India, Malaysia and Thailand.
Both inflation and exchange rates have remained stable in recent years. Budget deficit is maintained well within 5 per cent of GDP. Foreign reserves have gone over $33 billion. Government debt sustainability and payment capacity has also improved. Bangladesh now has a budget of Tk. 4 trillion ($50 billion) in the current FY and this will be around Tk. 4.65 trillion ($55.31 billion) in the next – a big jump compared to the previous decade. Sustained macroeconomic stability has helped Bangladesh grow steadily and maintain Ba3 (Moody’s) and BB (Standard and Poor’s) ratings, with a firm outlook for the eighth consecutive year.
People: the centre of the development paradigm
Bangladesh is among a very few countries that have performed well both in economic growth and human development. It became a champion in attaining most of the MDGs as well as internalising the SDGs in its periodic development plans, and is confident of achieving them in time. Average life expectancy is now 72.7 years, the highest in the region. The government’s determination towards inclusive growth resulted in poverty reduction to 24.3 percent. Extreme poverty has also sharply dropped to 12.9 per cent, with the government running 145 social safety-net programmes.
Its vibrant and resilient people are Bangladesh’s greatest asset. It has a labour force of 82 million, one of the largest in the world, with workers who are intelligent, hardworking and adaptable to new technologies. Earning very competitive wages, they are, in terms of productivity, well ahead of those in peer countries.
Considerable success has also been achieved in attaining gender parity through the pursuance of conscious policies for the wellbeing of women and girls. Special provisions in health, education, employment, social safety-net programmes and the legal system have empowered women, resulting in them becoming the agents of social change. Growth in Bangladesh is not merely concentrated in urban areas; there has been noticeable transformation in rural areas as well. This balance in growth and development has kept national demand high, even amidst global economic recessions.
Bangladesh has a strong export base. Ready Made Garments (RMG) is its leading export sector and is positioned second only to China in the global market. In the next decade or so, with production in traditional manufacturing countries becoming more expensive, it will be the least expensive source of RMG. Since 2010, it has seized one-third of the market share of Chinese exit industries. Consultants McKinsey have forecast that RMG exports from Bangladesh could reach as high as $54 billion by 2020.
The country has learned lessons from the tragic Rana Plaza factory collapse in 2013. Since then, with strenuous efforts, it has transformed its garments industry into one of the world’s most compliant with safety and security standards. The number of green RMG factories is also on the rise, which is revolutionising the country’s apparel industry and drawing the attention of renowned global brands and retailers. Since 2011, a total of 67 RMG factories have received Leadership in Energy and Environmental Design (LEED) certification and many others are in the queue. The top seven environment-friendly garment and textile factories in the world are also located in Bangladesh. Garment manufacturers are now creating their own designers, setting up fashion houses and promoting branding in home markets and abroad. The success of RMG has created backward and forward linkage industries like textiles, accessories and packaging.
…while others boom
Information Technology and IT-Enabled Services (ITES) are considered the next booming sector. With strong policy support from the government, tech-savvy youth and dynamic individual entrepreneurs are fast changing the IT landscape of Bangladesh. There is a vision that within the next 15 years IT could be close to the level of RMG exports. Currently, around 90 per cent of Bangladesh’s population has mobile connections, and the government is aiming to increase this to 100 percent, as well as ensuring the whole country has access to broadband connections by 2021. Very recently, the country launched 4G services to upgrade its mobile and internet performance capabilities.
One of the huge success stories of digitalisation in Bangladesh is in the finance sector. Bkash, now the world’s second biggest mobile phone payment company, handles over $1.4 billion in transactions per month, with more than 26 million people regularly using its services. Bangladesh maintains 21st position in A.T. Kearney’s 2017 Global Service Location Index and ranks second in the global freelancing sector. Over 800 companies with approximately 30,000 professionals are now thriving in the IT sector and will surely claim a sizeable share of the international market in coming years. Today there are 650,000registered freelancers in Bangladesh’s Business Process Outsourcing (BPO) sector who are turning over $100 million annually. There has also been significant advancement in the software industry. Bangladesh now exports software products to 30 countries including the US, Canada, Japan and several European countries. This rapid growth in the software and ICT industry has resulted from market demand, the increase in ITC automation in the domestic market and large automation projects by the telecom, banking and garments/textile industries. The present IT environment in Bangladesh offers enormous opportunities for foreign companies in upgrading telecommunication infrastructures, undertaking joint venture projects with local companies for Business Process Outsourcing and software exports and consultancy services. Bangladesh is also seeking partnerships in cyber security to create a safe environment for businesses and services.
The rise of pharma
Pharmaceuticals is on the verge of becoming another billion-dollar industry – ‘Made in Bangladesh’ medicines have now made an impression in the highly regulated markets of the US, the EU and Australia while catering to 97 percent of domestic demand. A good number of reputable companies have also received UK MHRA licenses and many others are in the pipeline. Significant generic drug capabilities, an increasing number of international accreditations, skills in diverse dosage delivery systems, competitive wages and a sound track record of partnership with global MNCs have brought Bangladesh comparative advantages to emerge as a major medicine-producing country. Apart from generic medicines, Bangladeshi pharmaceutical companies are already producing and exporting vaccines and hormones.
Rising healthcare costs have become a big global concern. On the other hand, major generic hubs are losing their cost advantages. Against this backdrop, MNCs are planning to outsource their production from cost-effective destinations. Bangladesh could be an ideal candidate, as medicine prices there are currently among the lowest in the world. For example, generic Sofosbuvir costs only $6 in Bangladesh, whereas the brand price is $1,000.Bangladesh plans to establish an API Park (Active Pharmaceutical Ingredients Park) which will further elevate its position in the global market as it will ensure its self-sufficiency in API production. Investing in the API Park could also be a lucrative choice for foreign investors.
Based on a large livestock industry (estimated as comprising 1.8 per cent of the world’s cattle stock and 3.7 per cent of the goat stock), Bangladesh produces between 2-3 per cent of the world’s leather which, with its unique grain pattern and fibre structure, ranks second to France’s for quality. It also has an abundant supply of experienced workers and expertise in the sector. Moreover, the price of Bangladesh’s leather and leather goods is very competitive internationally.
The government has announced leather and leather products (footwear and leather goods) as a thrust sector. The industry is supported in the form of tax holidays, duty-free imports of raw materials and machinery for the export-oriented leather market as well as export incentives. Bangladesh also enjoys tariff and quota-free access to major markets. With a new industrial site and a central effluent treatment plant at Savar, leather and leather products in Bangladesh now seem poised to secure a niche in the world market. Foreign direct investment in this sector, along with the production of tanning chemicals, appears to be extremely rewarding. Already big player brands such as Young One, Blue Ocean, Venturini and Tata have invested in Bangladesh and that suggests many more to follow.
Other sectors showing significant promise for exports as well as investment are the jute and jute products industry, frozen food, home textiles, light engineering, shipbuilding, the toy industry, tiles and ceramics, furniture, electrical and electronic appliances, plastics, automobiles, handicrafts, cosmetics and toiletries, bicycles and agricultural processing, among others.
Investment opportunities unbound
As one of the fastest growing economies of the world, Bangladesh guarantees a high return on investment. Foreign investors can leverage the benefits of its booming sectors by investing largely in RMG, IT, pharmaceuticals, leather/leather products and many other rapidly growing industries. A good number of megaprojects, including the Padma Bridge, are self-financing. The Rooppur Nuclear Power project, Paira Sea Port, the coal-fired large power projects of Matarbari and Rampal, the Dhaka Mass Rapid Transit Development Project, the LNG terminal, the Padma Rail Link and the Dohazari-Cox’s Bazar rail line are presently under implementation and these projects, when completed in the near future, will provide much needed support for investment and growth. In 2009, the country’s power generation capacity was only 4,972 megawatts; it has now reached at 20,133 megawatts. The Bangladesh Power Sector Master Plans indicate that electricity demand will be around 34,000 MW towards the end of2030. To meet this demand-supply gap, the government welcomes foreign investment into the coal and LNG-based power plants, renewable energy products, cross-border power projects, projects to enhance energy efficiency and projects for the expansion of transmission and distribution capacity.
The establishment of 100 economic zones and other infrastructure projects is expanding urbanisation, which has created additional investment opportunities in the areas of housing, utility services, sewerage system development, waste management, entertainment, telecommunications, retail and financial services. Another yet unexplored but important area for investment is Bangladesh’s marine resources. Exploration of oil, gas and renewable energy, long line fishing, marine transport, sea weed and pearl culture and many others could attract extensive foreign investment.
Its strategic location at the crossroads of South Asia and South East Asia means Bangladesh has the potential to become an economic hub. Regional integration features high on the priority lists of countries in these regions. Bangladesh is affiliated with a number of regional organisations, such as the South Asian Association for Regional Cooperation (SAARC), South Asia Sub-Regional Economic Cooperation (SASEC), Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and the ‘One Belt, One Road Initiative’, to name just a few. These regional alliances have already undertaken several projects aiming at increased connectivity. But this is just the tip of the iceberg. In due time, huge investment is anticipated in the development of road and rail infrastructure and sea and air networks, along with regional power grids.
UK largest trade & investment partner
Trade and investment relations between Bangladesh and the United Kingdom have widened and deepened over the years. The UK is the third single largest destination for Bangladesh’s exports, after the Unites States and Germany ($3989.12 million). Main Bangladeshi exports to the UK are RMG, fish and crustaceans, footwear and vegetables. Well-known brands Asda, Primark, Marks & Spencer, Tesco, Matalan, H&M, Topshop and Sainsbury’s are regular importers of Bangladeshi clothing and textile products. Owned by British Bangladeshis, Seamark and Euro foods are two leading processors, exporters and distributors of frozen food who source most of their imports from Bangladesh. There are also huge opportunities for trade in non-traditional products such as pharmaceuticals, electrical and electronic equipment, leather and leather products, jute and jute products. Fresh fruit and vegetables also have greater prospects. Furthermore, trade in services is one area where there is immense potential.
The UK has emerged as one of the biggest sources of Foreign Direct Investment for Bangladesh. In 2017, the FDI provided by Britain was $312.98 million – 14.56 per cent of the total investment. Major areas of British investment in Bangladesh include energy, power generation, oil and gas, tea gardens, the financial and other service sectors. Pharmaceuticals, footwear, IT services, agro-processing, railways and other transport, LNG and marine resources are some potential investment sectors for the UK as it looks to an extended economic relationship with emerging economies after Brexit. Some of the major British concerns in operation in Bangladesh include Aventis, Berger Paints, BOC Bangladesh, British American Tobacco, Cairn Energy, Duncan Brothers, GEC, Glaxo Smith Kine, GCM Energy, HSBC, James Finlay, Meghna Energy, P&O Nedlloyd, Price Waterhouse Coopers, Reckitt Benckiser, Standard Chartered Bank, Tetley, ACI, Tullow Bangladesh, Unilever and World-Tel.
Britain has been one of the top sources of remittances. At present, it is the fifth largest source of remittances ($1106.01 million in 2017). Today more than half a million people of Bangladeshi origin live in the UK. These British-Bangladeshis play significant roles in the promotion of trade and investment between the two countries. They run some 10,000 restaurants, thus forming the mainstay of the UK’s£4 billion curry cuisine industry, which creates more than 100,000 jobs. More importantly, third or fourth generation British Bangladeshis are on their way to establishing themselves in mainstream British business, commerce, politics and culture. The British Bangladesh Chamber of Commerce, the UK Bangladesh Catalysts of Commerce and Industry, the Bangladesh Caterers Association and Wales Bangladesh Chamber of Commerce are some of the most distinguished British Bangladeshi Business Associations that are working closely with both the British and Bangladeshi governments to further strengthen commercial ties between the two countries.
Most liberal FDI regime
Bangladesh offers the most liberal FDI regime in South Asia. Foreign investment is encouraged in all sectors except for four sensitive areas. A 100 per cent foreign equity holding is permitted by law. The Foreign Investment Act of 1980 guarantees, among others, 100 per cent foreign equity, unrestricted exit policy and the right of repatriation of invested capital, profits, capital gains, post-tax dividends, and approved royalties and fees. The present government has widened the incentives and a list of the advantages and regulatory rules can be obtained from the Trade Secretary at the Bangladesh High Commission.
Bangladesh maintains an unhindered macro-constancy. Its workers are the most willing and productive in the region. It has a large population of youths who are educated, talented, innovative and entrepreneurial. Its exports remain persistently robust and the economy is fast diversifying. It has proven its ability to deliver superior products at the most competitive prices while maintaining high standards, and its investment regime is most liberalised. The country’s leadership has a strong vision and commitment to upscale infrastructural facilities and bring rapid reforms, targeting further reduction in the cost of doing business and a rise in the quality of governance.
So why wait? Come and explore this thriving economy: Bangladesh is open for business.