Road to a trillion dollar economy: Bangladesh sets its sights to the future

Mostafa Kamal, the founder of the Meghna Group of Industries, began his business career with a small trading company in 1976, five years after Bangladesh gained independence. It took him 13 years to establish his first factory, Meghna Vegetable Oil Industries Ltd, on a small piece of land at Meghnaghat, Narayanganj. 

Over the next two decades, he built several other factories and in the following decade, he set up around 30 factories, making Meghna Group one of the largest conglomerates in the country. In 2020, Kamal invested $451 million in nine new industrial units, defying the pandemic, and expanding the group's empire.

Today, Meghna Group of Industries employs over 50,000 people, 6,300 distributors, and 15,000 suppliers, with an annual turnover of approximately $3 billion or over Tk30,000 crore. Other large conglomerates that have established 30-40 industrial units and employ thousands of people include Square Group, City Group, Abul Khair Group, Akij Group, Transcom Group, Pran-RFL, East Coast Group, Bashundhara, TK Group, Partex Group, Beximco Group, ACI, and Orion Group.

There are many other textile and garment companies that have created empires starting from scratch. For example, Noman Group, which manufactures and exports knitwear, woven garments, denim, home textiles, and accessories, exports over $1.5 billion annually. The annual export volume of Ha-Meem Group, DBL Group, Envoy Textile, Pacific Jeans, Mohammadi Group, Fakir Apparels, and some others will also reach the $1 billion mark in a few years.

But not long ago, Bangladesh was considered one of the poorest countries in the world, with a poverty rate of 59% in 1991, which came down to 21.8% in 2018. During the same period, the number of people living in extreme poverty decreased from 43% to 11.9%. If not for the Covid-19 pandemic, the number would have been higher.

In 2008, the size of Bangladesh's GDP was only $90 billion, but it crossed $460 billion in 2022, growing over five times in the last 14 years. Export-oriented industrialisation, entrepreneurial spirit, and improved infrastructure have contributed to this growth. Domestic consumption, driven by thriving consumerism fuelled by increasing purchasing power, has made the economy vibrant, as evidenced during the pandemic when many global economies struggled while Bangladesh remained relatively untouched.

Bangladesh met all the criteria to graduate from LDC status in 2015 and has been on track to become a developing country in 2026. In 2021, Bangladesh also surpassed India in terms of per capita income. According to forecasts by the US Boston Consulting Group and HSBC Global Research, the size of Bangladesh's economy will reach $1 trillion by 2040.

"Bangladesh is a resilient economy…We just need to prioritise mega projects for positive impact in the next 10 years," Azam J Chowdhury, chairman of East Coast Group.

What were the reasons behind Bangladesh's economic success?

Several factors have driven private sector growth in Bangladesh over the past few decades, including economic reforms, export-oriented industrialisation, microfinance, improved infrastructure, and the entrepreneurial spirit of its people.

Economic reforms: In the 1980s, the Bangladesh government introduced economic reforms that encouraged private sector growth. The government allowed banking, non-banking financial services and insurance business in the private sector. It also removed restrictions on foreign investment, reduced trade barriers, and promoted entrepreneurship by offering tax breaks and other incentives.

Export-oriented industrialisation: Since the 1990s, Bangladesh has focused on export-oriented industrialisation, which has led to the growth of industries such as textiles, ready-made garments, leather goods, and pharmaceuticals. This has helped the country earn foreign exchange, create jobs and increase exports.

"A growing young population of earners and consumers, make Bangladesh an ideal investment destination for labour and skill-intensive sectors," Economist Dr Masrur Reaz.

Microfinance: Bangladesh pioneered the concept of microfinance, which helped millions of people start their own businesses in the 1980s and 1990s. The success of microfinance has led to the growth of small and medium-sized entrepreneurs and domestic demand, which form the backbone of the country's private sector.

Improved infrastructure: Bangladesh has made significant investments in infrastructure, such as roads, bridges, and ports. The government has implemented a number of mega projects, including the Padma Bridge and Metro rail which has facilitated the growth of industries, particularly those that rely on transportation.

Why is Bangladesh an attractive place for investments?

There are several reasons why Bangladesh is an attractive destination for investments. These include a thriving domestic economy, duty-free exports to the world until at least 2029, a surplus of low-cost labour, scope in high-quality garment products, a growing agro-processing sector, and a burgeoning digital economy.

Also, the country's growing middle class population who accounts for around 22% of the total 170 million, creates an opportunity for the investors.  The number would rise to one-fourth of the total population or around 40 million by 2025, which is higher than most of the European countries' total population.

The government is developing 100 special economic zones and the biggest one ­– Bangabandhu Sheikh Mujib Shilpa Nagar (BSMSN) – is being developed at Mirsarai, Chattogram, near the country's largest sea port. Along with BSMSN, four other state-run economic zones have received over $22 billion investment proposals. Foreign investors can get hassle-free land at an affordable price in these zones. In addition, dedicated zones are being developed for the Japanese, Indian and Chinese investors and Bangladesh welcomes any other country's interest for dedicated zones.

Though Bangladesh has invested heavily – about 6.2% of its GDP between 2010 and 2020 – on infrastructure, it still needs a lot to meet the growing demand. According to an estimate of the Dhaka Chamber of Commerce and Industry, Bangladesh will require to invest around $25 billion annually through 2030 to meet its infrastructure needs. This need offers enormous opportunities for foreign infrastructure development and engineering services firms.

Azam J Chowdhury, chairman of East Coast Group, one of the largest conglomerates in the country said, Bangladesh is a place of enormous opportunities for investment in large infrastructure, energy and power and services sector.

"Bangladesh is a resilient economy which can withstand any bad weather," Chowdhury told The Business Standard on Friday.

"We just need to prioritise mega projects that will create a positive impact in the next 10 years," he noted.

Dr Masrur Reaz, an economist, said that Bangladesh presents a vast opportunity for efficiency –seeking foreign direct investment that refers to a company or multinational corporation investing in another country with the primary goal of improving productivity and competitiveness. This investment strategy takes advantage of lower labour costs, technology, favourable tax policies, and infrastructure in Bangladesh.

Dr Reaz pointed out that Bangladesh's demographic dividends, with a growing young population of earners and consumers, make it an ideal investment destination for labour and skill-intensive sectors. Additionally, Bangladesh's strategic geographical location adds to its attractiveness as an FDI destination.

"But there are challenges to turn these opportunities into reality," Dr Masrur told The Business Standard on Friday.

Of the challenges, he mentioned improving the regulatory environment, making policies consistent and modernisation of services are required to attract new generation businesses.