Not the next RMG yet: What’s holding back ICT export growth?

As Bangladesh prepares for its official graduation from LDC status in 2026, its export base remains heavily dependent on ready-made garments. Diversification is imperative, but which sector can step up to the task?

ICT has been touted, among others, as one such 'next RMG' candidate. The country even set its sights on an ambitious target in 2022: expanding ICT export earnings to $5 billion by 2031. 

But ICT has yet to emerge as a true engine of export growth. 

Due to the diverse nature of the industry, it is difficult to pinpoint the exact size of the market and export. Industry insiders estimate that total ICT exports stands between $1 billion and $2 billion; and the local market is worth nearly $2 billion, with domestic firms meeting 96% of software demand. 

Telecommunication and Information Services exported $724.56 million, as per Export Promotion Bureau (EPB) data. 

Yet despite these achievements, the international footprint of Bangladeshi ICT firms remains modest.

Where the gap lies

Countries such as India, Vietnam and Philippines, which started from similar levels as that of Bangladesh, are now global ICT outsourcing leaders. 

India's IT services exports exceeded $200 billion in 2023, Vietnam's IT exports surpassed $140 billion (mainly hardware and software), while the Philippines has become a top destination for Business Process Outsourcing (BPO) and software services. 

Bangladesh, in contrast, is still concentrated on low-end outsourcing and freelancing.

The real issue is that our IT sector has not evolved to a more advanced level due to our lack of adequate skills… Bangladesh faces a harsh reality here: despite lofty rhetoric, the state of our education system is poor. The quality of graduates from many public and private universities is so weak that when a company receives a large contract requiring, say, 300 skilled developers, it simply cannot find enough qualified people.

AKM Fahim Mashroor, co-founder and CEO, BD Jobs and former president, BASIS

This lag stems from multiple factors: inadequate skills in high-value software development, weak international branding, underdeveloped infrastructure and payment barriers. 

According to industry insiders, while the country has 600,000-700,000 freelancers, about 150,000 are active, and most are engaged in basic content production, graphic design or low-value development rather than enterprise-grade solutions.

AKM Fahim Mashroor, co-founder and CEO of BDjobs and AjkerDeal, said, "In truth, the total income from freelancing is no more than $100–200 million, while the entire ICT industry earns less than $700 million. And growth has been stagnant for the last three to four years. 

"Corruption and mismanagement have clearly been factors, but the problem runs deeper. A key question is whether our firms and workforce lack the skills to expand beyond their current size and capacity," he added. 

Mashroor, also former president of Bangladesh Association of Software & Information Services (BASIS), further said that it is the big players who drive an industry's growth. But in Bangladesh's IT sector, there are no large firms of this scale. 

"We have 2,000 to 3,000 IT companies, but they're mostly small — 10 or 20 employees on average. The number of firms with more than a thousand employees can be counted on one hand. In contrast, India has major companies employing hundreds of thousands of people, and they alone dominate the country's export earnings," he said. 

Corruption and governance challenges

One uncomfortable truth is that years of mismanagement and corruption have weakened the sector's credibility. The White Paper on the economy submitted in December 2024 identified ICT as one of the most corruption-affected sectors, after banking and development projects.

"We must also acknowledge what happened under the previous government. Many ICT projects became avenues of massive corruption, siphoning off public funds under the guise of digital development," said Faiz Ahmad Taiyeb, Chief Adviser's Special Assistant on the Ministry of Posts, Telecommunications and Information Technology. 

"This corruption has undoubtedly set the sector back, making it harder for us to catch up with countries like the Philippines and Vietnam," he added. 

"We're now shutting down these fraudulent projects — particularly those based on inflated software and app development schemes — and moving away from that old model. Another major challenge is the lack of proper data governance in the country," Taiyeb further said. 

"The government has treated the ICT sector more as a political prop than a serious economic sector," Mashroor said. "The real priority should be strengthening the software sector — mobile applications, AI, cybersecurity — areas where demand is booming globally. Yet the government has focused more on flashy, politically marketable ideas rather than building core capacity." 

Skills vs infrastructure: A dual bottleneck

Despite a large youth population, the pool of advanced software engineers is relatively small in Bangladesh. 

On the infrastructure side, unreliable internet, bureaucratic delays in cross-border payments, and inconsistent energy supply raise operational costs. These are deterrents not just for local entrepreneurs but also for foreign investors evaluating Bangladesh as an outsourcing hub.

This raises the question: Is the problem policy-related, or are firms themselves to blame? 

Mashroor said the government incentives and tax policies are not that bad. Software exports are tax-exempt, and cash incentives were once 10% (now 6%), which is still higher than in some other industries. 

"The real issue is that our IT sector has not evolved to a more advanced level due to our lack of adequate skills… Bangladesh faces a harsh reality here: despite lofty rhetoric, the state of our education system is poor. The quality of graduates from many public and private universities is so weak that when a company receives a large contract requiring, say, 300 skilled developers, it simply cannot find enough qualified people," he explained.

Every year, 20,000–25,000 graduates enter the ICT job market, but an estimated 80% lack the skills to work in competitive export markets, he commented. 

Selim Raihan, professor of Economics at the University of Dhaka and Executive Director of the South Asian Network on Economic Modeling (Sanem), said, "Our promising startups and small firms often starve for growth capital, as traditional banks are notoriously hesitant to lend to an industry with intangible assets. A complex regulatory environment and weak intellectual property protections deter the high-value, long-term international partnerships we desperately need." 

Taiyeb said, "Our position is simple: if we are given a clear sense of the demand, we can organise specialised training programmes to meet it. But without aligning skills development with real industry demand, policy support alone will not be enough." 

What the government is doing 

Taiyeb said they are currently working to build AI- and cloud-based freelancing skills — particularly the soft skills needed to thrive in this changing landscape. "To that end, we're developing two separate curricula. In addition, National University (Bangladesh) is launching a new ICT course aimed at producing technically skilled freelancers." 

He added, "Beyond that, through the Bangladesh Computer Council, we've taken up certification-oriented training programmes. These include globally recognised certifications from Microsoft, IBM, and various cloud and cybersecurity providers. We're also reviving ICT startup programmes that were stalled for years. 

"This includes encouraging small venture capital firms through seed funding to build a healthier startup ecosystem. In parallel, we're scouting land in three or four locations in Dhaka to establish new software parks that can support the growth of homegrown firms." 

Taiyeb further said, "We're planning initiatives at BUET to teach the latest ICT skills. These are practical, time-bound measures we can take to make an impact." 

Achieving that $5 billion export goal would be ambitious but achievable — if a few key policy changes were made. 

Seilm Raihan said, "The government must go beyond vague encouragement and design concrete, actionable incentives. This means guaranteeing things like permanent, easy-to-access tax holidays for IT firms and simplifying the often-frustrating process of repatriating foreign earnings. In other words, we have to make it financially effortless for a company in Dhaka to do business with a client in Silicon Valley." 

Furthermore, a massive push in public-private partnerships is required to fundamentally reshape our education and training pipelines, he added.  

"We're not just talking about more graduates; we need industry-ready professionals skilled in cutting-edge fields like AI and cybersecurity. Put simply, our policy must build a bridge between our classrooms and the global market." 

Competing globally: More than coding

Success in global ICT exports requires reputation, trust, and integration into global value chains. Indian firms benefited early on from English proficiency, aggressive global marketing, and a robust pipeline of skilled graduates from technical institutes. 

Vietnam leveraged a state-led industrial strategy tied to electronics exports. 

The Philippines bet heavily on BPO services backed by language skills and ease of doing business.

Selim Raihan said, "It is not a coincidence that countries like the Philippines and Vietnam did not simply evolve into IT hot spots; rather, they implemented a national strategy in that sector from which Bangladesh can learn. Their best asset has been an enduring, sustained commitment to building a huge English-fluent population trained for the global tech industry."

The Philippines built an entire BPO industry based on this foundation of communicative competence, for example. 

Vietnam, meanwhile, made a calculated bet on intense STEM education, producing a deep bench of outstanding software engineers. Both countries also effectively marketed themselves as stable and enticing targets for foreign investment, providing a predictable business environment. 

So, to copy their success, Bangladesh will need to double down on specialised tech training integrated in English and launch a focused "nation branding" campaign, Selim Raihan said. "That will involve going out to the world with our positive story actively because it is that which will earn us trust and bring in the investment, enabling growth, particularly after LDC preferences are gone." 

Mashroor said, "Countries like Vietnam and the Philippines started their ICT journeys later than Bangladesh, yet have surged ahead. The gap lies partly in knowledge and skills, but also in strategy. One of India's biggest advantages is its global diaspora. Indians hold key positions in major tech firms across the US and Europe, creating a pipeline of work for their home country.

"Bangladesh's diaspora, by contrast, is largely absent from such decision-making roles. When Samsung explored setting up operations in Bangladesh, they left because the talent pool wasn't large or skilled enough to meet their needs. The industry faces serious challenges in both human resources and international marketing," he added.