How can cities in Bangladesh become engines of inclusive growth?

Bangladesh's capital Dhaka is now ranked as the world's second most populous city. Urbanization has accelerated rapidly: between 2011 and 2022, urban population increased by 11.5 million, driven in part by net rural-to-urban migration of about 6 million people.  One in four poor people now lives in urban areas. Because such urbanization was largely unplanned, Bangladesh has not fully enabled its cities to become true engines of inclusive growth.

In just three decades, the country has experienced a fundamental transformation - from an agrarian one to a global manufacturing powerhouse, especially in garments. Over the last 25 years, agriculture's share of GDP fell from 23.8% to 11.6%, while manufacturing rose from 14.7% to 22.8%. This makes it worrying that since 2016, more jobs have been created in agriculture—typically lower-paying and often informal—raising concerns about the quality of employment.

Where will the next wave of jobs come from and are cities and institutions ready? Addressing the spatial distribution of more and better-paying jobs requires understanding and shaping where firms locate and how cities grow, while ensuring that public policy and investment reinforce these trends – and not hinder them.

A spatial transformation more concentrated than expected

New analysis using population data, economic census, night-time lights, machine learning, and simulation models points to a clear contrast: small firms continue to spread across the country, while larger, more productive firms are further concentrating around Dhaka and Chattogram.

The Dhaka and Chattogram corridor accounts for 56 percent of total employment and hosts the largest clusters of manufacturing, export-oriented firms, and wage jobs. Within this corridor, analyses show further concentrations of jobs along a few strategic locations including, for example, Gazipur, Madhabdi-Narsingdi, Cumilla, Brahmanbaria, and Noakhali areas.

This geography of jobs is neither accidental nor fully planned. It reflects powerful economic forces—agglomeration, connectivity, and market access. This clustering also highlights two factors driving firms' location decisions: easy access to large urban labor markets, and access to transport infrastructure which connects with the port in Chattogram for both imports and exports.  

A job corridor primarily driven by markets forces

Bangladesh's spatial transformation has been largely market-driven. Two dynamics stand out:

1. Most clustering emerged through individual firm decisions rather than coordinated congregation. This bottom-up industrial dynamism has driven the industrial development in Bangladesh and the formation of this dominant corridor.
2. Location matters for the serviced industrial development too, among the Export Processing Zones, those which are on or along the job corridor have been more successful at creating jobs, while zones in more remote areas have lagged.

While market forces have shaped the job growth corridor, decisions on public investment have remained centralized and heavily tilted towards rural areas. In the Dhaka region, most population and job growth since 2010 have occurred to the north, northwest and southeast, while significant road improvements have gone eastward, into low-lying, flood-prone areas. These misalignments raise logistics costs, reduce productivity, and increase environmental risk—ultimately weakening competitiveness.

Is Dhaka reaching its spatial limits?

Dhaka remains Bangladesh's economic engine, but unplanned expansion, congestion, land scarcity, and rising business costs are pushing firms outward. Enterprise surveys show that between 2013 and 2022, large and medium-sized firms increasingly relocated from Dhaka city to peri-urban areas such as Gazipur, Savar, Narayanganj, and beyond the metropolitan boundary to emerging zones like Narsingdi and Araihazar.

Such shifts would be expected to trigger parallel investments in transport, land management, and secondary cities. Instead, planning remains fragmented across dozens of agencies, budgets are centrally controlled, and local governments lack the mandate and tools to guide and support urban growth.

A map for way forward: Align policy with spatial realities

Bangladesh's competitiveness and job creation hinges on better aligning planning, investment, and institutions with the evolving geography of firms and jobs. Four strategic priorities emerge:

1. Strengthen the coordination between spatial planning and public investment. This could be achieved by formalizing emerging growth corridors in national multi-year planning framework, and aligning strategic sectoral interventions—particularly in transport, logistics, and urban infrastructure—around a common spatial plan.  
2. Foster devolution (appropriate mix of deconcentration and decentralization) to bring public sector interventions closer to where growth and jobs creation are happening.   This could be achieved by developing and implementing tools such as differentiated fiscal transfers tied to service delivery and local economic development, while strengthening  the capacity of local institutions (including city corporations), and enhancing their ability to mobilize own sources revenues.
3. Align special economic zones and export processing zones with market demand. This can be achieved by leveraging Bangladesh's unique location factors when planning for industrial development and ensuring strong links to infrastructure and urban labor markets. Greater attention should be given to integrating industrial and urban developments, providing critical common facilities –housing, drainage, utilities and transport—to avoid isolated industrial parks.
4. Develop explicitly Dhaka and Chattogram as metropolitan regions. This requires consolidating fragmented municipalities and deploying metro-scale investment tools to enable integrated planning, efficient service delivery, stronger fiscal capacity—unlocking private sector participation and the timely development of job-rich growth corridors.

The geography of jobs offers a clear compass and opportunity, for Bangladesh to unlock a new wave of new and better paying jobs and inclusive growth.

Jean Pesme is the World Bank Division Director for Bangladesh and Bhutan.

This article, part of the #BangladeshRising Blog Series, has been published under special arrangement with the World Bank.