BANGLADESH: ON THE PATH TO AN ECONOMIC BREAKTHROUGH

Bangladesh’s economy has experienced strong, steady growth in recent years, which is confirmed by a significant increase in the gross domestic product (GDP) and by the improvement of key socio-economic indicators.

ECONOMIC GROWTH OF BANGLADESH IN RECENT YEARS

Bangladesh’s economy showed impressive growth in 2023. The country’s gross domestic product reached $437.42 billion, accounting for 0.41% of the global economy. Bangladesh’s real GDP increased by 5.78%, outpacing the world average growth rate, which was only 3.34%.

THE COUNTRY’S ROLE IN SOUTH ASIA AND THE GLOBAL ECONOMY

Bangladesh occupies an important position in South Asia. It is the second-largest economy in the region after India. In terms of GDP per capita, the country is ahead of India and Pakistan. The main drivers of economic growth are the textile industry, information technology, and agriculture. The textile industry, in particular, makes Bangladesh the second-largest garment exporter in the world after China.

Thus, Bangladesh continues to strengthen its position as a key player in the South Asian economy and the global economy as a whole.

KEY DRIVERS OF ECONOMIC DEVELOPMENT IN BANGLADESH

Bangladesh’s economy is characterized by dynamic development in several key sectors: textiles, information technology, and agriculture.
Textile industry: leadership in exports
The main driver of the Bangladesh economy is the textile industry. The country’s textile manufacturing market is estimated at $19.04 billion in 2024, with a projected CAGR of 5.81% to reach $25.25 billion by 2029. Bangladesh is the world’s second-largest apparel exporter after China, with more than 80% of export earnings coming from ready-made knitted garments and hosiery.

Growth of the IT sector and digitalization of the economy
The information technology sector in Bangladesh is showing steady growth. The country’s ICT (Information and communications technology) market is expected to grow by an average of 1.83% over the next five years. The introduction of digital technologies and the development of cybersecurity and artificial intelligence contribute to the modernization of the economy and increase its competitiveness.

Development of agriculture and agricultural technologies
Agriculture remains an essential sector of the Bangladesh economy, employing many of the population. In recent years, some agricultural technologies have been introduced to increase productivity and resilience to climate change. However, the sector faced challenges in 2024, including floods and protests, which shut down almost a third of large garment factories. Thus, despite the emerging challenges, textiles, information technology, and agriculture continue to be the key drivers of economic growth in Bangladesh.

INVESTMENT CLIMATE IN BANGLADESH
Bangladesh is actively working to create a favorable investment climate to attract foreign investors.
Foreign Investor Support Programs
The main body responsible for attracting and supporting foreign investment is the Bangladesh Investment and Development Authority (BIDA). BIDA provides a wide range of services, including:
• Providing information and advice to help investors obtain the data they need;
• Facilitating project registration and approval to streamline the process for foreign, joint, and local projects;
• Approving work permits for foreign specialists to simplify the employment process for international workers;
• Assisting with utility connections to arrange access to necessary infrastructure networks.

BIDA has also developed an online One Stop Service (OSS) platform that integrates more than 150 services from 40 different government agencies, providing investors convenient access to the services they need.

“Over the past decade and a half, I have witnessed Bangladesh’s numerous transformations through sustainable and inclusive economic growth with active private sector participation.” Masatsugu Asakawa, President of ADB

“Bangladesh has repeatedly demonstrated exceptional resilience and determination in the face of adversity. I am sure that with urgent and bold reforms aimed at improving the economic and financial management altogether with the business environment, Bangladesh will be able to return to the path of strong and inclusive growth with millions of job opportunities for its youth.” Abdoulaye Seck, World Bank Director for Bangladesh and Bhutan

FEATURES OF GOVERNMENT REGULATION

Government regulation of the Bangladesh economy aims to create favorable conditions for businesses and foreign investors. Key features include:
1. Providing tax holidays and reduced rates for specific sectors of the economy as part of tax incentives;
2. Incentives for exporters consist of support and subsidy programs for export-oriented enterprises;
3. The creation of special economic zones includes the establishment of SEZs with special conditions to attract investment and provide new job opportunities.

The Bangladeshi government is actively working to improve infrastructure, including transport and energy networks, which will help create a more favorable investment climate. Thus, Bangladesh offers foreign investors a variety of support programs and creates conditions for successful business.

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RISKS AND CHALLENGES FOR THE BANGLADESH ECONOMY

Bangladesh’s economy faces many risks and challenges, including infrastructure and urbanization issues as well as threats related to climate change.

Problems of infrastructure and urbanization
• Infrastructure problems:
The country is experiencing an electricity shortage, especially in rural areas, which limits the opportunities for industrial growth and the quality of the population’s daily life. In 2023, Bangladesh was reported to have had 114 days of electricity outages during the first five months of the year, which compares to 113 days for all of the 2022 year. The main reason for the electricity disruptions is the shortage of fuels, including gas, coal, and fuel oil, due to currency problems in the country.

The road network has significant problems, including congestion and insufficient road capacity, which hamper logistics and the movement of goods and people. In 2023, roads in Bangladesh were reported to be congested, causing significant delays and increased levels of air pollution.

• Urbanization problems:
Rapid urbanization is overburdening urban infrastructure, deteriorating quality of life, and increasing exposure to natural disasters. Lack of proper planning and investment in urban infrastructure exacerbates these problems. In 2024, the capital, Dhaka, was reportedly experiencing water supply and sanitation problems due to rapid population growth.

To address these challenges, investments in modernizing infrastructure, improving urban planning, and increasing resilience to natural disasters are necessary.

Threats of climate change to the economy

Bangladesh is among the countries most exposed to the effects of climate change. Rising sea levels and increased frequency of floods and cyclones significantly impact agriculture, fisheries, and water resources, leading to economic losses and threats to food security. According to the World Bank, climate change could lead to additional economic losses, up to 2% of the country’s annual GDP growth.

Bangladesh needs to invest in modernizing infrastructure, effective urbanization management, and the development of climate change adaptation strategies to achieve sustainable economic growth.

OUTLOOK FOR 2025 WITH OPPORTUNITIES FOR GLOBAL PLAYERS AND RECOMMENDATIONS FOR INTERNATIONAL COMPANIES

Bangladesh continues demonstrating strong economic growth, opening up new opportunities for international investors.
Opportunities for global players
• Development of special economic zones (SEZs)
The Government of Bangladesh is actively developing SEZs such as the National Special Economic Zone, formerly Bangabandhu Sheikh Mujib Shilpa Nagar. This zone, located in the Chittagong district, covers 33,407 acres and is designed to attract investment in various sectors, including textiles, shipbuilding, and pharmaceuticals. By February 2024, five industrial units had begun commercial production, with another 22 under construction. The total investment in the project is $1.13 billion, with an expected creation of 775,228 job opportunities.

Textiles, information technology, and agriculture continue to be the key drivers of economic growth in Bangladesh

• Information technology sector
Bangladesh aims to become a regional center for outsourcing and software development. Initiatives to create technology parks and provide tax incentives for IT companies create attractive conditions for international technology players.

“Bangladesh is a story of the successful development in South Asia, and the World Bank is proud to be a partner in the country’s development over the past 50 years. We remain committed to helping Bangladesh achieve its growth aspirations. This will require timely policy action to build strong public institutions, improve competitiveness, build climate resilience, and strengthen external and fiscal buffers. Martin Reiser, World Bank Vice President for South Asia

RECOMMENDATIONS FOR INTERNATIONAL COMPANIES

• It is recommended that the state of infrastructure, especially in the new economic zones, be carefully assessed to minimize risks associated with logistics and supply.
• It is important to familiarize yourself with local laws and regulations, especially regarding tax incentives and business registration procedures, to effectively take advantage of available incentives.
• Given Bangladesh’s exposure to natural disasters such as floods and cyclones, companies should develop risk management strategies and ensure the sustainability of their operations.

In conclusion, Bangladesh offers significant opportunities for international investors, especially in the areas of manufacturing, information technology, and agriculture. However, to run a successful business, one must take into account local features, infrastructure issues, and environmental risks.

By Anastasia Moore

PHOTO: VECTACLAUSE / ADOBE STOCK; PHOTO: ADB; MONIRUZZAMAN SAZAL / UNESCO-UNEVOC / CC BYNC-SA 3.0 IGO; PHOTO: WORLD BANK; K M ASAD / IMF PHOTO / CC BY-NC-ND 2.0; PHOTO: SK HASAN ALI / SHUTTERSTOCK; WORLD BANK

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