Bangladesh has an impressive track record for growth and development over the past decade. Bangladesh is slowly making its presence felt across the Asian belt. One of the major reasons behind this development is Foreign Direct Investment and Startups. The investments across the country are increasing every year which has almost quadrupled. International corporate investors and venture capitals are investing in industries like- fin tech, logistics and mobility over the last five years. More than 102 million people are now having access to the internet among the population of 164 million. Our young population is now quickly adapting to new technology, opening up to new ideas and exploring new avenues of improvement. More than thousand active startups are now generating over 1.5 million employments. These millions of people are also the active consumers of products and services made by startups, as part of their everyday life.
These are strong signs which indicate that Bangladesh is perfectly placed to become an important crown jewel in the Asian Sub-continent, propelled by more and more young people who are willing to take risks and push for greater innovation.
PROMISING SECTORS FOR NEW DECADE
As a developing country business sector in Bangladesh is growing very swiftly for which this sector has huge potential in coming years. From spinning to weaving, from knitwear to leisurewear and high street fashions, the textiles and clothing industry is Bangladesh’s biggest export earner. Our factories design and produce for the world’s leading brands and retailers. This rapidly growing sector of the Bangladeshi economy offers a unique competitive edge that supports profitable expansion into new strategic markets. The country has also enjoyed a promising 8.1% economic growth rate prior to the pandemic, strongly driven by RMG exports, a surging flow of remittances from abroad. A record amount of foreign investments (FDI) amounting to USD 3.88 billion in 2019 came into the country, however, due to the yearlong pandemic, coupled with infrastructural challenges and gap in policy implementation, it has since struggled to match the same figures, which explains the low FDI to GDP ratio in 2019. Moreover, the ease of doing business in Bangladesh needs drastic improvements, the country is currently ranked at a low 168th (jumping from 176th in the previous year) in the World Bank Groups’ Doing Business 2020 study. However, steps are already underway by the government, with the construction of new economic and export processing zones, with BIDA’s One-Stop Service, being one of the many bright examples. The country has also accelerated the adoption of digital services with Digital Financial Services (DFS), Logistics, and Grocery on-demand, Ed Tech, Health Tech seeing sharp growth.
Bangladesh is both an inspiration and a challenge for policymakers and practitioners of development. While the country recorded strong performance in income growth and human development, Bangladesh faces daunting challenges with an increased level of vulnerability with about 39 million people still living below the national poverty line. Bangladesh is considered a lower middle-income country by the World Bank and moved into middleincome status in previous years. Bangladesh is one of the fastest-growing countries in the world and as such, we can identify some of the benefits and costs from such a rapid pace of expansion. The country has made significant progress in reducing extreme poverty and its per capita income might soon overtake that of India. However, a severe infrastructure gap means that it cannot meet many of the sustainable development goals. The government’s Vision 2041 seeks to eliminate extreme poverty and secure upper middle- income country status by 2031 and achieve high income country status by 2041.
DRIVERS FOR SECTORAL GROWTH
Bangladesh has higher labor supply and cheaper power tariff than peer countries:
DOING BUSINESS INDEX
Economies are ranked on their ease of doing business from 1 to 190. A high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a local firm. The rankings are determined by sorting the aggregate scores on 10 topics, each consisting of several indicators, giving equal weight to each topic. The World Bank Group’s Doing Business 2020 study ranked Bangladesh 168th in the global ease of doing business ranking this year from 176th in the previous year. But government has taken an initiative to become a double digit by 2025.
ACTIVE STEPS TO IMPROVE EASE OF DOING BUSINESS RANKINGS
The government of Bangladesh has undertaken a number of initiatives to improve the ranking-
-Setting up a new business became less expensive with the reduction of registration and name clearance fees and removal of certifying fee for digital certificates.
-Obtaining an electrical connection in Dhaka was made more efficient as the city has invested in digitization and human capital. At the same time, the country reduced the amount of security deposit required for a new connection.
-Access to credit information was improved thanks to expanded coverage by the credit information bureau.
-Bangladesh Investment Authority (BIDA) has introduced a One Stop Service Center to assist foreign investors.
-Actions include Bangladesh Investment Development Authority (BIDA)’s One-Stop Service, Infrastructure investments, the building of economic and Export Processing Zones etc.
Therefore it is expected that Bangladesh will significantly improve its ease of doing business ranking over the coming years.
INFRASTRUCTURE INVESTMENT
The Rice Mill Industry of Bangladesh: Surviving throughout pandemic and bringing technological change
Corona virus has affected almost every spheres of life in the world including different businesses and industries where agricultural sector is not an exception. Rice is the most vital element of this agricultural sector. The average per capita rice consumption in Bangladesh stood at around 179.9 kg per year from 2016 to 2019, more than three times the world average. According to the USDA, approximately 500 million tons of rice were produced globally during 2019-2020. Bangladesh ranked fourth, contributing about 7% to the world production. Despite being one of the leading producers, Bangladesh cannot find a place among the top five rice exporters since its output is used to meet the domestic demand. Our domestic demand
has almost tripled since independence, causing us to somewhat dependent on imports to meet the demand.
Due to technological advancement and changing demands, the rice milling sector in Bangladesh has slowly shifted from the traditional “Dheki” or husking method of processing paddy to a more automated process. More than 12,000 husking mills had to shut down between 2012 and 2014 as they could not compete with the auto and semi-auto rice mills. Currently, 18700 public and private rice mills operate in Bangladesh, mostly in the North Bengal region. These mills broadly produce three categories of rice- Aus, Aman and Boro.
Since rice is a non-cyclical product, its demand is relatively inelastic. As such, the pandemic did not have much effect on the sector. Although the producers faced a temporary cash crisis during March and April due to the lockdown and limited banking hours, the situation improved from May and onwards. Handsome production and suitable government policies helped the producers to avoid any difficulty during the pandemic. Sales increased as people hoarded rice due to uncertainty, and different organizations procured rice for relief distribution. As a result, during the third quarter of 2020, the price of rice increased by BDT 5-7 per kg.
As technology advances, we need to use more modern technologies such as drones and field sensors in our farming process and adopt Climate Smart Agriculture (CSA) to boost our productivity. These need to be implemented almost immediately as we lose 1% of our cultivable land every year due to growing population demands. The government should also ensure proper financing and insurance facilities for the producers. Doing these will decrease our dependency on the RMG industry as our sole exporter and allow this industry to be a potential source of our export income.
Sushmita Saha
Assistant Manager
IDLC Finance Limited