Bangladesh on track to become trillion-dollar economy

With an average growth of 6.4 per cent over the past six years, Bangladesh has already become an emerging economy outpacing Vietnam, Indonesia, India and Thailand. Now, the country is poised to become a trillion-dollar economy by 2040 even its growth drops to 5 per cent during this time and if a 10 per cent growth continues, the country may reach this milestone by 2030.

Global management consulting firm Boston Consulting Group (BCG) said this in a report titled "Trillion-Dollar Prize Local Champions Leading the Way". The US–based firm released the report highlighting the state of Bangladesh economy at an event in Dhaka on 25 November.

According to the BCG, Bangladesh is reaping economic benefits one after another from its large consumer class, young population, high-level economic stability, resilience of people, progress in digital methods, and fast expansion of private sector. Private sector will be the main driving force of the country’s future journey. Emerging champions are rising from this sector and they are spreading across the globe, and having an impact on society.

BCG global chair emeritus Hans-Paul Bürkner at the event said, “Bangladesh is now a role model for other developing economies. The country has achieved much, especially due to the contribution of the local champions. Corporate transformation and notable contributions from the country's private sector have been driving this growth.”

The BCG has dubbed Bangladesh as emerging powerhouse with eight fundamental drivers. These are solid optimism, rise in consumption, young, growing workforce, high economic resilience, momentum in digital economy, government investment, fast growing private sector and thriving gig economy.

“Consumer optimism in Bangladesh is high. This vital optimism kicked off the virtuous cycle of high growth, which Bangladesh has experienced over the last decade. Recent macro-economic challenges resulting from the global economic slowdown have seen optimism levels dip, but 57 per cent of respondents continue to believe the next generation would have better lives than themselves, especially as the country transitions to a skill-based economy,” the report said.

There has been a surge in the consumer class in Bangladesh over the last 30 years. Bangladesh entered into free market economy and involved closely with globalisation following the restoration of democratic government at the beginning of the 1990s. Export-oriented industries including ready-made garment and pharmaceuticals flourished and poverty began to decline, thus, a consumer class rises. Currently, household consumption is contributing to 69 per cent of gross domestic products (GDP).

According to a recent report by HSBC, Bangladesh is expected to overtake the UK and Germany to emerge as the ninth-largest consumer market globally by 2030 and the growth of its middle- and affluent-class population will surpass Vietnam, Thailand, the Philippines, Indonesia and India by 2025. According to BCG’s 2015 study, the middle- and affluent-class population is expected to grow from 14 million in 2020 to 34 million by 2025.

A huge young workforce is ready to contribute to the high-growth landscape of Bangladesh. The country is home to a younger population relative to most peer economies, with a median age of 28 years, below that of Indonesia (31), India (29), Thailand (39), Vietnam (32), and the global average of 30 years. More than two-thirds of the total population or 68.4 per cent is of working age and that means 114 million people ready to create value through employment.

According to the BCG report, “Bangladeshi households are financially resilient thanks to high savings and low national debts. The nation has a high savings rate, with average savings equivalent to more than a third (34 per cent) of GNI, compared to a global savings rate of 27 per cent. Household consumption accounts for two-thirds (69 per cent) of GDP, protecting the economy from external shocks.”

“National debt levels are low relative to Asian peers, standing at just 19 per cent of GDP, compared to 39 per cent in Vietnam, 41 per cent in Indonesia, 53 per cent in Thailand, 56 per cent in India, and 61 per cent in the Philippines. High savings is enabling high investments, with gross fixed capital formation standing at 31 per cent of GDP in 2021, higher than all Asian peers. The economic resilience is also driven by high remittance inflow from Bangladeshis working overseas, with more than $22 billion entering the country in 2021, doubling from $11 billion in 2010,” the report reads.

Bangladesh’s digital economy continues to gain momentum, with consumer interaction increasing through digital modes. Mobile subscriptions doubled in last 10 years, reaching 177 million in 2021 while internet users grew by 70 per cent during this period. The volume of digital financial transactions more than doubled from 1.7 billion in 2019 to an estimated 3.5 billion in 2022 because of an improved environment digital economy.

The government is actively contributing to development of the nation’s economy, with public spending more than quadrupling over the last decade, from Tk 532 billion in 2012 to Tk 2,254 billion by 2022. Past government efforts have resulted in surpassing literacy rates at 70 per cent and electricity supply to more than 300 kWh per person. Besides, key master plans such as the Smart Bangladesh ICT 2041 Masterplan and Perspective Plan of Bangladesh 2021-2041 are in place to shape future government activities.

Bangladesh’s ambitious and expanding private sector is an engine of growth, and the emergence of some significant major players offers an encouraging outlook for the future, the BCG observed.

“The country is widely recognized for its important role in the global supply chain for textile and apparel, and we continue to see growth in this sector with major domestic players expanding their businesses globally. The nation’s telecom industry is led by three private players - GrameenPhone, Robi and Banglalink, who have helped position Bangladesh as the ninth-largest mobile market in the world. The NGO sector has also been a major driver of growth for the economy, with the world’s largest NGO BRAC and the pioneer of microfinance Grameen Bank, providing a safety net for the bottom of the pyramid,” the reports said.

Startups have emerged in Bangladesh significantly over the last decade, with over 1,200 active startups currently providing service focusing on a wide range of industries, including financial technology (FinTech), logistics and mobility, and e-commerce.

Mobile financial services provider (MFSP) bKash became Bangladesh’s the first unicorn (a startup company valued at over $1 billion), with attracting investment from SoftBank. Now bKash is a leading mobile financial services (MFS) providing company in the world.

The BCG report said, “Over the last year, an impressive new wave of startups are also surging towards unicorn status, with enterprises such as ShopUp, ChalDal, and Pathao enjoying robust growth. The industry overall has raised funding over $700 million and now the government is also taking active role to promote start-ups through ICT Division's flagship venture capital fund Startup Bangladesh.”

The report also highlighted the operations of big business. “Other sectors are also emerging on the global stage, with players like multinational goods company PRAN-RFL establishing franchises in Africa and the Middle East, and pharmaceutical and animal health companies like Renata driving expansion into Europe, the UK, and US. Successful local players, Square Pharmaceuticals, Renata Limited and Fortune Shoes have also featured in the Forbes list for the Asia Pacific (APAC) region, in recognition of their exceptional corporate performance,” it reads.

With 650,000 freelancers, Bangladesh is the world’s second-largest supplier of online labour after India. The nation is home to 15 per cent of the world’s freelancers —behind only India at 24.8 per cent —as the gig economy continues to drive economic prospects. The on- demand sector remains a major driver of growth, with digital platforms like Uber, Pathao, Truck Lagbe and Foodpanda expected to generate 500,000 jobs this year. The emergence of a growing social commerce segment is also driving digital economic growth, with more than 50,000 Facebook entrepreneurs in Bangladesh, according to the BCG report.

The BCG has dubbed the rising business firms of Bangladesh as emerging champions and these firms have the opportunity for further expansion in future as well as a challenger mindset.

According to the BCG study, 56 per cent of organisations have social impact at top of the mind and are geared to drive meaningful change; 83 per cent have a bold ambitious vision; 38 per cent focused on driving better customer outcomes through personalisation; 78 per cent strongly believe that they must build a culture of continuous transformation and 61 per cent of companies are pursuing strategic international expansion to create global brands.

The emerging champion companies will have to be more capable of raising fund from foreign investors. Corporation sector has grown primarily on private capital and individual financing. Some firms are raising funds from capital markets, but a number of emerging champions – for example Summit, ShopUp, bKash– are leading the way in leveraging equity capital from overseas investors and venture capitalists (VCs).

“No story is without ups and downs. The current economic climate has created some uncertainties, with liquidity challenges, foreign exchange risks, inflationary pressures in the short-term, but the measures the country is taking should allow Bangladesh to remain on its course towards a trillion-dollar economy,” the BCG said.

*This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Hasanul Banna