Bangladesh no longer requires introduction as global sourcing hub for major clothing brands of the world. The fierce suppression of the FOB price, increasing costs for compliance to many national and international rules and regulations – often separately brand by brand – and retail market volatility leave very little room for margins for most clothing factories in Bangladesh today.
Sixteen priority industry sectors, which will be discussed one by one in the next publications, together contribute over six million jobs and close to 50 billion Euros revenue from the domestic and international markets annually. The majority of the sectors are on a fast-paced growth trajectory, exhibiting double-digit growth. A burgeoning middle-income class with increased purchasing power is driving domestic consumption, yet ensures low-cost labour in the international market, which is creating price-competitiveness.
The sectors playing a vital role in Bangladesh’s economy such as agri-business, ceramic, plastic, and leather are gradually upgrading along the value ladder with the increasing presence of processing factories, dynamic leadership of local entrepreneurs, and technology-knowledge transfer from global investors. Sectors having backward or forward linkage connectivity between their supply chains, such as automotive and light engineering, are leveraging mutual complementarity to increase domestic value addition. Few sectors such as shipbuilding and pharmaceuticals have brought about a paradigm shift by launching world-class factories and maintaining globally acceptable product quality. On the other hand, sectors such as medical equipment, renewable energy, and information, communication, and technology (ICT) are at a more nascent stage of growth but have the potential to rapidly transform the local business landscape.
On the contrary, few sectors are also facing critical challenges, as evidenced by stagnant revenue and employment generation. The telecom sector has experienced sluggish growth in the face of rapid digital disruptions and an unfavourable regulatory regime. Healthcare, one of the most high-impact sectors, has been beset with infrastructural limitations as well as weak governance framework. The aquaculture, particularly the frozen fish and shrimp sector is in dire need of a sector-wide overhaul with the emergence of highly competitive and better equipped export peers.
Six, among the sixteen sectors, the agribusiness (food processing), light engineering, ICT and outsourcing, tourism, pharmaceuticals, and healthcare were recognised as the key sectors to support sustainable economic growth in Bangladesh. Those six selected sectors together contribute approximately 10 percent of the country’s GDP while generating around 3.5 million jobs. Having ensured strong and steady market fundamentals, these sectors are poised to earn more than 60 billion Euros at the end of 2023. In line with this, agribusiness (food processing) is thriving on a strong base of domestic backward linkage while generating around 4.8 billion Euros in the 2018-19 fiscal year. The food processing sub-sector alone contributes approximately 300,000 jobs and the sector is highly inclusive of the unskilled and female labour forces. In coherence with the Digital Bangladesh vision of the current government, the ICT and outsourcing industry earned 1.7 billion Euros in the 2018-19 fiscal year while creating around 940,000 jobs. The tourism industry, registering a robust annual revenue of 5.3 billion Euros last year, is currently boasting around seven million domestic travellers per annum. The light engineering industry, standing at 3.1 billion Euros, has the highest multiplier impact potential as it is the backward linkage vertical for almost all production and manufacturing sub-sectors.
Bangladesh is the only Least Developed Country (LDC) economy featuring a well-developed pharmaceuticals sector, which has earned 2.5 billion Euro in the 2018-19 fiscal year, generating approximately 170 thousand white-collar jobs. The healthcare sector is expected to reach more than 11 billion Euro in annual revenue by 2023.
Bangladesh’s growth potentials has already been recognised by major international companies and lenders such as the IFC, KfW, DEG, German Landesbanks and others for the last few years. Over the years, IFC has invested more than US$100 million in a Bangladeshi industrial groups and it’s committed portfolio, which consists of a combination of investments and advisory services in Bangladesh is around US$1.52 billion as of June 2018 .
Given the relatively recent success in global trade and manufacturing sectors, Bangladesh still remains a complex place for doing business mainly due to lack of international standard professional services, industry sector specialised and senior manager, consultants as well as technology and know-how transfer at scale, which Stein and Partners bridges in collaboration with it’s peers, industry specialists, suppliers and manufacturers from around the globe.
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The full in-depth report may be available upon request from the author.