There is talk of Bangladesh as the new ‘Asian Tiger’. The country’s export-led growth over the past two decades has been supported by an abundance of low-cost labour, an increase in female labour force participation, and productivity gains from a shift away from agriculture to manufacturing. It is estimated, for example, that Bangladesh has picked up about two-thirds of China's low-end manufacturing market share in Europe.
As a result, per capita income has risen steadily, with Bangladesh now considered by the IMF to be emerging from ‘low-income status’, and social indicators having markedly improved. More recently, sound macroeconomic policies and favourable external conditions—in particular, strong export demand, high remittances (nearly two-thirds of which originate in the Gulf countries), and low commodity prices—have combined to yield solid output growth, falling inflation, moderate public debt, and greater resilience to external shocks.
Real GDP growth has averaged more than 6% since the Global Financial Crisis, while CPI inflation is currently running around 5.5-6.0%. Foreign exchange reserves, which are a vital first line of defence against external shocks, now exceed $30 billion, or the equivalent of seven months of imports.
However, maintaining the economy’s recent growth performance will be a challenge. The threat of political instability and the rise in religious extremism affecting security have held back business activity, and the economy is increasingly strained by lack of basic infrastructure. With Bangladesh ranking near the bottom globally in commercial access to electricity, roads, and rail, a significant increase in public investment is needed. Overcoming these obstacles will be essential to generating the increase in private investment needed to sustain real GDP growth above 5% per annum.
The government is implementing several transport and energy infrastructure projects to leverage private investment: upgrading rural roads in the southwest; developing the Elenga–Hatikumrul–Rangpur highway in the northwest to four lanes for better connectivity with Bhutan and India; and constructing and upgrading electricity transmission lines to prevent power interruptions. The Bangladesh Investment Development Authority, set up in 2016, is implementing reform to improve the business climate, including the expected launch by December 2017 of a one-stop business service centre.
On the other hand, the implementation of a much-needed new value-added tax scheduled for July 2017, after a delay of one year, was deferred again.
While poverty has declined significantly; social safety nets remain weak, particularly in the areas of pension and unemployment support. Strengthening these will require both policy reforms and public resources.
Beyond these challenges, Bangladesh is also outgrowing some of its policy-making practices and institutions, many of which are constraints on stable, resilient growth. The priorities are upgrading the policy framework to support macro-stability, maintain competitiveness, build buffers against external shocks, mobilise resources needed for public investment, and promote a financial sector that maximises the country’s underutilised savings potential. An important impediment to modernising the financial sector arises from the increasing reliance on high-cost national savings certificates as a financing vehicle for the government budget. This prevents the development of a deep and liquid market for government securities.
About the guides
The main objective of this Doing Business in Bangladesh Guide is to provide you with basic knowledge about Bangladesh; an overview of its economy, business culture, potential opportunities and to identify the main issues associated with initial research, market entry, risk management and cultural and language issues.
We do not pretend to provide all the answers in the guide, but novice exporters in particular will find it a useful starting point.
This FREE guide is available in 4 formats:
Available on the iTunes App Store and Google play