Booming Bangladesh

21 October 2022

Bangladesh has bounced back from Covid-19 and, with its strong economic fundamentals, infrastructure improvements and digital vision, is growing trade flows and GDP. flow’s Clarissa Dann provides a deep dive into this rapidly evolving economy

According to the Embassy of the People’s Republic of Bangladesh, Germany is the country’s largest European trading partner and the second largest globally after the US. German exports to Bangladesh have seen huge growth over the past 25 years and in 2021 trade volume between Bangladesh and Germany was US$9.3bn. This comprises US$8.3bn in Bangladesh to Germany, and US$1bn in exports from Germany to Bangladesh.1 German consumer goods are in considerable demand, and, offsetting this incoming trade, Bangladesh exported more than US$1bn of products from its ready-made garments (RMG) sector. There are also healthy agri- and oil-trading flows. On 13 October, The German Business Council (GBD), an association of German private companies operating in Bangladesh, was launched in Dhaka, underlining the strength of the business partnership between the two countries.2

After 150 years of operating in Asia-Pacific, it made perfect sense for Germany’s best-known bank to have a presence in Dhaka, and on 3 September 2022, Deutsche Bank announced it was opening a representative office in the capital.   

Having observed the growth in the Bangladeshi banking industry that has followed its economic upward trajectory, Deutsche Bank’s recently appointed Chief Representative Officer Syed Naushad Zaman is, he says, “truly delighted to be a part of another representative office from the very beginning.” Twenty years ago, his career began with a local conglomerate, before he moved into the banking sector in 2003 – first with a local bank, and then joining the representative office of another global bank. Zaman notes the existence of “huge demand for investment in the infrastructure sector, renewable energy, IT and agro-based commodities.” Together Bangladesh’s status as the world’s biggest issuer of letters of credit, this provides a perfect opportunity for a global bank, such as Deutsche Bank to play a significant role in the country’s continued growth journey.

Economic resilience

Figure 1: GDP growth rate: Bangladesh

Source: Asian Development Bank
Bangladesh: Economy | Asian Development Bank (adb.org)

En route to transitioning from relatively undeveloped country to a developing one, Bangladesh’s current economy is worth, according to World Bank data US$416bn, with a gross national income per capita of US$1,715, well ahead of the least developed country average.3

Syed Naushad Zaman, Chief Representative Officer for Bangladesh, Deutsche Bank “Bangladesh has huge demand for investment in the infrastructure sector, renewable energy, IT and agro-based commodities”
Syed Naushad Zaman, Chief Country Officer for Bangladesh, Deutsche Bank

While Bangladesh is not fully immune from the spill-over effects of pandemic-related economic losses and, more recently, the Russia/Ukraine conflict, it has notes Zaman, has “managed the situation well thanks to good decisions made by the central bank and excellent growth in the RMG sector and remittances”. Economic growth bounced back in 2021 and this year is forecast to grow to 7. 2% (see Figure 1).4 The government has also tackled the other threat to its economy – flooding. As The Economist reported on 1 September, “Bangladesh has for years invested in flood defences to protect its low-lying coastal regions from cyclones. Residents near the coasts and in regions farther inland that are at risk from monsoon-related flooding have been encouraged to make their houses more resistant to floods and have received money to do so.”5 Despite all the economic, political and environmental challenges, Bangladesh has maintained annual growth of around 6% for more than a decade.

Importantly, the country can feed itself, is self-sufficient in the production of meat and eggs – two key sources of protein – and is a major aquaculture fish-producing country, according to the Food and Agriculture Organization.6

The government of Prime Minister Sheikh Hasina Wazed, daughter of Bangladesh’s founding President, has moved Bangladesh’s economy forward, and the number of Bangladeshis living in poverty has fallen. This turnaround was rapid: By 2014 Bangladesh’s economy had already doubled in size since the previous government left office in 2006.

French philosopher August Comte once said that “demography is destiny.” This observation is appropriate for Bangladesh, whose population has risen from 122 million in 2001 to just shy of 170 million in 2022. And this burgeoning population brings with it a growing workforce and the prospect of a further demographic dividend for years to come: two-thirds of Bangladesh's population is aged under 35 years, and approximately 80% of Bangladeshis are below 40. Population projections are tentative, but by 2050 some estimate Bangladesh’s population could reach nearly 243 million.

Life expectancy is rising, helped by a public health programme (including a ‘nudge’ campaign offering free face masks) that addressed threats from the Covid pandemic. Vaccination programmes will continue into 2023 – with RMG sector workers prioritised. So that growth can be sustained with better workforce skills, a new, more vocational curriculum is to be introduced by 2025, the result of a multi-year consultation process with workers and employers.

According to the Human Development Report 2021–22, from United Nations Development Programme (UNDP), Bangladesh ranks at 129 out of 191 countries in the Human Development Index (HDI), which places it among medium human-development countries. Bangladesh is also one of South Asia's better performers, with its HDI value above the regional value of 0.632. The Human Development Index (HDI), which measures a country's average achievement along three basic human development dimensions – a long and healthy life, education, and decent living standards – has seen nine out of 10 countries worldwide slip in their performance over the past two years. On the other hand, Bangladesh saw its HDI scores consistently improve in recent years, reaching a value in 2021 of 0.661.7

Deploying human capital

Bangladesh has seen significant urbanisation in the past 50 years: In 1974 only 9% of its population lived in towns or cities, but today that percentage has risen to 37%. Dhaka attracts the bulk of rural-urban migrants: the capital has grown from three million to 18 million inhabitants today. These internal migrations have helped Bangladesh sustain its economic growth, and today Dhaka generates around 35% of Bangladesh’s GDP. The RMG industry now generates up to 20% of the country’s GDP (and 84% of its exports), having radically improved standards since the 2013 Rana Plaza factory collapse tragedy. “Today, Bangladesh’s RMG sector is a frontrunner in transparency regarding factory safety and value-chain responsibility, thanks to initiatives launched in the aftermath of the disasters,” commented McKinsey in 2021.8 For example, Bangladesh has 165 US Green Building Council (USGBC) Leadership in Energy and Environmental Design LEED)-certified green apparel factories – the highest in the world.9

In addition to RMG exports, Bangladesh also exports jute and jute goods, fish, shrimp and prawns, leather and leather goods, home textiles, vegetables, and pharmaceutical products. Leather, jute and pharma sectors are growing fast “and have vast potential,” notes Deutsche Bank’s Zaman.

Add to this a longstanding tradition of Bangladeshis working internationally, with a diaspora of 13 million workers overseas sending US$22bn back home annually. Of the total Bangladeshi working diaspora, Saudi Arabia hosts the most at 2.5 million and also provides Bangladesh with subsidised oil, further helping to boost its economic growth. Malaysia, the UAE, US, and UK each host around one million Bangladeshis, with Italy hosting almost half a million. The economic presence of such expatriate workers in Western economies is sizeable – as are their remittances home, which all contribute to Bangladesh’s economic growth.

Infrastructure and decentralisation

Recognising Dhaka’s dominance in the country’s economic affairs, the government is now trying to ‘level-up’ economic growth. Plans include providing power and internet to rural areas and decentralising political power by giving new local authorities spending power for development purposes. “Addressing infrastructure gaps would accelerate growth and reduce spatial disparities in opportunities across regions and within cities,” noted the World Bank in April 2022.10

The current concentration of growth in the capital presents challenges but also opportunities. The number of cars on Dhaka’s streets has doubled since the 1990s, and a road safety bill is planned, with improvements to ease the city’s traffic congestion also scheduled.The government is building a metro system in Dhaka to further help ease congestion, and its planning authority is seeking to spread growth more evenly to the north and east of the city. Additional infrastructure improvements in Dhaka include funding of US$100m from the World Bank in 2019, to support public space and services improvements for four of the city’s poorest districts. Opportunities remain for investors to help develop affordable housing and new industrial zones.

The Padma Bridge under construction in September 2021, completed June 2022. Photograph by Kajal Debnath (source Wikipedia)

Nationally, infrastructure investment continues to be sought for major transport projects such as airports, bridges and ports (often involving co-investment with India or China), and essential utilities such as a reliable water supply. For example, of immense importance is the two-level road-rail Padma Multipurpose Bridge, completed in June 2022. Spanning more than 6km, the bridge was constructed by the China Major Bridge Engineering Company at an estimated total cost of US$3.86bn – fully funded by the government of Bangladesh.11 West of Dhaka, it connects Louhajang Upazila of Munshiganj and Zazira Upazila of Shariatpur and a small part of Shibchar Upazila of Madaripur, linking the less developed southwest of the country to the northern and eastern regions. 

Although situated in the world’s largest river delta, Bangladesh lacks sufficient potable water due to reasons both man-made (for example sewage and arsenic pollution) and natural (tidal surges and cyclones). The latter causes salty soil, which prevents the cultivation of rice, in turn forcing people to relocate from low-lying regions to cities. Desalination efforts using nanofiltration machines are being ramped up. Start-ups, in cooperation with NGOs, are also trying to make safe drinking water more widely accessible.

FDI, grand projects and international trade flows

Figure 2: Map of Bangladesh

Bangladesh is surrounded on three sides by India (see Figure 2): some economists estimate that full economic integration with its rising economic superpower neighbour would boost Bangladesh’s annual GDP growth from 6% to 8%. Existing cooperation between Bangladesh and India has ranged from trading electricity to building transport links along their common border (the world’s fifth longest).

China and India are the top two sources of FDI into Bangladesh. The Middle Kingdom has built seven ‘friendship bridges,’ provided scholarships to Bangladeshis studying in China, and sent doctors to Bangladesh during the pandemic. And almost 97% of Bangladesh’s exports to China are granted duty-free status – there is a perceived ease of doing business with the Chinese. In 2020, Bangladesh’s government awarded Beijing Urban Construction Group (BUCG) a US$250m contract to build a new terminal for Sylhet airport in a city just 50km from the Indian border.12  India’s investment in Bangladesh stands at around US$3.11bn, with the potential to rise to US$9bn to reflect existing signed agreements, according to industries minister Minister Nurul Majid Mahmud Humayun.13

Beyond China and India, other foreign governments are equally happy to do business with Bangladesh. For example, Japan pledged Bangladesh US$6bn in loans, Russia is currently building the country’s first nuclear power plant and Bangladesh’s first telecommunications and broadcasting satellite was launched on 12 May 2018. Russell Brown, Deutsche Bank’s Global Head of Trade Finance Financial Institutions points out, “Foreign involvement with Bangladesh also involves significant trade flows, such as with Germany – particularly Mittelstand companies, and a lot of intra-Asia-Pacific activity.”

Energy security, tourism and safety

Bangladesh has undergone rapid industrial growth, but its journey has seen some occasional industrial accidents in addition to Rana Plaza tragedy in 2013. In July 2021 there was a fire at a food processing factory14, and again at the Sitakunda container depot near Chittagong earlier this year.15 However, the government is pushing hard to introduce reforms to improve human rights protection and achieve “huge improvements in health and safety” Brown notes, all of which gives further encouragement to investors seeking opportunities aligned with the latest best practice in environmental, social and governance (ESG) factors.  Another issue is energy security. While Bangladesh has managed to meet its industrial demands, the country continues to be affected by the global power crisis arising from the Russia/Ukraine conflict, which, reports the Dhaka Tribune, has “prompted the government to reinstate continuous power outages”.16

The government is also introducing new rules limiting the production and licensing of alcohol. As Islamic country stringent rules surround the production and consumption of alcohol, with distinctions drawn for different cultures and religions. However, the change is aimed at accommodating Bangladesh’s growing number of foreign workers as well as tourists who can only consume alcohol in licensed bars or restaurants.

While foreign tourism to Bangladesh is growing steadily, domestic tourism has rocketed. In 2000 only 300,000 Bangladeshis holidayed within their own borders in 2000, but seven million did so in 2017. This was inevitable, given that average incomes have trebled or quadrupled in the past decade. Popular tourist destinations include the city of Cox’s Bazar, which has a 125km-long beach and in which the government plans to establish a special zone for foreign tourists. There has also been growing interest in adventure tourism and (ESG-friendly) environmental tourism, including outside Dhaka.

Digital Bangladesh

Dhaka’s traffic jams and the deficit of banks in rural villages have made mobile money extremely popular, helping to cut out unnecessary journeys for Dhaka residents and enable city-based workers to make remittances to family members in rural areas. In a country where more than 75% of the population has a mobile telephone, mobile money transactions, reported The Economist in March 202017, surged from US$27bn in 2016 to US$51bn in 2019. Of this figure, about 60% goes through BRAC Bank’s bKash, whose service has – just like ‘Googling’ – become a verb. bKash has 30 million customers, and is owned by a variety of investors, including a local bank, the World Bank, Alibaba, and the Bill & Melinda Gates Foundation. Such a growing mobile money market has attracted newcomers, such as Nagad, which has 60 million customers on paper due to a programme of automatic sign-up with a partner mobile network operator Robi and access to state post office branches. Such public-private partnerships tie-in with the government’s vision of a digital Bangladesh first set out in 2009. 18   

“The core commitment of Digital Bangladesh is to use digital tools to alleviate poverty and reduce corruption. Its main goal is to bring every home under the digital network. Many of the steps taken to build a digital Bangladesh by 2021 have already been implemented. The main goal of digital Bangladesh is to digitalise government services,” stated the government in 2021.19


“Bangladesh is a great example of the significant opportunity that we see for our platform in the region. With its fast-growing economy we enter this market to support its increasing participation in regional and global trade,” comments Deutsche Bank’s Alexander von zur Muehlen CEO for Asia Pacific. With its newly opened Dhaka representative office, the journey has begun.

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