Business in Bangladesh is robust with an energy and optimism that puts this nation at the forefront of global growth. The country could have easily been overshadowed by its neighbour to the northeast-China or its continental cousin to the west-India but in this region of economic powerhouses, Bangladesh stands tall, as it surges forward on its journey to capture a trillion-dollar prize.
With average annual gross domestic product (GDP) growth of 6.4 per cent between 2016-2021, this vibrant nation of 170 million-plus people has outpaced major Asian peers including Vietnam, India, Philippines, Thailand, and Indonesia. The country's growth rate was around two times that of fellow Lower-Middle-Income Countries (LMIC) nations, and significantly higher than the global average of 2.90 per cent.
Despite Covid-19, Bangladesh GDP grew by 3.4 per cent in 2020, demonstrating the resilience of the economy at a time of significant global economic disruption. The country spun an equally impressive growth story during the Global Financial Crisis, achieving 5.5 per cent annualised growth rate between 2007-2009 against a global average of 0.4 per cent.
Bangladesh's remarkable growth saw the nation progress from Low-Income to LMIC status in 2015 as classified by the World Bank. Despite graduating five years later to LMIC status versus India, the GDP per capita is already higher than its regional peer, and Bangladesh aims to become an Upper-Middle-Income Country by 2031. This rapid growth puts Bangladesh in touch of a trillion dollars by 2040 at an average growth rate of 5 per cent on average and earlier if the growth rate continues at the current rate.
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.
PILLARS OF AN EMERGING POWERHOUSE: Bangladesh's growth story is underpinned by some fundamental drivers - consumer optimism, a willingness to innovate into emerging economic sectors, the continued rise in middle and affluent consumers, an ambitious young workforce, and economic resilience.
Solid optimism. 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 around 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.
Rise in consumption. Bangladesh's GDP is heavily reliant on household consumption (69 per cent of 2021 GDP) for driving growth. Bangladesh is expected to be the fastest growing consumer market globally over the next decade according to a recent report by HSBC, emerging as the ninth-largest consumer market globally by 2030- overtaking established markets such as the UK and Germany, and surpassing high-growth peers Vietnam and Thailand. One major driver of rapidly growing consumer demand and greater spending is the surge in the middle- and affluent-class (MAC) which aligns with BCG's predictions over the last decade.
According to BCG's 2015 study, the MAC population was expected to grow from around 12 million in 2015 to around 19 million by 2020, and likely to reach 34 million by 2025, accounting for 17 per cent of the overall population.
Young, growing workforce. Bangladesh boasts a young workforce ready to create value in this high-growth landscape. The nation 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 (68.4 per cent) is of working age, with 114Mn working-age citizens ready to create value through employment
High economic resilience. 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 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 US$22 billion entering the country in 2021, doubling from around US$ 11 billion in 2010.
Digital momentum. Bangladesh's digital economy continues to gain momentum, buoyed by growing connectivity and improved digital consumer interaction.
Mobile cellular subscriptions almost doubled between 2012 and 2021, reaching around 177 million, while internet subscription grew from minimal users to about 70 per cent penetration in last 10 years. This is also providing a fertile environment for the digital economy, with the volume of digital financial more than doubling from 1.7 billion transactions in 2019 to an estimated 3.5 billion in 2022.
Digital transactions are expected to further accelerate with the launch of the interoperable digital transactions platform-Binimoy. This platform aims to increase convenience through interoperability, and drive further benefits through the impending launch of additional use cases including standardised QR for merchant payments. Binimoy is expected to revolutionise the digital transactions space in a move that echoes the impact of India's Unified Payments Interface (UPI), and Thailand's PromptPay. It aims to increase the rate of cashless transactions from 15 per cent to 50-60 per cent, and drive growth in access to financial services from 60 per cent to more than 90 per cent over the next 20 years. The platform sets the foundation to boost trust in the e-commerce sector, unlock access to credit through the provision of centralised credit scoring, reduce the cost of cash management, and improve transparency in financial transactions.
Government shaping the economy. The Bangladesh government is actively engaged in positively shaping the nation's economic outlook, with public spending having more than quadrupled over the last decade, from Tk 532 billion in 2012 to Tk 2,254 billion by 2022. Past government efforts have resulted in producing a strong base for the economy - by driving literacy rates beyond 70 per cent and electricity supply to more than 300 kWh per person. Key master plans such as the Smart Bangladesh ICT 2041 Masterplan and Perspective Plan of Bangladesh 2021-2041 also in place to shape future government activities.
Fast growing private sector. 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 country is widely recognised 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 last decade has also seen encouraging shoots of growth for the Bangladesh startup ecosystem, with the emergence of over 1,200 active startups in the country.
These emerging companies focus on a wide range of industries, including financial technology (FinTech), logistics and mobility, and e-commerce. Bangladeshi startup bKash became the nation's first unicorn, with SoftBank acquiring 20 per cent stake in November 2021, and is now a leading mobile financial services (MFS) player in the world. 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 $700Mn and now the government is also taking active role to promote start-ups through ICT Division's flagship venture capital fund Startup Bangladesh.
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.
Scaled up and thriving gig economy. With approximately 650,000 freelancers, Bangladesh is the world's second-largest supplier of online labour. 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.
Zarif Munir is a Managing Director and Senior Partner in the Kuala Lumpur office of Boston Consulting Group (BCG). Saibal Chakraborty is a Managing Director and Partner in the New Delhi office of BCG. Tausif Ishtiaque is a Partner in the Kuala Lumpur office of BCG. The piece is excerpted from the Boston Consulting Group (BCG)'s study titled 'The Trillion-Dollar Prize Local Champions Leading the Way'.