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Bangladesh's economy has seen remarkable growth over recent decades, largely driven by the ready-made garment (RMG) industry. This sector alone accounts for well over 80 per cent of the country's export earnings, employs millions, and has established Bangladesh as a global manufacturing hub.
However, Bangladesh's heavy reliance on RMG poses several risks, including fluctuations in global demand, increased competition from other low-cost producers, and pressure to improve labour conditions and environmental standards. For sustained growth and resilience, Bangladesh must look beyond RMG and explore diversification strategies that open new export and economic expansion avenues.
The RMG sector has undeniably played a central role in Bangladesh's development. It has provided significant employment opportunities, especially for women, lifted millions of families out of poverty, and contributed to improved social indicators across the country. However, the overwhelming reliance on a single industry has also created vulnerabilities. Bangladesh's economy remains exposed to global economic shifts, as seen during the COVID-19 pandemic when demand for apparel plummeted, and many factories faced closures.
Additionally, increased automation and technological advancements in garment manufacturing pose challenges as developed countries and competitors like Vietnam and Cambodia continue to invest in robotics, artificial intelligence, and more efficient manufacturing technologies. These advancements could diminish Bangladesh's cost advantage in the coming years, pushing the country to rethink its economic strategy.
To reduce its dependence on the RMG industry, Bangladesh must diversify its export basket and explore other sectors that can drive future economic growth. One potential area is the information technology and digital services sector, which holds considerable promise.
The IT sector, including software development, business process outsourcing (BPO), and freelancing has already demonstrated its growth potential, with annual revenue increasing steadily. Expanding and investing in IT and digital services could create high-paying jobs, bring in valuable foreign exchange, and reduce the economy's vulnerability to fluctuations in global manufacturing demand.
Another promising sector for Bangladesh is agriculture and agro-processing. Although agriculture has historically been one of the country's primary industries, it has yet to fully exploit its potential in the international market. Agricultural products like jute, fish, vegetables, and spices are in substantial demand globally. Bangladesh can expand its export base in this sector by investing in modern farming techniques, ensuring product quality, and promoting agro-processing industries.
Additionally, increased focus on organic and sustainable farming could attract new markets, especially in Europe and North America, where consumers are increasingly drawn to sustainable and ethically sourced products. Developing the agro-processing industry would diversify exports, create jobs, especially in rural areas, and enhance food security.
The pharmaceutical industry in Bangladesh is another sector that shows significant potential. Bangladesh's well-established pharmaceutical industry already meets most of the domestic drug demand and has begun exporting to various countries. With the impending patent expirations on a range of drugs globally, Bangladeshi pharmaceutical companies can capture a larger share of the global market by producing generic medicines.
Investments in research and development, quality control, and regulatory compliance are essential to seize this opportunity. If developed effectively, the pharmaceutical sector could become a significant economic growth and export revenue driver, further decreasing reliance on RMG.
The electronics and light engineering sectors could also be crucial in diversifying Bangladesh's export base. The local demand for electronics, such as smartphones, televisions, and home appliances, has surged in recent years, leading to the establishment of several domestic electronics manufacturers. With sufficient investment, these companies could also target export markets. Bangladesh could emerge as a regional electronics and light engineering player by focusing on quality improvement, branding, and cost competitiveness. Furthermore, establishing a robust supply chain within the country would reduce dependency on imported raw materials and support domestic industries.
Bangladesh's geographic location also presents opportunities to establish itself as a regional trade and logistics hub. Positioned between India and China, with access to the Bay of Bengal, Bangladesh is ideally situated for trade with South and Southeast Asia.
Investing in ports, airports, and road infrastructure could turn Bangladesh into a critical logistics and transhipment centre, facilitating regional and global trade. Enhanced trade connectivity would promote export diversification, support local businesses, and foster regional economic integration.
Bangladesh will need a strategic policy shift to achieve export diversification and sustainable growth. Government support in the form of incentives, subsidies, and regulatory reforms will be crucial to encouraging investment in new sectors. Educational reforms that align with the needs of emerging industries are also essential. This will ensure a skilled workforce that adapts to and supports a diversified economy. Building strong public-private partnerships, encouraging foreign direct investment, and streamlining bureaucratic processes will be necessary to create a conducive environment for new industries.
Environmental considerations must also guide future economic development. Industries like RMG have had significant ecological impacts, including pollution and high water usage.
Moving forward, Bangladesh should prioritise sustainable practices and invest in green technologies to reduce environmental damage and enhance the appeal of its products in environmentally conscious markets. Integrating sustainability into the diversification strategy will protect natural resources and align Bangladesh's economy with global trends toward sustainable development.
This transition will require economic investment and social and environmental commitments that reflect a sustainable and inclusive growth model. A diversified export sector will reduce the country's exposure to global market shifts, create new employment opportunities, and improve citizens' overall quality of life. With the right approach, Bangladesh can look forward to a future not defined by one industry but recognised for its innovation, sustainability, and economic resilience.
Dr Matiur Rahman is a researcher and development worker.