While investing in Bangladesh may offer attractive returns for investors, it's crucial to keep in mind the possible financial hazards that come with factors such as inflation, unemployment, reserve depletion, and significant indebtedness incurred for large-scale infrastructure projects.
The Centre for Policy Dialogue and Bangladesh Institute of Development Studies, in collaboration with Transparency International Bangladesh, have highlighted the need for a more resilient regulatory framework to reduce corruption and expand business opportunities in Bangladesh's economy. The World Bank data indicators show that Bangladesh's economy has been growing at a steady pace of around 6 per cent per year, with the country's export-oriented industries, particularly the garment sector, energy, Infrastructure, information, and communication technology (ICT), pharmaceuticals, food processing industries leading the way.
According to data from the McKinsey Global Institute and the International Finance Corporation (IFC), Bangladesh has made remarkable strides in poverty reduction over the past ten years. This progress can be attributed to the country's investment in education, healthcare, infrastructure, and social safety net programmes. Furthermore, the IFC data indicates that Bangladesh has enhanced its business environment, making it more attractive for investors to conduct business. The country has also experienced a substantial increase in foreign exchange reserves, which provides a buffer against any external economic shocks.
According to data from Pew Research, Bangladesh has achieved remarkable advancements in gender equality, with women's participation in the labor force surging from 20 per cent in 2000 to 36 per cent in 2020. The China Global Investment Tracker reveals that China has been among the most significant investors in Bangladesh, with a particular emphasis on infrastructure ventures. Furthermore, the American Enterprise Institute has recommended unconventional approaches to investing in Bangladesh beyond conventional banking methods.
One speculative idea is investing in Bangladesh's burgeoning technology sector, which has been growing rapidly in recent years. Bangladesh has been investing in digital infrastructure, and the government has launched several initiatives to encourage the growth of the country's technology sector. Another speculative idea is investing in renewable energy projects, as Bangladesh has been actively promoting the use of renewable energy sources to meet its growing energy needs.
It is worth noting that investing on speculative ideas does carry some level of risk. It is essential for investors to conduct thorough research and due diligence before making any investment decisions. There are some suggestions for alternative ways to invest in Bangladesh that can help mitigate the risks associated with inflation and unemployment:
INVESTMENT IN EXPORT-ORIENTED INDUSTRIES: Bangladesh is known for its export-oriented industries, such as textiles and apparel, accounting for 9.3 per cent of the GDP in the fiscal year that ended in June 2022, according to Bloomberg. However, the growth of apparel shipments is anticipated to slow down to 24.4 per cent in 2023 from 27.6 per cent in the previous year, resulting in a revenue decrease of $1.5 billion. This is expected to have a considerable impact on the economy's expansion, with an estimated 0.8 percentage point reduction in GDP growth. Furthermore, the country faces tough competition from rivals like Vietnam, which could capture more market share. Additionally, the risk of cancellations of overseas retailers' existing orders due to power outages may exacerbate the situation. Yet, these industries have shown resilience in the face of economic downturns, and investing in these sectors can provide stable returns, even during times of economic uncertainty.
INVESTMENT IN AGRICULTURE AND FOOD PROCESSING: Investing in food processing companies or agricultural technologies can provide a steady source of income and reduce the risk associated with inflation and unemployment.
INVESTMENT IN ALTERNATIVE ENERGY: Bangladesh has a high dependence on fossil fuels, making it vulnerable to energy price fluctuations. Investing in renewable energy, such as solar, wind, or hydropower, can provide a hedge against energy price volatility, reduce the risk of reserve crisis, and contribute to a more sustainable future.
INVESTMENT IN INFRASTRUCTURE PROJECTS: While high debt for massive infrastructure can be a concern, there are opportunities to invest in specific infrastructure projects, such as energy, transportation, or telecommunications. These types of investments can provide stable returns while also contributing to the development of the country.
INVESTMENT IN THE STOCK MARKET: The Dhaka Stock Exchange (DSE) is the primary stock exchange in Bangladesh, and it has seen significant growth in recent years. Investing in stocks can provide investors with the opportunity to earn significant returns on their investment, and it can be a good way to diversify their portfolio.
Private equity and venture capital firms have been active in Bangladesh, providing funding to companies across various sectors. The Buy Now Pay Later (BNPL) payment industry in Bangladesh has seen strong growth over the past year, driven by the increasing popularity of ecommerce. Projections indicate that BNPL payments in Bangladesh will continue to grow at an annual rate of 23.1 per cent, reaching US$1,074.6 million by 2023. Furthermore, the BNPL Gross Merchandise Value is expected to rise from US$872.7 million in 2022 to $1,914.2 million by 2028. This report provides a thorough data-centric analysis of the BNPL industry, examining market opportunities and risks across a range of retail categories. It also offers insights into consumer behaviour and retail spending dynamics, providing valuable information for private equity and venture capital firms looking to invest in the sector.
Syndicate collapsing has been a major obstacle to investment potential and growth in Bangladesh, stifling competition, hindering innovation, and reducing productivity. To address these challenges, the Bangladesh government has taken measures to reduce syndicate activities, such as introducing new legislation and strengthening regulatory bodies. The Competition Commission of Bangladesh was established in 2016 to promote market competition and prevent anti-competitive behaviour. According to the Transparency International's Global Corruption Perception Index (CPI) 2022, Bangladesh is ranked as the 12th most corrupt country among 180 countries in the world, and second in South Asia. This highlights the urgent need to reduce corruption to attract more investments and unlock the full business potential of Bangladesh's economy. However, by continuing to tackle these issues, the government can create a more favourable investment climate, attract more foreign investment, and promote sustainable economic growth.
In conclusion, Bangladesh's economy has shown impressive resilience in recent years, making it an attractive destination for investors. While traditional banking may be the most popular investment option, there are several speculative ideas worth exploring. The growth of Bangladesh's technology sector and the promotion of renewable energy are just two areas that investors could consider. However, as with any investment, it is crucial to conduct thorough research and due diligence to make informed decisions.
Mohammad Mushfiqul Haque Mukit is Business Analyst and Researcher, Western Illinois University.