Securing Bangladesh's economic future

Over the years of teaching in Bangladeshi universities, one alarming pattern kept repeating. A significant number of students pursuing their bachelor's degree or who are just weeks away from graduating do not have the basic skills required for the corporate world, namely, preparing a budget or understanding what an income statement is.

This wasn't just a classroom observation. Industry professionals echoed the same concern that fresh graduates lacked practical knowledge, fundamental skills, and workplace readiness.

Such complaints from the professionals reflect systemic challenges that threaten our competitive future. If we are to achieve sustainable growth over the next decade, diversify our economy, and uplift living standards, we must pivot strategically.

As we are going to celebrate the first anniversary of the youth-led July revolution, which sowed the seeds of reformations, it's time we addressed three critical areas: breaking free from export over-dependence, investing seriously in human capital, and maintaining the policy stability that economic transformation demands.

It would not be overstating things to say that Bangladesh's economy has ridden on the wave of prosperity of ready-made garments (RMG) for years, with the sector accounting for 82-85 per cent of our total exports. 

Although this concentration made us fortunate, it created dangerous vulnerability as well. The recent reciprocal tariffs imposed by the US only further validate the fact that excessive dependence on this particular sector has put us in a difficult position, with a looming dent in the country's overall economy. 

Although the United States has slashed its tariff rate to 20 per cent, a significant reduction from the previous 35 per cent, risks persist for exporters. This tariff level remains substantially higher than rates enjoyed by competitors with preferential trade agreements. Without diversifying export markets and improving competitiveness, growth in Bangladesh's exports might still face hurdles.

Taking all these factors into consideration, diversifying our export basket and taking effective measures accordingly is an urgent priority and probably the most feasible option.

Despite having huge export prospects, several sectors are largely untapped or unexplored. Our leathers, which currently have less than 0.5 per cent global market penetration, have undiscovered potential as Bangladesh is one of the major markets in South Asia when it comes to sourcing raw leather. The pharma industry, which has witnessed 4 per cent YoY export growth in FY 2024-25, promises to grow as regional demand rises and our manufacturing maturity.

Most promising is the Information and Technology (IT) sector. The global semiconductor market alone presents us with a trillion-dollar opportunity. Even capturing 2-5 per cent of this market would revolutionise our export earnings and technological status. Software programming, artificial intelligence, and digital services provide pathways to high-value exports that rely on brainpower, not just manufacturing capacity.

Our conventional industries must not be overlooked either. Our fisheries and agro-processing sector can be developed and upgraded with proper investment and strategic priority. The idea is to diversify our economic risk across different sectors so that the ups and downs of the global market of any one industry cannot bring our economy to its knees.

Shaping human capital

Bangladesh appears to have turned a blind eye to the demographic dividend it currently holds. Despite having a large youth population, a significant portion of our workforce remains unskilled or under-skilled. This missed opportunity not only limits individual potential but also restricts national growth prospects.

To change the scenario, we should prepare our youth to compete and contribute to the global workforce, considering the limited opportunities here and the growing needs for a skilled workforce globally, instead of focusing solely on the domestic job market.

Our neighbouring nations, namely Pakistan, India, and Sri Lanka, have successfully enabled millions of their citizens to establish careers in Western countries, particularly the United States and the United Kingdom, by equipping them with technological skills. Bangladesh must follow this trend through systematic skill development programs.

To achieve this, government subsidies for vocational education and technical training are essential. The emphasis should be on a modernised education system that aligns with market needs and strategic policymaker support. Countries like South Korea and Taiwan succeeded by coordinating education, targeted policies, and industry development. Bangladesh has similar opportunities in textiles technology, pharmaceuticals, and IT services, but requires an integrated approach where education, policy, and industry work hand-in-hand to create a competitive advantage.

This shift in focus must also be reflected in our migration strategy. At present, we are too reliant on unskilled labour migration to the Middle East and Southeast Asia. This path often compels families to exhaust their life savings for a limited economic return. In contrast, skilled workers earn significantly more, have higher savings rates, and remit substantially larger amounts of foreign exchange. By prioritising the export of skilled professionals, Bangladesh could add a substantial amount to its annual remittance earnings.

Whereas economic development is crucial, political stability forms the foundation for sustained growth. Policy stability attracts both foreign and domestic investment. The experience of the mobile manufacturing industry is very telling in this context. Tax concessions in the initial phases and the facilities of Export Processing Zones attracted investments, but subsequent policy flip-flops generated uncertainty, which was not in tune with long-term thinking.

Exchange rate volatility in the recent past is the cost of political unrest. Devaluation of the taka from 85-90 to over 135 per US dollar, then stabilising around 120, is a consequence of investor panic and capital flight. Foreign investors require stable frameworks for their long-term funds.

Stable government ensures policy stability, particularly in exchange rate management and monetary policy. To preserve the current regime of crawling pegs or to implement the system of freely floating rates, policy coherence strengthens investor confidence and allows long-term economic growth.

We are at a crossroads in 2025 from which the direction of sustainable growth can turn in either direction. The next decade can be the most decisive moment as it will determine whether we can just continue with a mono-export model or converge towards a resilient, multi-industry economy. The transformation entails collective pushes in education, industrialisation, skill development, and policy continuity.

As educators, we must shift the way we teach and what we teach students. As policymakers, the challenge is to remain consistent, open, and aligned with overall growth. And as our country, we must have faith in investing in human beings, and not just in buildings, because development begins there.

Let it be a decade of action, not just ambition.

Sayeed Ibrahim Ahmed is an experienced investment analyst, currently an Assistant Professor of Finance at American International University Bangladesh (AIUB).

siahmed@aiub.edu