Bangladesh’s commerce and industry in the twenty-first century

Bangladesh’s commerce and industry in the twenty-first century

The economy of Bangladesh has emerged as a formidable force in the twenty-first century. It is teeming with laborers, cultivators, and business owners who are resolved to achieve great things. The citizens of Bangladesh constitute the nation’s most valuable asset. Considering that fifty percent of the population is under the age of thirty, there is an obvious demographic dividend to be capitalized upon.

Bangladesh has undergone a significant transformation since the 1970s, when its population was regarded as a liability following its independence. Bangladesh, which had a population of 70 million, had experienced a perennial food deficit of 1 million metric tons, which compelled it to depend on food aid from countries with an abundance of food. Bangladesh has achieved a state of food self-sufficiency after fifty years, after producing 40 million metric tons of food.

In 2015, Bangladesh’s economy surpassed the per capita income threshold set by the World Bank, thereby attaining the status of a lower-middle-income country. The country has been deemed to have met all the requirements for graduation from the status of a least developed country (LDC) as classified by the United Nations Committee for Development Policy [1]. Bangladesh is scheduled to graduate to developing country status in 2026, as per the UN’s definition.

Mahmud Hossain Opu captured the image of an international migrant laborer verifying his travel document at the airport entrance in Dhaka, Bangladesh, on September 26, 2021.
In the twenty-first century, Bangladesh

The path Bangladesh has taken economically has garnered the praise of numerous preeminent development economists. A headline from the Wall Street Journal in 2010 stated, “Bangladesh, No Longer a “Basket Case.” This reclassification prompted international investment financiers such as Goldman Sachs and JP Morgan to consider Bangladesh as an uncharted investment territory.

Bangladesh quickly surpassed China as the second largest exporter of apparel in the world, an unprecedented achievement for an economy that, unlike its neighboring countries, did not cultivate cotton or have a substantial textile industry to begin with. Prominent apparel retailers in the European Union and North America had already identified Bangladesh as their primary procurement destination for apparel for the subsequent five to ten years by 2023. Migrant laborers from Bangladesh, meanwhile, are in great demand throughout the Middle East and beyond. Another substantial source of foreign exchange revenues.

An increase of a few percentage points in female labor force participation over the next decade may contribute to the expansion of Bangladesh’s economy.
Amartya Sen, an economist specialising in development, has praised Bangladesh’s human development advancements, which significantly outpace those of its South Asian counterparts, such as India. Social indicators including life expectancy, maternal mortality, fertility, and female labor force participation have all experienced significant and swift progress. Nonetheless, at 40%, female labor force participation remains modest.

The potential increase in female labor force participation over the next decade may contribute to Bangladesh’s economic development by a few percentage points. The expansion is presently being bolstered by the enormous 6.4-kilometer Padma Bridge mega-infrastructure, which Bangladesh constructed using its own funds subsequent to the withdrawal of multilateral assistance from the World Bank and the Asian Development Bank. In contrast to numerous postcolonial nations, Bangladesh has made strides while maintaining a minimal degree of democratic continuity and relegating the army to its barracks.

Accomplishing the headwinds

After more than ten years of macroeconomic stability, the Bangladeshi economy has started to demonstrate signs of robust development. In this context, effective leadership has been indispensable. Even more so for an economy on the verge of “takeoff,” effective leadership is critical. With profound poverty reduction, it is evident that Sheikh Hasina’s administration has successfully guided the economy toward expansion when viewed in the long run.

Although agriculture has contributed to rural employment and food security, commerce and industry have played a substantial role in the development of Bangladesh. This has become increasingly evident in light of the nation’s emergence as a leading economy in Asia. Without reservation, development economists assert that Bangladesh has transitioned from a “development test case” to a “development paragon” [2].

The Bangladeshi economy, similar to numerous economies across the globe, encountered a severe sustainability challenge in 2022. Bangladesh managed to circumvent the debt and balance of payments crises that befell numerous developing economies, thereby averting macroeconomic turmoil. In summary, the economy of Bangladesh encountered obstacles but managed to persevere.

This was the consequence of persistent macroeconomic management spanning thirty years. Due to its solid foundation, the economy was resilient in the face of the disruptions caused by the Russia–Ukraine conflict that broke out in 2022. Prior to this, the economy’s resilience had been examined in the form of the COVID-19 pandemic in 2020 and the worldwide financial crisis of 2007.

Development and commerce interdependence

Trade is a fundamental catalyst for progress. Throughout history, it has proven to be an effective tool in the struggle against destitution. Trade has been an indispensable means of sustenance for nations and communities across the annals of time. Presently, international commerce is a revenue-generating and employment-producing force.

Bangladesh is a developing country that has overcome the challenges posed by limited resources. Notwithstanding the enormous demographic burden of 170 million in 2023, it has effectively expedited expansion through the maintenance of macroeconomic stability. Trade has been an integral component of Bangladesh’s development since 2010. Long-term policies (the long “perspective plans” for 2021 and 2041) and mid-term national policies (the three five-year plans from 2009) have unequivocally endorsed trade- and export-driven development.

Open trade with the global economy promotes economic expansion and poverty reduction, according to research. Bangladesh’s economy has been predicated on a trade-driven approach since the latter part of the 1990s. Bangladesh underwent a significant turn of events during the 1990s when it shifted its trade approach from import substitution to export promotion. It was dubbed a “globalizer” by the World Bank in the context of developing economies. The economy of Bangladesh benefited from this regime change. This trading strategy has been vigorously maintained by the current Hasina administration.

The Korean entertainment industry is a prosperous export sector for services. “World of the Married” is a highly regarded Korean television program. The series’ ‘Gason station’ was shot in Gangneung train station, Republic of Korea, on October 26, 2019 | Image courtesy of Pavel Dudek.
The open commerce triumphed

Trade policies can be classified into two distinct types: those that prioritize exports and those that aim to import substitutes. This classification can be defined by the markets under consideration: the domestic market for the former category and the global market for the latter category. According to research, policies that substitute imports have no positive impact on industrialization or growth.

In the 1960s and 1970s, the extraordinarily prosperous industrialization of East Asian economies established a paradigm shift for growth driven by exports. Twenty years later, Bangladesh implemented a policy shift in its trade approach, adopting a focus on exports. East Asia’s progress had served as a model for other emerging economies. Since 2010, Bangladeshi policymakers have implemented a trade-driven development strategy that has resulted in substantial economic expansion. Presenting itself to the world is the Bangladesh method, the nation’s own export-driven model.

Since 2010, Bangladeshi policymakers have implemented a trade-driven development strategy that has resulted in substantial economic expansion.
Clothing items have dominated Bangladesh’s export achievements. However, this has been a significant paradigm shift for an economy that was heavily dependent on the exportation of raw materials like jute, tea, and crustaceans during the 1970s. Bangladesh has experienced the positive outcomes of global trade by establishing a manufacturing export sector that places a densely populated developing economy on the global stage.

The enduring philosophy of ‘comparative advantage’ as elucidated by classical economists such as David Ricardo is substantiated by the textile export success of Bangladesh. As garment manufacturing is a labor-intensive industry, Bangladesh’s ample labor force was an ideal complement. It allowed the nation to manufacture and compete internationally. Equal trade conditions on the international market and Bangladesh’s trade policies were also significant.

A liberalized export-driven growth regime has firmly established itself within the policy sphere of Bangladesh. The momentum generated by the reforms that were initiated in the 1990s was adequate to stimulate manufacturing, employment creation, and poverty reduction. Presently, this momentum remains constant. The decade-over-decade average growth rate of the gross domestic product (GDP) has been consistent upward. In the 1990s, the average rate of growth was 4.8%; by 2010, it had risen to 7.2% from 5.9% in the 2000s. In contrast, the poverty rate experienced a significant reduction of two-thirds, falling from 57% in 1990 to 20% in 2019. This instance exemplifies inclusive growth to the letter.

The reform agenda for commerce

Tariff reforms will be of the utmost importance to Bangladesh’s trade policy. Can the economy attain its long-term objectives in the absence of a tariff structure modernization? The negative response is the case. Policymakers in Bangladesh recognise that the existing tariff regime poses an obstacle to the aim of diversifying exports, a critical aspect of the country’s development agenda. In order to implement this reform, a task force tasked with developing a modernized tariff policy has been formed.

Bangladesh is capable of experiencing development rates in excess of 7%. In order to optimize the benefits presented by the worldwide market, it is imperative to implement assertive trade reforms, similar to those observed in the economies of East Asia. By implementing these measures, Bangladesh can bolster its reputation as a “resilient economy” and allay the concerns of geopolitical skeptics.

Numerous factors warrant celebration. In Bangladesh, trade-driven expansion has demonstrated a mutually reinforcing correlation. In 2021–2022, total trade, imports, and exports treble in comparison to 1999–2000. Trade has experienced an average annual growth rate of 12%. The successful performance of Bangladesh in the 2010s was the result of a policy that encouraged private enterprise rather than interfering with it.

The future of commerce and the expansion of services

The process of global commerce is dematerializing. This consequently indicates that trade in services has increased steadily alongside trade in commodities. According to recent data released by reputable international organizations such as the Organisation for Economic Co-operation and Development and the World Trade Organisation (WTO), the proportion of services in worldwide trade had decreased to approximately 50% by 2009.

In order to place Bangladesh’s services exports into context, it is vital to recognise the substantial influx of remittances sent by migrant labourers. Remittances rank second in terms of export earnings, following merchandise products. Remittance inflows contribute to foreign exchange inflows that are indistinguishable from earnings generated from the exportation of products, particularly clothing. Bangladesh is also a major player in the international commerce of services, with remittances contributing up to 6% of GDP.

Analysts predict that in the future, industries driven by services will predominate, while companies that prioritize sustainability will prosper. In order to capitalize on opportunities, policy attention must be directed immediately, as trade barriers in services will progressively diminish. The key to Bangladesh’s future export competitiveness is the development of service industries of international caliber.

An Examination of Globalization

In its journey towards shedding the label of least developed country (LDC), Bangladesh must exercise caution regarding specific World Trade Organization (WTO) regulations that have previously been disregarded. Concerns pertaining to intellectual property and subsidies will inevitably impact all economies.

In order to qualify for membership in regional trading blocs such as the Regional Comprehensive Economic Partnership Agreement, Bangladesh must further demonstrate adherence to its rigorous discipline. In general, it is imperative that economic institutions in Bangladesh make the necessary preparations to function in a global trading environment that is more regulated and competitive.

The South Korean conglomerate LG performed K-pop music at the IFA trade exhibition in Germany on August 31, 2011 (photo courtesy of LG).
Numerous analysts believe that tensions between the United States and China and the 2020 COVID-19 pandemic will contribute to a decline in globalization. Upon closer inspection, however, global integration appears to be here to stay. The world will continue to be interconnected through the exchange of products, services, information, and concepts. Globalization might require a reconfiguration. Bangladesh is confronted with the task of recognizing potential prospects within this dynamic international landscape.

Progress by means of industrialization

Since the 1960s, industrialization has been regarded as a mechanism to facilitate the progress of economies that are comparatively less developed. Diverse policy orientations have been necessary along the way to industrialization, with varying degrees of success. Industrialization, in conjunction with commerce, is an integral component of Bangladesh’s economic narrative.

A remarkable industrial performance was observed in Bangladesh throughout the 2010s. It was propelled by the dynamic apparel trade, which produced unprecedented results. Agricultural growth rates averaged 3% for the majority of the decade, whereas industry, especially manufacturing, propelled GDP growth rates to 6–7%. The sector’s contribution to the economy grew from 25% in 1999–2000 to 37% in 2021–2022, bringing it closer to the policy objective of 40% by 2041.

Industrial strategies and broader development policies are intricately intertwined in developing economies. Development necessitates a shift in focus from agriculture to industry, with an increasing proportion of manufacturing within the industrial sector. The news is extremely positive for Bangladesh. The structural transformation of the Bangladeshi economy has adhered to this prescription for more than ten years.

The key to Bangladesh’s future prosperity is an external focus. This will necessitate the alignment of Bangladesh’s industrial policies with worldwide developments. Specifically, Bangladeshi policymakers will need to acknowledge that the nation’s competitive advantage, which has been predicated on inexpensive labor, will be imperiled by technologies of the twenty-first century.

Bangladesh’s Perspective Plan 2041 delineates its long-term policies, capitalizing on the worldwide pattern, to establish a high-income, developed economy by the 2040s. The transformation envisioned by the 20-year plan is among the most rapid in the history of developing economies.

Beyond inexpensive labor

As the twenty-first century progresses, Bangladeshi entrepreneurs will be presented with extraordinary prospects to participate in international trade. Strict competition will accompanies the opportunities. Whether or not Bangladesh integrates its economy effectively with the global economy will determine the rate of industrialization.

Bangladesh can draw profound insights from this. Permanent assurance of the competitive advantage conferred by low-cost labor is unattainable. In the global arena of the future, competitive advantage will be a dynamic concept rather than a static one. Karl Schwab, the progenitor of the World Economic Forum, asserts that the digital age will usher in an era of transformation “unparalleled in human history.” Bangladeshi enterprises operating in the export sector should acknowledge that unwavering innovation is what sustains competitive advantage.

On June 28, 2007, an employee of Toyota’s Tahara facility in Toyohashi city, Japan, puts together a high-end Lexus engine. This image was captured by Robert Gilhooly.
Consider the case of South Korea, which within a matter of years surpassed Japan in the production of televisions and electronic goods. Brazil performed similarly to Italy in leather footwear. This implies that Bangladesh’s present preeminence in garment exports can solely be maintained through unwavering investment and innovation, followed by the expansion of this advantage to encompass a broader range of products. Prioritize a harmonious public–private effort in order to guarantee competitiveness by:

• Infrastructure constraint alleviation;
• Obtaining substantial financial support for social and physical infrastructure;
• Improving the overall caliber of the personnel;
• Facilitating innovation through research and development expenditures;
• Cost reduction in the conduct of business;
• Protecting against climate change.
• Aims of industrial policy

The primary objectives of industrial policy in Bangladesh are industrial development that substitutes imports and industrialization geared toward exports. This necessitates that the nation’s industrial policy and trade policy be coordinated. A conflict arises in the articulation of incentives between import substitution and export promotion, the two branches of trade policy that comprise the two-track industrialization policy.

Practically speaking, Bangladesh’s industrial policy aims to accomplish a number of goals, including the promotion of technological advancements, the mitigation of regional disparities, and the establishment of jobs and income inequality.

By implementing structural transformation, Bangladesh will attain its industrial policy objectives, which entail increasing the industry’s contribution to GDP to 40% by 2030. Thus, the majority of the labor force currently employed in agriculture and informal services will be absorbed. Furthermore, for Bangladesh to remain competitive in the manufacturing sector, it should provide performance-based assistance to nascent industries within specified timeframes. Ultimately, the industry policy ought to foster effective strategic collaboration between corporate entities and governmental entities.

In order to align with the industrialization strategy, it will be imperative for the trade policy to prioritize a robust export performance and a competitive manufacturing sector. The implementation of a strategic approach will capitalize on the extensive global market by increasing trade openness. Renewable expansion is exclusively attainable via strong export performance.

The predominant sector for employment generation in Bangladesh during the forthcoming quarter-century will be diverse manufacturing industries that operate on a global scale. These are the corporations that will expand their market share in developed economies while penetrating emerging markets.

The predominant sector for employment generation in Bangladesh during the forthcoming quarter-century will be diverse manufacturing industries that operate on a global scale.

Bangladesh in the century of Asia

Prominent economic historians have designated the twentieth century as the American century and the nineteenth century as the British century. Presently, prominent analysts anticipate that the twenty-first century will be characterized as the Asian century, owing to the rapid economic expansion of Asian countries including China, Japan, India, South Korea, Indonesia, Vietnam, and Bangladesh. Asia is projected to accommodate over half of the global economy and three of the five major economies by 2050. Bangladesh is positioned to emerge as a formidable participant in the current Asian century.

Bangladesh celebrated its independence jubilee in 2021, and there are numerous reasons for festivity. Bangladesh, upon its establishment in 1971, was arguably the cheapest nation on the planet. As predicted by international analysts, the situation appeared desperate. Bangladesh, which had a per capita income of less than $100, was positioned in the same category as countries including Chad, Rwanda, Burundi, and Nepal. Nonetheless, as of today, its economy has surpassed the USD 2,500 per capita threshold and stands at approximately USD 450 billion, ranking it among the top 40 economies globally.

Bangladesh is anticipated to surpass the United Kingdom and become the ninth largest consumer market globally by 2030, per HSBC Global. The country’s economic policies have facilitated growth momentum and poverty reduction, as is now evident.

Bangladesh, now over the age of fifty, has established a dignified standing among nations and is no longer deserving of derision. Its economic development has not been “paradoxical” despite its weak administration. It is the outcome of a determined and coordinated endeavor.