How Bangladesh is achieving export diversification
At only 52 years young, Bangladesh has come a long way in a short time. As one of the world’s fastest growing economies over the past decade and set to become the world’s 24th largest economy within the next 12 years, Bangladesh’s future looks bright.
As the South Asian economy looks set to cast off its “developing” status to become officially “developed” by 2041, its huge potential for growth is fuelled by the successful diversification of its export economy.
It’s no secret that economic diversification is tremendously important for a country’s growth and resilience to withstand the vagaries of the global headwinds. Bangladesh is a country that has proven its ability to move from one predominantly reliant on agriculture to one dependent on the ready-made garment (RMG) industry to one that excels in a large range of major exports around the world worth nearly US$60 billion, ranging from leather and footwear, to plastics, light engineering, pharmaceuticals and medical equipment, agriculture and agri-businesses, jute, leather, electronics, IT, automobiles, shipbuilding and ceramics.
Today, Bangladesh is the second largest RMG exporter in the world, but it is also so much more. Leather goods are the second largest export earner for the country after RMG and the sector has received considerable investment in recent years due to its comparative labour source. Bangladesh accounts for 3% of the global leather and products market and almost 60% of its annual output is exported.
The country is also the third largest producer of rice and vegetables and the fourth largest producer of freshwater fish. It’s also becoming a powerhouse in pharmaceutical exports, now exporting drugs to about 160 countries after fulfilling nearly 98% of local demand. It has even become a major player in the bicycle making industry, with the European Union buying about 18 million bicycles annually from Bangladesh, according to Eurostat.
Plastics is another major industrial sector making a significant contribution to the economy, with a market size of US$2.9 billion, and 20% year-on-year growth between 2017-2018, according to recent figures. There are around 5,000 plastics enterprises employing approximately 1.2 million people, producing a range of products for domestic and export consumption. Overall, the export trajectory in general is on the rise. In January 2024, exports hit an all-time high of US$5.7 billion, up 11% year-on-year.
Diversification for growth
Diversification has paid off for ULKASEMI, one of Bangladesh’s top semiconductor companies. Semiconductors serve as the central processing units of electronic devices, from microwaves and mobile phones to drones and automobiles. Founded in 2007 and headquartered in Cupertino, Silicon Valley, ULKASEMI now has a team of more than 350 engineers around the globe with operations in Dhaka, Bangladesh among others.
“We have a global workforce of highly skilled professionals equipped with the latest technological knowledge. So, the company's expansive growth not only signifies corporate prosperity but serves as a pivotal driver for fostering export diversification. With a specialised focus on cutting-edge technology, ULKASEMI plays a key role in aiding clients worldwide in the development of next-generation products, ranging from mobile devices to intricate technological systems,“ says ULKASEMI chief executive and president Mohammed Enayetur Rahman.
“This strategic emphasis on diversification assumes critical importance for Bangladesh's economic advancement, enhancing the nation's export portfolio and positioning it as a global player in high-tech industries,” he adds.
A digital success story
Bangladesh’s success as an exporter is rooted in its thriving digital infrastructure that is propelling a whole new generation of small medium businesses into existence and profitability. According to the Huawei Global Connectivity Index 2019, Bangladesh is one of the four fastest growing digital economies, and is already the ninth highest internet user in the world.
Bangladesh has prioritised digital infrastructure transformation, with local grants for hardware, software and training on the municipal web portal to improve the ability for remote working and moving from paper to online records.
Power of investment
The extraordinary growth in several of its sectors in recent years has been made possible because of strong private sector improvement, partly thanks to the spread of digitalisation, domestic income growth and increased household income.
Significant foreign investment has entered the country’s telecommunications industry, attracted by a skilled workforce competent in information and communication technology. Over the past few years, China has heavily invested in Bangladesh’s economy as its strategic location provides an ease of trade accessibility via the Indian Ocean.
The Centre for Economics and Business Research (CEBR) showed in its annual World Economic League Table report that despite the coronavirus pandemic, the country’s economy expanded by 3.5% in 2020, a rare achievement compared to international standards. This was due to strong remittance inflows and rebound of exports.
Home improvements
Bangladesh’s infrastructure is also set for major enhancements, as it sets up new airports, long bridges (such as the Padma Bridge, which is adding 1.2% to GDP), nuclear power plants (such as the Rooppur Nuclear Powerplant with 2400 MW capacity and other plants will help ensure 40,000 MW of electricity generation by 2030), and deep-sea ports (including the forthcoming Matarbari Deep Sea Port, which is expected to boost GDP by 1.14%).
Most importantly, Bangladesh’s young and healthy population bodes well for continuing diversity of its sectors. It has a population of more than 171 million, about 28% of which is between the ages of 15 and 29. It’s not only young and dynamic but, thanks to a much-improved healthcare and pharma industry, its people are staying healthier and living longer lives, with reduced infectious disease, and infant and maternal mortality, according to the World Bank.
Bangladesh’s healthcare system is growing at a CAGR of 10.3% since 2010, while the size of the healthcare industry has doubled in the past eight years.
This all contributes to a healthier domestic economy. Its nascent home-grown consumer market is seeing growth; household wealth is on the rise, with per capita national income reaching US$2,824 last year, up from US$860 in 2011.
Clearly, Bangladesh has achieved huge economic development since it gained independence in 1971, partly thanks to one key decision: diversification.
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