Bangladesh is on track of becoming a developing nation by 2026 and anticipating to be a developed nation by 2041. Its economy is regarded as one of the fastest growing in the world, and it has already cemented its reputation as the "next Asian Tiger." The nation's stable political and economic climate have helped it rank as the 41st largest economy in the world, and by 2035, it is expected to rise to the 25th spot.
Recently, PricewaterhouseCoopers (PwC) -- globally respected and one of the largest professional service network and accounting firms in the world -- surveyed 52 CEOs across various industries in Bangladesh to get a comprehensive picture of their business and economic outlook for the country.
The survey result revealed significant understanding regarding Bangladesh’s current status and future of business environment, as well as external linkage, especially with the great powers and development partners of Bangladesh. As a fast growing economy with a large consumer market, it is worth exploring the survey results and the issues that have been raised by the CEOs.
Regarding environment
All of them concurred on specific aspects and proclaimed that to thrive in the ever-changing business environment, there must be an insatiable desire for knowledge, inquisitiveness, adaptability, confidentiality, and a commitment to society and humanity. The CEOs also believe that they must adjust their strategies to accommodate the impact of technological progress, changes in contemporary world politics, and the presence of multiple generations in the workplace.
When they were asked if their present business models would remain relevant or not in the next decade, a clear distinction in the opinion was found. Half of them agreed and another half believed the legacy of the present system will be a strong determinant of the future of their business.
95% of the top executives in Bangladesh have already taken at least some steps to adopt the change (adaptation of AI and Just Transition) and captured value over the past five years. The key factor in this changing process will be government regulation, connection with the global market, and changing customer preference.
Existing obstacles and economic challenges
In Bangladesh, the regulatory environment has emerged as a formidable barrier to the achievement of objectives. The findings demonstrate a consensus, with 55% of respondents identifying the regulatory environment as a significant obstacle to their efforts to reinvent themselves.
The issue with supply chain, which 40% of respondents identified as a substantial obstacle, was additionally compounded by the escalation in fuel expenses, which led to heightened production and transportation expenditures.
We encountered a number of economic challenges during the fiscal year 2023, including significant inflation, a decline in foreign reserves, expensive fuel, a 15.76% decline in imports, a 6.7% decline in export revenue growth (compared to the government's target of 11.4%), and the volatility of dollar prices. A strong leadership from the political executives and cooperation from the bureaucrats is deemed necessary to tackle these obstacles.
The role of great powers
India has ascended to the top of the list of the six most significant countries in the survey this year, surpassing the importance of the US, China, and the UK. The CEOs in Bangladesh expect that the trading partnership with India will have a significant impact on revenue growth in the next 12 months.
These changes in responses suggest that the recent advancements in the bilateral trade and commerce relationships have influenced the business leaders’ assumptions. In September 2022, Bangladesh and India signed seven memorandums of understanding (MOUs). These agreements, which cover various areas such as water sharing and technology collaboration, indicate a more robust level of cooperation between the two countries.
Bangladesh and India have also implemented a dual currency debit card that uses the taka and rupee, aiming to reduce dependence on other intermediary currencies and encourage regional trade. Furthermore, ongoing discussions are taking place regarding a bilateral Comprehensive Economic Partnership Agreement (CEPA) between the two economies.
The United States is the second most economically crucial country for Bangladesh, serving as the single-largest export market for its products. Besides, the US remains the largest foreign direct investment (FDI) source for Bangladesh. Additionally, these two countries have entered multiple treaties to prevent double taxation and promote the development of niche markets.
The US policy of human rights and democracy and subsequent coercive diplomacy in Bangladesh prior to the 12th National Parliamentary Election invoked an uncertainty within the economy, as many feared for unilateral sanctions.
But the latest developments such as President Biden’s letter to Prime Minister Sheikh Hasina expressing his willingness to work together have seemingly reduced the fear. The continuous diplomatic communications also bear fruit as for analysts, the US policy in Bangladesh is changing as the US is looking toward a “new chapter” in bilateral relations.
China is also a major market for Bangladesh; especially for raw materials and for investments. Bangladesh imports approximately $8 billion worth of goods from China. Recently, China has exempted tariffs on 97% of Bangladesh's products.
Moreover, between 2016 and 2022, Chinese state-owned and private companies invested nearly $26bn in Bangladesh, contributing to the country’s infrastructural development that benefited the business sector greatly.
Noteworthy progress has also been achieved in the diplomatic ties between Bangladesh and the United Kingdom. The UK's implementation of the Developing Countries Trading Scheme (DCTS) in June 2023, which is a more open Generalized System of Preference (GSP) scheme, will benefit exporters from Bangladesh as they get ready to transition from the least developed country (LDC) status by 2026. The negotiations for a GSP+ Scheme after LDC graduation with the European Union (EU) is also going on to protect Bangladesh’s export to EU countries.
All of these countries are important for Bangladesh for ensuring its balanced growth and sustainability. Bangladesh needs to maintain a well-calibrated foreign diplomacy and cultivate friendly relations with not only these countries but also with neighbouring countries and global powers.
In the context of the Indo-Pacific Strategy (IPS) and growing geopolitical tension in the region, it will be a tough job for Bangladesh to maintain a three-way balance between China, India and the US. But the key will be to maintain the viability and continuing the neutrality in foreign policy.
Impact of Artificial Intelligence
While in the political arena, Artificial Intelligence (AI) is being subject to a debate of whether it is a threat to humanity or not is going on, CEOs in Bangladesh are convinced of the advantages of rapidly adopting generative AI and also detected some of its major disruptions.
Over the next 12 months, many of the CEOs (53%) anticipate that generative AI will enhance their capacity to establish rapport with stakeholders and change their preferences, while approximately 62% expect it to enhance the quality of their products or services. Approximately 70% of those surveyed expect that generative AI will lead to increased competition, necessitate changes to their business strategies, and demand fresh abilities from their workforce within the next three years.
However, the impact of generative AI on employment remains uncertain. A portion of the efficiency advantages are expected to be achieved through a decrease in the number of employees, particularly in the near future. Specifically, 26% of CEOs in Bangladesh anticipate reducing their workforce by at least 5% in 2024 because of generative AI.
In order to effectively address the future challenges posed by the AI and Fourth Industrial Revolution in Bangladesh, it is imperative that our education policy is redesigned to prioritize practical and skill-oriented learning. This approach should also ensure inclusivity, allowing all individuals to benefit from the education system. By doing so, we can build a robust and high-quality pool of human resources.
The government also needs to explore policy options to minimize the coming threats from the misuse of AI and maximize the benefit of it for the development of the country.
Maruf Hasan Rumi is a Lecturer of the Department of Public Administration, University of Dhaka.