For a more resilient, inclusive and sustainable growth, Bangladesh will need to diversify its export basket, the IFC says
Bangladesh needs to embark on a new round of reforms to strengthen and modernize the private sector for unleashing the country’s potential to drive diversified, export-led growth and create jobs, according to a new World Bank Group report.
The Bangladesh Country Private Sector Diagnostic (CPSD) report, prepared by the International Finance Corporation (IFC) and the World Bank, says while Bangladesh has been one of the biggest development success stories in recent decades, it is now time to switch gears to meet ambitions to transform into an upper middle-income country in the next decade.
“Bangladesh had a positive GDP growth rate last year despite the adverse impact of the Covid-19 pandemic and it was the only country in South Asia which did not experience a recession,” said Salman F Rahman, Private Sector Industry and Investment adviser to the prime minister.
“We have prepared the Eighth Five Year Plan keeping all the challenges of the COVID-19 pandemic in mind,” he said, adding: “The CPSD recommendations are well aligned with the priorities of the government’s Eighth Five Year plan for setting a trajectory towards a prosperous Bangladesh by 2041.”
The pandemic has hit Bangladesh hard and as the country recovers from Covid-19, the need for reforms will become even more compelling, said Alfonso Garcia Mora, IFC’s Vice President Asia and Pacific.
Finding new sources of income and growth will be an urgent priority, he added.
“The private sector, which already accounts for more than 70% of all investment in Bangladesh, supported by a strong financial sector, will need to play an important role in spurring the recovery so the country can grow, export and create quality jobs,” Garcia further said.
Successful development of the ready-made garment (RMG) sector, which alone created more than 4 million jobs, along with the strong inflow of remittances, supported by prudent government policy choices, have been the key growth engines of Bangladesh's strong and resilient growth, even during the pandemic outbreak, according to the CPSD report.
“As the world’s second largest exporter, RMG has contributed significantly to Bangladesh’s economic growth,” said Mercy Tembon, World Bank’s Country Director for Bangladesh and Bhutan.
“For a more resilient, inclusive and sustainable growth, Bangladesh will need to diversify its export basket and develop a robust and sophisticated private sector, relevant in the post–Covid-19 recovery phase when public resources will be needed most in the social sectors,” she added.
The report says key priority areas for the reform agenda include creating a favorable trade and investment environment for domestic and foreign investors, modernizing and expanding the financial sector and removing impediments for developing infrastructure.
Transport and logistics, energy, financial services, light manufacturing, agribusiness, healthcare and pharmaceuticals sectors are among those with the strongest potential for private investment that could play a significant role in boosting economic growth, the report adds.
“It is clear the private sector has an important role to play to meet the rising demand for quality healthcare and improving the efficiency of delivering health services, as health financing in the country is low compared to others at a similar level of development,” said Wendy Werner, IFC Country Manager for Bangladesh, Bhutan, and Nepal.
Bangladesh could also target high-end markets and introduce new technology in the ready-made garment sector, and seize opportunities in footwear, leather electrical goods, and agribusiness exports, she added.
The government of Bangladesh’s Perspective Plan 2021-41 sets the objective of becoming an upper-middle-income country by 2031, along with full employment and the elimination of extreme poverty.
As the CPSD report points out, challenges persist with more than 40 million Bangladeshis still living below the poverty line, and nearly half the population vulnerable to falling back into poverty.
The private sector is responsible for 90% of jobs in the developing world. It is therefore critical to boost development of a broad-based private sector, the report suggests.
The findings of the report will be used to craft IFC’s strategic inputs for the World Bank Group’s new Country Partnership Framework with the government of Bangladesh, paving the way for joint programming to create markets and unlock private sector potential.