Bangladesh has long been a global leader in the ready-made garment (RMG) sector, with textiles contributing around 84% of the country’s total exports. Yet, as the country faces shifting global dynamics and recent political changes, the urgency to diversify its exports has reached a critical juncture.
The student-led revolution has brought to light underlying social, political, and economic challenges that Bangladesh must now confront. As the new leadership charts a course forward, reducing the country’s overreliance on a single sector and building a more resilient and diversified economy will be paramount.
Bangladesh’s economy continues to be heavily dependent on the RMG industry. The sector’s rapid growth has driven the country’s economic development, created millions of jobs -- especially for women -- and significantly reduced poverty. However, the concentration of exports in one industry leaves the country vulnerable to external shocks, such as changing trade policies in major markets like the US and Europe, as well as growing scrutiny over labor rights and sustainability.
The recent political crisis, coupled with global economic uncertainties, makes it clear that Bangladesh must diversify its export base to sustain long-term growth. Export diversification not only strengthens economic resilience but also creates opportunities for new job creation, technological advancement, and investment in emerging industries.
Sectors with high potential
Bangladesh has several sectors beyond garments that show significant potential for growth and diversification. The new political climate offers an opportunity for the interim government to implement reforms and attract investment in these key areas.
- Information and Communication Technology (ICT): Bangladesh has made significant progress in developing its ICT secto. The country is now positioned to become a hub for IT outsourcing, software development, and tech startups. By improving digital infrastructure and education, Bangladesh can tap into the growing global demand for digital services and position itself as a regional leader in the tech industry.
- Pharmaceuticals: Bangladesh’s pharmaceutical industry has been expanding steadily, with the country already supplying affordable generic drugs to many developing nations. As demand for healthcare rises globally -- particularly after the Covid-19 pandemic -- Bangladesh has the potential to further grow its pharmaceutical exports. With investments in research, development, and quality control, the country could become a major player in the global pharmaceutical market.
- Leather and footwear: Bangladesh is one of the world’s largest producers of leather goods and footwear. However, environmental concerns, particularly related to the tannery industry, have limited the sector’s growth. By implementing stricter environmental standards and adopting sustainable practices, the leather and footwear industry could expand into high-value markets, such as luxury goods, further diversifying the country’s export base.
- Jute: Once known as the “golden fibre” of Bangladesh, jute has seen a resurgence in global demand due to its eco-friendly and biodegradable properties. As countries and companies move toward sustainable materials, Bangladesh has a unique opportunity to reclaim its position as a leading exporter of jute and jute products, catering to industries like packaging, textiles, and home goods.
- Agriculture and agro-processing: While Bangladesh has a rich agricultural heritage, its export potential in this sector remains underdeveloped. Investments in agro-processing and value-added agricultural products, such as frozen foods, spices, and seafood, could unlock new markets. Additionally, developing supply chains and logistics for agricultural exports could position Bangladesh as a significant player in global food production.
According to Sayful Islam, Deputy Director of the Bangladesh Investment Development Authority (BIDA): “We are prioritizing foreign direct investments (FDI) in key sectors to diversify Bangladesh’s export portfolio. With China’s recent policy adjustment allowing 100% duty-free imports of Bangladeshi goods, we see a strong opportunity to expand into alternative markets beyond [RMG]. Starting with this new access to China from December, we aim to establish a foothold that will help us grow and reach more sophisticated global markets.”
A clear vision and long-term strategy for export diversification, supported by sound governance, will be critical to driving progress
Challenges to diversification
While these sectors hold promising opportunities for diversification, several critical challenges must be addressed to unlock their full potential and sustain long-term growth. Inadequate infrastructure, particularly in transportation, logistics, and energy, remains a significant barrier to export diversification. Ports, roads, and supply chains must be upgraded to support the efficient movement of goods and reduce costs for exporters.
To move into higher-value industries like ICT and pharmaceuticals, Bangladesh needs to invest in education and vocational training. Building a skilled workforce that can meet the demands of emerging sectors is crucial to long-term success.
The recent political upheaval and transition to an interim government have introduced uncertainty into the business environment. Stability is essential for attracting foreign direct investment (FDI) and building confidence in the country’s economic future. A clear vision and long-term strategy for export diversification, supported by sound governance, will be critical to driving progress.
Bangladesh will face intense competition from emerging economies like Vietnam and India, which are also expanding into ICT, pharmaceuticals, and agro-processing. To stay ahead, Bangladesh must focus on innovation, sustainability, and high-quality production to carve out a competitive advantage.
How can we all contribute?
The student-led revolution has created both challenges and opportunities for Bangladesh. This pivotal moment provides a unique chance to reimagine Bangladesh’s economic future. However, building a more resilient and diversified economy is not solely the government’s responsibility. Active participation from all stakeholders is essential for long-term success. Here’s how various groups can contribute to this shared vision:
The new government: The interim government must prioritize reforms to improve the ease of doing business, invest in critical infrastructure, and foster innovation. Streamlining regulatory processes and providing incentives for industries beyond RMG will help attract both local and foreign investment. Policies that support small and medium-sized enterprises (SMEs) in emerging sectors such as ICT, pharmaceuticals, and sustainable agriculture will be crucial.
Exporters: Exporters need to diversify their product offerings and explore new international markets. Collaboration between exporters from different sectors can also lead to innovative cross-sector opportunities. By adopting sustainable practices and focusing on value addition, exporters can build resilience in a changing global market, positioning Bangladesh as a leader in new and high-value sectors like eco-friendly products, tech services, and pharmaceuticals.
Farmers and agro-entrepreneurs: Aadopting sustainable practices and improving supply chains will help with untapped export potential, positioning Bangladesh’s agriculture as a key player in global markets.
Industry associations and chambers of commerce: Industry bodies, such as trade associations and chambers of commerce, play a vital role in building bridges between the private sector, government, and international investors. By offering support to new industries, providing market insights, and advocating for policies that encourage export diversification, these associations can help businesses toward sustainable growth.
Investors and venture capitalists: Both local and international investors will play a critical role in supporting emerging sectors. Venture capitalists and private equity firms should focus on funding startups and SMEs in industries like ICT, pharmaceuticals, and sustainable agriculture.
Educational institutions and vocational training centres: As Bangladesh seeks to diversify into higher-value industries, building a skilled workforce is essential. Educational institutions must provide the technical skills needed in sectors like ICT, biotech, and renewable energy.
Civil society and NGOs: Civil society organizations and NGOs must advocate for inclusive growth, sustainability, and equitable policies. They can work to ensure that marginalized groups, such as women and rural communities, benefit from new economic opportunities.
Julia Wesemann is Director of Growing Together and Founder of Co-creation lab.
