Bangladesh is entering a decisive phase in its development. As it prepares for life beyond its least developed country (LDC) status, it faces two defining challenges of the 21st century. The first is sustaining economic growth in an increasingly competitive world. The second is successfully transitioning to an upper-middle-income economy.
To achieve these goals, Bangladesh cannot rely on its traditional old low-cost growth model. Instead, it needs a new productivity-driven model built on artificial intelligence (AI), human capital, agriculture, small and medium enterprises (SMEs), and IT-enabled services (ITES).
Building the next growth model
While LDC graduation is assessed through specific metrics - gross national income (GNI) per capita, the human assets index (HAI), and the economic and environmental vulnerability index (EVI), attaining upper-middle-income status depends on sustained productivity growth, industrial upgrading, technological innovation, and a highly skilled workforce.
New technologies are transforming agriculture, industry, and services by boosting productivity, reshaping business models, and changing the nature of work.
Bangladesh's success in both its economic transition and technological transformation will therefore depend on how effectively it harnesses these technologies to enhance productivity, competitiveness, and innovation across all sectors.
For decades, the ready-made garments (RMG) sector, built on a labour-intensive manufacturing framework, has been the primary engine of growth. While this strategy delivered remarkable economic progress, it is increasingly vulnerable to automation and global competition.
Rather than attempting an abrupt leap to fully automated smart factories, Bangladesh should adopt a pragmatic, AI-enabled growth strategy centered on three foundational pillars: Agriculture, services, and SMEs.
Equally important is sustained investment in human capital through continuous reskilling and upskilling, supported by an education system that equips graduates with disciplinary expertise, digital competence, AI literacy, and interdisciplinary skills. Together, these priorities can underpin sustainable productivity growth and long-term competitiveness.
Agriculture: Raising productivity through AI
Agriculture remains a cornerstone of Bangladesh's economy, employing the lion’s share of the labour force, contributing approximately 11-12% of GDP, ensuring national food security, supplying raw materials for agro-processing industries, and generating valuable export earnings.
Yet many farmers continue to struggle with low productivity, climate risks, volatile markets, and limited access to timely information, leaving them vulnerable to intermediaries and fluctuating prices.
AI can transform this landscape through precision agriculture. AI-enabled digital platforms can provide real-time crop disease diagnosis, weather and pest alerts, and recommendations on irrigation and fertilizer use, helping farmers reduce costs, improve yields, and strengthen climate resilience without requiring expensive machinery.
AI can also forecast market demand and price trends, enabling farmers to make better production and marketing decisions while reducing post-harvest losses.
Technology alone, however, is not enough. AI tools must be affordable, user-friendly, and accessible through Bangla-language, voice-enabled interfaces, supported by agricultural extension services, cooperatives, NGOs, and agribusinesses. Equipping extension workers with digital and AI skills will be essential to ensuring that smallholder and less-literate farmers also benefit from this transformation.
SMEs and ITES: Expanding high-value growth
The cottage, micro, small, and medium enterprise (CMSME) sector is the lifeblood of Bangladesh's economy, accounting for about 99% of all enterprises and nearly 80% of industrial employment. However, systemic barriers in accessing finance and adopting technology often stall their growth.
AI can level the playing field by automating administrative tasks, optimizing inventory, improving fraud detection, and streamlining credit assessments, making small businesses more creditworthy for formal financial institutions.
AI-driven demand forecasting and supply chain management can also help agro-processing and manufacturing SMEs connect more effectively with domestic and international markets.
Alongside conventional SMEs, ITES represent a frontier opportunity. Compared with heavy manufacturing, the sector requires relatively modest capital investment but yields high-value returns in software development, business process outsourcing (BPO), and cloud solutions. As global demand for digital services continues to expand, ITES can generate high-value employment for educated youth and diversify Bangladesh's export base beyond apparel.
The services sector will also play a central role in Bangladesh's next phase of growth. AI can augment human capabilities, enabling institutions to deliver more accessible, affordable, and efficient services.
In healthcare, AI-assisted diagnostic tools can support clinicians, particularly in underserved areas where specialists are scarce. In education, AI-powered personalized learning platforms can help improve learning outcomes and expand access to quality instruction. In financial services, AI can strengthen credit assessment, streamline microfinance operations, detect fraud, and extend banking services to underserved communities.
The policy imperative
First, Bangladesh must make digital literacy and AI literacy national priorities. While government initiatives are already equipping young people with advanced digital skills, comparable efforts are needed at the grassroots so that farmers, SME owners, and workers can confidently adopt AI-enabled technologies.
Second, policy-makers should consider creating regulatory sandboxes and targeted incentives that encourage AI start-ups to develop solutions tailored to Bangladesh's development challenges. Continued investment in digital infrastructure, secure data ecosystems, and reliable connectivity will provide the foundation for AI innovation to flourish.
Bangladesh’s economic resilience has always rested on the ingenuity and adaptability of its people. By strategically integrating AI into agriculture, SMEs, and services, the country can break free from the low-wage trap.
Lasting prosperity will not belong to the nations with the cheapest labour, but to those that deploy technology most intelligently. Bangladesh must seize this moment to build its next-generation economy.
Dr MM Shahidul Hassan is Distinguished Professor, Eastern University and Former Vice-Chancellor, East West University.
