Bangladesh started its journey as an independent country with only 313 factories. During the Liberation War of 1971, the country’s industrial sector faced losses of Tk 2.9 million. Nurul Islam, the then vice-chairman of the Planning Commission, drafted the industrial sector’s poor situation in the first five-year plan in November 1973. The industrial sector was mainly nationalized. It was not until the nineties, when Bangladesh adopted the free economic policy, that the private sector could significantly contribute to the country’s economy. However, since then, there has been an upward trajectory in private investment as a share of GDP. The contribution of the private sector can be divided into three phases.
In the first phase, between 1985 and 1991, the country was preparing for economic expansion. Denationalization and structural reforms were yet to be finalized. Therefore, private investment remained more or less flat in this phase. However, the second phase, between 1991 and 2010, is marked as the golden era of the private sector. During this phase, the private sector more than doubled in volume. This phase is also highlighted as an inflexion point because, during the 1990s and 2000s, private investment became the critical factor behind the improving investment to GDP ratio. Finally, the third phase began in 2010 and is continuing. The investment to GDP ratio fluctuated between 21 and 23 percent during this phase. In the Seventh Five Year Plan (FY2016-FY2020), the government envisaged the performance of the private sector would reach 27 percent of GDP by 2020. Unfortunately, this goal remained unreachable due to the unprecedented pandemic situation. Yet, the remarkable new height Bangladesh’s industrial sector has embarked on in the last fifty years is noteworthy. And the lion’s share of the credit goes to the private sector. The number of factories has multiplied 150 times from 313 to 46,110. And about 3000 of those are large factories. Apart from six public enterprises, the rest are under the control of the private sector.
Moreover, the private sector consists of over 100 conglomerates. The market capitalization has also helped establish large enterprises such as Grameenphone, British Tobacco Company, BRAC, Square, etc. Bangladesh’s biggest ever single FDI came from the private sector. In 2018, one of the world’s largest tobacco companies, Japan Tobacco Inc., acquired Akij Group’s US $1.5 billion worth of tobacco business. From all these factoids, anyone can comprehend the crucial role the private sector plays in the economic development of Bangladesh. Even if we set aside the numerical data and think from a general perspective, the private sector has helped develop multiple sectors such as employment, transportation, exportation, etc. The RMG sector, known as Bangladesh’s economy’s pillar, was able to grow at length it did due to the private sector investment. After a short-lived downfall, Bangladesh regained its position as the second-largest RMG exporter from Vietnam in 2021. RMG sector has only created 4 million job opportunities and holds about 82 percent of exports. However, to have sustainable economic growth, export diversification is pivotal. And the best cautious tale is right next to us. One of the reasons behind Sri Lanka’s financial crisis is its inability to diversify its exports. Once the export industry of Sri Lanka may have been sufficient to increase GDP. But then more developing countries like Vietnam and Bangladesh came into the race, which could offer cheaper labour. Sri Lanka should have been able to anticipate it and diversify its export. A lesson that Bangladesh needs to learn from this is- to build a diversified domestic economy. Thanks to the private sector investment, Bangladesh is slowly but surely diversifying its economy from RMG. The automobile and electronic industries have been creating a lot of buzzes recently. The pharmaceutical and construction industry is also becoming vibrant and is heavily invested by the private sector. In brief, if Bangladesh wants to graduate from LDC status in 2026, as it anticipates, then the private sector’s role needs to be expanded and structured. The government has set a target to reach 8.5% GDP growth by FY25 in their Eighth Five Year Plan. But 75% of the private sector’s total investment must be generated to achieve this. A sector that is this crucial to a country’s economy must be accountable for its activities. For instance, generating profit is not enough. It also needs to focus on state welfare. The private sector must contribute to building a country’s public sector, such as education, health, etc., because a well-structured and advanced public sector can only lead to a skilled and healthy workforce. The private sector needs to maintain what is known as a ‘conscious capitalism’ to aim for sustainable growth. Destructing the environment in the name of profit is not sustainable and will not benefit anyone in the long run. It is a matter of great relief that the private sector of Bangladesh is looking forward to doing more public-private partnerships (PPP). Hopefully, this private and public collaboration will help Bangladesh avoid the infamous ‘middle-income trap’ and complete its dream of becoming a high-income country within two decades.
Written by Nayeema Nusrat Arora
