In a new ground-breaking analysis, Boston Consulting Group (BCG) reveals Bangladesh’s enormous potential to unlock a trillion-dollar prize through revolutionary initiatives. The paper outlines the steps Bangladesh needs to take to become a regional economic powerhouse and open up the previously unimaginable potential for growth and development.
In a webinar hosted by YPF (Youth Policy Forum) on 2nd June 2023, one of the authors of the report, Tausif Ishtiaque, shared his insights on the current scenario of Bangladesh and the necessary steps to accelerate the growth further. He is also a fellow of Youth Policy Forum and presently a partner at the Boston Consulting Group. The webinar was hosted by Munshi Forsythia Amin, an associate of the Business and Private Sector Policy Team at YPF, and Fatema Tuz Joohora, head of policy advocacy at YPF, who moderated it.
According to the report, “Bangladesh’s growth story is underpinned by some fundamental drivers – consumer optimism, a willingness to innovate in emerging economic sectors, the continued rise in middle and affluent consumers, an ambitious young workforce, and economic resilience.”
Over two-thirds of the population in Bangladesh is of working age, with 114 million prepared to contribute to society through employment. On the other hand, with 15% of the world’s freelancers as well as 50,000+ Facebook entrepreneurs, Bangladesh is the second-largest provider of online labour, following India. Equipped with a sizable consumer-driven economy and a fast-growing private sector, Bangladesh is set to become a major economic powerhouse globally. The country’s consumer market is set to become the 9th largest by 2030, overtaking major players like the UK and Germany. It is expected to increase from 19 million in 2020 to 34 million in 2025.
In fact, Bangladesh is the fastest-growing economy among its Asian peers, maintaining a 6.4% annual GDP growth, whereas those of Vietnam and India are 5.4% and 3.9%, respectively. With a highly resilient economic infrastructure, Bangladesh maintained a 5.5% annual GDP growth when other developed countries struggled with recession during the Global Financial Crisis (2007-09). Currently, Bangladesh is maintaining a high savings ratio of 34% vs 27% globally, allowing for significant investment, with gross fixed capital creation standing at 31% of GDP in 2021, more than all Asian counterparts.
In the fiscal year 2021–2022, Bangladesh’s economy had a $465 billion value. Researchers from BCG are optimistic that Bangladesh’s relatively resilient economy will continue to display substantial growth over the long run, despite short-term economic uncertainty. According to the paper, Bangladesh is well known for playing a significant part in the worldwide supply chain for textiles and garments. The apparel sector is predicted to flourish, with large domestic companies expanding abroad. On the other hand, three private companies, Grameenphone, Robi, and Banglalink, are at the forefront of the country’s telecom sector and have contributed to Bangladesh’s ranking as the ninth-largest mobile market globally.
The trail of successful achievement continues as, for the past ten years, Bangladesh’s startup scene has raised $300 million in venture capital funding. On another positive note, the ICT Division’s flagship venture capital fund, Startup Bangladesh, has allowed the government to promote start-ups actively.
To gain an in-depth insight, leading Bangladeshi companies with annual revenues between $300 million and $3 billion were interviewed by the BCG. These companies included multigenerational businesses, tech startups, wholly local businesses, globally diversified businesses, single-sector speciality businesses, and conglomerates. BRAC, for instance, operates massive social enterprises and is a prestigious lender of Brac Bank. Other companies include a shipbreaking, glass, and vehicle manufacturing company. In BCG’s case studies, companies like PHP, Shopup (e-commerce and smart logistics startup), Pathao (ride-sharing and food delivery giant), Walton (home appliances and electronic market leader), Pran (food giant), Summit Group (power generation champion), Square and Renata (largest pharmaceutical firms), FCI (clothing exporter), Beximco and Meghna Group (conglomerate), and Confidence Group (power generation conglomerate) are discussed.
Even more, these Bangladeshi companies mostly grow on their own capital to dominate the local market. According to BCG, the median debt-to-capital ratio for the S&P 1200 is 42% compared to 27% for Bangladeshi enterprises. The S&P 1200 is a stock market index of 1,200 of the world’s largest publicly traded companies from various regions. This means the Bangladeshi companies were doing a better job than the top 1200 global companies in maintaining their debt-to-capital ratio.
Publicly traded local champions in Bangladesh are delivering an annual average total return of 16% in the last ten years of the bearish stock market, which is higher than that of the S&P Global 1200 companies, Asia 50 Index (stock index of Asian stocks that is a part of the S&P Global 1200), and the MSCI Emerging Markets (a selection of stocks that is designed to track the financial performance of key companies in fast-growing nations).
The report’s analysis highlighted six areas where champions could absorb knowledge from industry leaders to accelerate their growth and make the transition from Great to Beyond Great. One of the critical areas of attention is increasing financial resilience. This includes encouraging foreign direct investment, creating capital partnerships, and encouraging transformative growth using the balance sheet. The focal areas encouraging transformative growth include placing bets on digital data, investing through corporate venture capital, building alliances, and participating in ecosystems. The BCG stated that the rising champions require support from the government in the form of appropriate national programs, especially to attract foreign direct investment and ultimately to reform the banking industry. Strategic imperatives such as raising high-quality capital, looking for international partners, and controlling a larger global supply chain are vital for these rising champions. They could benefit greatly from switching from process excellence to product innovation, increasing productivity, and utilizing digital technology and data.
Author- Khondker Sahaf Bin Asif.
