Per capita income has risen nearly threefold since 2009, reaching $1,750 this year
Bangladesh has been marred by tragedy including: the 1971 Liberation War, poverty, natural disasters—and now—one of the world's largest refugee crises after receiving an influx of 750,000 Rohingya Muslims who fled persecution in neighboring Myanmar.
However, with remarkably little international attention, Bangladesh has also become one of the world's economic success stories.
Aided by a fast-growing manufacturing sector—its garment industry is second only to China's—Bangladesh's economy has averaged above 6% annual growth for nearly a decade; reaching 7.86% in the year through June, reports Nikkei Asian Review.
From mass starvation in 1974, the country has achieved near self-sufficiency in food production for its more than 166 million people. Per capita income has risen nearly threefold since 2009, reaching $1,750 this year.
Meanwhile, the number of people living in extreme poverty—classified as under $1.25 per day—has shrunk from about 19% of the population, to less than 9%, over the same period, according to the World Bank.
Earlier this year, Bangladesh celebrated a pivotal moment when it met United Nations criteria to graduate from "least developed country" status by 2024. Prime Minister Sheikh Hasina considers the elevation of status to "developing economy" a significant boost to the nation's self-image.
Bangladesh's economic performance has even exceeded government targets on many fronts.
With a national strategy focused on manufacturing—dominated by the garment industry—the country has seen exports soar by an average annual rate of 15-17% in recent years; reaching a record $36.7 billion in the year through June.
This sector is on track to meet the government's goal of $39 billion in 2019, and Prime Minister Sheikh Hasina has urged industry to reach a $50 billion valuation by 2021; to mark the 50th anniversary of the Liberation War, said the Nikkei Asian Review report.
A vast community of about 2.5 million Bangladeshi overseas workers further buoys the economy with remittances that jumped an annual 18% to top $15 billion in 2018. However, Hasina also knows the country needs to move up the industrial value chain.
Political and business leaders echo her ambitions to shift from the old model of operating as a low-cost manufacturing hub partly dependent on remittances and international aid.
Sheikh Hasina launched a "Digital Bangladesh" strategy in 2009 backed by generous incentives.
Now, Dhaka, the nation's capital, is home to a small but growing technology sector led by CEOs who talk boldly about "leapfrogging" neighboring India in IT. Pharmaceutical manufacturing—another Indian staple—is also on the rise.
The government is now implementing an ambitious scheme to build a network of 100 special economic zones around the country; 11 of them have been completed while 79 are under construction.
Tailored industrial policy
The ready-made garment industry is a key factor in the country's phenomenal success story. The industry is the country's largest employer, providing about 4.5 million jobs, and accounted for nearly 80% of Bangladesh's total merchandise exports in 2018.
It has undergone seismic changes since the watershed Rana Plaza disaster in 2013, when a multi-story garment factory complex collapsed, killing more than 1,130 workers. In the aftermath, the industry was forced by international apparel brands to implement sweeping reforms; including factory upgrades, inspections, and improved worker conditions.
Further investment is needed if Bangladesh's garment industry is to remain competitive.
Bangladesh's textile industry could benefit if China's garment exports are hit by a prolonged US-China trade war. However, other garment centers are also taking aim at a vulnerable China, including: Vietnam, Turkey, Myanmar, and Ethiopia.
Intensifying international competition has already sparked consolidation in Bangladesh's garment industry, reducing the number of factories by 22% in the last five years to 4,560, according to the BGMEA.
The government has moved to streamline the investment process with the creation of a "one-stop" investor service intended to replicate similar services in Singapore and Vietnam. This has yet to gain momentum.
More successful is Sheikh Hasina's digital push. With her son, a US-educated tech expert, as a key adviser, the program has introduced generous tax breaks for the information and communications technology sector; and a sweeping scheme to build 12 high-tech parks across the country.
Bangladesh's exports of software and IT services reached nearly $800 million in the year, till June 30, and are on track to exceed $1 billion this fiscal year.
There have been outstanding homegrown tech successes, such as the ride-sharing service Pathao, which received a $2 million investment from Indonesian unicorn Go-Jek, and mobile financial services group bKash, in which Alipay—an arm of China's Alibaba Group Holding—took a 20% stake in April.
What about pharmaceuticals?
Bangladesh is hoping to challenge India in pharmaceuticals, too. With its "least developed country" status, the country has enjoyed a waiver on drug patents.
This has fueled intensifying competition between India and Bangladesh in the field of generic and bulk drugs. Among local star performers are Incepta Pharmaceuticals, Bangladesh's second-largest generics maker, which exports to about 60 countries, and Popular Pharmaceuticals, which is eyeing an eventual listing.
One of Bangladesh's competitive disadvantages is its poor infrastructure, and the country has turned to China for help.
Under its Belt and Road Initiative, China has financed various megaprojects in Bangladesh, including most of the nearly $4 billion Padma Bridge rail link, which will connect the country's southwest with the northern and eastern regions. In all, China has committed $38 billion in loans, aid, and other assistance for Bangladesh.
China's heavy infrastructure investment has drawn criticism of its "debt diplomacy" in other countries, including Pakistan and Sri Lanka. However, local economists dismiss such concerns.
Chinese investors also bought 25% of the Dhaka Stock Exchange in 2018, and Bangladesh is now the second-largest importer of Chinese military hardware after Pakistan.
While some may question so much investment from Beijing, Sheikh Hasina said it is simply a fact that China is set to play a bigger role in the region.
Bitter political rivalry
Behind the impressive numbers and bold ambitions, however, are daunting hurdles ranging from structural problems to deep political divisions, which have come to the fore ahead of national elections on December 30.
Bangladeshi politics have been dominated for years by the bitter rivalry between Prime Minister Sheikh Hasina and former Prime Minister Khaleda Zia. Both women have been in and out of power—and prison—over the past three decades.
Khaleda Zia, who chairs the opposition BNP, is in jail on corruption charges that she says are false.
Since 1981, Sheikh Hasina has led the ruling Awami League, founded by her father, Sheikh Mujibur Rahman—the country's first president—who was killed by army personnel along with most of his family in 1975.
The party enjoyed strong support in some past elections. However, opposition activists and human rights groups have voiced concern about potential polling fraud and intimidation tactics.
After two consecutive five-year terms for the ruling party, analysts point to a palpable "anti-incumbency" sentiment among some voters. Yet from an economic standpoint, many agree that a ruling party victory would support further development.
Business seems largely on the ruling party's side—if only for stability's sake.