Country Report | Bangladesh
 

Author: Udayan Gupta
Ray, 1857 Advisors: Political uncertainty and confusion around business and economic policy are holding back capital providers.

INFRASTRUCTURE INVESTMENT NEEDED

“There is a crying need for infrastructure investing if the economy [is] to be vital and foreign and domestic investors are to be encouraged,” says Sakhawat Hossain, managing director of Western Marine. The more capital that comes into companies such as Western Marine that are building ships for international buyers, the greater the foreign exchange saved, adds Hossain.

The country is experiencing elevated investment in infrastructure—with megaprojects initiated and expected to be completed in three to five years, according to a country report by 1857 Advisors. Projects include construction of the Padma Bridge ($1.8 billion), a deep-sea port on Sonadia, the Dhaka Metro, the 1000 MW Ruppur Nuclear Power Plant and the 1320 MW Rampal coal power plant. The Padma Bridge alone is expected to add 1.2% to GDP upon completion, says the report.

Foreign direct investment is key to the economic revitalization of the country, emphasizes Ray. But for the country to reach its investment-to-GDP target of 30%—domestic investment is currently 27.6% of GDP—FDI has to reach 2.4%.

After decades in which Bangladesh relied on crony capitalists to provide the impetus for economic growth and social development—and ultimately made little progress—the country is moving toward a balanced economy. While the economy continues to rely on cheap labor for local manufacturing and for export, it is also relying on infrastructure businesses as well as such new sectors as consumer goods and pharmaceuticals.

Local cheap labor may not remain a competitive advantage for too long. Many of the large multinationals that use low-cost manufacturing facilities are under pressure from their investors and customers to explore more humane and more technological options. But for transformation to take place, there is the need for more capital.

And in Bangladesh’s uncertain political climate, the capital markets are hard to navigate. The stock market is poorly regulated and lacks transparency. Private equity firms seem to have done little in the way of growing businesses or creating jobs—or even producing replicable returns. Some banks, with the assistance of groups like the IFC, are attempting to increase access to capital.

The opportunities are increasing, says Ray of 1857 Advisors. “Now if we can only create a climate where investors can exploit the opportunities.” n

GFmag.com data Summary Bangladesh

Central Bank: Bangladesh Bank

 International Reserves                 

$18.1 billion

 Gross Domestic Product (GDP)

$ 161.8 billion

 Real GDP Growth

2012
6.3%

2013
6.1%

2014*
6.2%

 GDP Per Capita—Current Prices

$1,033.01

 GDP—Composition By Sector*  

agriculture:
17.2%

industry:
28.9%

services:
53.9%

 Inflation

2012
6.2%

2013
7.5%

2014*
7.2%

 Public Debt
(general government
 gross debt as a % of GDP)

2012
35.1%

2013
35.2%

2014*
33.9%

 Government Bond Ratings
 (foreign currency)

Standard & Poor’s
BB-

Moody’s
Ba3

Moody’s Outlook
STA

 FDI Inflows

2011
$1,136 million

2012
$1,293 million

2013*
$1,599 million

* Estimate
Source: GFMag.com Country Economic Report, IMF

 

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