The Bangladesh economy is undergoing steady above six per cent average annual real GDP (gross domestic product) growth for more than 12 years now amid ups and downs in the global economy including financial crisis and the subsequent ongoing growth slowdown. Inflation has been contained within single-digit level. The stable and sustained growth trend has been maintained with the Bangladesh government's inclusive development strategy, supported by the Bangladesh Bank's initiative of mainstreaming socially responsible financing in corporate ethos and objectives of the country's financial sector. Financing support from these initiatives for agriculture, SMEs (small and medium enterprises) and environment-friendly projects have generated domestic output and domestic demand to compensate for external demand weakness from slowdown in advanced Western economies.
Exports have also continued to grow, and together with healthy inflow of remittances from workers abroad, have underpinned strong gains in external sector viability. This is reflected in healthy positive current account balance, more than ten-fold increase in foreign exchange reserves to over US$ 20 billion from only $1.6 billion in FY2000. Prudent fiscal policy helped accumulate higher revenues with moderate deficits leading to declining public debt ratio. Attention of the inclusive financing initiatives on adequacy of credit flows to SMEs helps enhance macro-financial stability, with incremental output on the supply side and employment and income generation on the demand side.
Bangladesh is maintaining a most welcoming regime for FDI (foreign direct investment) and FPI (foreign portfolio investment) inflows. Up to 100 per cent foreign ownership is freely permissible for FDIs in the industrial sector; FPI inflows are freely permitted in the local equity and bond markets. Post-tax profit or dividends earned by non-residents on FDIs and FPIs are freely repatriable abroad; disinvestment proceeds along with capital gains are likewise also freely repatriable. Tax holidays, import tariff waivers/concessions on capital goods and serviced industrial zones are available for foreign and local investors.
Taka term-loan from the domestic market and working capital financing in foreign currency from parent company are also now permissible for foreign owned/controlled companies engaged in manufacturing or services output activities in Bangladesh. Besides manufacturing, major opportunities for foreign investors in Bangladesh exist also in the infrastructure sector, including gas and electricity generation, toll bridges, hotels and other tourism facilities, tertiary health care hospitals, developing land port, seaport, airport facilities and so forth. Software- and IT-enabled services are yet another new promising area for foreign investors in Bangladesh.
Bangladesh has already attained a number of MDGs (Millennium Development Goals) including halving of poverty well ahead of 2015 timeline. Rapid poverty decline in the large population of 160 million is providing domestic and foreign investors with a large demand base, coupled with very competitive low wage in the largely young working population. This is attracting relocation of foreign investors from costlier locations elsewhere. Many large globally active businesses including Samsung, Unilever, Honda, Telenor etc. have set up manufacturing units and other facilities in Bangladesh. In the financial sector, globally active banks like HSBC and Citi NA are maintaining branch operations in the country.
Bangladesh currently enjoys the advantages of demographic dividend of a large youthful workforce. There is a broad-based consensus on social responsibility-driven inclusive development strategy to harness the ingenuity and creative energy of all population segments in overcoming challenges to rapid poverty eradication and eventual prosperity. Bangladesh is now charting the next phase of its progress path aiming at reaching the upper middle income country group GNI (gross national income) threshold by 2030 and attaining developed advanced economy status by 2050.
The article is adapted from the speech of Dr Atiur Rahman, Governor of Bangladesh Bank, gave at a function of the American Chamber of Commerce in Bangladesh (AmCham)
