Bangladesh IT and Digital Sector Tackling COVID-19 Implications
Bangladesh has been working relentlessly to establish “Digital Bangladesh”, an integral part of the government’s Vision 2021. IT companies in Bangladesh started exporting software around two decades ago, joining the business process outsourcing (BPO) bandwagon. Bangladesh Association of Software and Information Services (BASIS), which started its journey with 17 companies in 1997, now stands at 1200+ companies involved in software development and providing IT services. ICT exports by 250+ companies, in 60+ countries around the world, accounted for USD 800 Million in which was 2.2 percent of the total export value. According to USAID, North America is the country’s main export destination. Bangladeshi IT and ITES firms generate almost 35% of its export revenue from US buyers, 15% from the UK, followed by a number of EU countries such as Denmark and the Netherlands. A number of local enterprises also export IT-ITES services to UAE, Saudi Arabia, South Africa, Malaysia and Singapore. This is the hard work of the 1 Million people who are working directly in the ICT industry. The government had set an export target of total USD 5 Billion by 2021.
The sector has been declared as a thrust sector by the government assessing the ability and interests of the youth segment of the country. In Bangladesh, there are more than 100 software houses, 35 data entry centers, thousands of formal and informal IT Training centers and numerous computer workshops. Additionally, Bangladesh Hi-Tech Park Authority (BHTPA) was formed with the vision to ensure sustainable development and proliferation of IT/Hi-Tech Industry in Bangladesh. Given the potential of the ICT sector in Bangladesh, it can work as a major economic driver.The digital e-commerce and e-service industry is growing in pace with ICT
Similarly, during the late ‘90s, the e-commerce industry started its journey in Bangladesh, however, did not witness any growth up until the last decade. The development of banking facilities logistics communication and electronic payment methods has created opportunities for the e-commerce sector of Bangladesh to grow. Over the past years, the country’s shopping behavior has shifted dramatically with the change in the living standard of the population. The emerging population is now more acquainted with making transactions of products and services online.
As of 2019, according to a research firm, published in a Bangladesh daily , the e-commerce market of Bangladesh is stated to be USD 1.6 billion and is expected to double to USD 3 billion by the year 2023. Bangladesh’s government imposed a 7.5 percent VAT on this sector that may adversely affect the ongoing digitization agenda of the government and hamper the employment rate in this sector according to industry insiders. In terms of revenue from e-commerce, Bangladesh ranked 46th position globally. Growing smartphone penetration and popularity of 4G networks along with the increasing purchasing power of consumers are driving the e-commerce industry across the world including this south Asian country, Bangladesh. With the advent of COVID-19, the e-commerce industry is witnessing an unnatural upsurge globally and with the world heading into an inevitable global recession, the growth of the industry is bound to slow down.IT companies in Bangladesh are tackling similar challenges to those faced by in India
The COVID-19 impact possesses an unique challenge for the IT industry as it is only in its growth stage in Bangladesh. Industry insiders expect the overall revenue for the 2020 year to decrease by 20-25 percent due to the pandemic. Companies that deal with BPO of medical and legislative data for North American companies, such as Therap, Augmedix are somewhat stable in terms of their business given the heightened respiration of the medical industry. However, the industry players that mainly focus on outsourcing of software development, are at a disadvantage. India serves 16 percent of the global market and they’re already predicting a lower growth rate than the previously estimated 7.5 percent for this year (Nasscom).
Although the industry technically has the capacity to operate remotely by its nature, the impact of the pandemic is still felt due to stuttering business orders from end clients. Since Bangladesh ICT export is mainly dependent on business from North American and European companies, there has been a general fall in outsourcing given the spread of the virus in these regions. As most global tech companies are now shuttered with employees working from home, the impact of business growth has been stagnated and the ripple has been felt in the local outsourcing industry. Other than a few large tech companies in Bangladesh, most companies do not operate on a retainer basis and are dependent on project basis business generation. Due to the cancellation or postponing of projects in such an unexpected event, business continuity is in serious trouble, resulting in local companies facing cash crunches. This is applicable at least for those that do not have a force majeure provision in their contracts than works in their favor.Maintaining steady cash flow is the biggest challenge during this time
Software companies than serve the local market mostly are facing more challenges compared to those that are focused more on outsourcing. Due to the economic halt, local clients are stalling payment leading to cash flow challenges for these companies. Companies in north American and Europe are having to source locally for the time being, especially on security monitoring, disaster recovery etc. as delivery of work from offshore services, especially China has come to a screeching halt. Kabir, Co-Founder and CEO of BrainStation-23 says that there’s also potential here for growth – if companies are agile and are willing to pivot fast. According to him, video streaming, machine learning and online learning are strong business vertices to explore now. They have seen a strong upsurge in demand for Moodle, an open-source Learning Platform or course management system (CMS), from clients in the education sector due to the sudden increase in online classrooms. Government contracts where foreign governments are seeking software solutions in relation to the pandemic crisis are also a potential target growth area for the industry.Infrastructure level challenges such as data protection and access to internet are major challenges of working from home
Layoffs are yet to happen in the industry but smaller companies with limited cash-flows might have to rely on pay cuts to survive if the pandemic persists long-term. On a micro level, since tech companies operate on an agile methodology of delivering work in a predetermined deliverable schedule, accountability due to remote work has disrupted the delivery cycles. Als0, most companies are having issues with remote work as loss and delivery of data over unprotected internet connections is a big challenge. Large companies operate through their own protected servers and systems in their office and data sharing and assurance of protection of said data on an open system is a big challenge for most. In India, some companies have begun installing corporate desktop computers at their employee homes but this is hard to sustain and implement in an industry-wide scale. Another systemic challenge reported by the industry is the lack of internet bandwidth when operating from home. Due to sudden upsurge of demand for home internet consumption, the infrastructure is strained and its impact is also felt in the IT industry. The only silver lining in such a grim situation is that outsourced service desks are having to support huge volumes of end-users trying to access systems remotely but it also comes with the challenge of engineers having to facilitate overwhelming demand often with technology stacks with which they have no training or familiarity.Some e-services are faring better than others due to the pandemic
In a time such as this, the e-commerce and e-service industry is also facing similar challenges. Initially, with most of the urban Dhaka population put into isolation and following social distancing, the number of online purchases in the B2C e-commerce platforms (daraz.com, pathao, chaldal.com, etc) faced an unnatural spike. However, food delivery services have seen a sharp downturn in just the past week with orders falling by 75 to 80 percent according to an industry representative from Shohoz. Consequently, 40 to 50 percent of restaurants have also closed down leading to the fall in business. As per a BRTA directive, ridesharing by Uber and Pathao have been banned to limit the spread of COVID-19. The demand for flu-related products such as cleaning agents and healthy supplements is high. However, due to the shortage of supplies owing to the pandemic, the limited products are priced at a higher range. Delivery of e-services have also come to an halt due to the implementation of quarantine. Chaldal has seen an increase in online grocery delivery demand and along with other food delivery services have replicated the contactless delivery system. Online grocery stores are experiencing double digit growths in the number of deliveries with Chaldal’s average 5000 orders-per-day jumping to 10,000 to 15,000 orders-per-day on an average. The digital e-health service industry is facing a sudden surge in phone call consultation with Telenor Health reporting a 30 percent increase in phone consultation services. Similarly, Praava Health has launched a low cost video consultation services to tackle the upsurge in healthcare advice demand. Since the e-services and e-commerce industry is highly dependent on day-wage/contractual earners, the sudden outflow of workers from the city has also led to serious staffing shortage.The ICT and digital sector can be easily protected from the impact of COVID-19 if precautionary measures are taken
With the challenges now apparent for the IT and digital sector, it’s crucial that the government pays significant attention to its third-engine post coronavirus Bangladesh. On a B2C level, e-service companies such as food delivery and ride-sharing companies need to create a safe and hygienic environment in its operations through ensuring all its delivery men, riders and drivers take safety precautions seriously. On B2B level, tech companies need to support its staff through providing proper work-from-home initiatives and creating accountability through better management and delivery techniques. Companies also need to reassure its clients that their work-from-home will not impact business significantly and that precautionary measures are being taken to ensure business continuity. The coronavirus stands to wipe out 1.1 percent of Bangladesh’s gross domestic product, resulting in 894,930 jobs being lost as per a projection of the Asian Development Bank (ADB) . It is highly likely that the IT and digital industry will fall into this crunch along with the RMG industry. For long term growth assurance, provisions should be made for the industry in the recently sought $1 billion in support from the International Monetary Fund (IMF) and the World Bank (WB) by the government. Admittedly, it’ll be impossible to not feel the impact of the pandemic in any industry but precautionary and supportive policies will ensure the tech and digital industry will not be crippled in a post COVID-19 economy.