We are always excited to launch the Business Confidence Index which provides you with a sneak peak of what the private sector of Bangladesh is thinking – which industries are the businesses most optimistic about? Which sectors might face difficulties? How do they feel about the profitability of their enterprises? Where do they see the opportunity space for Bangladesh and what are the most significant challenges?
BUSINESS CONFIDENCE INDEX VERTICAL-WISE 2017-18
To understand these sentiments better, we surveyed more than 102 (Chief Experience Officers) CXOs, and members of the leadership team across more than 20 different sectors clubbed into primary, secondary and tertiary. Using harmonized business confidence index, we calculated sentiment scores across various industry verticals and an overall confidence score.
The overall business sentiment is “Cautiously Optimistic” with an index of +43 – on a scale of -100 to +100. Industry representatives cited increased investment in power generation, green revolution and mechanization in the agriculture sector, higher disposable income and consumer spending, growing health awareness, and the government’s particular interest in the ICT sector as factors contributing to their optimism for Bangladesh as an investment destination.
However, business leaders were cautious due to needing for financial sector reform (the classified loan conditions have created fault lines), bureaucratic red tapes in commencing and operating businesses, a slump in apparel prices, infrastructure issues such as port congestion and problems related to transportation and logistics.
Nonetheless, if we are to summarize the sentiments – the future of economy will hinge on three key themes.
Accelerating the discovery of the third Engine
Our forex reserve is dependent on our two twin engines – remittance and export of RMG industry (making up ~80% of our total export basket). Although, as we move forward, we also need to figure out our third engine.
If we look at the rankings of verticals according to confidence from all industry stakeholders (the question was to rank top two most promising sectors) – we will see that ICT/ITES has moved onto the top of the list – with Pharma and Footwear being close competitors. ICT/ITES is strongly supported by the government (via tax breaks and export incentives) and is marked to reach $5 billion by 2021. The pharma riding on a thriving domestic industry is eyeing the export market with currently at more than $90 million growing at a rate of about 9%. Nevertheless, with FDA approvals (Square and Beximco cleared initially now seeking limits for specific drugs) and TRIPS extension till 2032 high export potentials to Asia, MENA, US and European markets.
Agriculture is the new tech: Ag-business were on the top six last time and in the latest confidence survey has moved onto number two. While government budget allocation plays a role, growing demand for processed consumer foods coupled with a rise in per capita income, rise of disposable income of cities all around the country (the number of middle-income cities to rise to 33 from 10 by 2025) and opportunities to use Ag-tech to boost productivity have pushed optimism. Mechanization is already playing a critical role, and ODA (overseas development assistance) is also focusing on migrating technologies starting from high yielding Ag-inputs to funding private satellite imaging for better crop management. Additionally, innovative financial instruments via agent banking and even impact investments have begun finding its way into the sector. Accelerator and incubation programs which were once only part of the ICT/Tech industry has started for Ag-SMEs as well with Spark, Unity, and Open Accelerator being early in the field.
The Talent at Our Core
While we have grown with over 6% GDP over a decade with a growing demographic bulge the country faces an absence of ready to use talent. While ICT/ITES stands at the top of potential sectors – the potential would stay unmet if we cannot develop our abilities at the same pace with up-to-date skills. Stronger industry-academia linkage is needed to build talent pipelines and create complementary industry expertise. At the same time, the curriculum has to reflect the more critical thinking and communication components geared towards to set up small businesses that would accelerate employment creation.
Bangladesh is at a crossroads waiting to drive into the highway leading to advanced economies. Hence it’s imperative we optimize our resources and strategic intent so that we focus on the right verticals and position ourselves as the “heart of Asia.”
