With an age less than 50 years and more than 43% of its population under the age of 25, Bangladesh is a young country in more ways than one, a major competitive advantage considering that more than half of its population of 160 million are in prime working ages (15-54). Although the RMG sector remains dominant in the nation’s contribution to GDP and workforce, ICT (Information and Communications Technology) is the new underdog that maybe soon to catch up due to large foreign investments, government incentives, and favorable policies for the industry. Unlike other industries however, ICT has the potential to directly impact and transform other markets given the overreaching effects of automation, AI, big data, and advanced analytics is having in other countries throughout the world. Basis opens a Japan Desk
However, the question for Bangladesh, remains not whether the country will be able to achieve its goal for 2021 for the ICT industry of $5bn in exports, employing at least 2 million; with its contribution to the GDP to be at least 5 percent.
BASIS (Bangladesh Association of Software and Information Services) Japan Desk, will work specifically on the Japan market, and was launched to expand the business of Bangladeshi companies in Japan and to increase export earnings. The desk will work on B-to-B matchmaking, connecting with Japanese IT companies, research on the Japan market, participation in all events held in Japan, grooming sessions on Japanese business and culture, informing about new business opportunities coming from Japan and so on.
Bangladesh’s ICT players are slowly carving a space for themselves in that market over the decade, spearheaded by Mahboob Zaman during his time as the president of BASIS. Today, Bangladesh’s annual exports of ICT products to Japan amount to about Tk 100 crore. In the last couple of years, Japan has been a large market for Bangladesh’s ICT sector. Basis opens a Japan Desk
Currently, Bangladeshi IT and IT-enabled services (ITeS) firms generate almost 35 percent of its export revenue from the U.S., 15 percent from the U.K., followed by several EU countries such as Denmark and the Netherlands. Although the industry can operate remotely by its nature, the impact of the pandemic is still felt due to stuttering business orders from the end clients. With its dependence on North American and European companies, there has been a general fall in outsourcing given the spread of Covid-19 in these regions. Covid-19 possesses a unique challenge for the IT industry of Bangladesh as it is only in the growth stage now. Industry insiders expect the overall revenue for the 2020 year to fall by 20-25 percent due to the pandemic. Basis opens a Japan Desk
This further bolsters the argument of diversifying the export market for the local ICT industry. Moreover, the global coronavirus pandemic has further opened doors for local firms in Japan, which is keen on shifting its associated businesses to destinations other than China. The Japanese government has already decided to move its companies to other destinations and for that, they have declared a stimulus package of $2.43 billion. This prompted 24 companies to move to Vietnam, 11 to Hong Kong, 3 to India, and only 2 to Bangladesh. Basis opens a Japan Desk
There is no doubt that Bangladesh needs to do much more to attract Japanese and other foreign investors in the ICT sector. The government has been working relentlessly to build “Digital Bangladesh”, an integral part of its Vision 2021. Plus, the Bangladesh Hi-Tech Park Authority was formed with the vision to ensure sustainable development and proliferation of IT or Hi-Tech Industry in the country. Given the potential of the ICT sector in Bangladesh, it can work as a major economic driver. Basis opens a Japan Desk
According to a McKinsey report, annual global spending on external IT services was approximately $900bn in 2019. Despite the many advantages of Bangladesh, India remains the global giant in IT outsourcing, with the IT export market set at $150bn, but tides are changing due to the IT industry’s high turbulence. The growth of the IT export market in India has also been consistently declining from 18.5% in 2011 to 8-10% in 2017. And if there’s one thing to learn from the decline from Bangladesh’s neighbor, it’s that to achieve long-term sustainability, IT outsourcing businesses need to focus more on being a business partner to their clients than a temporary IT provider. This includes developing a shared understanding of business outcomes, long term relationships, active collaboration on critical IT-architecture decisions, transformation with clear planning and action, and win-win contract mechanisms.
With a sizable young workforce and high-cost competitiveness (20-30% less than in India or Philippines) the country is estimated to only strengthen with the completion of IT parks, a major key value proposition for companies looking to outsource or offshore operations. Leading global IT service providers like Wipro, IBM, TCS, NTT Data, Infosys, and WPP have already entered the market through delivery center set-ups and joint ventures with local companies. Despite this, the IT-ITeS industry remains significantly smaller than its main competitors (India & Philippines) and has yet to reach the growth phase in its industry life cycle. However, once it arrives at this destination, we are likely to see greater growth due to favorable government policies and foreign investments (Russia invested $100m in 2018). In essence, Bangladesh is an upcoming hotspot for ICT outsourcing, where it’s speed to reach that position depends on its ability to develop its talent capital and infrastructure to compete in the global platform.