In November 2022, the Boston Consulting Group (BCG) published a report titled: The Trillion-Dollar Prize Local Champions Leading the Way. The American consulting firm claimed that Bangladesh is set to emerge as a trillion-dollar economy powered by an ambitious business community by 2040.
BCG conducted an extensive study to assess the approach to doing business of Bangladeshi companies with an annual turnover of USD 300 Million to 3 Billion. In terms of the information gathered and the findings suggested, we picked a few points to share our perspectives on.
The Middle and Affluent Class population of Bangladesh is currently exhibiting a faster growth than its Asian peers, which is projected to position Bangladesh as the 9th largest consumer market globally.
The present demography of our country is also a form of great opportunity. With a median age of 28 years, the nation is home to a younger workforce than Indonesia (31), India (29), Thailand (39), and Vietnam (32). Enhancing the skills and knowledge of this workforce is essential to generate the maximum value out of this opportunity.
Bangladesh is home to 650,000 Freelancers, a large part of whom bring in foreign earnings to the country. Apart from flexibility in hours, higher earning potential is also a reason why people choose freelancing over formal employment.
While good for the economy, a high number of freelancers might also indicate a mismatch between the skills expected from and the respective compensation offered to potential recruits. Although a thriving gig economy addresses the problem, its dominance might actually be an outcome of the mismatch in the employment sector.
Bangladesh has grown faster than its contemporary economies in the last 10 years in terms of output per worker indicating an increased capability of the labor force. However, the higher growth could also have resulted from a relatively delayed adoption of tech and subsequently lesser need for human resources, which is supposed to drive up the per head output value. This assumption falls in line with the country’s low standing in the global innovation index. The ratio of spending on R&D against the total GDP of the country is almost 1/7th of the global average.
Over the last year, an impressive new wave of startups is also surging towards unicorn status, with enterprises such as ShopUp, ChalDal, and Pathao enjoying robust growth. The government is also taking an active role to promote start-ups through ICT Division’s flagship venture capital fund Startup Bangladesh.
The nation has a higher savings rate compared to the global average which indicates economic resilience and poses an opportunity for more optimized capital utilization. Efforts towards increasing formal financial inclusion, particularly through digital means can be explored to effectively leverage these savings for the growth of the economy.
The report primarily claims that Bangladesh will grow to a trillion-dollar economy by 2040. From the position the economy is currently in, it will take a CAGR of 4.7% for the country to achieve this feat. To put things in perspective, the CAGR of the same for the past 5 years was 9.4%.
Looking at the numbers, it is easy to be convinced of the outcome, but there are a number of other factors that need to be considered.
Firstly, the report does not take into account the ongoing Ukraine-Russia crisis and its impact on Bangladesh. Supply chain disruptions, energy crises, and price hikes of essentials pose significant challenges in terms of the growth of the economy. The longevity and outcome of the war are therefore crucial in determining the direction of growth.
Secondly, the report also fails to mention the challenges the economy will face with its prospective graduation from an LDC. Loss of GSP facilities and DFQF facilities with its top trading partners and increased price of labor will raise the cost of production and affect the export earning potential of the country. Upon graduation, the flow of foreign grants and official development assistance (ODAs) are expected to shift toward other LDCs, which is also a concern for the economy.
The methodology of the report is based on interviews with Bangladeshi companies with an annual turnover of USD 300 Million to 3 Billion, and a framework that is generated based on the success factors of similar companies in the global market.
The report finds that many of these factors are observable within the Bangladeshi “local champions” who were interviewed, an observation used to support the report’s primary claim of Bangladesh transforming into a trillion-dollar economy by 2040.
One of the potential issues with this logical progression is that it only focuses on large firms over a certain threshold in terms of revenue. SMEs contribute around 20.5% to the total GDP of Bangladesh . Hence, the performance of these enterprises is also a crucial determinant of the direction the economy is headed towards.
The report defines 3 strategic pillars of success: growing beyond, operating beyond, and organizing beyond, focusing on strategic domestic and international collaboration. BCG also identifies a few companies whose operations represent these factors. However, for large-scale adoption of these pillars by domestic companies, improvement of the “doing business” environment of Bangladesh is crucial.
Before its discontinuation, as per the last Doing Business Index (2020), Bangladesh ranked poorly at 168th place . Foreign entities, particularly, have apprehensions regarding the repatriation of proceeds, red tape, bureaucracy, and concerns regarding achieving legal resolutions. The existence of these perceptions in the global market acts as a barrier to domestic entities establishing their global footprint.
As Bangladesh graduates from LDC status in 2026, the country will lose its competitive advantage of low labor costs. Hence, it’s high time that the country focused on innovation, upskilling workers, and developing expertise in high-value offerings with better margins to stay competitive in the global market. It is also important for the country to improve its business environment to encourage and facilitate international collaborations and investments.
The report identifies the key success drivers of successful businesses. Hence, the emerging entities of Bangladesh can learn from the recommendations of the publication, centered around raising international capital, forming global alliances, ensuring supply security through diversification, boosting innovation and productivity, and leveraging the growing digital landscape to fully utilize the country’s huge growth potential.
Priyo Pranto, Business Analyst at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: [email protected]
 Institute of Chartered Accountants of Bangladesh, 2021
 Doing Business Index (2020)
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