Country Private Sector Diagnostic

Creating Markets in Bangladesh: Country Private Sector Diagnostic

June 21, 2021

Unleashing the Private Sector to Sustain Development Success

Bangladesh has been a development success story. A remarkable export-oriented expansion of the garments sector and robust inflows of remittances propelled strong economic growth and rapid poverty reduction. Now the country seeks to graduate from the Least Developed Country group in 2026 and become an upper-middle-income economy by 2030. However, the current growth model is reaching its limits. GDP growth is at risk of slowing down, as contribution to growth from exports has declined and job creation stalled—when 2.5 million people enter the labor force every year. Going forward, it will be important to revitalize growth as prominent development challenges remain. Around 40 million Bangladeshi, or one quarter of population, live below the poverty line. The country faces some of the highest climate risks in the world, and Dhaka is one of the largest most polluted and congested cities in the world.

Bangladesh urgently needs to embark on a new round of reforms to support a more competitive, diversified, and outward-oriented private sector that can drive growth and create jobs. Within a comprehensive program of reforms, the CPSD prioritizes three: (a) creating a more favorable trade and investment environment; (b) restructuring and modernizing the financial sector; and (c) removing infrastructure bottlenecks. The CPSD specifically highlights the need to reduce domestic market protection, move away from relationship-based approaches in policy making, and address banking sector vulnerabilities. It identifies entry points and reforms to enable strategic private investment to strengthen transport and logistics, address problems in power transmission, and support greening of the energy mix. It also explores promising opportunities for private investment in sectors that can generate jobs at a large scale in the near-to medium term, such as light manufacturing and agribusiness. Finally, as the COVID-19 pandemic has exposed the weaknesses of the healthcare system in the country, the CPSD offers advice on how to improve service delivery through private sector solutions such as public-private partnerships and MedTech.