Dhaka, Bangladesh, June 23, 2021— Bangladesh needs to embark on a new round of reforms to strengthen and modernize the private sector in a bid to unleash the country's potential to drive diversified, export-led growth and create jobs, according to a new World Bank Group report.
The Bangladesh Country Private Sector Diagnostic (CPSD) report, prepared by IFC and the World Bank, says while Bangladesh has been one of the biggest development success stories in recent decades, it's now time to switch gears to meet ambitions to transform into an upper middle-income country in the next decade.
"Bangladesh had a positive GDP growth rate last year despite the adverse impact of the COVID-19 pandemic and it was the only country in South Asia which did not experience a recession. We have prepared the Eighth Five Year Plan keeping all the challenges of the COVID-19 pandemic in mind," said Salman F Rahman, Private Sector Industry and Investment Adviser to the Honorable Prime Minister. "The CPSD recommendations are well aligned with the priorities of the government's Eighth Five Year plan for setting a trajectory towards a prosperous Bangladesh by 2041."
"The pandemic has hit Bangladesh hard and as the country recovers from COVID-19, the need for reforms will become even more compelling. Finding new sources of income and growth will be an urgent priority," said Alfonso Garcia Mora, IFC's Vice President Asia and Pacific. "The private sector, which already accounts for more than 70 percent of all investment in Bangladesh, supported by a strong financial sector, will need to play an important role in spurring the recovery so the country can grow, export and create quality jobs."
The report says the successful development of the ready-made garment (RMG) sector, which alone created more than 4 million jobs, along with the strong inflow of remittances, supported by prudent government policy choices, have been the key growth engines of Bangladesh's strong and resilient growth, even during the pandemic outbreak."
"As the world's second largest exporter, readymade garments have contributed significantly to Bangladesh's economic growth. For a more resilient, inclusive and sustainable growth, Bangladesh will need to diversify its export basket and develop a robust and sophisticated private sector, relevant in the post–COVID-19 recovery phase when public resources will be needed most in the social sectors," said Mercy Tembon, World Bank's Country Director for Bangladesh and Bhutan.
The report says key priority areas for the reform agenda include creating a favorable trade and investment environment for domestic and foreign investors, modernizing and expanding the financial sector and removing impediments for developing infrastructure. Transport and logistics, energy, financial services, light manufacturing, agribusiness, healthcare and pharmaceuticals sectors are among those with the strongest potential for private investment that could play a significant role in boosting economic growth.
"It's clear the private sector has an important role to play to meet the rising demand for quality healthcare and improving the efficiency of delivering health services, as health financing in the country is low compared to others at a similar level of development," said Wendy Werner, IFC Country Manager for Bangladesh, Bhutan, and Nepal. "Bangladesh could also target high-end markets and introduce new technology in the ready-made garment sector, and seize opportunities in footwear, leather electrical goods, and agribusiness exports."
The government of Bangladesh's Perspective Plan 2021–41 sets the objective of becoming an upper-middle-income country by 2031, along with full employment and the elimination of extreme poverty. As the CPSD report points out, challenges persist with more than 40 million Bangladeshis still living below the poverty line today, and nearly half the population vulnerable to falling back into poverty.
The private sector is responsible for 90 percent of jobs in the developing world. It is therefore critical to boost development of a broad-based private sector.
The findings of the report will be used to craft IFC's strategic inputs for the World Bank Group's (WBG) new Country Partnership Framework with the government of Bangladesh, paving the way for joint programming to create markets and unlock private sector potential.
The full Bangladesh CPSD can be downloaded here: http://wrld.bg/kAov50Fgqjt
About the Country Private Sector Diagnostic (CPSD)
The World Bank Group's Country Private Sector Diagnostics aim to identify sectors where private sector solutions can create or expand markets and make substantial contributions to development impact. The diagnostics use a structured approach to analyze key sectors with unrealized private sector potential in each country, select several sectors for deeper analysis, and make recommendations for policy action. The sector analyses, conducted with significant input from teams across the World Bank Group and from external partners including governments, provide valuable information on the challenges and opportunities to better leverage the private sector to achieve developmental objectives. The CPSD aligns with the World Bank Group's Maximizing Finance for Development (MFD) approach, which looks to private sector solutions to reach the 2030 Sustainable Development Goals.
About IFC
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2020, we invested $22 billion in private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org.
About the World Bank Group
The World Bank Group plays a key role in the global effort to end extreme poverty and boost shared prosperity. It consists of five institutions: the World Bank, including the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Working together in more than 100 countries, these institutions provide financing, advice, and other solutions that enable countries to address the most urgent challenges of development.
For more information, please visit www.worldbank.org, www.miga.org, and www.ifc.org.
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