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Posted:07Jan,201600:00:00

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What2016holdsforBangladesheconomy
AshekIshtiakHaq

TheBangladesheconomyisexpectedtoshowstronggrowthin2016.BothInternationalMonetaryFund(6.8percent)
andAsianDevelopmentBank(6.7percent)haverevisedtheirgrowthforecastsalthoughnoneoftheseisasambitious
asthatofthegovernmentwhichisprojecting7.0percentpluseconomicgrowthrate.Inflationisexpectedtoremainat
around 6.2 per cent mark. ADB said: "The GDP growth forecast for FY2016 is revised somewhat higher still with the
expectationthatexportswillgrowwithcontinuedeconomicrecoveryintheUSandtheeuroarea.Strongexpansionin
remittanceswillboostconsumptiondemand,privateandpublicinvestmentwillpickupasthebusinessclimateimproves
underastabilisingpoliticalsituation,andspendingwillincreaseundertheannualdevelopmentprogramme".WorldBank
has said something similar: "The political dynamics seems to be the main uncertainty for Bangladesh's otherwise
favourable economy underpinned by strong macroeconomic stability, prospects of recovery in the US and Euro Zone,
andstrongdomesticdemand".

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However, the country is passing through an overall pessimistic

investment climate as huge amounts of idle money are piled up in
thebankingsystem.Apartfromthat,theBangladeshCountryRisk
Report by Fitch says that "the recent series of domestic terror
attacksinBangladeshcouldposedownsideriskstopoliticalstability
as the ruling Awami League appears to be trying to gain political
mileage by putting the blame on the opposition Bangladesh
Nationalist Party. The rise of domestic security threats can cause
realturmoilforthelocalindustries."
Nowlet'slookatsomeofthemostimportantsectors.
READYMADE GARMENT SECTOR: The sector is expected to show
positiveresult.Therelativelystablemarketofcottonwillhelpkeep
the cost down. Low wage rate will attract a lot of firms which are finding China to be too expensive. The economic
recoveryinthemajortradingpartnerswillhelptoboostdemand.AccordingtoMckinseyinitsrecentlypublishedreport
titled'Sourcinginavolatileworld',"ForinternationalCPOs,Bangladeshremainsthetopfuturesourcingdestination,as
48percentofrespondentsputitinthetop3upandcomingsourcingmarkets.Sixtytwopercentofourrespondents
saidtheyintendedtoincreasetheirsourcingvaluefromBangladeshoverthenextfiveyears,indicatingthattheforecast
annualgrowthrateof7to9percentinour2011reportstillstands".
POWER:Thissectorwillcontinuetogettheforemostpriorityasthebusinesscommunitysaysavailabilityofthisisthe
most crucial factor for business growth and further investment. In the next five years, the government plans to add
12,863 MW more capacity, 40 per cent of which will come from the private sector. The sector will require Tk 1,650
billion investments in next five years, half of which will come from the public sector. A nuclearbased power plant,
Rooppur power project, will be established in cooperation with Russia. By 2018, it expects to generate 1,000 MW of
electricityandby2020,itscapacitywillreach2,000MW.
CEMENTANDSTEEL:Asinfrastructureisamajorpriority,thegovernmentwillcontinuetoundertakebigprojects.The
governmentisthebiggestcustomerforcementandrod.Itsprojectsconsumeabout40percentofthetotalproduce.
Theindustryhassufficientcapacitytoaddresstheadditionaldemand.Thismeans,ratherthantermfinanceinvestment
forBMREtheywillneedworkingcapitalsupporttomeetadditionalinventoriesandreceivables.Themajorprojectswhich
are on their way are Padma bridge, metro rail, Paira deepsea port, 1,320 megawatt Rampal Power Plant, Matabari
1,200MWPowerPlant,1,000MWRooppurNuclearPowerPlant,LNGTerminalandDhakaElevatedExpressway.
REAL ESTATE: Amid falling apartment price, recent decision of the Bangladesh Bank to offer 50:50 financing for the
nonresidentBangladeshis(NRBs)maygivemuchneededboosttotheindustry.
CONSUMER GOODS: According to the Boston Consultancy Group, Bangladesh is one of the fastestgrowing markets

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worldwide. It projected that each year for the next decade, the annual income of around 2 million additional
Bangladeshis will reach $5,000 or more. This means that they will be earning enough to afford goods that offer
convenience and luxury. Although half of Bangladeshis still live at the socalled bottom of the pyramid, economists
estimatethatanother30millionto40millionwillmaketheleapfrompovertytotheentryrungsofthemiddleclassby
2025.Thecountryisexpectedtoreapdemocraticdividendwithapopulationof160+mconsumersofwhich64percent
arebetween1564yearsandwithamedianage24.2years.Rapidurbanisationwillbeanotherfactorthatwillplayan
important role. This huge customer base will crave: processed and semi processed food items, electronics, personal
vehiclee.g.motorcycle,airconditionersetc.
PHARMACEUTICAL INDUSTRY: Sales of generic drug is expected to treble (Tk 303 bn) by 2024 as WTOTRIP recently
granted the leastdeveloped countries an exemption until 2033 from obligations to implement patents and data
protectionforpharmaceuticalproducts.Thedomesticmarketisgrowingby11.73percenteachyear.Exportisexpected
toreachUS$2bninafewyears.
FOOTWEAR,LEATHERANDLEATHERGOODS:Theindustrycrossed$1bnexportmarktwiceinarow.AsChina'sfocusis
movingawayfromthesector,Bangladeshhasanopportunitytograbmoreshares.By2020,theindustrytargetisto
export$5bnworthofleather
MOTORCYCLEINDUSTRY:Thepositivedemographicandeconomicchangesthatthecountryisgoingthroughwillcause
theindustrytogrowat25percentannuallyforthenextfiveyears.Thisalongwiththeregulatorychanges(moretax
onimporters)hascausedthebiggerplayerstosetupshopslocally.
PLASTICPRODUCTS:ThisisanotherindustrythatcangainfromthewoeofChina.Theexporthasgrownby40percent
asthecountryhasexportedUS$250mnplasticproductstotheUSAandEurope.
SHIPBUILDING:WithChina'sappetiteforcommoditycoolingdownandtheworldsufferingfromeconomicslowdown,
theshippingindustrywillseeadropintrade.Theorderfornewshipsisexpectedtodryupwhichmaycausetroublefor
thisindustry.
SHIPBREAKING:ThedropinpricesofthebilletsduetocheapChineseimportswillnegativelyaffectthisindustry.
IT, APPS AND TECHNOLOGY: MTV recently named the new generation The Founders. Armed with a fresh university
degreeintechandbusinessmanyofthemareembarkingonthebravenewworldofsocialmediawheretheyareusing
smart phone apps to change the world. At the same time, 2016 may be the year when ebusiness takes off in
Bangladesh.However,decisionsuchasrestrictingsocialmediaaccesscanniptheindustryinthebud.
Thegovernmenthasatalltaskupahead.Theyneedtorestorethepositiveinvestmentoutlookandthatwillcomewith
the resolution of the political quagmire that we have witnessed. At the same time they will need to carry on their
excellentefforttoeradicatethethreatofterrorisminthecountry.

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Thewriter,anMBAfromIBA,DU,isaMarketAnalystataprivatecommercialbank.
ashanto123@yahoo.com

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