Home ›› 11 Dec 2022 ›› Editorial
The report published by the Boston Consulting Group [BCG] in November 2022 on the future trend of the Bangladesh economy manifests the emerging role of the private sector in attaining a trillion-dollar economy in the near future. BCG, established in 1963, reviews the trend in emerging market economies and identifies the driving forces that shape the economy on a sustained growth path. The study by BCG focuses on Bangladesh’s economic aspects and how the country has fared well despite setbacks in recent years. The mainspring of the growth is the strength of Bangladesh’s burgeoning consumer population in the Middle and Affluent Class (MAC) and the consistent growth path in the aftermath of the democratic transition from 1990. With the historical average GDP growth of 6.6 during the last six years, the economy could reach the target of USD 1 trillion in the official exchange rate [OER] in 2040, giving a conservative growth of 5 per cent. However, given a higher GDP growth rate with a fair global growth prospect, it would take less time. The current GDP is USD 416 billion.
The eight driving forces are; fair consumer confidence, the rise of a consumer society, burgeoning youth power, the resilience of the economy in crisis, the hidden potentialities of the digital economy, the government’s massive investment in infrastructure, the emerging role of the private sector and the burgeoning gig economy in the informal labor market. The resilience is observed in growth momentum during the financial crisis of 2007-09 and the GDP growth during the COVID-19 pandemic. With GDP growth of 5.5 per cent, Bangladesh was ahead of India and Indonesia and the average low- Middle-income average of 4.4 per cent. Bangladesh and Vietnam had positive GDP growth in 2020, with an increase of 3.4 and 2.9 per cent, respectively.
Consumerism with fair consumer confidence encourages the creation of a vibrant economy, stimulates economic growth, and encourages innovation. However, consumer confidence in an uncertain economic environment retards consumerism, but the study revealed that 57 per cent of respondents expected to regain faith when the global economy improves. The last three decades observed a growing community of consumer society and a resilient economy through political stability and consistency in the pursuance of important macroeconomic and social policies by the elected governments. As a result, the country is more open and holds a respectable position in globalization. RMG, pharmaceutical, electronic, and agricultural products replace the traditional export basket. The endogenous economy is mainly driven by a vibrant consumer society constituting 69 per cent of the GDP, which also works as a hedge against uncertainty in the global economic environment. The middle class is emerging with purchasing power that values foreign brands and is hopping on to the digital bandwagon in their millions. The report, though, ignored the plight of the bottom quartile of the population; the report revealed data on income distribution patterns. The average income of targeted families, which falls into the seven per cent of the population that constitutes the middle class, have an average annual income of USD 5,000. The varieties of consumer products, the consumption of luxurious products, and the transformation of products into essential items in the consumption basket manifest the metamorphosis in this class. The proliferation of banking facilities like credit card purchases and accessible installment and affordable loans have seen the consumer market record stupendous sales in consumer products ranging from foreign cosmetics, air-coolers, and refrigerators to brand cars.
Seven per cent of the population with purchasing power translates into roughly 11 million people who are “middle and affluent consumers” (MAC) and are seen as confident consumers with an expectation of seeing their incomes increase positively in the next fiscal. Yet, another undercurrent differentiates the average Bangladeshi consumer from their Asian counterparts, i.e., the aversion towards accumulating debt they may or may not be able to repay. HSBC, in a report, predicts that the consumer society would be among the first ten in global ranking above the rank of the United Kingdom and Germany. The cohort of MAC consumer society in 2025 will be 340 million from 140 million in 2020. Thus, the growth of the consumer class of Bangladesh would exceed the consumer society of the Philippines, Thailand, India, and Indonesia
BCG lists seven companies in the private sector that could be instrumental in propelling growth through product diversification and innovation. The companies are Walton. PRAN R.F.L. Summit group, BKash, Brac Bank PHP, and Renata limited. Walton, which enjoys trademark licenses in 57 countries, enjoys a monopoly position in electronic products with reasonable competitive prices. The PRAN-RFL group is the largest agribusiness and plastic product manufacturer in Bangladesh, which exports its product to 138 countries. B Kash emerged as a mobile financial service network with exponential growth from a paltry USD 1.4 billion to USD 3.4 billion in four years. The report also highlighted the role of PHP as a ship-breaking industry, and Brac Bank as a role model for SME loans. The increasing number of startup companies is also flourishing the private sector role in the growth process. Over one thousand start-up companies encompass dynamic sectors such as e-commerce, logistics, and mobile financial service networks, and many units are eligible for Unicorn, with an asset value of USD 1 billion. “Bangladesh is now a role model for other developing economies. The country has achieved much, especially due to the contribution of the local champions. Corporate transformation and notable contributions from the country’s private sector have driven this growth. Our study has also outlined the next steps for the local champions to achieve their bold visions and continue to drive economic growth for the country.”
The writer teaches at BRAC University and BIDS as an adjunct Faculty in the Master’s Program in Economics. He can be contacted at mirobaidurr7@gmail.com.
