Bangladesh needs to revamp economic model: OECD report

Riding on an impressive annual GDP growth rate of 6 per cent since the 2000s, Bangladesh showcases remarkable fortitude amid the COVID-19 pandemic. A significant pivot has been seen with manufacturing currently accounting for 22 per cent of the GDP, up from 9 per cent in the 1970s. The readymade garment (RMG) sector stands as the cornerstone, encapsulating 57 per cent of domestic value in manufacturing and offering 72 per cent of the jobs, predominantly held by women.

The RMG sector, sourcing 84 per cent of the country’s exports, has rocketed Bangladesh to the position of the second largest RMG exporter globally. This sector has a pronounced reliance on raw materials imported from Asia, channelling its output to prestigious brands in Europe and North America. Despite this, Bangladesh maintains a narrow focus on twenty RMG products, spotlighting a grave need for diversification, as per the report.

The report elucidated a largely untapped realm of innovation in Bangladesh, with a scant 1.2 per cent of firms allocating budget for R&D. The country trails behind with a mere 2.6 per cent of firms adopting technologies under foreign licenses. The OECD urged fostering a more substantial Foreign Direct Investment (FDI) landscape, which presently accounts for only 0.7 per cent of the GDP, starkly contrasted by Viet Nam’s 6 per cent.

As Bangladesh strides towards graduating from the LDC status in 2026, it confronts a melange of internal and external challenges including a single export sector reliance and vulnerability to natural calamities. The impending LDC graduation accentuates the need for astute policy amendments and fostering robust international partnerships, particularly in enhancing regional integration.

To cement a sustainable future, Bangladesh is urged to steer away from a price competitiveness anchored economic model to embrace a quality and innovation-driven approach. Modernising policy tools to foster learning and risk-taking, alongside nurturing new business avenues, stands pivotal.

The government aspires to attain high-income status by 2041, leveraging its strategic geographical placement and a vibrant, young workforce. The report emphasised that realising this ambition hinges on comprehensive reforms, a synergy between the government, private sector, and international allies, coupled with an unyielding commitment to transparency and accountability.

ALCHEMPro News Desk (DP)