Bangladesh Innovation Opportunities

by: Tatjana Guznajeva, Technopolis Group

Why should I read this document?

When confronted with the differences between your own market and the market of Bangladesh you will likely feel that you have to adapt your product/service significantly to make it fit the preferences and expendable income of local people. While many may see this as a challenge this can also proof to be a great opportunity for your company! Adapting to a new market, like Bangladesh, will allow your company to innovate. Not only will operating in Bangladesh lead to new insights to be more successful in Bangladesh, you will most likely also pick up on ideas to be more successful in your home market.

This document provides a short overview of innovation aspects, business opportunities and challenges in Bangladesh. It will also give advice on best practices for starting and developing an innovative business venture, considering Bangladesh’s country context. May it help you to explore Bangladesh and lead you to innovation and success.

Opportunities and tips for innovation and doing business in Bangladesh

Bangladesh has a growing market, stable economic growth rate of around 5% per year, developing industrial sector, and lower competition than in other emerging markets.
Bangladesh has the largest cell/mobile phone market in South Asia, telecommunications sector is rapidly growing in Bangladesh. Consider developing innovative products and services in the telecommunication sector and using mobile phones for business operations, trade and marketing.
The sectors with the highest economic potential are energy (gas and petroleum), pharmaceutical, IT, textiles and apparel, banking, as well as, labour-intensive industries.
The agricultural sector is in need of innovation, the local market lacks agriculture equipment, inputs (fertilizers, seeds), dairy/fish/canning processing technologies.
Many people in Bangladesh speak English, particularly, in the business sector. Hence, it is relatively easy for a foreign company to start a business and to collaborate with other local enterprises.
If you wish to produce or to trade in the local market, carefully examine consumer preferences and estimate your potential customer base, since Bangladesh suffers from a high poverty rate (31.5% live below the national poverty line). Income and consumption levels in Dhaka are considerably higher than in other urban areas.
Bangladesh and India have close trade and political relations, therefore Bangladeshi companies enjoy facilitated access to the large Indian market and vice versa.
The government of Bangladesh has introduced several benefits for companies which operate in the special economic zones. Some of the benefits include tax holidays, exemptions of VAT, custom and stamp duties, loans for foreign companies, citizenship for large investors and others.
The motor vehicle path and the coastal shipping line in South Asia are developing, therefore Bangladesh is becoming a good place for trade and transit of goods.
The tourist sector in Bangladesh is underdeveloped, whereas the interest in famous archaeological sites is growing.

On Level 2 you can find information about innovation climate in Bangladesh, while Level 3 will tell you more about business activities in Bangladesh.

This page will tell you about the innovation ecosystem, major technology sectors, innovation and business practices in Bangladesh.

Innovation ecosystem

The concept of social innovation (strategies that aim to meet social needs) was born in Bangladesh. Due to social innovation, the poverty rate has dropped significantly, and the population became enthusiastic about novel, technological ideas. Bangladesh does not have a well-developed innovation ecosystem, however, this country provides a very supportive network of young entrepreneurs for anyone who wishes to start an innovative business or social venture. If a business venture is expected to have great value for the society, the entire community and local government may support and invest into a new business idea.

The Bangladeshi government tries to stimulate innovation through various policies and state-funded programmes, however, without state support the access to finance is difficult. Foreign investors and venture capital organisations start to identify opportunities in Bangladesh, therefore the influx of capital funds has increased in recent years.

The collaboration between universities, companies and consumers in Bangladesh is relatively weak. Some local companies approach foreign universities, research institutes to get expert advice on business development, as Bangladesh has a lack of local professionals that have experience in development of innovative products.

Innovation sectors and technology

In the last few years, Bangladesh has started to undergo digital transformation with Dhaka being the centre of innovation. The IT sector is the major driver of economic change, as around 1500+ software and IT-related companies are currently operating in the country. Technologies that promote e-commerce, online healthcare, public-sector services as well as mobile applications are most promising for business development.

Innovation in some labour-intensive sectors, such as textile and garment industry, is faced with opposition, due to potentially large-scale (negative) impact on employment, a need for reskilling a large proportion of the workforce. However, the agricultural sector is more active in exploring novel solutions. Among the technologies that are significantly transforming the agricultural sector are inexpensive axial flow pumps, reapers for mechanical harvesting, and seed fertilizer drills.

In light of environmental challenges, the country is exploring opportunities in green innovation, shifting to efficient energy use, renewable energy sources, technologies that reduce accidents and help to mitigate hazards.

Innovation culture and practices

The current generation of entrepreneurs in Bangladesh is young, dynamic and optimistic about economic prospects of their country. People embrace new technologies, ideas and are willing to develop novel products and services. However, due to fear of business risks, lack of financial resources and experience in development of innovative products, many entrepreneurs in Bangladesh choose to imitate foreign products rather than invest in development of new solutions.

The Bangladeshi government encourages the development of an entrepreneurial mindset through support to start-ups. However, the government aims to direct entrepreneurs towards social innovation that will deliver both economic and social solutions to local challenges.

This page highlights major economic sectors and iconic products, shows business trends and explains how easy it is to do business in Bangladesh. In addition, you will find the list of websites, which provide some hands-on information.

What is the country known for?

Sectors

Textile, clothing, food, electronics, pharmaceutical, chemical, steel, shipbuilding, construction, leather, energy and ceramics. Despite that the service and industrial sectors account for 56.3% and 28.6% respectively, the agricultural sector represents only 15.1% but employs around 47% of population.

Iconic products

Rice, potato, clothing, accessories, tropical fruits, jute products, fish, ceramic tableware, HFA and CFC inhalers, nasal sprays, software products, cosmetics, ships and vessels.

How easy is it to do business in Bangladesh?

	Bangladesh	EU average	Emerging markets average
Overall - ease of doing business	176	30	83

Bangladesh is a relatively underdeveloped area for doing business, in contrast to other emerging markets. The protection of investors and the process of starting a business in Bangladesh are comparable to other emerging markets. However, due to complex regulatory procedures, bureaucratic inefficiencies, corruption, social and political instabilities, poor physical and financial infrastructure, all processes related to doing business in Bangladesh are relatively complex, time-intensive and expensive.

As a result of a high poverty rate and growing inequality, crime is a significant problem in poor areas of major cities. In addition, Bangladesh regularly experiences natural disasters, such as floods, tornadoes, tropical cyclones. Thus, the country incurs substantial financial losses and experiences soil degradation. Such difficulties demotivate foreign entrepreneurs, but therefore there also is lower competition in the market. If you have a long-term perspective EU companies have the potential to gradually yield benefits from doing business in Bangladesh and become an important player on the market.

Business trends in Bangladesh

The domestic and international value chain networks in Bangladesh are relatively weak, primarily due to underdeveloped infrastructure. Internet connectivity in the country is low, however, e-commerce is growing and contributing to domestic and international supply chain development.

The main trade partners for Bangladesh are the European Union, the United States, China, India, Japan, Malaysia and Singapore. Amongst major export goods of Bangladesh are clothing, knitwear, agricultural products, footwear, leather goods, frozen food (mostly, seafood), and jute products. Bangladesh imports petroleum-based products, raw cotton, textiles, iron, steel, machinery and equipment, edible oil, chemical and plastic products.

The biggest share of expenditure of Bangladeshi population goes to food, housing (rent or house repair), education, health and entertainment/lifestyle goods (gifts, festivals, clothing, furniture, mobile phones). In Dhaka city people lead more luxurious lifestyles, spending around 20% of their total expenditure on additional health services, recreation, and salaries for maids/drivers/guards.

More hands-on info

Bangladesh National Portal (in 2017: http://www.bangladesh.gov.bd/index.php?lang=en)
European Commission: EU and Bangladesh (in 2017: http://ec.europa.eu/trade/policy/countries-and-regions/countries/banglad...)
Bangladesh Economic Zones Authority (in 2017: http://www.beza.gov.bd)
ICAEW: Doing business in Bangladesh (in 2017: https://www.icaew.com/library/subject-gateways/doing-business-in/bangladesh)
Bangladesh – Market Overview (in 2017: https://www.export.gov/article?series=a0pt0000000PAtGAAW&type=Country_Co...)
Bangladesh Bank: Central Bank of Bangladesh (in 2017: https://www.bb.org.bd/aboutus/regulationguideline/guidelist.php)

Bibliography

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Level 2:

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Level 3:

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