With a population of 164 million people (2019), the country has experienced considerable economic growth over the past years. Much of the economic growth is driven by a rapidly emerging private sector and low costs of production and workforce. As a result, Bangladesh offers an open and diverse market, which is well-positioned as a gateway to countries in the Asia-Pacific region, and that is characterized by an economic and legislative environment that is favourable to business.
Background: According to the World Bank, Bangladesh has experienced an annual GDP growth rate of 4%-8% over the past two decades, making it one of the fastest-growing economies in the world. This is mainly due to the readymade garment (RMG) market which represents around 12% of the country’s GDP and 84% of total exports. Despite the annual economic growth, it should be emphasised that, according to the latest data from Asian Development Bank, around one-fifth of the total population remains living below the poverty line.
Compared to leading economies in Asia (e.g. China and South Korea), innovation in the country is rather low. When considering expansion to Bangladesh, it is important to keep in mind that there is low public funding for research and innovation, and a lack of availability of local investment for high-risk innovative companies.
Background: Despite the strong economic growth experienced by Bangladesh, the country has largely failed to drive innovation to help ensure sustainable growth. Instead, the growth is mainly based on production with low added value. Bangladesh has been outperformed by all countries in the region in terms of innovation. In particular, according to the Global Innovation Index 2019, Bangladesh ranks 116th out of 129 countries, and it is placed last among the ten countries from Central and Southern Asia that were considered.
When approaching the Bangladesh market, foreign organisations can expect a young and increasingly digital-savvy population with strong entrepreneurial energy. Bangladesh has a good basis on which to transform the current innovation ecosystem into a global digital hub: a large population, a government increasingly committed to the adoption of new innovation policies, a fast-growing economy and generally improving infrastructure. Further, more than 25 Hi-Tech Parks are being developed in Bangladesh, including data centres, science labs, tech incubators.
Background: Educational institutions in the country are now creating curricula for the integration of technology, with more than 5,000 IT graduates each year. With limited opportunities for STEM graduates in Bangladesh’s traditional industries (due to the absence of large-scale industrialization), many young people are establishing ICT-enabled start-ups and finding innovative solutions to everyday business challenges.
As noted by the Regional Innovation Centre UNDP Asia-Pacific (2020), in the last ten years, internet penetration in Bangladesh has gone up 100 times, with 98% of the population having mobile phone connections and over 102 million people with access to the internet. In addition, Bangladesh is now the country with the highest number of adults that have a mobile money account (25 million), including 22% of the rural population.
Recently, digitalization has had a significant impact on the economy of Bangladesh, particularly on employment. Improved access to the internet has helped drive better access to the global market for the Bangladeshi population. As a result, it is notable that freelancing is an ever more popular career option for young Bangladeshis.
Background: Combined with low labour costs, digitalization has led Bangladesh to become the second-largest supplier of online labour, according to the Oxford Internet Institute. The ICT Division of Bangladesh figures show that around 650,000 freelancers are registered in the country, generating substantial annual revenues. Moreover, an assessment by UNCTAD from 2019 highlighted recent improvements in telecommunications infrastructure, trade logistics, payment solutions, laws and regulations, skills development and financing, which has accelerated e-commerce and spread the related benefits throughout the economy.
Bangladesh is one of the leading countries in the region in terms of ease of setting up a business. When starting a new business in Bangladesh, European stakeholders should expect a registration process lasting 15-30 days. Further, only limited obstacles to the acquisition of local companies by foreign investors can be expected.
Background: According to the Global Innovation Index (2020), starting a business in Bangladesh is easier than in the neighbouring countries Nepal, India and China. There are several ways to establish a business in Bangladesh, with the most common approach being setting up a limited liability company (LLC). This requires at least two shareholders, two directors and a minimum paid-up share capital. The reduced costs both in terms of monetary values and time are perceived as the main advantages in setting up a business in the country.
Many local innovative start-ups have difficulties with accessing local finance sources. According to the information from Light Castle Partners (2021), within a sample of 88 funded start-ups, only 7% (EUR 19 million) of the received funding was from local sources, with the remainder originating from abroad.
Background: Bangladesh mainly relies on the three distinct sets of financial institutions to cater for the financing needs of entrepreneurs: commercial banks; stocks; and NGOs operating with the financial market. According to an article from Dhaka University (2016) and a policy paper from the Asian Development Bank, the main difficulty in access to finance for start-ups in Bangladesh is the use of a codified risk assessment system that deters investment in small firms exposed to higher uncertain scenarios. Furthermore, the country does not have a separate stock market for promoting finance to innovative start-ups and small firms, and the regulatory environment related to NGO financing is often not suitable for highly innovative companies.
Much of the innovation activity in Bangladesh is centred around the capital Dhaka – which can be regarded as the main hub for the development of emerging technologies in the country, particularly Artificial Intelligence, Internet of Things and smart analytics for big data.
Background: The start-up ecosystem is concentrated in the area of Dhaka, with a few start-ups located in Chattogram and Gazipur. Due to growing pressure on the capital city in recent years, there have been efforts made to decentralize innovation with a number of incubation and accelerator programs nationwide. However, Dhaka remains the major innovation hub in Bangladesh and is home to the biggest domestic venture capital companies and incubators - such as Bangladesh Angels, Truvalu Enterprises, BYLC Ventures, Startup Dhaka Incubator, StartUpDhaka - and a number of the larger start-ups such as Sindabad, Augmendix and SOLshare.
Start-ups in the country range across a diverse set of sectors, among which the most prominent are FinTech, Online Service, Marketplace, Content/Media, Edutech, Ride-Sharing, Logistics, AgTech and Lifestyle Solutions.
Background: According to the report from Light Castle Partners (2020), the Bangladesh Start-up Ecosystem operates in various sectors, with over 1,000 start-ups in total. Every year, more than 200 start-ups are established, with the ICT sector leading the ecosystem and growing at an annual rate of 40% since 2010. In addition to the front-runner sectors mentioned above, the same report notes that EdTech and HealthTech are now also emerging as promising sectors, both in terms of investor interest and adoption of technology.
European organisations can partner with organisations and researchers from Bangladesh for collaborative R&I projects under the European Framework R&I programme, Horizon Europe. It should be noted that such collaboration will require the identification of suitable calls and projects.
Background: Organisations and researchers from Bangladesh are eligible to participate in Horizon Europe. According to the EU Cordis database data, however, organisations from Bangladesh only rarely participated in the previous European R&I Framework programme (Horizon 2020). Projects funded under Horizon 2020 that have included Bangladeshi organisations are SoNAR-Global, SHIGETECVAX, TB and Tobacco, PRESCRIP-TEC, ASILE, and SMART.
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