Under the Banyan Tree - Bangladesh: Introducing a sleeping giant
Aug 24, 2023
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Exploring the economic potential of Bangladesh, including its GDP growth rate and foreign direct investments. Discussion on the influx of tech companies and the role of the textile industry. Exploring Bangladesh as a consumer market and its future growth potential. Challenges posed by floor prices on securities and their impact on the liquidity of the market. Discussion on current challenges faced by Bangladesh and its potential to become a thriving market.
Bangladesh's impressive GDP growth, with zero years of contraction since 1971, positions it as an attractive frontier market for foreign investors.
Bangladesh's diversification from textiles to tech and other sectors presents earning growth potentials, but challenges such as liquidity issues and technical barriers need to be addressed to attract more investors.
Deep dives
Bangladesh: A Compelling Long-term Growth Story
Bangladesh is one of the most fascinating economies in the Asian market, with a strong macroeconomic scenario and impressive GDP growth. In fact, since its independence in 1971, Bangladesh has not experienced a single year of GDP contraction. With a growth rate of over 6% since 2010, it has surpassed India in terms of GDP per capita. Bangladesh is attracting foreign direct investments due to its shifting supply chain and is becoming a major consumer market. Its young population, with half below 25 years old, provides a vast labor supply. The high female labor participation rate and investment in education contribute to the expanding consumer market, making it one of the fastest rising markets globally.
Bangladesh's Evolving Role in the Global Supply Chain
Bangladesh is benefitting from the 'China plus one' strategy, as companies diversify their manufacturing locations. Initially known for its textile industry, Bangladesh is now attracting tech companies, architectural design, and other sectors. While the equity market is still small and concentrated, there are strong earnings growth potential and opportunities. However, there are technical challenges, such as the introduction of floor prices, affecting market liquidity. To attract more investors, the local regulator needs to address these issues and align with global market standards.
Challenges and Future Outlook for Bangladesh
Despite its compelling growth story, Bangladesh faces challenges. Power shortages, dependency on gas prices, and the need for macro-level reforms, including tax collections and foreign currency trading, impact the economy. However, as seen in Vietnam, addressing these challenges and proper reforms can lead to immense growth potential. In the next decade, Bangladesh has the potential to become one of the strongest markets, attracting investors and emerging as a key player in the global economy.
Herald van der Linde is joined by fellow Asia Equity Strategist Prerna Garg for a broad discussion on the macro and micro factors attracting investors to one of the region's key frontier markets. This podcast is also available on Apple Podcasts http://grp.hsbc/UnderTheBanyanTree_Apple and Spotify http://grp.hsbc/UnderTheBanyanTree_Spotify.