Bangladesh’s economic rise over the past two decades has been powered by industrial expansion, export growth, and rising energy consumption. Yet this growth model carries a structural vulnerability: increasing dependence on imported fuel. As domestic natural gas reserves decline, the country has become significantly more exposed to global energy markets—and to geopolitical tensions far beyond its borders.
Data from the Bangladesh Energy Regulatory Commission shows that Bangladesh now imports roughly 35–40% of its primary energy supply, including liquefied natural gas (LNG), crude oil, and refined petroleum products. This share has risen rapidly over the past decade as industrial demand surged, and domestic gas fields matured.
The geopolitical dimension of this dependence is often overlooked. A large portion of global oil and LNG shipments travels through the Strait of Hormuz, one of the most strategically sensitive maritime chokepoints in the world. According to the U.S. Energy Information Administration, around 20 million barrels of petroleum per day—nearly one-fifth of global oil trade—passes through the strait.
Any escalation of tensions in the Middle East therefore has immediate implications for global energy markets. Disruptions to shipping routes, insurance costs, or production in major Gulf exporters can quickly trigger supply shocks and price spikes. For energy-importing economies such as Bangladesh, these shocks can ripple directly into domestic electricity prices, industrial production costs, and overall economic stability.
The country’s industrial sector is particularly vulnerable. Manufacturing has become a central pillar of Bangladesh’s economy, contributing about 24–25% of GDP, according to the World Bank. Millions of jobs depend on the steady functioning of factories, supply chains, and export logistics.
Within this sector, the ready-made garments (RMG) industry plays an outsized role. According to the Bangladesh Garment Manufacturers and Exporters Association, garments account for over 80% of Bangladesh’s export earnings. The industry’s global competitiveness relies heavily on low production costs and consistent delivery schedules—both of which depend on reliable and affordable energy.
However, Bangladesh’s energy system is already under strain. Gas shortages have forced several power plants to operate below installed capacity, while industrial zones periodically experience electricity constraints. These pressures have intensified as the country increasingly relies on imported LNG to fill the gap between supply and demand.
Reliance on global spot markets has also increased Bangladesh’s exposure to price volatility. During recent global disruptions in energy markets, spot LNG prices surged dramatically—from roughly $10 per MMBtu to more than $25 per MMBtu within a relatively short period. For a country importing millions of tonnes of LNG annually, such price swings translate into billions of dollars in additional energy costs.
Higher fuel prices feed directly into electricity generation costs, which in turn raise industrial production expenses. Export-oriented sectors like garments, textiles, and light manufacturing operate in highly competitive global markets where margins are often thin. Even modest increases in energy costs can erode Bangladesh’s price advantage relative to competitors such as Vietnam, India, or Cambodia.
The macroeconomic consequences can be significant. Rising energy import bills put pressure on foreign exchange reserves and contribute to trade imbalances. Higher electricity costs can slow industrial expansion and discourage investment in energy-intensive sectors. In extreme scenarios, prolonged supply disruptions could delay export shipments, reduce factory output, and weaken overall economic growth.
These vulnerabilities highlight a deeper structural challenge: Bangladesh’s industrial growth has become increasingly dependent on energy flows that originate thousands of kilometers away and pass through geopolitically sensitive regions.
Reducing this exposure will require a multi-pronged strategy focused on energy diversification and resilience.
First, Bangladesh must accelerate the expansion of renewable energy. Despite strong solar potential, renewables currently account for only a small share of the country’s electricity generation. Scaling up solar parks, rooftop solar installations, and grid modernization could reduce dependence on imported fuels while improving energy security.
Second, domestic gas exploration should receive renewed attention. While many existing gas fields are maturing, unexplored offshore areas—particularly in the Bay of Bengal—may still hold potential reserves. Strategic exploration partnerships and improved regulatory frameworks could help unlock new domestic energy resources.
Third, Bangladesh should diversify its energy import sources and procurement strategies. Long-term LNG supply contracts, regional energy cooperation, and diversified shipping routes could reduce exposure to sudden market volatility.
Finally, improving industrial energy efficiency could significantly reduce overall demand growth. Modernizing factory equipment, upgrading industrial boilers, and promoting energy-efficient manufacturing technologies would allow Bangladesh to maintain production while lowering fuel consumption.
The broader lesson is clear. In an era of geopolitical uncertainty, energy security has become a central component of economic resilience. For Bangladesh, safeguarding industrial growth will require not only expanding energy supply but also reducing vulnerability to external shocks.
The country’s development success has been built on the strength of its manufacturing sector. Ensuring that this sector has reliable, affordable, and secure energy will be critical to sustaining Bangladesh’s export competitiveness and long-term economic progress.
Author: Abdullah Al Mamun, Business Unit Manager,M&S Bangladesh
