Bangladesh could attract significant investments and create millions of jobs by implementing essential reforms across four sectors, according to a World Bank Group report. The CPSD report unveils the last BIDA Summit in Dhaka.
The new Bangladesh Country Private Sector Diagnostic (CPSD) report highlights that with targeted policy actions, Bangladesh could create 2.37 million jobs annually in the construction industry by supporting the construction of new housing units, generate over 664,000 formal jobs by expanding domestic paint and dye production, and create between 96,000 to 460,000 new jobs through digital financial services reforms.
The report identifies four sectors—green ready-made garments (RMG), housing for middle-income families, paint and dyes, and digital financial services—where policy actions can help remove barriers to private investment. The report outlines specific, near-term steps the government can take to attract investment in these sectors, generate jobs, remain competitive after graduating from Least Developed Country (LDC) status, and strengthen the domestic economy.
“As part of the World Bank Group, IFC is committed to supporting Bangladesh to strengthen its private sector and drive economic growth,” said Martin Holtmann, Country Manager, IFC, Bangladesh, Bhutan, Nepal. “The CPSD provides a strategic roadmap, identifying sectors and the key reforms needed to enhance their competitiveness and attract investment. By working together, we can create jobs and opportunities to improve the livelihoods of the people of Bangladesh, to accelerate sustainable economic development.”
Green Ready-Made Garments:
Bangladesh is the world’s second-largest exporter of textiles, after China. The textile sector draws more foreign investment than any other and accounts for 85 percent of the country’s exports, mostly destined for the European Union. Its position as a leading FDI destination and exporter will be threatened once Bangladesh graduates from LDC status and loses its automatic duty-free access to the European Union (EU) (figure ES.4). Loss of trade preferences is expected to result in a decline in exports by 14 percent according to the World Trade Organization (WTO). For Bangladesh to retain market access, it will need to meet the conditions of the EU’s Generalised Scheme of Preferences Plus (GSP+), which require improvements in labor and environmental standards. In addition to GSP+, regulations such as the EU’s Corporate Sustainability Due Diligence Directive require firms selling to the EU to adopt more stringent sustainability practices. Meanwhile, there is growing consumer preference for environmental, social, and governance–compliant products, with major apparel brands having strengthened their sustainability commitments. These shifts can attract private investment to help firms maintain market access and strengthen competitiveness.
To remain competitive, the RMG sector must invest in advanced technologies to meet the increasingly stringent environmental and labor standards of major markets. One way of doing this is by diversifying into man-made fibers (MMF) products, which require less water and have lower greenhouse gas emissions than traditional cotton products. To attract private investment to the sector, Bangladesh will need more coherent import and export policies. For example, equalising the duty for solar inverters (currently 37 percent) with the duty for solar panels (currently 1 percent) could encourage more solar investment in RMG factories. And rather than offering a cash incentive to export the polyethene terephthalate bottle and flake used in MMF, manufacturers could be encouraged to use them to develop a domestic MMF production industry
Bangladesh is an emerging economy with a rising population, making it essential to remove barriers to private investment, and create new opportunities for growth. The suggested policy actions have relevance beyond the selected sectors and demonstrate the potential for policy reform in other parts of the economy to enhance the investment climate, safeguard jobs, and build on ongoing development achievements.
