Despite facing political challenges, Bangladesh has shown remarkable economic resilience with an impressive economic growth. However, structural weaknesses persist. Bangladesh’s low rankings on global indices, such as 108th in the International Property Rights Index and 127th in the Economic Freedom of the World Index, reflect a poor state requiring urgent battention. Furthermore, the country’s tax-to-GDP ratio remains merely around 8 per cent, which is one of the lowest in South Asia, significantly below the Asia-Pacific average of 19.3 per cent and the OECD average of 34 per cent highlighting the limitations of its fiscal policy.
Since its independence, labour migration has been crucial for increasing household incomes, reducing poverty, and fostering micro-enterprises in Bangladesh. Additionally, remittances have become a primary source of foreign currency for the country. The steady growth of remittance inflows over the years has not only bolstered Bangladesh’s economy but also improved its social indicators and helped rebuild the forex reserve from a vulnerable level.
Remittances play a vital role in strengthening the country’s GDP and maintaining the balance of payments (BoP), helping to partially offset the trade deficit. Second, the social impact of remittances is significant, contributing to income stabilisation, reducing vulnerability, and improving living standards at the household level. However, the impact largely depends on individual consumption, saving, and investment behaviours. Overall, remittances have led to improvements in rural education, healthcare, and financial inclusion.
While migration and remittance growth are essential for Bangladesh’s future income generation and unemployment reduction, several challenges remain. High processing costs, debt burdens, information gaps, exploitation, and informal migration practices are major barriers to the growth of overseas employment of Bangladeshi workers through formal channel. To address these challenges, stronger monitoring of the migration process, improved policy collaboration with foreign governments in potential destination countries, and a reduction in bureaucratic obstacles can help foster manpower export.
Furthermore, skilled migration is becoming increasingly important for future growth, though most Bangladeshi migrations still fall within the low-skilled category. Proper policy formulation is needed to facilitate the country’s participation in skilled migration. Such policies should focus on reforming basic education to develop character, ethics, and foundational skills, language of the host country, while higher education should emphasise practical knowledge and adaptive skills. A public-private partnership is essential for driving nationwide educational reform and preparing the future workforce to compete effectively in the global job market.
The Ready-Made Garment (RMG) sector has long been a cornerstone of Bangladesh’s economy, accounting for about 85 per cent of merchandised export earnings. The sector has provided over 4 million jobs, with about 70 per cent of the workforce being women. Since 1980s, the RMG sector has been playing a crucial role in poverty reduction and women’s empowerment. Additionally, the sector benefits from globally competitive low wages, high adaptability, and policy support, including bonded warehouses and tax exemptions.
However, the RMG sector in Bangladesh faces significant challenges. One of the primary concerns is the gradual erosion of its competitive and comparative advantage, especially in the face of increasing global competition. Key factors contributing to this decline include low productivity, labour unrest, inadequate diversification and overwhelming dependence on low and medium-range products. Recent imposition of reciprocal tariff by the United States, with a breathing period for three months, has added a new dimension into its ongoing challenges.
The risk of losing comparative advantage in the RMG sector is largely cultural and traditional. For generations, Bangladeshi women, motivated by cultural factors, have developed sewing skills from childhood. This long-standing tradition has given Bangladesh a strong competitive edge in the global RMG market. However, this tradition of early skill development has started to diminish in both urban and rural areas in recent years, potentially leading to a skill gap in the workforce in the long term. To mitigate this risk, a focus on automation and innovation is essential.
Labor productivity, skill development and human capital formation significantly depend on health policy, public expenditure on healthcare and nutrition. Since its independence, Bangladesh’s healthcare sector has struggled to receive the necessary and effective policy attention. Some notable successes in healthcare include reductions in child and maternal mortality, improvements in life expectancy, and wide vaccination coverage, which have largely been driven by international development agencies, NGOs, and private sector involvement. However, the sector remains hindered by a lack of proper infrastructure, a shortage of skilled professionals and modern medical technologies, and inefficient governance, all of which severely limit its growth.
Moreover, about 1 per cent of real GDP is allocated to healthcare, while about two-thirds of medical expenses are paid out-of-pocket by patients. This creates significant inequities in access to healthcare, with many people (particularly those who can afford it) opting to seek critical treatments at foreign hospitals. This trend places additional pressure on the foreign exchange market.
Overall, Bangladesh’s healthcare sector requires stronger policy focus and improved governance in line with the report of the reform commission on health sector formed by the current interim government. Collaboration with internationally renowned hospital management groups to enhance the governance of public hospitals, attracting foreign investment, and introducing universal health coverage are crucial steps toward building a robust healthcare system in the country.
Bangladesh has significant potential to build a strong and sustainable economy in the future, although the path ahead will be challenging. The success of this endeavour hinges on political will, national unity, inclusiveness, and the implementation of progressive, strategic policies-both for domestic development and foreign relations.
Dr. Shahriar Kabir, Professor, Department of Economics, Independent University Bangladesh (IUB), skabir@iub.edu.bd. Dr. Mahfuz Kabir
Research Director, Bangladesh Institute of International Strategic Studies (BIISS), mahfuz@biiss.org, Dr Carmelo Ferlito CEO – Centre for Market Education, Malaysia, International Senior Fellow – Tholos Foundation, USA, carmelo.ferlito@centermarketedu.com