With targeted actions and appropriate policies, followed by timely implementation to overcome key challenges, Bangladesh has the capacity to become an upper-middle-income country by 2031, as stated by the International Chamber of Commerce-Bangladesh (ICCB) on Monday.

An editorial in the current News Bulletin (January-March 2024) of the ICCB highlighted Bangladesh’s achievement of its current position, overcoming numerous obstacles and setbacks.

The country’s remarkable development progress over the last five decades showcases its resilience, policy decisions, and commitment to reducing poverty and fostering shared prosperity, as noted by the World Bank in its recent publication “World Bank in Bangladesh in 2024.”

Macroeconomic stability, characterized by low levels of inflation and high levels of GDP growth, has been pivotal to Bangladesh’s underlying strengths and major drivers of socio-economic achievements.

Bangladesh reached lower-middle-income status in 2015 and is on track to graduate to a middle-income country in 2026, aspiring to become an upper-middle-income country by 2031, according to the editorial.

However, Bangladesh, after its LDC graduation in November 2026, will experience significant preference erosion.

Although the EU and UK have offered to extend preferential duty-free market access for an additional three years, the export scenario to other markets will change immediately after graduation.

Bangladesh has a significant opportunity to increase exports to ASEAN, which has a population of 661 million, a GDP of $3.08 trillion, and trade exceeding $2.7 trillion.

According to 2020 data, Bangladesh imports goods worth nearly US$7.0 billion from ASEAN countries compared to its export of only $1.0 billion.

Therefore, Bangladesh should prioritize establishing a Free Trade Agreement with ASEAN to boost its exports.

With several major infrastructure projects, including the completion of the Padma multi-purpose bridge, Dhaka Elevated Expressway, Bangabandhu Tunnel linking Dhaka to Cox’s Bazar, and the 3rd terminal at Hazrat Shahjalal International Airport, 2024 is anticipated to be a year to reap the benefits of these investments.

However, in 2024, the economy is also facing challenges on multiple fronts such as inflation, declining foreign exchange reserves, a depreciating currency, income inequality, and demand-supply imbalances in the energy sector.

Despite impressive growth rates, Bangladesh faces challenges in diversifying its export basket, as more than 80 percent of Bangladesh’s total export earnings come from garment exports.

Bangladesh possesses significant opportunities in various sectors including leather and footwear, food processing, pharmaceuticals, light engineering, assembling plants, and API production.

Both domestic investment and Foreign Direct Investment (FDI) should be directed towards these sectors to capitalize on their potential.

As the second-largest economy in the South Asian region, Bangladesh can draw lessons from Vietnam, which ranked fourth in Asia-Pacific after China, India, and Indonesia in attracting FDI.

The majority of total FDI inflows of US$ 274 billion at the end of 2022 into Vietnam were in the manufacturing sector, accounting for 61 percent of the total registered FDI.

However, Bangladesh’s FDI inflows, averaging $2.92 billion annually, pale in comparison to Vietnam’s US$ 36.61 billion.

FDI plays a crucial role in increasing export earnings and bolstering foreign exchange reserves. Therefore, Bangladesh should reassess its strategy for attracting FDI, as suggested in the editorial.

Bangladesh faces energy challenges primarily due to its reliance on imported fuels, which amounts to about US$ 2.5 billion annually for power generation, coupled with a scarcity of renewable and cleantech alternatives. Despite the need to transition towards renewable energy sources, Bangladesh has increasingly turned to fossil fuels such as coal, oil, and LNG. This reliance, coupled with a depreciating currency, has resulted in a significant increase in power generation costs.

Climate change poses a grave threat to Bangladesh, making it one of the most vulnerable countries to its effects.

According to Germanwatch’s 2021 Global Climate Risk Index, Bangladesh ranked seventh in the list of countries most affected by climate calamities during the period 2000-2019.

Addressing these energy and climate challenges will be crucial for Bangladesh’s sustainable development and resilience in the face of climate change impacts.