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The Bangladesh Country Private Sector Diagnostic (CPSD) draws on data and interviews to identify concrete policy actions that can be taken in the near term to help create commercially-viable investment opportunities for the private sector. The CPSD analyzes four sectors – Green Ready-made Garments (RMG), Housing for Middle-Income Households, Paint and Dyes, and Digital Financial Services – with potential to attract private investment and create jobs if policy reforms are taken.
Bangladesh is the world’s second largest exporter of textiles, after China. 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 fiber (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 in order to facilitate, for instance, solar investments in RMG factories.
Bangladesh’s urban population grows by about 2 million people per year, while only about 30,000 housing units are supplied annually by formal sources in urban areas. This report recommends that, among other things, the government spurs the housing market by making available its significant stock of vacant land at the periphery of urban areas for private development of housing. Improving infrastructure in exurban areas could enhance the commercially viability of housing development.
Bangladesh’s paint and dyes sectors provide opportunities to expand manufacturing of ‘closer-to-the-customer’ products. Despite demand growth for dyes, Bangladesh overwhelmingly relies on imported dyes. Paint and dye producers could benefit from faster customs clearances, improved bonded warehouse access and equalized duties. A cost analysis in this report finds that these and other changes could allow Bangladesh to produce certain raw materials and finished goods more cheaply than importing them.
Finally, adoption rates of digital financial services (DFS) in Bangladesh are growing in some segments of the market. There is relatively untapped lending potential that could enable higher usage of more complex financial services with the right enabling policy framework. Implementation of CPSD recommendations could result in an increase in active MFS accounts and digitization of payment transactions, more data available for cash flow analysis and credit scoring, greater use of alternative data credit scores, and improved ability of non-bank lenders to fund their balance sheets.
