Bangladesh needs to embark on a new round of reforms to strengthen and modernise the private sector in a bid to unleash the country's potential to drive diversified, export-led growth and create jobs, according to a new World Bank Group report. 

Bangladesh has been one of the biggest development success stories in recent decades, according to the Bangladesh Country Private Sector Diagnostic (CPSD) report, prepared by IFC and the World Bank.

"It is time to switch gears to meet ambitions to transform into an upper middle-income country in the next decade."

The successful development of the readymade garment sector, which alone created more than 4 million jobs, along with the strong inflow of remittances, supported by prudent government policy choices, have been the key growth engines of Bangladesh's strong and resilient growth, even during the pandemic outbreak, it said.

Key priority areas for the reform agenda include creating a favourable trade and investment environment for domestic and foreign investors, modernising and expanding the financial sector and removing impediments for developing infrastructure, the report recommended.

"Transport and logistics, energy, financial services, light manufacturing, agribusiness, healthcare and pharmaceuticals sectors are among those with the strongest potential for private investment that could play a significant role in boosting economic growth."

The CPSD aims at identifying sectors where private sector solutions can create or expand markets and make substantial contributions to development impact, the IFC said in a statement yesterday.

The CPSD recommendations are well aligned with the priorities of the government's Eighth Five-Year Plan for setting a trajectory towards a prosperous Bangladesh by 2041, said Salman F Rahman, prime minister's private industry and investment affairs adviser.

"Bangladesh had a positive GDP growth rate last year despite the adverse impact of the Covid-19 pandemic and it was the only country in South Asia which did not experience a recession," he said.

"We have prepared the Eighth Five-Year Plan keeping all the challenges of the Covid-19 pandemic in mind."

"The pandemic has hit Bangladesh hard and as the country recovers from Covid-19, the need for reforms will become even more compelling. Finding new sources of income and growth will be an urgent priority," said Alfonso Garcia Mora, IFC's vice president for Asia and Pacific.

"The private sector, which already accounts for more than 70 per cent of all investment in Bangladesh, supported by a strong financial sector, will need to play an important role in spurring the recovery so the country can grow, export and create quality jobs." 

As the world's second largest exporter, readymade garments have contributed significantly to Bangladesh's economic growth, said Mercy Tembon, World Bank's country director for Bangladesh and Bhutan.

"For a more resilient, inclusive and sustainable growth, Bangladesh will need to diversify its export basket and develop a robust and sophisticated private sector, relevant in the post–Covid-19 recovery phase when public resources will be needed most in the social sectors."

"It's clear the private sector has an important role to play to meet the rising demand for quality healthcare and improving the efficiency of delivering health services, as health financing in the country is low compared to others at a similar level of development," said Wendy Werner, IFC country manager for Bangladesh, Bhutan, and Nepal.

"Bangladesh could also target high-end markets and introduce new technology in the readymade garment sector, and seize opportunities in footwear, leather electrical goods, and agribusiness exports."  

The government of Bangladesh's Perspective Plan 2021-41 sets the objective of becoming an upper-middle-income country by 2031, along with full employment and the elimination of extreme poverty.

As the CPSD report points out, challenges persist with more than 40 million Bangladeshis still living below the poverty line today, and nearly half the population vulnerable to falling back into poverty.

The private sector is responsible for 90 per cent of jobs in the developing world. It is therefore critical to boost development of a broad-based private sector. 

The findings of the report will be used to craft IFC's strategic inputs for the World Bank Group's (WBG) new Country Partnership Framework with the government of Bangladesh, paving the way for joint programming to create markets and unlock private sector potential.