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Bangladesh at a crossroads: Industrialize now or risk economic decline

Published : Friday, 14 February, 2025 at 12:00 AM  Count : 1197
KSM Mostafizur Rahman
Bangladesh stands at a pivotal moment in its economic trajectory, facing both immense challenges and opportunities. The nation's reliance on a narrow export base-dominated by garments and pharmaceuticals-while neglecting the agricultural sector, which employs a significant portion of the population, has created a precarious imbalance.

As Bangladesh approaches its graduation from Least Developed Country (LDC) status in 2026, the urgency to diversify its economy and invest in balanced industrialization has never been greater. The garment sector accounts for over 80 per cent of exports, while pharmaceuticals contribute significantly as well.

However, these sectors are vulnerable to external shocks, such as global demand fluctuations, trade policy changes, and intellectual property regulations post-LDC graduation. Agriculture, despite employing 38 per cent of the workforce, contributes only 12 per cent to GDP, highlighting inefficiencies and underinvestment. Graduation will lead to the loss of trade privileges, such as duty-free access under the Everything But Arms (EBA) initiative, potentially increasing tariffs on garment exports by 12-18 per cent and threatening $6 billion in annual revenue. Simultaneously, stricter intellectual property laws under WTO rules could cripple generic drug production, risking $1.5 billion in pharmaceutical exports by 2030.

The World Bank warns that failure to diversify could slash GDP growth from 6% to 4% by 2030, trapping millions in poverty. The agricultural sector's underperformance is particularly alarming. Bangladesh spends $1.2 billion annually on agrochemical imports, leaving farmers vulnerable to global price shocks. The IMF notes that doubling agrochemical self-sufficiency could boost agricultural productivity by 25 per cent, lifting 10 million rural households into secure incomes. Yet, complacency persists, exposing the economy to volatility as global fertilizer prices remain 35 per cent above pre-pandemic levels. The consequences of inaction are stark: yields for rice and wheat lag 30-50 per cent behind regional averages, perpetuating a cycle of low income and low investment.

Vietnam's $40 billion agro-processing boom and India's fertilizer self-sufficiency drive demonstrate how strategic policy pivots avert crises. Vietnam transformed from a rice importer to the world's second-largest coffee exporter by aligning smallholder farms with industrial demand, slashing rural poverty from 70 per cent to 5 per cent in three decades. India, once reliant on urea imports, now produces 95 per cent of its fertilizer needs through public-private partnerships and subsidies for domestic manufacturers. Bangladesh, however, remains paralyzed by inertia. While competitors invest 3-5 per cent of GDP in agricultural R&D, Bangladesh allocates just 0.3 per cent, leaving farmers dependent on outdated techniques.

The solution lies not in resisting globalization but in fortifying domestic industries. Redirecting $500 million in annual agricultural subsidies toward domestic agrochemical R&D could cut imports by 40 per cent within five years, estimates the Bangladesh Institute of Development Studies. Pairing this with tax incentives for pharmaceutical raw material production would create a symbiotic industrial base, boosting exports and shielding farmers. Critics argue for caution, but the numbers defy hesitation: every 10 per cent increase in agro-processing adds 0.5 per cent to GDP growth, directly benefiting 20 million rural poor.

"Bangladesh is at a critical juncture, facing the challenge of diversifying its economy as it approaches graduation from Least Developed Country (LDC) status in 2026”

Bangladesh's labour market reveals a deeper malaise. Despite rising literacy rates, only 12 per cent of graduates possess technical skills aligned with industrial needs. This mismatch fuels a service sector dominated by informal, low-productivity jobs-a "survival economy" rather than a growth engine. The World Economic Forum ranks Bangladesh 105th in human capital development, below Nepal and Myanmar. Without urgent curriculum reforms and vocational training partnerships with industries, the workforce will remain unprepared for high-value manufacturing roles. The cost of inaction is quantifiable: a 2023 UNDP study found that closing the skills gap could add $8 billion annually to GDP by 2030.

The private sector bears equal responsibility. While conglomerates invest in real estate and retail, agrochemical innovation receives scant attention. Bangladesh's top five agribusinesses allocate less than 2 per cent of revenue to R&D, compared to 8-10 per cent in India and Thailand. This myopia ignores a $3 billion domestic agrochemical market poised to double by 2030. Public-private partnerships could replicate India's National Agrochemical Policy, which mandates joint ventures for technology transfer and local production.

Some local agrochemicals companies have already reduced finished product imports by 25 per cent through localized formulation plants. National AgriCare, ACI, Bangladesh Agriculture Industry, Rahman Pesticides, and Sadik Agro are notable examples.

The ACI Limited reduced pesticide imports by 20 per cent through localized formulation plants. Scaling such models requires bold incentives, including tax holidays for agro-industrial startups and low-interest loans for farmer cooperatives. Bangladesh's founders envisioned a self-reliant nation, yet today's leaders must confront harder truths. The 2024 awakening isn't just political-it's economic.

By aligning education with industrial needs, incentivizing high-value crops, and scaling agrochemical innovation, Bangladesh can transform its rural heartland into an engine of growth. Delay risks more than numbers; it betrays the martyrs' legacy.

As global volatility reshapes supply chains, proactive industrialization isn't optional-it's existential. The rebirth begins with soil, science, and swift action. Vietnam prioritized rice and coffee; India bet on generic drugs and fertilizers. Bangladesh's blueprint must merge both strategies, leveraging its dual strengths in pharma and agriculture.

The alternative-a service-sector trap, import dependency, and generational inequality-is a future unworthy of the sacrifices that built this nation. The martyrs' blood demands more than rhetoric; it demands results.

The writer is President, Bangladesh Agrochemical Manufacturers Association and Executive Member, Bangladesh Association of Pharmaceutical Industry


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