Bangladesh Bets on Connectivity for Its Next Economic Leap

Why you should care

Because Bangladesh aims to be the connectivity link between South and East Asia.

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Geo facts & figures

Asia’s booming economies are contributing more than half of the world’s economic growth each year. And China and India aren’t the only ones driving those gains. A communist nation is betting on private and foreign education; a post-Soviet country is emerging as a fintech power; a country born out of war is growing as a connectivity hub; an outsourcing-dependent economy is turning to the creative arts; and an oil giant is exporting green tech. These are the New Asian Tigers.

Firecrackers lit the March sky over Dhaka as Bangladesh savored the U.N. announcement that the nation was on the cusp of leaping out of the 47-nation club of the world’s least-developed countries. As folk dancers performed in Bangabandhu National Stadium, cheered on by Prime Minister Sheikh Hasina, construction crews 190 miles south were at work. In Payra, at the head of the Bay of Bengal, China and India are — separately — helping build a deep-sea port that could make Bangladesh the region’s maritime nerve center.

Bangladesh’s imminent transition to a developing nation caps a dramatic economic rise that has seen it emerge as one of Asia’s steadiest engines of growth. The South Asian nation has tripled its gross domestic product in a decade, from $79 billion in 2007 to $250 billion in 2017, growing more than 6 percent annually during this period. The country outranks regional nations Pakistan, Nepal and Myanmar in the U.N.’s Human Development Index, whereas it trailed them in 2009. It joined the World Bank’s category of lower-middle-income nations in 2015, six years before the 2021 deadline it had set for itself.

But Bangladesh’s overwhelming dependence on ready-made garments, which constitute 80 percent of its exports, global uncertainties and the reduced economic benefits the country will now receive from the World Bank and U.N. because of its success all add up to a ticking time bomb. Bangladesh is preparing to defuse that crisis by positioning itself as a regional transit hub. It has offered China, India, Nepal, Bhutan, Myanmar and Thailand access to each other and to the sea, through its territory.

The whole idea is to gradually make Bangladesh a regional maritime hub.

Mustafizur Rahman, Centre for Policy Dialogue

These and other countries are in turn investing in Bangladesh’s infrastructure. India is building rail lines linking its distant northeast with the rest of the country — cutting through Bangladesh. China is funding a rail line between Dhaka and Jessore. Both Asian giants are building coal-fired power plants — India in Khulna, China in Payra. And India, China and Japan — Beijing’s persistent rival — are competing to build a network of ports for Bangladesh, in Chittagong, Mongla, Payra and Matarbari.

“Multimodal connectivity with its neighborhood is critical for Bangladesh,” says Debapriya Bhattacharya, an economist and former Bangladesh permanent representative to the World Trade Organization and the U.N. in Geneva. “And it is keen to build that, both to its east and to its west.”

Bangladesh is taking other steps to diversify its economy. The world’s second-largest exporter of ready-made garments after China wants to replicate that success with ceramics, jute, leather goods and footwear, says Mustafizur Rahman, a distinguished fellow at the Dhaka-based Centre for Policy Dialogue. Within the garment sector, the country wants to move from cheap fashion to products higher up the value chain, he says.

But nothing highlights Bangladesh’s arrival as a major regional player more than its ambition to emerge as a central link in Asia’s modern connectivity architecture. Since 2014, it has signed on to China’s Belt and Road Initiative, a Bangladesh-Bhutan-India-Nepal pact to allow vehicles to travel seamlessly between the four countries, and the BIG-B initiative with Japan, under which Tokyo is financing infrastructure projects in Bangladesh. Two earlier initiatives that were languishing — a Bangladesh-China-India-Myanmar corridor and the Bimstec, a grouping of Bay of Bengal littoral states — have found fresh momentum too. The most prominent letter spanning this alphabet soup of initiatives? It’s “B.”

That isn’t a coincidence. “The whole idea is to gradually make Bangladesh a regional maritime hub,” says Rahman.

Nor is the region’s response to Bangladesh’s plans surprising. Neighborly tensions over decades have left South Asia the world’s least interconnected subregion. Now, as Asia’s major powers look more than ever to expand their spheres of influence, that same competition is offering Bangladesh an opportunity. India has received Bangladesh’s permission to use the Chittagong and Mongla ports. China is supplying giant gantry cranes to help Chittagong port manage its overflowing traffic. India and China are financing different parts of the Payra deep-sea port project. And Japan is financing another deep-sea port, at Matarbari.

“Once Payra port becomes fully operational along with the deep-sea port at Matarbari, it could transform the region as a whole,” says former Bangladesh Foreign Secretary Farooq Sobhan.

Gettyimages 941700380

A container train is prepped on April 4, 2018, in Kolkata, India, for a 300-km trial run to Bangladesh — the first such rail service between the two South Asian nations.

Source Debajyoti Chakraborty/NurPhoto via Getty

Not everyone is convinced Bangladesh can achieve its goals. “We want to turn Chittagong into this region’s Rotterdam, but projects are proceeding far too slowly,” says Razon Saha, a Bangladeshi researcher studying the country’s maritime infrastructure.

And challenges litter Bangladesh’s path. So far, Bangladesh has successfully courted India and China. But rising tensions between these powerful neighbors could make balancing the relations more difficult, suggests Bhattacharya. And Bangladesh needs the connectivity projects to reduce its dependence on European and North American markets for exports, and instead expand its access to Asian consumers.

The country, says Bhattacharya, needs to strengthen its defense of minorities and other vulnerable communities to avoid traps that have waylaid other economic success stories. Finally, Bangladesh’s economic growth has benefited from years of relative political stability, says Rahman, but the country faces tense elections at the end of the year.

But Bangladesh has faced bigger challenges. Soon after Bangladesh’s independence from Pakistan in 1971, then U.S. National Security Adviser Henry Kissinger said the country “is and always will be a basket case.” In 1976, economists Just Faaland and J.R. Parkinson, in their book, Bangladesh: The Test Case for Development, argued that if development took root in Bangladesh, it was possible anywhere.

Since then, a once-starving Bangladesh has tripled its food production. Its exports are 15 times greater than the aid it receives — they were equal in 1990. And even as India and the U.S. shy away from accepting refugees, Bangladesh has taken in over a million Rohingya migrants fleeing Myanmar. “Bangladesh has shown that the greatest scholars could not anticipate what a country even with weak governance and a faltering democracy can achieve,” says Bhattacharya.

With its connectivity gamble, Bangladesh is testing the odds once again.

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