Bangladesh Economy to Bounce Back

Inflation in Bangladesh fell by 3 percent in 2011 to 9 percent. The currency has also somewhat stabilized. Thus Bangladesh is moving from a stormy situation to a much calmer one it seems. Along with these progresses, Bangladesh has also secured a loan from International Monetary Fund (IMF) worth $987 million. This loan is to be utilized to overcome its macroeconomic pressures and create a reserve buffer.

Iraj Ispahani of Ispahani Advisory pointed out some of the reasons for investors to return to Bangladesh. The main reasons would be - emergence of a substantial and entrepreneurial middle class and high employment with strong participation of women. He also said that the Myanmar effect would bring benefit to Bangladesh as people will realized that Bangladesh being a neighboring country to Myanmar has a better investment framework and macro environment.

A recent FTfm report noted that at the end of 2010, Bangladesh did what frontier market investors feared. The rally against sharp fall in the stock prices and violent protest by garments workers demanding the wages set by the government dashed away the hopes that fortune changes would be short lived. Even though the stock market remained volatile, the country's GDP grew at 6.0 percent, while IMF predicts it to grow at 5.9 percent in 2012. Bangladesh is one of the 30 largest economies in the world with a large informal economy that has a lot of potential. Furthermore, during the global economic crisis that troubled several countries to cope with, Bangladesh coped with it much better than many countries in the region with minimum impact mainly due to the cheap labour.

Women in particular have continued to play a vital role and have been the driver of growth for many years. The readymade garment industry that account for 80 percent of the country's exports and a significant number of women are employed in this sector. Women in the rural areas have benefited from the microcredit offered by BRAC and Grameen Bank. The microcredit has also let Bangladesh experience emerging middle class entrepreneurs.

The ongoing diversification into engineering, shipbuilding and pharmaceuticals industries are expected to increase the living standards and deepen the stock market. There are opportunities for foreign investors to play a role in the development in Bangladesh. Bangladesh is unable to finance certain infrastructure projects that are planned for. This is a lucrative sector where foreign firms could concentrate on and seek investment opportunities.

Currently about 65 percent of the corporate houses including Amzad Hossain led Pran Group, Azharul Islam led Aftab Group, Salman F Rahman led Beximco, Hashem led Partex Group are not listed. However, there is a tendency that many companies are now thinking of offering an IPO. The appetite for risk capital is growing and this is expected to benefit Bangladesh.

One vital barrier that Bangladesh has to overcome is when it will have to hold a legitimate, fair and free general election. Even with that, foreign investment is expected to grow along with domestic investments.