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Singapore-Bangladesh ties a study in complementarity for win-win gains
THE Bangladesh economy finds itself on the cusp of transformative growth, ready to make the step up to a middle-income nation. As it continues its growth journey, facilitating the flow of goods and services, ideas and people across borders will remain a vital part of the development challenge; regional collaboration and inclusive globalisation are central themes of its solution.
For a region as diverse as Asean and South Asia - not least in terms of economic development - regional integration can be a challenging task. Cooperation and collaboration will require both countries to find areas of mutual benefits and shared opportunities. These opportunities are not always easy to identify, but in some cases, they can be somewhat easier to spot.
Bangladesh and Singapore have always enjoyed warm bilateral relations, ties that have only strengthened over time. Bilateral trade grew from around US$2.1 billion in 2013 to US$2.8 billion last year. Singapore is also a major source of FDI (foreign direct investment) for Bangladesh. In 2017, net FDI inflow from Singapore into Bangladesh was the second highest of all countries, at around US$200 million, accounting for more than 9 per cent of total net FDI inflows.
Singaporean companies have invested in manufacturing, information and communications, oil and gas, services, chemical engineering, textiles, agro-based products, and printing/publishing - but the largest sector by far for Singaporean FDI was power generation. Singapore has invested around US$390 million in Bangladesh power sector, making it one of the largest foreign investors in this area. It is easy to see why Singaporean capital and businesses are increasingly considering Bangladesh as an attractive destination. Over the past decade, Bangladesh's economy has recorded annual growth of more than 6 per cent on average. Macroeconomic growth, currency stability and stable geopolitical conditions mean Bangladesh's market fundamentals remain strong. Inflation has been moderate and public debt levels are low by world standards.
With a median age of 26.7, Bangladesh's growing working-age population will endow the country with the benefits of demographic dividend today and in the coming decades. Sustained growth is also driving tremendous upward mobility. This rising middle and affluent class - expected to grow from 12 million to around 34 million by 2025 - coupled with fast-paced urban growth, will create voracious demand for a broad variety of consumer goods and services.
EASE OF DOING BUSINESS
The nation is actively working to improve ease of doing business for foreign investors, and possesses a large pool of skilled labour. Per capita GDP is set to hit US$2,000 - a tipping point which will open up major opportunities with significant upsides for investors looking to become a part of the nation's success story.
Bangladesh will continue to welcome investments, particularly in power generation, energy, infrastructure, telecommunications, light engineering and agro-based industries. The nation's ICT sector, which is globally the second largest contributor of online workers and home to an increasingly sophisticated tech startup scene, remains an attractive proposition. With an inherently low-cost base, skilled labour force, developing infrastructure and export incentives, Bangladesh can also prove itself to be a strategic base for sunset industries from more advanced Asean markets that are looking to relocate, and the industries that find themselves in crosshairs of protectionist trade policies.
Bangladesh's infrastructure deficit is also a major opportunity. The investment requirement for infrastructure is likely to be in the range of 7 to 8 per cent of GDP, according to the government's Seventh Five-Year Plan. For Bangladesh, securing resources, including funding, is crucial towards the timely accomplishment of its growth target. For Singapore, well-structured infrastructure assets can prove to be attractive for its investors. A recent partnership between Enterprise Singapore, Bangladesh's Public-Private Partnership Authority (PPPA) and Bangladesh Investment Development Authority (BIDA) will facilitate Singaporean companies' direct participation in Public-Private Partnership (PPP) infrastructure projects in Bangladesh. This partnership will ease the market-entry process for Singapore's investors, and is a clear example of where Bangladesh and Singapore can complement each other.
Standard Chartered has the proud heritage of being the longest established financial institution in both Singapore and Bangladesh; we mark our 159th and 113th anniversary in the two markets respectively this year. We have been a witness to the incredible energy and vitality driving these economies forward. Closer collaboration between Bangladesh and Singapore will not only add to the prosperity of these nations, but also serve as a marker for what is possible to the region as a whole.
- The writer is managing director and head of Global Banking at Standard Chartered Bangladesh.