Bangladesh The Digital Delta

Nestled between India and Myanmar in South Asia, Bangladesh a country filled with hopes and dreams of 160 mn people (8th largest) and spanning 147,540 sq. kilometers surfaces
as one of the most prominent, lucrative investment frontiers in the world. Despite its fair share of myriad challenges, the country has shown remarkable resilience to register a steady
economic growth of > 6% in the last decade, an accomplishment to take pride in. This significant growth has resulted in a massive change in the composition of the countrys workforce
today, as is evidenced by the rise of consumerism

Developed By
LightCastle Partners (Decisions Simplified)
Frontier Market Series: LAW (LightCastle Analytics Wing) Publications

Acronyms
ARPU
B2B
B2C
BDT
Bn
BTRC
C2C
F
FY
GDP
ISP
MFS
Mn
MW
USD

Average Rate Per User

Business to Business
Business to Consumer
Bangladeshi Taka
Billion
Bangladesh Telecommunication Regulatory Commission
Consumer to Consumer
Forecast
Fiscal Year
Gross Domestic Product
Internet Service Provider
Mobile Financial Services
Million
Mega Watt
United States Dollar

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Table of Contents
Emerging Bangladesh A Part of Your Global Growth Strategy .................................................................................3
The Technology Landscape Opportunities for Economic Leapfrog ..........................................................................6
The Rise of Digital Society .............................................................................................................................................8
The e-Commerce Business Frontier driving Growth ....................................................................................................9
ITES Sector The Gateway to the Middle Income Status ..........................................................................................12
Investing in Bangladesh Government Policy Support .............................................................................................15

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Emerging Bangladesh A Part of Your Global Growth Strategy

The Economy has been experiencing steady growth over the last decade and prospects are
looking better for the coming one, with a booming RMG sector, flourishing remittance flow,
record high foreign currency reserve and international investors interest in FDIs. Geographic
proximity to emerging Asian powerhouses - India and China - will further add impetus to the
countrys drive towards middle income status.
Strong Performance Relative to Emerging
Economies
Bangladesh economy has performed well over the
last decade with GDP growing by 6-7%, while many of
its competitors have faltered and lost their ways
(Growth has been over the median of Ba rated
countries and BRIC). The growth is considered
impressive taking into account frequent instances of
natural calamities and political unrest which have at
times hindered economic activity.
Inflation has remained stable over 2013 at 7%
(Source: Bangladesh Bank) despite frequent supply
chain disruption due to political unrest. Reining of
inflation is attributed to declining growth of non-food
inflation e.g. Rent, which have contributed to lower
inflationary pressure. Bangladesh Bank has also
adopted a tight monetary policy which has further led
to lower inflation.
Average GDP Growth (%): 2013-18
8.4%
6.5%

6.4%

5.5%

5.4%

5.1%

Brazil

Egypt

Vietnam

Phillipines

Indonesia

India

Bangladesh

Nigeria

China

3.9%

3.8%

3.1%

Pakistan

6.6%

Korea

7.0%

SOURCE: IMF

Moody affirms Bangladeshs rating at Ba3

with Stable Outlook
Bangladesh has performed well compared to other
comparable countries and sovereign ratings by both
Moodys and S&P are testament to the economys
resilience. The ratings are driven by a healthy

economic outlook, progress on policy reform and

limited vulnerability to fiscal and external funding
stress. Local currency country risk ceiling is affirmed
at Baa3, Long term foreign currency bond B2 and
Bank Deposit ceiling at B1.

Bangladesh Economic Vitals are on Growth

Trajectory
Exports have been growing based on the blossoming
RMG sector, which has clocked USD 24.49 billion
over 2014. Remittance revenues has grown to the
tune of USD 14.2 Billion, albeit at a slower pace.
However, import growth has declined at a relatively
higher rate which contributed to positive current
account balance.
Bangladesh is experiencing record high forex reserve
position, currently standing at USD 21.8 billion. The
current reserve can comfortably cover 7 months of
countrys import and the Forex reserve is expected to
grow with steadily improving RMG export and growth
in remittance earnings. Manpower export is also set
to improve as the Malaysian labor market reopens
and the Government undertakes measures to train
and send more semi-skilled and skilled workers
abroad.

Influx in Infrastructure Development

Government has been investing heavily in
infrastructure developments, especially in the field of
power generation. Government has tackled the
demand-supply gap by directly involving the private
sector. Entrepreneurs have established quick rental
power generation plants which have been regularly
supplying to the national grid, contributing to lower
electricity shortage. Additionally, government has
reached an agreement with India to import
electricity, starting with 500 MW per day. The existing
installed capacity is 10,213 MW.

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Government has been working to improve efficiency

of the Chittagong Port which has the potential of
doubling its capacity. There also are long term plans
of establishing a deep sea port in Sonadia and both
Chinese and Indian investors have expressed interest
in developing the sea port. Establishment of seaport
will significantly reduce export lead times.

Expanding Consumer Market providing

Growth Opportunities
Spending power of Bangladesh is steadily enhancing
and by 2021, Bangladesh is projected to become a
middle income nation of 175m people.
GDP/Capita (USD)
1,284
818
374

2002

520

2007

2012

Economy Offering Long-term Growth

Opportunities
Bangladesh is developing as a key export hub in the
heart of Asia. With Indian and Chinese consumer
spending projected to grow by USD 2.6 trillion+ and
USD 4.2 trillion+ in the coming decade this
powerhouses will become key markets for
Bangladesh.
Additionally, Bangladesh is one of the few locations
that possess the capacity, access and cost-base to
capture the manufacturing shift out of China.
Bangladesh has competitive wage rates compared to
other emerging markets like India and Vietnam.
RMG continues its success story mostly to EU. With
product diversification and new markets in Asia the
volume may well exceed USD 40 billion by 2020.
Additionally, Bangladesh has one of the lowest Public
Debt to GDP ratios compared to other frontier
markets even India and Vietnam.
Public Debt to GDP

2018

USA, 105%

SOURCE: IMF

With an emerging economy consumer spending,

disposable income and personal savings are also
experiencing positive momentum. Bangladesh is a
mammoth sized consumer market consisting of
almost 160 million consumers.
This huge consumer base is being driven by catalytic
factors like age and gender distribution (60% of the
population being between 15-64 years of age),
increasing urban population (growing at a rate of
over 4%/year), expanding labor force (increasing
purchasing power of the masses), increasing literacy
rate (primary education enrollment of 95%+), rising
middle class, growing white collar culture and
globalization (youth influenced and linked with the
globe via IT and social media).

Strategic Location at the Heart of Asia

Beneficial location at the crux of Chindia. Close
proximity of India and China leads to strong trade
relations. Additionally, Bangladesh leverages on the
exceptional growth environment in the region and
commutable distance to key Asian cities traction
from the 975 million new Asian middle class market.

Vietnam,
57%

Italy, 127%
UK, 91%

Bangladesh,
37%

India, 60%
SOURCE: INDEX MUNDI AND CIA FACTBOOK

A Host of Emerging Sectors

Bangladesh has started moving into diverse, higher
value sectors. Light Engineering, Pharmaceuticals,
Leather and IT services are exhibiting high potential.
Non RMG exports stand at USD 5 billion now and
expected to exceed USD 11 billion by 2025.
Export - Emerging Sectors in mn (FY
2012-13)

Shrimp
Leather Shoes
Leather Goods
Bicycles
ITES
Consumer Electronics
Pharma
Ceramics

539

305
161
105
101
63
59
32

SOURCE: EPB

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Bangladesh provides an opportunity space for foreign

investors who can bring in technology and market
access whilst the country provides a favorable cost
base, trade terms and capacity for set-up of
production facilities.

FDI yet to reach its full Potential

Bangladesh has been experiencing increasing FDI
over the last decade. FY 2013 inward FDI was USD 1.7
billion (highest in the manufacturing sector USD 713
million).

Dhaka Stock Exchange Performance (Jan'07

to Oct'14)
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
3-Jan-07

SOURCE: DSE

50
45
40
35
30
25
20
15
10
5
3-Jan-09
DSEX

3-Jan-11

3-Jan-13

Market Cap. (USD bn)

FDI (USD bn)

0.96

0.91

FY 2009-10

0.77

FY 2008-09

FY 2005-06

0.79

FY 2007-08

0.74

FY 2006-07

0.80

FY 2004-05

1.73
1.19
0.78

FY 2012-13

FY 2011-12

FY 2010-11

FY 2003-04

0.28

SOURCE: BANGLADESH BANK

Additionally, FDI is currently 1.2% of GDP which is low

compared to the frontier market average.
FDI to GDP Ratio
2.90%
1.17%
Frontier
Market
Bangladesh
SOURCE: CIA FACTBOOK

Potential Gap of USD 2 billion +

Capital Market provides Long Positions and

Risk Diversification for Investors
Bangladesh capital markets have very low and even
negative correlation with developed, emerging and
other frontier equity markets. Therefore, an
exposure to Bangladesh significantly improves risk
adjusted returns.
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Market Cap (USD bn)

Till date, Bangladesh is already producing motorbikes,

consumer electronics (TVs, Refrigerators and Mobile
devices) and even ships.

The market has returned 247% since Jan 2007 (17.4%

p.a.). For long term investors looking to participate in
the Bangladesh growth story now is a good time to
start investing.

DSEX/DGEN

Next Investment Hub in Asia

Internet 2G Population Coverage

The Technology Landscape

Opportunities for Economic
Leapfrog

As of now GP has reported that 2G coverage was

99.17% by population and 89.50% by area and that all
64 of the countrys district headquarter cities are
covered by its 3G network.

Bangladesh

Rwanda

89%

Kenya

87%

Afghanistan

85%

Cambodia

85%

99%

91%

Source: GSMA

Telecommunication sector has been growing at a

rapid pace with penetration increasing every year.
The first telecommunication service provider in
Bangladesh was Sheba Telecom during the early 90s,
after which Grameenphone (parent: Telenor)
established their company in Bangladesh in 1997 and
started providing more affordable mobile services.
Currently, there are six mobile operators in
Bangladesh with Grameenphone (GP) as the market
leader with 42% market share (BTRC July 14).
Currently total number of mobile subscription
equates
to
117.577
million.
Bangladesh
telecommunication sector has a fairly competitive
market with falling prices. The number of subscribers
have been growing every year but the market shares
of the operators have remained relatively same.
Growth of Subscribers (in Mn)

97%

Zimbabwe

The Telecommunication Sector Growth

Story

2G Coverage Reach

Tanzania

As an emerging economy Bangladesh has

embraced technology at a rapid pace. The
penetration of the telecom sector, mobile
commerce and advent of internet based
businesses validates the growth story that is
going to unfold in the e-space of Bangladesh.

140
120
100
80
60

Bangladesh has the highest penetration among the

comparable bases.

Key Indicators of the Telecom Sector

Connections
(million)
% active
% prepaid
SIMs per
subscriber
Unique
subscribers
(million)
Penetration,
connections
Penetration,
unique
subscribers
Connections
growth (annual)
Unique subscriber
growth (annual)
ARPU, by
connection ($)
ARPU, by
subscriber ($)
Recurring revenue
($, million)
Recurring revenue
growth (annual)

2011

2012

2013

2014F

85.7

97.6

114.3

125.1

100%
97%

100%
97%

100%
97%

100%
97%

1.65

1.70

1.81

1.86

51.7

57.2

62.9

67.1

56%

63%

73%

78%

34%

37%

40%

42%

25%

14%

17%

9%

16%

11%

10%

7%

2.40

$2.27

2.01

3.85

$3.81

3.55

2,221

2,493

2,556

18%

12%

3%

Source: GSMA

40
20
0
Jan 12

Jul 12
GP

Jan 13
Banglalink

Robi

Jul 13
Airtel

Jan 14
Citycell

Despite being ranked as a low income country 50% of

the population of Bangladesh are subscribed to
mobile services and in terms of network coverage it
has outpaced all its peers.

Jul 14

Teletalk

Source: BTRC

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The telecommunication industry is reaching maturity

which means there will be less reliance on growth
from new subscribers over the next 45 years.
This has led mobile network operators to look for
innovative value- added services (VAS) through
internet. Services (mostly related to agriculture,
education and employment) that add value to and
improve the living standard of the consumer are more
likely to support these goals

infrastructure for Digital Bangladesh by the year

2021.
WIMAX technology has already come into action
with three companies already operating including
Banglalion Communications and Augere Wireless
Broadband.
Mediums used to access Internet
WiMAX
1%

Internet Accessibility and the advent of 3G

With an estimated internet user-base of close to 40
million, the number of people using the internet has
rapidly proliferated in just three years.

ISP + PSTN
3%

Mobile
Internet
96%

The local internet industry was obviously preparing to

move into the next stage of its development. An
estimated 96% of Bangladesh's Internet users got
their access using mobile services in 2014 (BTRC).
The first 3G license in the country was awarded to
Teletalk, the state-owned operator launched a pilot
3G offering in late 2012. The four operators
GrameenPhone (GP), Banglalink, Robi Axiata and
Bharti Airtel later acquired 3G spectrum through an
auction, setting the scene for further developments
in the market place.

Mobile Internet

ISP + PSTN

WiMAX

The existing consumer base is only going to grow

with incremental discretionary income. By utilizing
the electronic and mobile channels there are
immense opportunities for technology enabled
economic growth.

The 3G network is now currently about to reach all

64 district HQs though GPs coverage infrastructure.
This will ensure a country-wide fast internet coverage
boosting the extent of communication to a higher
level.
Broadband Internet and e-commerce in Bangladesh is
slowly progressing. In 2009 there were 50,000 fixed
broadband Internet subscribers. BSCCL (Bangladesh
Submarine Cable Company Limited) which is a party
on behalf of Bangladesh in the SEA-ME-WE-4 (South
East Asia-Middle East-Western Europe-4) submarine
cable. BSCCL has become a member of the SMW-5
Consortium to join in the newly planned Submarine
Cable named SEA-ME-WE-5 which will provide more
capacity and redundancy for Bangladesh.
They will soon start operations as IIG (International
Internet Gateway) which should help the people to
get broadband Internet with cheaper rate and better
quality of service. The submarine cable network is
expected to be the main telecommunications

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The Rise of Digital Society

Widespread internet and mobile penetration has
catalyzed the growth of social media. Facebook
is now extensively used in both rural and urban
areas. The accessibility has also given rise to a
whole new wave of businesses based solely out
of a social media platforms.

Such strong online brand presence created a climate

for the formation and growth of new businesses
solely dedicated to managing the social media and
online activities of these brands. Companies like
Magnito Digital, a full service digital marketing
agency, G&R Ad network, the first online
Bangladeshi Advertising network, NewsCred, the
worlds largest leading content marketing platform,
are prime examples of the tech and digital startup
boom in Bangladesh.

Youth leading the Social Media consistent

with Bangladeshs Demographic Dividend
Majority of the users are youth between the age
group of 18-24 years old followed by 25-34 years old.
Among these 78% of the users are male and 22% are
female.
Age Distribution of Social Media Usage
55-64

1%

45-54

1%

35-44

4%

25-34

24%

18-24

53%

16-17

12%

13-15

5%

Source: SocialBakers

Increasing Brands in Social Media and

Emergence of Digital Businesses
With such a strong presence of consumers in social
media, major brands in Bangladesh now use social
media as a strong marketing platform. Big
Bangladeshi brands present on Facebook now count
the number of likes as a return on investment.
Among the top five brands present in Bangladesh,
the third most popular brand is Ekhanei.com, an ecommerce based marketplace business.
Top Brands in Social Media (in terms of
Fan Following - in Mn)
2.67

GP

2.39

Airtel

1.98

1.95

1.94

Ekhanei.com

Robi Axiata

Banglalink

Government in Social Media

Social media and the internet has become such an
efficient portal to reach the general public that the
government of Bangladesh took an initiative to create
better connectivity between the ministries by
opening up a Facebook group Public Service
Innovation Bangladesh.
In the group government officials actively contribute
and hold open dialogue to solve current social
impact issues. This is an unprecedented technological
leap on the governments part as it has made
administrative decision making processes a lot faster
and efficient.

The Police Department in Social Media

As a personal initiative, an assistant superintendent
of Bangladesh Police, opened up a Facebook page for
his Uttara branch, where citizens could voice their
concerns and ask for help from the police directly.
This simple step was highly instrumental in
revolutionizing the way police services are delivered
to the common people and stood as a testament to
the significance of a rising digital space in Bangladesh.

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The e-Commerce Business

Frontier driving Growth
Driven by increasing discretionary income,
technology adoptive consumers, literacy rate,
effects of globalization, middle income societal
enhance and rapid urbanization e-commerce in
Bangladesh is growing rapidly. Local businesses
are jumping on to the bandwagon to reap the
benefits.

The Journey of the e-Space Business Model

B2B (business to business) transaction based

businesses in Bangladesh are the least prevalent form
of e-commerce business in Bangladesh. Mostly
companies operating in the RMG sector utilize B2B
online transaction to do business with foreign firms.

Positive Growth Prospects

With the central bank step to allow the
implementation of e-payment gateways in 2009, ecommerce businesses have proliferated rapidly.
Though many B2C businesses operates under the
hybrid model incorporating cash on delivery
mechanisms.

The earliest e-commerce sites present in Bangladesh

were back in the 90s and were primarily gift sites
targeted towards Non-Residential Bangladeshis living
abroad.

Within five years between 2007 and 2012 the ecommerce and online auction area grew by 10.4%
and is expected to grow by 8.8% annually through
2017. The number of businesses operating in the ecommerce sector are expected to grow exponentially
to 61K+ over the next five years (source: IBIS World).

Right now, in addition to exclusive e-space firms

existing businesses are also rehashing their business
models and are offering more customized and online
services to meet the ever increasing customer
demand.

Young Target Demographics providing

Market Stability and growing in Wallet Size

E-space Businesses in Bangladesh (in

No.)

167

E-commerce

18

26

Classified

Web Hosting

Age Group

36
8
Internet
Banking

The current consumer demographic of E-commerce

in Bangladesh is primarily made up of youth with
female consumers making up the majority (55%).
The most prevalent age group is 26-30 years old
consisting of 50% of the consumer group.

30+ years,
15%
18-25
years, 35%

Online Courier
Services

Source: Computer Jagat E-commerce directory

E-commerce models currently Prevalent in

the Market
Majority of e-commerce business in Bangladesh falls
under C2C (consumer to consumer) transaction
business model where a consumer sells products to
another consumer. Companies like Bikroy.com,
Clickbd.com, and Olx.com are the top players.
A growing number of B2C (business to consumer) ecommerce sites also operate, mostly existing
businesses adding an online shop front. However
there are also social media exclusive firms as well.

26-30
years, 50%

Source: Pi Strategy

Majority of the consumers are either young

professionals (44%) or university students (33%).
More than 90% of them live in Dhaka and one-third of
them has a monthly income of BDT 30K+.
Fashion wear and consumer care products are the top
selling categories in the market.

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Category Wise Breakdown

Clothing &
Beauty,
34%

Others ,
29%
Food
Delivery,
6%
Mobile
Money, 8%

Travel
Tickets,
11%

Books, 12%

Source: Pi Strategy (Others include consumer electronics, gadgets,

household care products, medicine)

For e-commerce right now there is a positive

correlation between lower priced products and high
sales. This is attributed to the fact that currently
Bangladeshi consumes are more prone to value buy
via e-commerce sites. For high value items the trend
is still to have a physical Feel of the product before
purchasing.
This has been one of the primary reasons why ecommerce sites have concentrated on competitively
priced products. However with companies are
establishing strong security protocols and easier
transaction facilities with the help from banks and
trusted logistic companies consumers are
becoming more conducive to online transactions.
This has increased festival based shopping and
enhanced basket size.
Currently, the yearly transactions are averaging BDT
2,000 mn (USD 25 mn) per annum but this is growing
around 30%/month recently (source: The Daily Star).

Diversified set of e-commerce models

driving growth in the Market
Online Retail Stores - These are the most widespread
form of e-commerce sites present in Bangladesh and
the most popular ones with transaction taking place
in a B2C and C2C basis. Well renowned websites
include Ekhanei.com, Akhoni.com, Kaymu.com and
Bikroy.com.

As the country and culture has evolved so has the

taste buds of its inhabitants. This led to the boom in
the restaurant business and services like home food
delivery.
Grocery Stores - Chaldal.com serves as the most
renowned online grocery store in Bangladesh where
consumers can order groceries online and itll be
delivered to them. Chaldal recently received seed
funding from 500 Startups, a VC firm based out of
California.
Recently, Meenabazar, a concern of Gemcon group
and one of the biggest retail supermarket chain in
Bangladesh also opened up their own online grocery
order and delivery service.
E-ticket - During the major holidays in the country,
like Ramadan and Eid, most people living in cities
travel to their villages to celebrate Eid. They have to
wait in long queues for hours on end to buy tickets for
bus, train and steamers.
To evade this hassle faced by everyone, Bangladesh
Railway introduced the e-ticketing system where
tickets could be bought online. Around 25% of the
tickets in 2013 were bought online. This year
BusBd.com also introduced online tickets for buses
and they sold thousands of bus tickets online.
Online Car market - Carmudi.com serves as an online
marketplace for people who want to buy used or new
vehicles and connects them with individual vehicle
owners or vehicle dealers that want to sell new or
used vehicles. They are the first company to provide
this service and the most renowned one.
Online Real-Estate market - Lamudi.com is the first
website in Bangladesh solely dedicated to the real
estate market where consumers can find the best real
estate offers within the country.
Both Lamudi.com and Carmudi.com are a concern of
Rocket Internet Group, an e-commerce focused
venture capitalist firm and startup incubator from
Germany.

Food Delivery Stores - Foodpanda.com, a concern of

Rocket Internet from Germany, and Hungrynaki.com
are two major players in the food delivery services in
Bangladesh.

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Mobile Financial Services (MFS) making

Extensive Headway

users are more likely to receive money, rather than

send money.

M-banking is a rapidly growing market segment in

Bangladesh. New regulatory guidelines, strategy
shifts among the key M-banking providers, increased
awareness among the public, have all contributed to
extensive growth. Bangladesh reached the 10 million
registered customers mark in early Nov 2013, and by
end of Sep 2014, that number had experienced a 107
% growth, with 20.7 million registered users served
by about 478,000 agents transacting around USD 1
bn per month (source: Bangladesh Bank).

Bangladesh has a large population in a small

geography. It is also home to one of the most deeply
penetrated
microfinance
markets.
Indeed,
Bangladeshs overall access to accounts for adults of
nearly 40% is higher than South Asias average of
33% and the global lowincome country average of
27%. Nevertheless, most banks, mobile operators
and microfinance institutions agree that mobile
financial services are likely to focus initially on
domestic person-to-person transfers.

Mobile Financial Services - Monthly Vol

in USD bn
0.89 0.82 0.98 1.01 1.03 1.07

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14

1.37
0.93

1.25

Jul-14 Aug-14 Sep-14

Source: Bangladesh Bank

Till date, Bangladesh Bank has approved 28 banks to

operate as mobile financial service providers in the
country. Of which 19 banks have been able to
officially launch the service so far. In the current
market only three players have widespread presence.
The top three players are BRAC Banks bKash, DBBL
Mobile Banking and Islami Banks mCash.
MFS Revenue/Month (in BDT mn)

The Independent has ranked Bangladesh as 7 among

the list of the top mobile financial service provider in
the world. Bangladesh Bank also recently introduced
the National Payment Switch Bangladesh (NPSB)
which would further proliferate MFS.
MFS Service Breakdown
Others, 1%
Utility
Payment,
2%

Salary
Disbursem
ent, 1%
Inward
Remittanc
e, 0%

Peer to
Peer , 17%

Dec 13,
50
Apr 13,
21

Young people continue to contribute to M-banking

growth. Most people will continue to use a variety of
different modes of funds transfer (Pure OTC, Partial
OTC, Pure Wallet, and non-mobile). Moreover, issues
like instant transfer and trust will continue to be key
influencing factors in the wider adoption of Mbanking.

Apr 14
(E), 83

Cash out
Transactio
n, 37%

Cash in
Transactio
n, 43%

Source: Bangladesh Bank

Source: Bangladesh Bank

The telecom operators are developing products to

provide VAS in the segment. GP has already floated
Mobicash which provides gateways to the various
mobile wallets available in the market.
According to pi Strategy survey, nearly 48% of the Mbanking users reside in urban areas while 32% in
rural and 20% in semi-urban areas. However rural

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ITES Sector The Gateway to the

Middle Income Status
Bangladesh IT sector has historically remained
outside the limelight due to neighboring Indias
spectacular IT success. The lack of adequate
infrastructure and inadequate training facilities
compounded the slow progress of the IT sector.
However, over the last decade, there has been a
proliferation of IT ventures earning foreign
currency reserves for the nation.

Thriving Domestic ITES Market

Recently, many large-scale automation projects have
been implemented in sectors like banking, telecom,
pharmaceutics, RMG and Textile sectors increasing
the domestic demand for software and ITES solutions.
Manufacturing sectors including garment, textile
and pharmaceuticals have created sustainable
demand for IT solutions like ERP, HR and Payroll
management systems, and production and financial
management software. As a result, the domestic IT
service industry has grown by 20 to 30 percent per
annum over the last few years (source: BASIS).

Prospect of Outsourcing is Positive

Development measures from government has
improved overall infrastructure resulting in
reliable and cheaper internet connectivity while
ensuring training facilities for budding IT
professionals.

Market is growing with more Product Depth

Currently there are over 800 IT and ITES companies
registered in Bangladesh with an estimated total
industry turnover of around USD 200 million. Nearly
76 percent of these companies are involved with
customized
application
development
and
maintenance.

The ITC estimates that around 200 Bangladeshi ICT

companies are serving international markets offering
outsourcing services and project delivery models. In
terms of export destinations, North America (Canada
and the US) dominates, whereas European countries
like the UK, Denmark, the Netherlands and Germany
have emerged over the last few years as major export
destinations (source: BASIS). According to the ITC
Exporter Directory there are over 10,000 ICT
freelancers active in Bangladesh as of 2014, billing
an export revenue of nearly USD 200 million.
Top Export Destinations
68%

Specialization of IT & ITES Companies

18%

E-commerce
IT Enabled Services
Customized Application

Source: BASIS

8%

8%

UAE

8%

Japan

9%

India

17%

Product Development

9%

Germany

11%

Mobile Application

Denmark

7%

USA

R&D Services
System Integration

Australia

3%

Canada

IT Infrastructure

20% 18% 15%

UK

3%

Netherlands

33%
Reseller

45%
50%
76%

Big Names are Taking Notice

Source: BASIS

Whereas most Bangladeshi market players initially

offered their services and products predominantly on
the domestic market, Bangladeshi software solutions
and ITES are nowadays exported to other regions like
Europe and Northern America.

Recently in a global survey, world renowned

management consulting firm AT Kearney published a
report on the development of the IT sector in
Bangladesh. Kearneys Global Services Location
Index (GSLI) gives a comprehensive list for the most
lucrative outsourcing location around the world and
Bangladesh entered the list for the first time and was
ranked 26th among 51 other countries, nestled
between Pakistan (25th) and United Kingdom (27th).
Bangladesh, Pakistan and United Kingdom hold the
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same score on the GSLI scale 5.34 out of 8.

Bangladesh was also ranked the highest in terms of
financial attractiveness among the 51 countries on
the list.
Comparative Scores

The Sector Outlook is Optimistic

3.43

3.31

2.282.17
1.39

1.17
0.64

Pakistan

Initiatives like Digital World and BASIS Softexpo are

playing a positive role in building awareness and
promoting IT sector to both domestic and the
international market. Internet connectivity has been
vastly enhanced over the country.

0.74

Bangladesh

Financial Attractiveness
Business Environment

0.88

United Kingdom

With cooperation and support from both

Government & the private sector; the sector is
expected to reach export earning of USD 1 billion
within the coming decade from the European and the
US markets.
Yearly IT Export Earnings (USD mn)

People Skills & Avialibility

250

120 %

200.0

Source: AT Kearney

100 %

200

80%

150

Coders Trust an initiative backed by the development

fund Danish International Development Agency
(DANIDA), is also providing microfinance for students
in Bangladesh to develop their programming skills
and take outsourcing jobs from popular freelance
marketplaces such as Elance and oDesk. Bangladesh
was also ranked as the third best country for
contractors on oDesk behind the Philippines and
India, within just three years.

Government is Strongly Backing the Sector

Governments Digital Bangladesh initiative has
assisted in increasing export revenues in the IT
sector from USD 35 million to USD 200 million over
the last five years and also helping to set up
infrastructure for enhanced connectivity, ICT based
citizen service delivery and ICT based Education
system, multiple internet connectivity.

101.6

100

50

26.1

24.1

32.9

35.4

45.3

60%

70.8

40%

20%

0%

2013-14

2012-13

2011-12

2010-11

2009-10

2008-09

-20%

2007-08

2006-07

Bangladeshs prospects have been identified by

several global ICT companies. For example, the
Korean technology firm Samsung has opened a highend Research and Development (R&D) center in
Bangladesh employing over 250 engineers. VizRT, a
Norwegian company that creates content production
tools for the digital media industry, is building captive
centers following acquisitions of ICT production
companies in Bangladesh. Other global IT companies
like AMD, LG and IBM are currently in the process of
setting up either their captive R&D or support centers
in Bangladesh.

Source: BASIS

Booming Startup Community

Bangladesh is witnessing the rise of a vibrant startup
ecosystem. Many initiatives from public as well as
private sectors are being regularly held with the likes
of Digital World 2014, A2I Innovation Fund, GIST
Bootcamp, StartupBash, Startup Cup, DCCI
Innovation and Entrepreneur expo to promote the
startup concept and support budding entrepreneurs.
Local ventures like BDJobs.com and NewsCred have
raised international funds with many local tech
companies like chaldal.com raising seed finance from
local and international investor networks.
A host of freelancers are now setting up small teams
and making their way towards setting up their own IT
firms. With the right mentoring and access to market
linkages, these local entrepreneurs can be the next
generation of leading global startups.

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Tech Startup Showcases

SEEK International, number one job portal in
Australia has acquired 25% of Bdjobs.com,
Bangladeshs leading online job market at USD 4.8
mn in 2014. Bdjobs was launched in 2000 and
currently has 90% share of Bangladeshs online job
marketplace.

Accenture in 2013 bought 51% stake in GPIT, an IT

wing of the country's top mobile operator GP, at USD
10 mn. This signifies growing attraction and
confidence on Bangladeshs growing ITES market.

The optimism driver surrounding the IT sector, is the

country's large youth demographic, who happen to
be very receptive to the latest technology. 60% of
the country's total population of 160 million are
below the age of 35 and they are very pro-IT and are
easily trainable.
Every year more than 5,000 IT graduates are coming
out. Furthermore, the expatriate Bangladeshis are
doing exceptional and are moving up in the decisionmaking ladder of big tech-companies such as Google,
Microsoft and Facebook.
The government is also committed to nurturing this
sector and has granted tax exemptions for the next
five years; 300 acres of land in Kaliakoir is also being
used to develop an industrial park while BASIS is
working with the government to formulate the best
policies for the sector.

NewsCred, which provides licensed content to

publishers and brands for their websites and content
marketing campaigns, raised a USD 25 million (Series
C) round of financing this year, led by InterWest
Partners. The investor folio includes names like AOL
Ventures, Mayfied Fund, IA Ventures, Greycroft
Partners, IA Ventures, FLOODGATE, FirstMark Capital
and Lerer Hippeau Ventures. NewsCred has grown
fivefold just last year and boasts clientele like P&G,
Bank of America, GE, Toyota, Yahoo and Sprint.

Robust Pipeline (including Talent Base)

Success cases have propelled the emergence of
Startup Culture in Bangladesh. Local Angel
Investment Networks are also providing active
support.
Additionally, business friendly ICT related laws and
policies like tax breaks from the government have
catalyzed growth.

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Investing in Bangladesh
Government Policy Support
Since economic liberalization of the Bangladesh
economy in the early 90s, successive
Governments have pursued a pro-investment
policy with a view to increasing Foreign Direct
Investment (FDIs). Special economic zones have
been setup across the country and major foreign
investors have been provided with subsidized
lands, tax holidays, profit repatriation and
priority in utility connections.

Bangladesh Emerging Investment Hub

Recently, attractiveness of Bangladesh as an
investment destination has increased manifold,
especially due to the countrys preferential trade
status in major international markets, inexpensive
labor and proximity to China and India. Increasing
labor costs in China has further precipitated a shift of
investment to neighboring regions. Given the
backdrop, Bangladesh government is keen to attract
investment not only to positively tilt the balance of
payment position, but to further rejuvenate the
economy through employment generation and GDP
growth.

Investment Friendly Policy Framework

A host of policies have been adopted to incentivize
foreign investment.
Tax Holidays: Foreign investors will receive tax
holiday ranging from 5 to 7 years based on geographic
location. For instance, for industrial enterprises
located in Dhaka and Chittagong, tax holiday is for five
years. While it is seven years for locations in Khulna,
Sylhet, Barisal and Rajshahi divisions.
Accelerated depreciation facility: Industrial units
financed by foreign investors will enjoy an
accelerated depreciation allowance post tax holiday
period. Such allowance is available at 100 per cent
cost of the machinery or plant if the industrial
undertaking is set up in the areas falling within Dhaka,
Chittagong and Khulna. If the industrial undertaking is
set up elsewhere in the country, accelerated
depreciation is allowed at the rate of 80 per cent in
the first year and 20 per cent in the second year.

Concessionary duty on imported capital machinery:

No import duty will be charged for imported
machinery for industrial units which are 100% export
oriented in nature. For the rest, 5% import duty will
be charged for initial installation or BMRE/BMR of the
existing industries.
Full repatriation of Capital: Full repatriation of
capital invested from foreign sources will be allowed.
Similarly, profits and dividend accruing to foreign
investment may be transferred in full. If foreign
investors reinvest their dividends and or retained
earnings, those will be treated as new investments.
Legal protection: The policy framework for foreign
investments in Bangladesh is based on 'The Foreign
Private Investment (Promotion & Protection) Act.
1980, which ensures legal protection to foreign
investment in Bangladesh against nationalization and
expropriation. It also guarantees non-discriminatory
treatment between foreign and local investment, and
repatriation of proceeds from sales of shares and
profit. Despite change in government, there has been
a continuity of policies with regards to attracting
foreign investments.
Bilateral agreement and treaty: The Government of
Bangladesh has a series of bilateral investment
agreements with a number of countries in Asia
(China, India, Japan, Singapore, South Korea, Sri
Lanka, Thailand, Iran, Malaysia, Pakistan, Philippines),
Europe (Belgium, Denmark, France, Germany,
Poland, Romania, Sweden, The Netherlands, United
Kingdom, Italy, Romania, Switzerland, Turkey) and
North American (Canada, USA).
In addition, Bangladesh is a signatory to MIGA
(Multilateral Investment Guarantee Agency), OPIC
(Overseas Private Investment Corporation) of USA,
ICSID (International Centre for Settlement of
Investment Disputes) and a member of the
WIPO (World Intellectual Property Organization)
permanent committee on development co-operation
related to industrial property.
Preferential Trade Agreements: Bangladesh has a
number of preferential trade agreements with
countries having significant market size like GSP with
EU, quota and tariff free access to Canada and Japan.

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About us:
LightCastle Partners simplify decision making by
providing advisory services (market intel/industry,
due-diligence/business design) and tools to make life
simpler.
On the private sector side we have worked with
global end clients like Mitsubishi (Japan), Generac
(USA), Telenor (Norway), Starbucks (US) and
International Investment Funds (like Asian Capital
Advisors) and local business conglomerates.
In impact investments we have worked in multiple
projects with top tier firms like CARE Bangladesh,
Swisscontact Katalyst, Traidcraft (UK), Habitat for
Humanity (Philippines) and Hivos (Indonesia).
The founding partners have backgrounds in
Corporate and Investment banking, Audit and
Advisory with firms like Citi, HSBC, StanC, KPMG and
Deloitte.

For any Queries please contact-

LightCastle Partners
FR Tower 19 Floor
32 Kamal Ataturk Avenue
Banani Dhaka 1213, Bangladesh
Mail @ info@lightcastlebd.com
Read our blog at http://www.lightcastlebd.com/blog
Visit us at http://www.lightcastlebd.com/

All information contained herein is obtained by LightCastle from

sources believed by it to be accurate and reliable. Because of the
possibility of human or mechanical error as well as other factors,
however, all information contained herein As IS without warranty
of any kind.
LightCastle adopts all necessary measures so that the information
it uses is of sufficient quality and from sources LightCastle considers
to be reliable including, when appropriate, independent third-party
sources. However, LightCastle is not an auditor and cannot in every
instance independently verify or validate information received in
preparing publications.

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