Workers in Bangladesh have followed in the footsteps of their peers from all around the world in working from home as the coronavirus emergency unfolds.
Social distancing and working from home in Dhaka – as elsewhere in the country of 165 million – have presented challenges to many professionals and organisations, but do not seem to be grinding the country's economy to a halt. Things would have turned out very differently 15 years ago, however.
“When we started off in 2005, the biggest challenges were internet connectivity and power supply,” says Imtiaz Ilahi, managing director of Dhaka-based GraphichPeople, an offshore production company working with ads agencies across the globe. “We still relied on satellite connections, which heavily limited internet bandwidth, and power cuts happened often.
"Things have changed dramatically in the past years, the government has invested heavily in infrastructure, power cuts are rare today and we now have two submarine and two terrestrial fibre optic cable connections. These are the two factors that have drastically improved the foundations of the ICT industry in Bangladesh.”
With these fundamentals in place, and a rampant economy driven by both the public and private sector that has lifted millions out of poverty, the country's domestic ICT industry is finally maturing.
A question of talent
Bangladesh has built a global brand in sectors such as ready-made garments thanks to its deep and cost-convenient pool of labour. The government is now expending efforts towards channelling some of that labour towards the ICT industry. With 46.5% of its population under 25 years of age, the country appears ready to supply staff for an industry synonymous with a younger workforce.
A major factor in Bangladesh’s favour is that its workforce offers highly competitive costs compared with well established and dominant offshore centres such as India and the Philippines. Among the top 250 IT delivery locations, Bangladesh offers significant savings over any of its counterparts, according to a 2017 report by research company Everest Group. In particular, operative costs in Dhaka are 16% to 20% cheaper than Bangalore in India, and 30% lower than Cebu in the Philippines.
However, the skills do not yet match the supply. “Actually, there is a shortage of readily available talent,” says Parul Jain, practice director at Everest Group. “The industry in Bangladesh is nascent; investors have to build entire ecosystems. We have a large workforce available, but companies have to make investment into training these workers. To compete with the Indian or Filipino offshore industry, we need a unique proposition. It is about costs, but also investing into training talent and infrastructure.”
As part of its Digital Bangladesh initiative, the government has stepped up efforts to supply the ICT industry with the necessary talent. Some 65,000 young professionals get training in ICT-related subjects every year in the country, according to government figures, and specialist labs are mushrooming across Bangladesh to leverage the potential of a workforce that appears relatively tech-savvy and connected with the outer world; Bangladesh is the world’s second largest supplier of online labour, with 16% of active online freelancers, second only to India with 24%, according to a study by the Oxford Internet Institute.
Leading global IT service providers such as Wipro, IBM, TCS, NTT Data, Infosys and WPP have already entered the market through setting up delivery centres and joint ventures with local companies, but Bangladesh is widely deemed to have a long way to go to catch up with the leading countries that provide ICT services to the world.
“Despite this, the IT industry remains significantly smaller than its main competitors [India and the Philippines] and has yet to reach the growth phase in its industry life cycle,” Mohammed Shehab, a junior associate with Dhaka-based business consulting firm LightCastle Partner, wrote in 2019. “However, once it arrives at this destination, we are likely to see greater growth due to favourable government policies and foreign investments. In essence, Bangladesh is an upcoming hotspot for ICT outsourcing, where its speed to reach that position depends on its ability to develop its talent capital and infrastructure to compete in the global platform.”
Prime minister Sheikh Hasina launched her vision for a Digital Bangladesh in the political campaign for the general elections held in December 2008. She eventually won those elections, and has stayed in power since then, giving that initial vision a lasting political platform for it to develop and flourish.
Despite its many challenges, which include rapid urbanisation and extreme vulnerability to climate change, Bangladesh has embarked on a solid economic growth trajectory, with its GDP increasing by more than 7% every year since 2014.
Public investment in basic infrastructure and the ready-made garment industry have been the main driving forces behind the country’s recent economic success, but the government is now committed to making the ICT industry a new engine of growth for the whole economy as it gradually reaches a stage where it can compete with other major offshoring destinations both in terms of infrastructure and talent.
A wide range of incentives is available for investment in the ICT industry, including initiatives for investors such as a 10-year corporate income tax exemption, a three-year exemption on the income tax of the foreign professionals they employ and 100% equity control of the company even if they are foreign.
Besides, now that basic power and internet connections are in place, the Bangladeshi government is developing 28 hi-tech parks where ICT companies can find plug-and-play-ready infrastructure for their operations. Two of these parks are already up and running in Dhaka and the south-western city of Jessore. The remaining 26 are expected to come online in the near future.
Bangladesh has made tremendous inroads in the past decade, reducing poverty levels from 44.2% in 1991 to 14.8% in 2016/17, according to World Bank figures. It aims to reach middle-income status by 2021, and triple its per capita income by 2041. To do that, it needs more, and better skilled, jobs for the 2 million young people that enter the employment market every year.
The ICT industry is crucial to this vision. Having the right talent and infrastructure opened the doors of the global ICT market to companies in neighbouring India 20 years ago; Bangladesh now has both, and is keen to follow suit.
This article first appeared in the April-June edition of fDi Magazine. The full digital version of the magazine is available here.