Introduction
The IT industry in Bangladesh is experiencing unprecedented growth, transforming the country into a burgeoning hub of technological innovation and digital prowess. Over the past decade, Bangladesh has made significant strides in developing its IT infrastructure, fostering a vibrant startup ecosystem, and enhancing its global competitiveness. This remarkable progress is fueled by a combination of government initiatives, private sector investments, and a young, dynamic workforce eager to embrace new technologies. As a result, Bangladesh is not only attracting international attention but also paving the way for a future where technology drives economic development and societal advancement. In this blog, we delve into the key factors behind the rapid growth of Bangladesh’s IT industry, the opportunities it presents, and the challenges that lie ahead.
IT Education and Workforce
A critical component of Bangladesh’s IT sector’s success is its focus on education. The country boasts a literacy rate of 74.66% and has 169 universities, including 55 public and 114 private institutions. Each year, over 25,000 IT graduates enter the workforce, many equipped with global certifications from leading vendors such as Oracle, Microsoft, AWS, and Cisco. The government has taken initiatives with some private organizations to double the number of IT graduates to 50,000 per year to meet the increasing demand for skilled IT professionals. These initiatives are taken for Universities to increase the number of seats for the ICT department.
Economic Landscape
Despite global economic challenges, Bangladesh’s economy has demonstrated remarkable resilience and growth. Between 2021 and 2022, the country’s nominal GDP fluctuated between $416 billion and $460 billion. The GDP growth rate peaked at 7.1% in the fiscal year 2021-2022, slightly declining to 5.8% in 2023. The income per capita showed a consistent rise, indicating an improvement in living standards for many Bangladeshis.
Key Economic Indicators (2020-2023)
| Indicator | 2020-2021 | 2021-2022 | 2022-2023 |
| Nominal GDP (in Bn) | $416 | $460 | $431 |
| GDP Growth Rate (in %) | 6.9% | 7.1% | 5.8% |
| Income Per Capita (in Thousands) | $2497 | $2730 | $2621 |
| Exports (in Bn) | $45.4 | $52.1 | $51 |
| Imports (in Bn) | $68.7 | $75.5 | $80 |
| Remittances (in Bn) | $22.00 | $21.03 | $21.50 |
IT Industry
The IT industry is a significant contributor to this economic narrative, with the government aiming to expand its export market to $5 billion by 2025. Bangladesh’s IT sector encompasses software development, IT-enabled services, custom software, digital marketing, e-commerce, and many more. Over 4,500 software and IT companies employ more than 1.5 million IT professionals, and the local software and IT market is valued at around $2 billion.
Diverse Expertise of Bangladesh’s IT Industry
Bangladesh’s IT industry is not only expanding rapidly but also diversifying in its areas of expertise. With a robust ecosystem that supports various IT-enabled services, business solutions, and specialized tech fields, the country is well on its way to becoming a global IT hub. Here’s a breakdown of the key areas of expertise within Bangladesh’s IT sector:
Export Markets and Global Presence
Bangladesh’s IT industry has rapidly expanded its export markets and global presence, establishing itself as a key player in the international arena. With a strategic focus on software development, IT-enabled services, and digital solutions, Bangladeshi companies are now serving clients in the United States, the European Union, Japan, and the Middle East. This success is driven by a combination of competitive pricing, high-quality service delivery, and a highly skilled workforce. Government initiatives, including incentives and supportive trade policies, have further bolstered the industry’s growth. As a result, Bangladeshi IT firms are not only attracting a diverse range of international clients but also forming strategic partnerships, enhancing the country’s reputation as a reliable and innovative IT service provider.
Type of Export IT Services
Top Export Markets for Bangladeshi IT Services
IT firms in Bangladesh have extended their reach internationally, exporting software and services to almost 80 nations, including the USA, UK, Japan, Australia, Denmark, Germany, Netherlands, Canada are the biggest export markets.
Exports of ITES and IT products, including software, technical assistance, and equipment maintenance, brought in $592 million to Bangladesh during the previous fiscal year. The real yearly IT export is estimated by the Bangladesh Association of Software and Information Services (BASIS) to be close to $2 billion.
Cost-Effective Operations
According to the Oxford Internet Institute, Bangladesh has emerged as the second-largest supplier of online labor globally, boasting a remarkable 0.7 million online workers. This achievement is driven by the country’s youthful demographic, with over 50 million individuals aged between 15 and 29. Bangladesh’s appeal as an outsourcing destination is further enhanced by its lower living costs, which are significantly lower than those in major Asian outsourcing hubs.
One of the significant advantages of operating in Bangladesh is the cost-effectiveness. Living costs and office rents in Dhaka are significantly lower compared to other Asian IT hubs like India, China, Vietnam and the Philippines. Additionally, Bangladesh offers one of the lowest internet charges in South Asia, making it an attractive destination for outsourcing and IT operations.
Cost Comparison
Standard Living Costs: USD 301 in Bangladesh vs. USD 428 in India, USD 1,145 in China, and USD 3,218 in the Philippines.
Internet Charges: USD 30.77 per month, among the lowest in South Asia.
Office Space Rents in Dhaka: USD 1.15 per square foot vs. USD 1.40 in Mumbai, India, and USD 2.19 in Manila, Philippines.
Government Support and Incentives
The Bangladeshi government provides robust support to the IT sector through various incentives, including:
- VAT Exemption: 100% VAT exemption for procurement.
- Profit Repatriation: 100% profit repatriation for investors.
- Tax Exemption: Three years of income tax exemption for foreign experts.
- Hi-Tech Parks: 29 special hi-tech parks and software technology parks are being developed to provide infrastructural support needed by IT companies. These parks will be treated as bonded warehouses with no customs duty applicable for export, and reduced duties for home consumption.
Since 1996, the government has allowed zero or low tariffs for computers and other capital goods necessary for the software industry. Special government subsidies are available for long-term equity and short-term working capital financing, and there are cash incentives on software, ITES, and ICT hardware exports.
Additional Incentives
8% Cash Incentives: On software, ITES, and ICT hardware exports.
10-Year Tax Exemption: For investors in hi-tech parks.
12-Year Tax Exemption: For developers.
Global Recognition
The global confidence in Bangladesh’s IT sector is rising. Renowned publications and organizations like The New York Times, Standard Chartered, World Economic Forum, and Bloomberg have highlighted Bangladesh’s growth story and potential. The country’s digital payment systems are poised to boost economic inclusion and drive towards meeting Sustainable Development Goals (SDGs):
- The New York Times: “Educating Girls has been the key to Bangladesh’s Success.”
- Standard Chartered: “Bangladesh – A Compelling Growth Story.”
- World Economic Forum: “How digital payment systems can boost Bangladesh’s push to meet the SDGs.”
- Bloomberg: “South Asia should pay attention to its Standout star.”
As Bangladesh continues to invest in education, infrastructure, and supportive policies, its IT industry is set to become a major player on the global stage, offering cost-effective and skilled labor to meet the demands of a digital future.
Conclusion
Bangladesh’s IT industry is on an impressive growth trajectory, supported by a young and educated workforce, cost-effective operational environment, and strong government incentives. As the country continues to expand its IT capabilities and export markets, it stands as a compelling destination for global IT and software development needs. With continued investment and strategic planning, Bangladesh is poised to become a powerhouse in the global IT landscape.
References
FocusEconomics. (2023). Bangladesh
The Daily Star. (2023). IT export to Japan surges
Statista. (2023). Gross domestic product (GDP) per capita in Bangladesh
World Bank Data. (2023). Bangladesh
Bangladesh Bank Annual Report. (2023). Publications
Bangladesh Bureau of Statistics. (2023). National Strategy for the Development of Statistics (NSDS)
