Accelerating the growth of Bangladesh IT industry

For years, Bangladesh's IT sector has leaned heavily on the outsourcing skills of its young workforce, while countless self-anointed 'experts' have rushed to claim credit for its growth. From NGOs to government bodies, they endlessly assume the responsibility for training programs, skill gap solutions, capacity building and IT literacy. 
Meanwhile, the industry is flooded with so-called leaders who dish out their unsolicited 'wisdom' both in universities and all-over social media requesting the collective to do X, Y and Z. Yet all this noise overlooks one simple truth—the sector's success has little to do with any of it.
The IT sector has thrived precisely because it's the most difficult to interfere with. Apart from the genius move of an extended internet shutdown in July this year, none of these activities have truly impacted the realities on the ground. The sector's value comes from the basics: electricity, internet and computers.

Steroids are for cheaters
Still regulators continue throwing cash incentives at the industry, trying to become the industry's best friend while taking credit for its growth—and using it to fuel their own coercive money-making schemes. 
A whole new legal economy has sprung up, with lawyers and auditors assessing export invoices to qualify software exports for incentives. And, of course, finding loopholes that allow sectors like RMG to cash in on these higher incentives meant for software exporters. It is also leaving companies like mine with no other option than to accept what is offered to stay competitive.
Nowadays we eagerly wait for every cash incentive disbursement —because we need to compete for the highest-paid software engineers and highly incentivized, tax-exempt freelancers who are all part of the same inflationary labour market. But does it help the sector to put everyone on financial steroids? 
No, it brings serious downsides. Corruption, administrative overheads, fake projects, and rent-seeking behaviour thrive, while highly talented and productive players often go unnoticed. Put simply, if you want the best payoff in Bangladesh's IT business, your core competence better lies in legal and finance than in IT. The real winners are large local companies with the resources to navigate these systems—unlike foreign direct investors like us, who adhere to global compliance standards.

IT is a global discipline
So instead of continuing with these technocratic, corruption-inviting activities, it's time to put the brake paddle on and focus on the actual economic reforms required before it's too late again. Here's what truly needs to change to let the sector reach its full potential.
The ultimate goal of these reforms should be to create an environment where Bangladesh IT companies can thrive and compete globally. Our software engineers must be considered a part of the global talent pool, and therefore need to be given the same environments and tools as their counterparts abroad. 
If we cultivate an environment where our engineers can connect to the global market while enjoying a high-quality work-life balance, Bangladesh could even attract top international talent, like how India succeeded with its thriving tech hubs. Unfortunately, before we can even dream of becoming a destination for global talent, we must confront a harsh truth: we're losing most of our best and brightest.

A hard-earned dollar buys you less in Bangladesh
What does it really mean to create an environment where engineers can thrive? To answer that, we need to understand why 85% of the best-educated Bangladeshis leave the country for good. 
In my company, we employ many highly educated Bangladeshis, most of them in Dhaka, and while building this team over the past decade, I've seen hundreds of talented individuals leave the country permanently. Sure, many say it's for higher education or short-term opportunities—but the reality is, they have rarely ever returned.
The real reason they leave isn't because Finland has a university offering that Bangladesh doesn't. 
While that may be a subjective factor, it's not the driving force at the population level. The real cause is the stark economic disadvantage they face with the same dollar salary here compared to almost any other country. 
One might argue that the dollar goes further in Bangladesh due to higher purchasing power—but that only applies to basic services, not to anything that's globally produced. For any upper-middle-class lifestyle, the cost of goods and amenities erodes the PPP advantage entirely.

It's simply not fair
In our group, we employ almost 250 people in countries outside of Bangladesh, and I often ask myself this question: How can it be that a European employee, earning 4-5 times more in dollars, spends 30-40% less on the same goods than a Bangladeshi?
It is utterly unfair to its own people that Bangladesh imposes outrageously high tariffs on anything meaningful entering the country, only to slap an additional 15% VAT on these goods when they reach consumers, who are already paying high income taxes on relatively low incomes.
No other country in Asia taxes someone earning between $1,000 and $4,000 per month as heavily as Bangladesh—especially when we factor in implicit taxes, like tariffs and duties. The Bangladeshi engineer is stuck with a Vivo smartphone, while their German counterpart can buy an iPhone for the same amount of dollars earned.
It gets even worse when it comes to cars. Bangladesh has turned itself into the dumping ground for Japan's outdated automobiles by taxing the life out of any imported car, rather than implementing smart road taxes like advanced nations do.

Stop interfering
All of this—crippling taxes on everything from cars, electronics to basic goods—is exactly what drives productive people away from the country. It pushes them to hide their income, hold money abroad, shop abroad, and haul goods back in oversized suitcases, ultimately benefiting no one.
So, the solution for the interim government is simple: stop the interference. Stop charging exorbitant duties. Simplify the tax code. Stop redistributing tax money with yet another useless skill enhancing training program. The industry will thank you by growing even faster, training even more people and giving you higher tax revenues instantly.
Countries like Kosovo, another place my company operates from, have shown that simple tax rates as low as 10% can generate four times the revenue for the government and even encourage people to return home. Taxes matter. Tariffs drive up inflation endlessly, while low taxes attract productive people, and high taxes drive them away. It's those productive people who create the environment a country needs to elevate the economy and society alike. 
In summary, IT export earnings represent the greatest opportunity for Bangladesh's youth today. Let them enjoy the benefits through local consumption and investment. Minimise income tax rates, tax roads instead of cars, and encourage—rather than penalise—the consumption of globally produced goods. Corruption will decrease, revenues will increase, the economy will flourish, and the IT industry will take off like a rocket ship. Just look at Singapore, South Korea, Japan, Thailand, or Vietnam if you need proof.
 

Julian A Weber. Photo: Courtesy

Julian A Weber is the CEO of SELISE Digital Platforms. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.