Can Bangladesh become a global leader in IT?

Bangladesh needs a skilled workforce to capitalise on this potential of IT. Photo: TBS

The relentless march of artificial intelligence (AI) and the Internet of Things (IoT) underscores the critical importance of information technology (IT) for nations worldwide. A robust IT sector fosters rapid access to information, a cornerstone of national economic progress. We are witnessing a global rise in prominent IT firms, leading to the development of thriving IT sectors in many countries.

Asian nations are actively capitalising on this trend by creating environments that attract international IT investment. Major players like Microsoft, Apple, and Samsung strategically invest in Asia to benefit from cost advantages. 

Bangladesh, with its highly skilled and cost-effective workforce compared to regional competitors like India, Malaysia, and China, is well-positioned to seize these opportunities.

Bangladesh needs a robust framework for attracting foreign investment, a comprehensive nationwide IT infrastructure, and a skilled workforce to capitalise on this potential fully. Bangladesh's software and IT-enabled services (ITES) sector demonstrates significant growth potential. 

Several factors drive this, including a large pool of talented young workers, supportive government initiatives, proactive leadership from the Bangladesh Association of Software and Information Services (BASIS), and positive media coverage.

The IT sector plays a transformative role in developing countries like Bangladesh, offering many economic and societal benefits. This sector encompasses many services, including IT-enabled services (ITES), e-commerce, artificial intelligence, outsourcing, and software and hardware production. These services are essential for enhancing productivity, streamlining business operations, and fostering economic growth, especially in a competitive global environment.

Furthermore, the IT sector dramatically improves governance efficiency and accessibility. Increased transparency through IT facilitates better management and delivery of essential government services like healthcare, education, and consumer rights protection.

The IT sector contributes significantly to economic growth by creating employment opportunities across various skill levels, from software developers to customer service representatives. Exporting IT services generates valuable foreign exchange earnings, bolstering the country's foreign reserves and reducing trade deficits. 

Additionally, freelance IT service providers contribute a substantial source of revenue through outsourcing. Investment in IT education and training programmes enhances the workforce's skillset, making them globally competitive and adaptable to technological advancements. 

Moreover, the IT sector fosters a culture of innovation, entrepreneurship, and startups, encouraging the development of new products, services, and business models.

Under Prime Minister Sheikh Hasina's leadership, the current government of Bangladesh is demonstrably committed to bridging the digital divide between rural and urban areas by leveraging technological advancements and implementing various government initiatives. 

As industry professionals observe, local entrepreneurs are securing significant outsourcing contracts for multiple services, including back-office operations, image processing, graphic design, animation, data entry, communication services, accounting, legal process outsourcing, and data analytics.

Bangladesh's IT sector is experiencing impressive growth. Freelancing alone contributes significantly, with around 650,000 individuals generating $500 million annually. IT companies are also seeing a rise, with exports reaching $282.77 million in the July-December period of 2022–23, a jump from $208.09 million in the same period of 2021–22 (data from the Export Promotion Bureau).

According to the Bangladesh Association of Software and Information Services (BASIS), annual IT exports are $1.5 billion. With ambitious goals, Bangladesh aims to reach $5 billion in exports by 2025 and $20 billion by 2031. We expect this growth to generate 3 million IT jobs by 2025.

North America remains the primary export market, with the USA leading. However, recent years have seen the rise of prominent destinations like the UK, Denmark, and the Netherlands.

Beyond these established markets, Bangladeshi IT companies are achieving success in the mobile applications and communications sectors of Malaysia, Singapore, the UAE, Saudi Arabia, and South Africa, adding to their regular exports to Australia and Japan.

While Bangladesh's IT industry is booming, it's helpful to consider regional competitors. India's tech sector, for instance, amassed export revenues of a staggering $227 billion in fiscal year 2022. 

Factors, including rapid industry progress, government initiatives like reduced trade obstacles, lifted import tariffs on tech goods, and significant foreign investments, have contributed to this growth. India's outsourcing sector alone holds a $140 billion share of the $500 billion global market, compared to Bangladesh's current $700 million.

Similarly, Malaysia's government-backed IT sector has seen impressive expansion, establishing 800 new IT companies, over 98,000 new jobs, and attracting 200 foreign companies with billions in investments.

Pakistan's IT sector also shows promise, with exports in information and communication technology reaching $2.62 billion in fiscal year 2022. Favourable policies, including incentives for repatriating earnings and creating a dedicated support council, are credited with this growth.

Pakistani IT firms are showcasing their innovations at the LEAP technology exhibition in Riyadh, aiming to attract further investment from Saudi Arabia. This focus on facilitating cross-border payments allows Pakistani exporters to capitalise on foreign markets.

The IT sector in Bangladesh boasts significant potential, but to fully thrive, some key challenges need close evaluation and improvement.

One major hurdle is the lack of highly skilled professionals. This talent gap hinders the industry's competitiveness in the global market. Furthermore, insufficient infrastructure, including unreliable internet connectivity and power supply, impedes business growth and efficient operations.

The regulatory environment also presents challenges. Complex frameworks and bureaucratic procedures can deter foreign investors seeking smooth market entry and expansion. Additionally, cyber threats and data security vulnerabilities pose a significant risk to the sector's sustainability.

Another concern is the prevalence of unofficial currency exchange practices. Numerous companies and independent professionals tend to bypass official channels to benefit from a higher exchange rate for the dollar. This undermines transparency and financial stability within the sector.

Finally, the software industry faces a dynamic and competitive landscape. Large and established local firms and smaller, agile companies create formidable competition for new ventures launched by smaller players. This competitive pressure can be a double-edged sword, fostering innovation while making it difficult for newcomers to gain a foothold.

Bangladesh is well-positioned to capitalise on the growing global demand for IT services. The current administration, under the Awami League, is actively fostering this growth with numerous initiatives aimed at transforming Bangladesh into a robust IT hub.

One key advantage Bangladesh offers is a large, relatively low-cost workforce, making it an attractive destination for IT outsourcing and software development. Since 2018, the government has further incentivised this sector by providing a 10% cash incentive on software exports, diversifying the nation's foreign exchange earners beyond the apparel industry.

Technology has also enhanced affordability and accessibility. The government exempts all taxes and duties on imported computer hardware and software, promoting the widespread use of PCs in Bangladesh. 

Additionally, the government has simplified tax-free export-earning remittance procedures, enabling businesses to retain 40% of their earnings in foreign currency. The recent increase in cash incentives on remittances, raised from 2.5% to 5%, further sweetens the deal.

Beyond these economic incentives, the government is committed to creating a supportive legal environment. The Intellectual Property Rights Law protects innovation, while the Digital Security Act 2018 safeguards the sector from cyber threats.

Perhaps most critically, Bangladesh boasts sufficient energy resources to support a thriving IT industry. The creation of high-tech parks has the potential to transform the landscape significantly. These specialised zones offer essential infrastructure, resources, and assistance tailored to technology-driven enterprises.

The government has established high-tech parks nationwide, including the Bangabandhu Sheikh Mujib Hi-Tech Park in Gazipur and the Janata Tower Software Technology Park in Dhaka. These state-of-the-art facilities provide high-speed internet, advanced telecommunication infrastructure, and uninterrupted power supply, fostering the success of technology-based businesses.

Bangladesh has a network of approximately 28 High-Tech Parks (HTPs), Software Technology Parks (STPs), and IT Training and Incubation Centres. While some are already operational, others are under construction, reflecting ongoing efforts to expand this vital infrastructure. 

Additionally, the recent sanctioning of more high-tech park projects demonstrates the government's unwavering commitment to nurturing the IT sector. The Bangladesh Hi-Tech Park Authority (BHTPA) oversees these projects, ensuring their successful implementation and maintenance.

With these initiatives, Bangladesh has made significant strides toward becoming a "Digital Bangladesh." However, continued investment and development are crucial to capitalise on the global IT boom fully. Bangladesh must strive to attract foreign investors by further enhancing the IT sector's competitiveness, particularly compared to other technologically advanced and well-funded Asian countries.

Developing countries like India, Pakistan, China, Vietnam, Taiwan, and the Philippines can flourish in their IT sectors and earn foreign revenue by prioritising education in science, technology, engineering, arts, and mathematics (STEAM) fields alongside vocational training programs. This will develop a skilled workforce capable of handling high-value projects.

Governments can stimulate growth by creating favourable policies, tax incentives, and regulatory frameworks to attract foreign investment and nurture local IT businesses. Encouraging innovation is key, achieved through funding research institutions, establishing tech parks, and fostering collaboration between academia and industry.

Building trust and attracting global clients requires robust cybersecurity infrastructure and regulations to protect digital assets. Additionally, revising foreign exchange regulations and revenue policies can streamline operations.

Entrepreneurship is crucial. Governments can support young, tech-savvy graduates (including those returning from abroad) who are already launching successful IT ventures despite local and global challenges. Increased support through funding, mentorship, and incubation facilities can nurture a vibrant startup ecosystem.

Furthermore, exploring subcontracting opportunities in technologically advanced Asian countries such as India and China can be beneficial. 

For instance, Bangladesh has the potential to draw in smaller-scale companies that larger nations may overlook. Collaboration between countries can further accelerate growth, with India and China potentially assisting Bangladesh in expanding its IT sector.

The success of the IT sector relies on both the public and private sectors working together: promoting IT careers to young people, fostering entrepreneurship through startup capital, or facilitating easy bank loans for launching IT businesses can unlock immense potential.

Dr Md Sazzad Hossain is a senior professor, researcher and academic teaching advisor with extensive experience. Currently, he is working as a full-time member of the University Grants Commission of Bangladesh (UGC). 

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.