Remittance from foreign labourers is the second highest source of foreign currency earnings for Bangladesh. However, since a major portion of the earnings from the highest source, i.e., RMG, is spent buying raw materials, remittance is the largest source of net foreign earnings.^[1] Globally, Bangladesh secured the 9th highest position in remittance earnings for 2018.^[1] Remittance was the source of 40.86% of export earnings and 27.51% of import payments in FY18.^[1]

About 77% of the total remittance earnings come from the Gulf Countries which include Kingdom of Saudi Arabia (KSA), UAE, Qatar, Oman, Bahrain and Kuwait.^[2] This indicates that the Bangladesh economy is highly dependant on these countries to sustain its foreign earnings. Thus, if remittance inflow from these countries decline for any reason, it will cause a significant blow in the Bangladesh economy.

Though a large portion of Bangladeshi laborers are unskilled/semi-skilled, the number of skilled workers have recently been on the rise.^[1] The major competitors of Bangladesh in the foreign labor market include India, Sri Lanka, and the Philippines.^[3]

Challenges and Issues

Despite the fact that that the foreign labor market is a major driver in the economy of Bangladesh, some significant issues are plaguing it.

Mistreatment of laborers in Gulf Countries:  Bangladeshi labourers in the Gulf Countries have regularly been victims of exploitation and mistreatment by their employers. On interview of 110 returnees, it was found that 86% did not receive their full salaries, 61% were physically abused, 24% were deprived of food and 14% were sexually abused by their employers.^[5] According to BRAC, 1,353 female workers came back to Bangladesh from Saudi Arabia in 2018 citing inhumane working.^[6]

A major culprit in the exploitation of Bangladeshi workers in the Gulf Countries is the Kafala System which enables employers to sponsor the visas of immigrant workers in exchange for taking away their ability to bargain wages.^[7] While Qatar has banned this system in 2019, it is still in practice in the other Gulf Cooperation Council (GCC) countries. Apart from the GCC countries, Jordan and Lebanon also practice this system.^[8]

At the mercy of the Gulf Countries: Given Bangladesh’s high dependency on Gulf countries for the majority of remittance earnings, the country has little bargaining power when it comes to protecting the rights of its workers. Moreover, Bangladesh is at the mercy of the regulators of these countries to allow Bangladeshi workers. For example, the UAE has banned Bangladeshi labourers since 2012.^[9] Kuwait had also banned Bangladeshi workers from the year 2006 to 2014. Another ban on VISA 20 or the Visa for domestic servant was imposed in the year 2018.^[10] Moreover, Saudi Arabia, the biggest destination for Bangladeshi workers has enforced a Saudization policy which looks to reduce its dependence on foreign workers.^[11] Bangladesh’s only resort against these regulations and policies are confined to requesting the respective governments to lift them.

Illegal Labor Trafficking By Man Power Businesses (Adom Bepari): A significant portion of the migrant workforce gain work-permits and other documents through illegal sub-agents (dalals) or intermediaries.^[12] These often lead them to use illegal and potentially dangerous channels of migration.^[13] In fact, only 10% of Bangladeshi workers migrate through formal channels which leads to them falling victims to fraudulent middlemen and exploitative employers, leading to loss of their lifetime savings and assets while facing harassment, abuse and imprisonment.^[14] Migrant workers resort to these channels because the official channels are more expensive and there is no scope of migration on a regular basis.^[12]

Uncoordinated Skill Development Institutions: While Bangladesh has a sizeable number of skill development institutions, they are not well-coordinated. This raises questions on the quality of the certificates they provide and their students often do not gain the required skills.^[15]

Shifting Pattern among the Migrant Workers

Migrant workers are classified into four categories: Professionals (doctors, engineers, nurses, teachers etc), Skilled (garments workers, manufacturing workers, electricians etc), semi-skilled (tailor, mason etc) and unskilled (housemaids, cleaners, labourers etc).^[16] Historically, the percentage of unskilled workers have always been higher than skilled workers. However, this scenario has changed recently. As of 2018, 43.25% of the workers were skilled as opposed to 38.55% unskilled.

This is a very encouraging trend because it will help Bangladesh concentrate on countries outside the Gulf since there is a demand for skilled workers all over the world. Historically, Bangladesh has been lagging behind its competitors due to a lack of skilled workforce. As of 2018, for every $100 earned by a Bangladeshi worker, an Indian worker would earn $200 and a Sri Lankan would earn $300.^[18]

The demand for skilled workers is increasing in other parts of the world as well. Japan will take 334,000 workers in the next five years from eight countries including Bangladesh.^[19] To compete with the other seven countries and make full use of this opportunity, Bangladesh will have to increase its supply of skilled workers.

Europe is facing a demographic decline which will result in its working population to drop by 10% or 1.9 million by 2020. Currently, India is looking to fill up that gap, mainly, with their huge force of IT skilled workers.^[20]  The Bangladesh IT sector is growing and is expected to reach around 4.8 billion USD by 2025.^[21] Thus, Bangladesh can also look to take a bite out of this market in Europe.

Germany has passed a law on June 2019 to allow skilled migrants in the country. The federal government of Germany predicts that this law will bring in 25,000 skilled workers to Germany every year.^[22]

The Way Forward

While Bangladesh has been reaping the benefits of the remittances of the unskilled and semi-skilled labourers, it is now time to take the next step and enter the market of skilled workers.  While countries like India and the Philippines have already made strides in the skilled labour market, it is not necessarily a disadvantage for Bangladesh. Bangladesh can use their cases as models to build its own infrastructure to fulfill the demand for skilled labour in the world.

To develop skilled workers, it is necessary for the population all over the country to have access to training centers. This will require activities from both Public and Private organizations. However, Bangladesh Technical Education Board (BTEB) and Bureau of Manpower, Employment and Training (BMET) should have centralized control over the content of the courses to ensure they meet the international requirements.

The remittance sent by the low-skilled migrant workers has been a driver to the economy of Bangladesh for a very long time. As Bangladesh is transitioning to a middle-income country from a low-income country, it is time for the migrant worker industry to transition to its next phase and concentrate on producing skilled labourers.

Kidwa Arif, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

References

• 1.Quarterly Report on Remittance Inflows-January 2019-March 2019– Bangladesh Bank
• 2. Bangladesh Development Update October 2019– World Bank
• 3. International Job Market Demand Analysis– Pic-Cassed Consortium
• 4. Labor Migration In Asia –Asian Development Bank
• 5. Abused Bangladeshi domestic workers struggle for justice at home– Al Jazeera
• 6. Bangladeshi women recount stories of abuse in Saudi Arabia– Al-Jazeera
• 7. Migration in the Gulf: Open doors but different laws– The Economist
• 8. Landmark labour reforms signal end of kafala system in Qatar– International Labour Organization
• 9. UAE hints to reopen labour market for Bangladeshi workers …– Dhaka Tribune
• 10. Kuwait reinstates ban on Bangladeshi workers –The Daily Star
• 11. Overseas labour markets shrinking– The Daily Star
• 12. The Cost Causes of and potential redress for high recruitment and migration costs in Bangladesh– International Labour Organization
• 13. Overseas Employment of Bangladeshi Workers: Trends, Prospects, and Challenges– Asian Development Bank
• 14. In Bangladesh, Migrant Workers Can Dream of a Better Life …– World Bank
• 15. Skilling the workforce: Labour migration and skills recognition and certification in Bangladesh– International Labour Organization
• 16. Migration from Bangladesh and Overseas Employment Policy– BMET, The Government of Bangladesh
• 17. Quarterly Report on Remittance Inflows: July-September 2018 – Bangladesh Bank
• 18. Migration and skills development– International Organization For Migration
• 19. Dhaka, Tokyo sign MoC for recruiting skilled workers to Japan– The Daily Star
• 20. India’s growing talent pool can meet EU labour market shortages– International Labour Organization
• 21. Betting On The Future-The Bangladesh IT-ITES Industry is Poised for Growth– Everest Group
• 22. Skilled personnel welcome– deutschland.de

The post Foreign Labour Market: Sustainability Through Skilled Labour appeared first on LightCastle Partners.

With the global focus towards sustainability and the achievement of Sustainable Development Goals, there has been a consequent limelight cast on the prospects of renewable and clean energy generation. Solar Power has taken somewhat of a vanguard role for such power generation plans in Bangladesh, and is expected to be a major driver of the Government’s goal of providing uninterrupted electricity to all by 2021 through the generation of 24,000 MW (10% owing to renewables).^[1]

The Sun is Far from the Zenith

The global focus towards renewable energy poses the choice of which source to focus on viable and reliable power generation relative to the needs of the populace.

In the case of Solar Power, the power generation process involves the use of what is known as Photovoltaic (PV) Power cells. The function of these is to directly convert sunlight into electricity via non-reflective panels, which can be placed in suitable locations outdoors with high exposure to the sun. The relative ease of PV adoption in the modern day has led to significant growth in the field of solar power.

Solar Energy, particularly through Photovoltaics, seems at present to be the renewable energy source with the greatest average growth rate sustained over the last few years.

The International Energy Agency reported in 2016 that PV electricity generation globally had been 303 gigawatts, which equates to 1.8% of estimated world demand for electricity. Much of this generation was owed to growth in the PV markets in China, India and the U.S. In retrospect, the generation from installed PVs in the year 2000, was only 170 megawatts, this means a nearly 1,800 times growth.^[2] This goes to show that growth has been exponential despite being concentrated within a few major markets. There is hope for a positive technological spillover that will see more extensive market development in Lower Middle Income Countries as well.

The most recent reports as of 2018, shows a 97 GW global capacity growth through installations of PV-s, which accounted for almost half of renewable capacity growth from all sources. The year also saw an excess of 2% of world electricity demand met through solar energy alone.^[3]

Baby Steps for Bangladesh

The Need for Solar energy in Bangladesh

• Susceptibility to Climate Change: Although Bangladesh is not a significantly large contributor of worldwide carbon emissions, the geographical make-up of the country makes it vulnerable to adverse effects on energy demand.
• A growing population: As population continues to rise, so too does the demand for electricity. To supplement on-grid, traditional generation of electricity, non-renewable energy sources provide a cleaner option.
• Natural gas reserves have declined with their sustained use in energy generation and Bangladesh now faces costly imports.

The Current Scenario

Solar Energy can be harnessed and utilized via both on-grid and off-grid sources and mediums.

On-grid sources for Solar Energy generation include Solar PV (Photovoltaics)-s through implementation of large-scale Solar Parks, distributed rooftop generation etc. Off-grid sources have arguably been more in-focus in the context of Bangladesh, and include Solar Home Systems (SHS) which already provide lighting for a significant proportion of the population-based in rural areas, estimated at around 13%.^[5]

Bangladesh is currently generating 338.65MW of electricity from Solar Power. While this is a significant proportion (59.14%) of total renewable energy generation of 572.63MW, it is not an optimistic figure in terms of the government target of generating 2,896MW by 2021, ^[6] despite valiant strides forward such as the commencement in operation of the recent solar plant in Teknaf by Technaf Solartech Energy Ltd (TSEL) dubbed at the time as the largest of its kind and with an expected generation of 20MW during the daytime.^[7]

However, it is not all doom and gloom, as costs for Solar Power has declined to US$1.0–US$1.5 per watt and continues to fall, as reported in 2017.^[8]

Bangladesh is one of the largest users of Solar Home Systems and has around 5.5 million units in use to supply electricity to rural households. A large proportion of these units is supplied through the Infrastructure Development Company Limited (IDCOL) through a joint programme with the government.^[5]

A Market Analysis Report by the International Finance Corporation (IFC), simplifies the main operation of IDCOL’s SHS Program as follows:

Where We Fall Short

1. Lack of Private Incentive: There exists a considerable gap in the dissemination of information about project viability, risk, and return for private investors. Because of this, there is a lack of incentive that slows down renewable generation growth. Credit ratings for such projects are not as high as those in India, for example.^[10] Domestic financial institutions and commercial banks are not sufficiently equipped for large scale infrastructure financing.

2. Land Requirements: As Bangladesh already faces the prevalent problem of overpopulation, there is a considerable lack of viable land required for large scale solar projects. Most of the viable land is government-owned and this further discourages private investors. SREDA’s current renewable energy development plan states that solar parks are to only be built on non-agricultural, government-owned land.^[11] In addition to this, viable land also is under risk of environmental shocks due to Bangladesh’s vulnerability to natural disasters and flooding.

3. Deficiencies in Grid Infrastructure: Despite having generation capacity, actual generation and distribution is often hindered by process-loss and underdeveloped grid infrastructure.

The Way Forward

Better Private Incentives: With the potential that solar energy has in Bangladesh, it is imperative for sound policy frameworks to be in place in order to extract the greatest benefits out of private investors and the private power-generation ecosystem. These may include mandates to produce a certain proportion of their total generation through renewable sources, lowering the prevalent tariff on equipment which facilitates solar power generation, or provide tax exemptions and easier credit to investors in solar power.

Improved Data Collection: It is crucial to improve data collection and communication in terms of quicker viability reports, regular stage-by-stage progress reports, and efficiency reports for major solar plants and other projects. This would fast-track a number of proposed projects such as the 50MW Kaptai Lake project which is on hold until approval from the ADB fund arrives. ^[12] Also, it will lower the chances of the Government having to ax projects such as the proposed 200MW Solar Park in Teknaf, which was cancelled due to failures in timely delivery. ^[13]

Sartaz Zahir, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

The post High Hopes, Stunted Output: Why Bangladesh’s Solar Energy Output is Failing to Meet Targets appeared first on LightCastle Partners.

“Brain drain” refers to the flight of human capital from developing countries to developed countries in the search for better opportunities and futures. Often, poor conditions in the home country such as war or political instability are also to blame, which is the case particularly in the Middle East. Genocide, discrimination, and disease have also led to large waves of emigration.

It is common in the Less Developed Countries (LDCs), meaning Bangladesh also suffers from it. Around 82% of young people aged 15-29 expressed their desire to leave the country in a survey by the World Economic Forum. Over 1 million people emigrated from Bangladesh in 2017 alone.^[1] Approximately 10 million people of Bangladeshi origin living abroad, of whom 2.4 million are permanent migrants.^[2] This makes Bangladesh the 5th country with the most emigrants.^[3]

Brain drain essentially limits a country’s capacity for growth as intellectuals and skilled workers leave. Expertise and knowledge in crucial sectors, like healthcare, technology, and research, are lost with the exodus and the advancement of these fields is stunted. The economic benefit these individuals would have offered in the home country is also lost.

The Bangladeshi Diaspora

The Bangladeshi diaspora is the global community of people of Bangladeshi origin and heritage living around the globe. There are significant migrant communities in the US, the UK, and Canada.

A major reason for the high number of migrants in the USA is the Green Card Lottery system that awards 50,000 visas to skilled and educated workers from specific countries. However, as of 2012, Bangladesh is no longer eligible for it as over 50,000 people of Bangladeshi origin have migrated to the United States.

The graph above excludes the Middle Eastern nations and Malaysia as the Bangladeshis there are mainly for temporary employment services and unable to immigrate permanently.

Foreign Education

Studying abroad is increasingly viewed as a pathway to a better life for Bangladeshi students at the tertiary level.

Many developed countries have universities that offer attractive scholarships or financial aid. Those who do not get access to funding have to finance it themselves, meaning both money and talent leave the country. Most of these students belong to the postgraduate and doctorate levels. Bangladeshi students pay an average of $400 million annually on foreign education.^[4]

A major reason for this exodus of students is the fact that Bangladeshi tertiary education institutes do not match up to their international counterparts. Moreover, political unrest on the campuses of these universities causes concerns about safety.

Finally, there is no guarantee of employment in Bangladesh even after graduating from the best public universities. BUET, the Bangladesh University of Engineering and Technology, is the highest internationally ranked university in the country, with a QS Global World Ranking in the range of 801-1000, and Asian University Ranking of 207.^[7] However, hundreds of its engineers are unable to find jobs locally and are forced to go abroad to find employment each year. Only 39% of university graduates in Bangladesh are employed in either part or full-time jobs.^[8] As STEM students find that their institutes cannot provide a quality education, and that job prospects are not optimal, they may choose to go abroad instead.

Skill Gaps Created in Industries

Approximately 24% of the jobs in the ready-made garments (RMG) sector, which is Bangladesh’s best performing sector in terms of GDP and exports, belong to foreign nationals.^[4] Most of these positions are of the top management level. Despite this, Bangladeshis are leaving the country to strive for the same jobs abroad.

It is not just students leaving the country. Over 43% of the workers who left the country in 2018 were skilled or professionals in their fields.^[5]

The healthcare industry is one that feels the effects of brain drain more acutely. Healthcare professionals, including both doctors and nurses, find that while their degrees are difficult and intensive to acquire, it is not as easy to find well-paying jobs within the country. They may choose to go abroad, but some countries do not accept the Bangladeshi MBBS and those students have to repeat their medical education to get a license. Moreover, foreign healthcare is generally preferred for long-term medical treatments, due to a perception of better and safer service. This is also discouraging to local healthcare professionals and pushes them to leave.

The technology and information sector are also industries where brain drain is a significant trend. Not only do developed countries have more advanced and growing technology markets, but they also offer relevant training and education programs. As a result, a prospective software engineer or data analyst sees a much brighter and valuable future abroad than in a country like Bangladesh, where the Fourth Industrial Revolution is just starting to take hold and that too among significant challenges.

Brain Gain and the Way Forward

Brain drain hurts the economy through the loss of skilled workers who could have contributed to the economy and generated business. Moreover, this skill and expertise gap is then financed by foreign professionals or external support, which is costly.

An alternate, counter-effect has been identified as brain gain. This is said to occur when migrants return to their home country after acquiring knowledge, skills, and experience abroad. These returned migrants enjoy better opportunities in their home country while being able to make a difference and contribute their expertise. This gives a positive perspective of the emigration of workers as they are expected to return with useful resources and as more developed human capital.

Several developing countries around the world have taken initiatives to convert brain drain into brain gain, such as subsidized housing and education in Taiwan and tax waivers in China.^[6] The Indian government focused on the return of software engineers and IT professionals by promoting favourable policies for the sector as well as developing Bangalore as “Asia’s Silicon Valley”. The steps taken by India and China were necessary to sustain their large economies and growth, which requires skilled professionals and experts.

Bangladesh currently has very limited policies to encourage brain gain, an example of which is the offering of dual citizenship for those migrants who do not want to lose their foreign passport. Additional policies such as sponsoring migration costs or facilitating their rehabilitation should be introduced. In addition to encouraging brain gain, the government can take initiatives to prevent brain drain in the first place. A major issue to address here is the quality of education, which needs to be improved. Improving conditions for specific industries, such as the medical field or technology, will also encourage the growth of these crucial sectors.

It is difficult for a country to grow without its people and the loss of Bangladesh’s most learned and capable intellectuals should be something of great concern. As a future in Europe or America appears to most as the ideal life, Bangladesh must address the issues that mark the difference in the standard of living in a more long-term transformation. This cannot simply be done through economic growth, however. Improvement of infrastructure, education, the financial sector, and environmental protection are some of the many fields that need to be addressed.

Mondrita Rashid, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

The post Brain Drain Creating Dangerous Skill and Expertise Gaps In Bangladesh appeared first on LightCastle Partners.

Food is a source of joy for people around the world, but those limited by their resources have to resort to basic staples. This is especially true in developing countries like Bangladesh, where rice and potatoes act as staples. However, these do not satisfy protein requirements which are essential for nutrition and health. The availability of cheap and accessible protein through the poultry sector, as a result, has been a considerable development.

Chicken and egg are the cheapest sources of protein available in developing countries, compared to the more expensive sources like beef and fish. In Bangladesh, too, poultry is the most consumed protein. The investment in the sector is approximately $4.16 billion which is expected to double in the next decade, and the number of poultry farms increases at an average of 15% annually.^[1] The poultry sector contributes around 1.5% to the GDP of nearly $250 billion, making it the second-largest sector after ready-made garments.^[2]

Poultry dominates local consumption due to higher availability and affordability, and this consumption has been increasing due to rising incomes. The rise of the popularity of processed and frozen food in both homes and the growing restaurant industry has also increased the demand for poultry meat, especially in expanding urban areas. This has boosted production, especially as poultry rearing is profitable. However, consumer perception is still plagued by certain misconceptions regarding safety.

The industry has a highly structured value chain, with Bangladesh increasingly focusing on the sourcing of high-quality chickens through the import of purebred fowl. This has led to the development of high-yield varieties such as the Sonali chicken, which is a cross-breed of an American male and Egyptian female breed.

Highly Structured Supply Chain is Cornerstone to Sustained Growth

The size of the poultry industry can be seen through the rise in farming and the population of poultry being reared.

There are several types of chickens sold in the Bangladeshi market, including Deshi, broiler chicken, and the newer variety of Sonali chicken. While broiler chicken is cheaper, most easily available, and thus most consumed, Deshi chicken is the one that consumers perceive to be healthiest and of the best quality, causing it to be the most expensive.

Sonali chicken is a new breed and a rapidly growing segment of the market. It was created in Bangladesh using cross-breeding of a Rhode Island Red male and Fayoumi hen, and has resulted in the Sonali fowl which has proven to be the most profitable and highest-yielding in Bangladeshi conditions.^[7]

Health concerns have caused people to purchase Sonali chicken over broiler. In 2018, the percentage of Sonali chicken consumption was around 20%, but this rose to 45% in just a year.^[8]

The poultry supply chain is intricate and detailed, with several stages of breeding and rearing. It starts with the grandparent stock, also known as the GPS. These are purebred, highly valuable eggs with a controlled pedigree. The farms are highly secured. There are only 8 players in this market who own GPS, who operate a total of 15 farms.^[4]

The next stage is parent stock, who produce fertilized eggs which are sold to farms and poultry businesses. Hatcheries buy these fertilized eggs to produce day-old chicks or DOC. Approximately 525 million broiler DOC and 60 million layer DOC are produced annually. These are then sold to commercial producers, who supply directly to the market. There is a lack of slaughterhouses in the Bangladeshi poultry market, which is largely due to the fact that chickens are sold live.

Production is concentrated around Dhaka and the North-Western districts, and this centralization is higher due to limited temperature-controlled facilities outside these areas. Bio-security is a key issue in the industry for the protection of fowl and prevention of diseases, for which the government is reportedly aiming to develop poultry industrial zones.^[6]

Contract farming refers to independent farmers who maintain their own poultry farms but supply to processing companies, such as CP and Kazi Farms. These large companies lend the initial finance and provide resources like the feed and technical guidance regarding operations. However, as their operations, supply, and sales are completely under the control of the contractor, this makes the industry difficult to survive in. Cost efficiency is of highest priority, as they must remain competitive to receive contracts, but this is difficult as the price of inputs like feed rises and DOC fluctuates.

Large poultry market players in Bangladesh include CP, Kazi Farms, Aftab Bohumukhi Farms, and Paragon. While the emergence of these companies allows a wider range of processed products, and large-scale production, it has led to the shutdown of small-scale independent farmers.

Rising Consumption is Troubled by Issues of Perception

Protein consumption in Bangladesh has been on the rise, largely due to rising incomes and access to food. The falling prices of eggs have benefitted lower-income consumers in gaining access to cheap protein sources. Additional drivers of the growth in the consumption of poultry meat and products have been rising health concerns of the educated population, leading to less consumption of red meat like beef, as well as the higher costs of fish. Compared to its alternatives, chicken and egg are not only cheap but considered healthier with lower fat and cholesterol content.

According to the UN, an average human being must consume 104 eggs annually to remain healthy. Bangladesh got closest to achieving this target in 2018, with a per capita annual consumption of 103 eggs. This is expected to reach 105 eggs in 2019, putting it ahead of other subcontinental countries.^[3]

However, this growth in consumption is affected by certain misconceptions Bangladeshi consumers have about poultry, particularly about the safety of broiler chicken and eggs. They believe that the use of antibiotics or chemicals in feed causes these sources of protein to be contaminated and harmful for the human body. These vaccines are necessary to protect the fowl from illness, without which they would die before reaching adulthood.

Moreover, as most broiler hens are raised in captivity on small farms, they do not get much movement and thus do not have tough, gamey meat like Deshi chicken, which is also called the country chicken as they forage in open spaces. These concerns are causing shifts in consumption patterns.

The Bangladeshi Food Safety Authority is tasked with preventing adulteration, but there are still concerns about their capability. To increase food safety in the country, the BFSA is developing new laboratories and awareness campaigns. ^[9]

DOC Demand-Supply Mismatch Causes Fluctuations

Broiler and egg prices are falling as production rise. However, there is a demand-supply mismatch of DOC in the industry. This mismatch often causes fluctuations in price, which farmers have to bear the cost of as they cannot pass on the higher prices to consumers. As a result, profit margins fall and can also become negative.

Often, supply falters due to the impact of diseases. Recently, 13 outbreaks of the H5N1 virus of avian flu were detected and analyzed for vaccine development.^[5] The threat of diseases like bird flu is highest for GPS, which is the most valuable fowl for the industry. However, even if the outbreaks are contained, news regarding bird flu tends to cause panic among consumers which causes demand to fall.

In terms of backward linkage, the market still needs to develop. The main input of the poultry sector is feed, which includes raw materials such as corn, soybean, rice bran, and various minerals and medicines. This is largely imported from India, China, and South America, as local production is insufficient and also falls with seasonality. However, global price fluctuations mean that local players often have to suffer as this is an essential input.

The Bangladesh government has recently imposed a 5% Advance Tax on imports to encourage sourcing from the two larger local producers. However, as these producers do not have the capacity to supply to the industry, this is likely to only drive up costs. Nearly 96% of demand is satisfied by the domestic feed industry, 2% is imported, and 2% is of homemade mix.^[1]

The Way Forward

The new variant, Sonali chicken, has the potential to change the industry. This development shows the advancement of the poultry sector in Bangladesh as new, better breeds are being developed, and the industry is focusing on importing GPS for higher yield and control of production.

Similar to most industries, access to affordable finance is the main struggle for small-scale farmers, especially when they are faced with threats such as bird flu. Low-interest loans and tax incentives will be beneficial in dealing with those losses. To strengthen the safety and consumption aspect, the government should ensure vaccine coverage for all farmers from local sources, and provide bio-security and safe production training. As the perception of poultry is affected by opinions and perception, it is important for there to be credible authority ensuring the health and safety of the food products created by the industry.

It is greatly in the interest of the government to promote the poultry sector. It provides cheap and essential nutrition for its population and leads to the employment of many farmers both directly in poultry and indirectly in the feed industry.

Bangladesh’s poultry sector has been predicted to be able to export to the Middle Eastern ‘halal meat’ markets by the year 2024.^[1] However, the conversion of an industry that has only recently started reaching levels of self-sufficiency, into one that can sustain exports will require significant policy support.

Mondrita Rashid, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

The post Structured Poultry Industry Growing in Size appeared first on LightCastle Partners.

Venture capital is gradually spreading its roots all over the world facilitating startups. Although in Bangladesh these days, we do find a number such enterprises, the progress is rather slow. In 2019, around US$ 15 million were invested in several start-ups in the country which is much lower than previous year’s (2018) US$ 27 million. On a positive note, however, in 2018 only US$ 2 million came from local sources and the rest from overseas, whereas in 2019 US$ 6 million came from local sources which shows 200 per cent growth. The ICT ministry provided grant to around 40 ideas and startups. Chaldaal, grocery e-commerce company, raised US$ 5.5 dollars from IFC and IDLC finance. This is a good sign as more financial institutions may come forward to finance start up if it succeeds. Aavishkaar, Impact Fund from India invested US$ 4.2 million in Sindabad, a B2B e-commerce. BD Venture invested in 4 start-ups namely Handy Mama, C-work, Gaze and Beatles. They invested second round in Esoshikhi, an edu tech, along with other Angel Investors. The government has allocated Tk 1 billion in the budget for startups. However, modalities of use of that fund are yet to be clarified. ICT Ministry’s effort to form a venture capital company has recently got the nod of the cabinet.

Bangladesh Securities & Exchange commission (BSEC) registered two new Alternative Investment Fund managers (AIFM), namely CAML and Constellation. Total number of AIFM became 17 out of which few will concentrate on private equity or impact fund. Two Alternative Investment Fund Managers, namely BD venture and Lanka Bangla, launched their venture capital funds of Tk 500 million and 450 million respectively.

ACCELERATOR AND INCUBATION

Mobile telecom company Robi revamped its Accelerator programme. They widened the horizon by accepting application from anyone in Robi payroll. They extended coverage all over Bangladesh. They received 2200+ applications out of that 56 were shortlisted for pitching. Finally, 8 were awarded funds and incubation facilities. These programmes were broadcasted on television to create awareness and inspire people regarding the concept of entrepreneurship. Grameenphone has reshaped the Accelerator programme as GP Accelerator 2.0 which has two parts: Pre-Accelerator and Accelerator. Pre-Accelerator is 8 week-long programme which provides training and mentorship to validate their idea and help to go to the market. The accelerator is 4.5-month-long programme for the team having Minimum Viable Product (MVP). They get advice from local and foreign mentors, industry experts, and professionals. Grameen Phone received 1100+ application from which 9 teams have been selected for Accelerator. Bangladesh Angel Network arranged two events where twelve startups pitched, out of which three got funding from thirteen Angel Investors. Tiger IT in collaboration with MIT arranged competition of start ups and they financed a few business ideas and took the winners to an international platform to present their ideas.

MAJOR HURDLES

Fund raising, as usual, remains the major hurdle for startups as well as for VCs. Investors are reluctant to invest in startups, as a result the newly licensed venture capital forms are struggling to collect funds. Such unwillingness to invest is caused by fear and lack of awareness regarding the venture capital ecosystem.

Venture capital and private equity association of Bangladesh (VCPEAB) requested the National Board of Revenue to consider venture capital fund as an allowable investment for tax rebate, which has not happened. Provident fund and gratuity fund may be allowed to be invested in Alternative Investment Fund. The Internal Resource Division exempted 2 per cent stamp duty, which was to be paid while registering a venture capital fund as a trust.  Stamp duty on all startup funds needs to be waived.

EXPECTATIONS REGARDING POLICY LEVEL REFORMS

Though it was mentioned in the Alternative Investment Rule that provident and pension funds can be invested in venture capital funds, other Acts and rules such Trust Act and Finance Act need to be changed to smoothen the investment process. Globally, life insurance provides major fund to Alternative Investment Fund as both are long term. But the eligible list of investment, under Insurance Act, does not include Alternative Investment Fund. The government or the Bangladesh Bank can create a fund to act as ‘fund of fund’ which will provide fund to venture capital funds to invest in startups. In India, Small Development Bank of India (SIDBI) acts as fund of fund for different venture capital funds which are interested to invest in SMEs with a condition to match the fund. If government gives its fund to private venture capital fund, government’s agenda like nurturing start-ups and creating employment can be fulfilled efficiently and at the same time venture capital sector will get a strong support.

EXPECTATION AND CHALLENGES

Globally, nations which supported startups experienced a boost in their economy. In the era of fourth industrial revolution, innovation and technological support is crucial for competing in international markets. Therefore, startups should be in the priority list of all. Our government prioritises it but this should be reflected throughout all the levels of policy planning. Our entrepreneurs struggle in getting trade licence, intellectual property right and other licences and permits to do business. Foreign investors are reluctant to invest in a business which doesn’t have all legal documents. Foreign investors are also not confident about hassle-free exit of their investment. Regional hubs such as Singapore, China have huge funds to invest but we are not able to attract them to invest in our ventures. One of the reasons could be lack confidence — is Bangladesh a good place for investment? We need to build a positive image of our country by creating examples of seamless transactions of foreign investment. Our local investors also lack awareness about the venture capital investments. Foreign investment will transfer know-how and inspire local investors by setting examples of successful investments. We have to prepare our venture capital ecosystem to facilitate foreign investment in all respects.

Some of our startup have achieved global recognition, for example Bkash, Pathao, Shohoz, Chaldaal,  Ajker deal etc. They received funds internationally. These enterprises are representing Bangladesh to the world as ambassadors. Hopefully, more such examples will arise in near future and play a crucial role for making Bangladesh a global investment destination.

Shawkat Hossain, Managing Partner of Velocity Asia and Director, Financial Inclusion and Investments at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

The post Activating Venture Capital in Bangladesh appeared first on LightCastle Partners.

Starting from a school strike, a seventeen-year-old Swedish girl, Greta Thunberg became an iconic figure for climate activists all over the world. By raising her voice loud about the seriousness of the climate crisis, she led a global movement calling for change and demanding immediate actions from world-leaders. Climate change primarily refers to significant changes in global temperature, precipitation, wind patterns and other measures of climate that occur over several decades or longer.

Carbon emissions from fossil fuels and industrial processes are influencing climate change the most. The developed countries, more specifically the industry leaders such as China, the US, Russia are the largest contributors to climate change. China and the US, these two countries alone are responsible for more than 40% of the world’s CO2 emissions.^[1] Unfortunately, this leaves the developing and LDCs to face the dire consequences. LDCs such as Puerto Rico, Haiti, Bangladesh, Vietnam that make the least contribution to climate issues, are the most affected ones.^[2]

As natural disasters result in a $520 billion loss in annual consumption globally, climate change has a significant impact on the global economy.^[3] The developed countries namely the UK, Norway, China have shown their concern to tackle climate change by taking mitigation steps. Whereas, disaster-prone countries and LDCs have to concentrate mainly on building resilience to climate change rather than taking mitigation steps as they are more vulnerable to climate issues and they contribute relatively less to the global climate crisis. Bangladesh falls under this categorization as it was ranked 9th among the countries most affected by extreme weather events in 1998-2017 according to the Global Climate Risk Index, 2017.^[2]

The Impact of Disasters on the Economy

By experiencing 219 natural disasters between 1980 and 2008, Bangladesh comes with a long history of natural disasters. Over the past 40 years, the economic losses caused by disasters were at an estimated $12 billion, depressing GDP annually by 0.5 to 1%.^[4]  Floods and tropical cyclones caused the majority of the damage, for example, cyclone Sidr caused an estimated $1.7 billion in damages or about 2.6% of GDP in 2007. In May 2009, cyclone Aila caused an estimated $270 million in asset damage.^[4] The figure below shows the economic loss caused by tropical cyclones in the last few decades.

Despite facing a heavy toll from the frequently occurring disasters, Bangladesh’s adaptation and strong disaster-coping mechanisms are minimizing the loss in comparison to past natural disasters. For example, 1970 Cyclone Bhola killed half a million people while a similarly strong 2019 Cyclone Fani caused less than 10.^[7]

The Government currently allocates 6 to 7% of its annual budget – around $1 billion on climate change adaptation, with 25 percent of this coming from international donors.^[5] Bangladesh Climate Change Strategy and Action Plan (BCCSAP) of 2009 works in six thematic areas to tackle climate change. The figure below shows the breakdown of the climate budget against the six areas for 2018. The largest chunk of the budget is used for basic services, food, health and infrastructure. However, the disaster management area requires more investment because of the high frequency of disasters in Bangladesh.

The Trajectory of Greenhouse Gas Emission in Bangladesh

Since Bangladesh emits a relatively low amount of greenhouse gases than the developed countries, it does not have any pressing international obligation for climate change mitigation. Agriculture is the leading contributor, with 39% of total greenhouse gas emissions. The energy sector is the second-highest emitter with 33%, followed by land-use change and forestry, waste and industrial processes representing the third, fourth and fifth-highest emitters, accounting for 17%, 10% and 2%, respectively.^[11]

The energy sector contributes highly to carbon emission with 33% of total emissions which can be reduced by using renewable energy. According to Renewable Energy Policy 2008, the government is aiming to achieve 10% power generation from renewable sources by 2020. But Bangladesh is currently generating only 2.95% of total power generation from renewables which puts the country in a challenging situation to reach the target.

CO2 emission in Bangladesh is gradually increasing as the figure below shows. Per capita emission was 0.21 metric tons in 2000 which reached 0.47 metric tons per capita emission in 2014.^[10]

The increasing trend in carbon emissions is a matter of concern and Bangladesh Government has formalized an unconditional commitment to reduce greenhouse gas emissions by 5% from ‘Business as Usual’ levels by 2030 in the power, transport and industry sectors while submitting ‘Intended Nationally Determined Contributions’ (INDC) to the United Nations Framework Convention on Climate Change (UNFCC) in 2015.^[12] It also included a commitment to increase its contribution to a 15% reduction, dependent on international support.

In-state Initiatives

The economic sectors that are particularly at risk due to disasters include agriculture, water and sanitation, infrastructure, and health.^[6] The International Panel on Climate Change (IPCC) predicted that rising sea levels and coastal erosion can cause Bangladesh to lose 17% of its land and 30% of its food production.^[5]

In that case, agriculture would be severely affected and internal migration would increase causing a greater regional disparity. With more people moving to Dhaka, the living cost would be getting higher which might lead to inflation. Moreover, Dhaka is facing serious air pollution as the average AQI (Air Quality Index) value remains between 201-300 which is extremely unhealthy for city dwellers. If this continues, Bangladesh will face serious healthcare challenges in the near future.

The Government of Bangladesh’s on-going 7th five-year plan (2016-2020) addresses climate change concerns by taking initiatives such as enacting Clean Air Act to improve air quality in Dhaka, increasing productive forest coverage to 20% with 70% tree density, promoting zero discharge of industrial effluents, etc.^[8] Sustainable Development Goal 13 that explicitly talks about tackling climate change, is integrated into these objectives. The figure below shows the climate-relevant allocation by twenty ministries which reflects the government’s commitment to higher public investment in climate-related activities.

Climate funds are primarily used for building adaptation along with a limited investment in mitigation. The major international sources of climate finance are Global Environment Facility (GEF),  Least Developed Countries Fund (LDCF), Adaptation for Smallholder Agriculture Program (ASAP), Global Climate Change Alliance (GCCA), Climate Investment Funds, UN-REDD Readiness Program, and recently established Green Climate Fund (GCF).^[5] Bangladesh was among the first eight countries to be funded by the GCF which is a fund set up under the UNFCCC to channel $100 billion a year from developed countries to developing countries to help tackle climate change.^[5]

According to World Bank, Bangladesh will need $5.7 billion as adaptation finance by 2050 to tackle climate change. But currently, the country spends $1 billion a year, nearly a fifth of the estimated need which indicates a significant funding gap.^[5]

Looking to the Future

The bright side is, Bangladesh is internationally recognized for its cutting-edge efforts to tackle climate change. Sheikh Hasina, the Prime Minister of Bangladesh was announced as one of the winners of the United Nations Champions of the Earth award in recognition of her country’s initiatives to address climate change. The award cited the progressive Bangladesh Climate Change Strategy and Action Plan (BCCSAP) for its effectiveness. Bangladesh is also the first country to set up its own Climate Change Trust Fund (CCTF), supported by nearly $300 million of domestic resources from 2009-2012.^[14]

‘Women’s Action Towards Climate Resilience in South Asia’, a project led by an Indian NGO Mahila Housing Sewa Trust (MHT), was announced one of the winners of the 2019 UN Global Climate Action Award. This project’s mission is to organize and empower low-income households’ women to increase their resilience to the impacts of climate change. So far, MHT’s initiatives have helped 25,000 low-income families across seven cities in India, Bangladesh and Nepal.^[15]

A Pioneering Industry: Readymade Garments

Even though Industry Policy 2016 covers some areas regarding environmental compliances for industries, most of the industries in Bangladesh have been playing an inactive role in addressing climate concerns except the garments industry.^[9] Being a standout, the garments industry has expressed its commitment to tackling climate issues through the implementation of green infrastructure.

The RMG industry of Bangladesh, the leading export industry with 83% contribution to the economy, has recently joined the Fashion Industry Charter, a UN initiative for Climate Action that includes a target of 30% GHG emission reductions by 2030. Surprisingly enough, Bangladesh is also leading the green garment industry with the highest number of green garment factories in the world. There are 91 LEED-certified factories in Bangladesh, including the 24 platinum-rated buildings. The LEED (Leadership in Energy and Environmental Design) certification, awarded by USGBC, is considered to be the global standard of compliance and safety.^[13]

The RMG industry realized the urgency of going green to regain international trust after the Rana Plaza incident. Other industries are relatively less motivated for adopting green technology due to lack of such incentive, the high implementation cost and the absence of responsible consumption behavior in Bangladeshi buyers.

Moving Forward

Despite making significant progress by the Government of Bangladesh, without changes in current global behavior, Bangladesh would see annual economic costs equivalent to 2% of its GDP by 2050, increasing to 9.4% by 2100 as climate change will intensify the threat of natural disasters.^[16]

To improve the condition of coastal areas and disaster response systems, reduce pollution in Dhaka and avoid the possible inflation and healthcare challenges, Bangladesh is in need of larger funds to allocate resources. To fill the international funding gap, institutional capability needs to be increased as most of these funds implement high-standard fiduciary structures and social protections. It is important to come up with good monitoring mechanisms, transparency and track records to ensure that the funds are being used for the purpose it is meant for.

The lack of concern about climate change in the mass population is a huge threat to the future of Bangladesh. In order to make the people aware of climate change consequences, the grassroots solution lies in educating the next generation about the broader issues of climate change and disaster preparedness. This can be done through awareness created by the Government. The environmental laws should be strictly implemented and to do so, Bangladesh can take a lesson from Peru’s establishment of a specialized environmental court. It helped the country strengthen its environmental laws against environmental degradation issues.

The Government of Bangladesh should incentivize the industries on going green by introducing green industry policies and establishing monitoring cells to regulate and evaluate the implementation of the policies by the industries. The government has announced its plans to establish a total of 100 Special Economic Zones by the year 2025 which will help the country reduce existing regional disparity. Many of these zones are located near rivers and thus are threatened by the ongoing climate crisis. With adequate funding, an environmental panel should be formed to help build environmental infrastructure in the right economic zones. It will establish the basis of industries as environment-friendly in the economic zones from the very beginning.  Legislations and regulations should be enacted in order to set environmental bounds for industries but most importantly focus should be on the proper implementation as Bangladesh has faced trouble with such efforts.

Ishrat Jahan Holy, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

The post Bangladesh Addressing Climate Crisis: Struggling and Surviving through Environmental Adversity appeared first on LightCastle Partners.

Blessed with the demographic dividend since 2007, with more than half of the population in prime working ages (15-54), the ICT industry in Bangladesh has a tremendous potential in driving the economy of the country. The ICT sector in Bangladesh has grown by 40% annually since 2010.^[1] The presence of a high number of young entrepreneurs and their enthusiasm and the government’s high focus on ‘Digital Bangladesh’ are the main driving forces of the ICT industry in Bangladesh.

The domestic IT and Information Technology Enabled Service (IT-ITeS) industry in Bangladesh is currently valued at close to USD 1.1 billion.^[2] There are over 4500 registered software and ITES companies in Bangladesh.^[3] 43% of the firms are present in both the local and foreign market, where 48% are present exclusively in local market and 9% in the foreign market only.^[3]

Over 400 IT companies currently export to over 60 countries, with North America being the main export destination. Bangladeshi IT and ITES firms generate almost 35% of its export revenue from US buyers, 15% from the UK, followed by a number of EU countries such as Denmark and the Netherlands. A number of local enterprises also export IT-ITES services to UAE, Saudi Arabia, South Africa, Malaysia and Singapore.^[4]

At present, the IT-ITeS industry is primarily focused on IT products and services. However, as technology advances on the back of Big Data Analytics, Internet of Things (IoT), 3D Imaging, and Robotics Process Automation (RPA), the scope for Business Process Outsourcing (BPO) industry will keep growing. On top of that, with more than 650,000 registered freelancers, there is a huge potential for the growing online labor market in Bangladesh.

Online Labor Market Scenario in Bangladesh

With the rise of gig economy, freelancing has turned out to be a popular career choice in Bangladesh among the youth primarily who are in their 20s.^[2] According to the Oxford Internet Institute (OII), Bangladesh has already become the second-largest supplier of online labor. Out of 650,000 registered freelancers in the country, about 500,000 active freelancers are working regularly with a combined total earning of USD 100 million annually.^[5]

The neighbouring country India is the prime competitor of Bangladesh as it is the largest supplier of online labour, with close to 24% of total global freelance workers, followed by Bangladesh (16%) and the US (12%).^[5]

The current working trends among freelancers are shown in the figure below:

The figure shows that about 40%, the majority of Bangladeshi freelancers, work in sales and marketing support, representing 6.8% of the total number of online freelancers in the world. Around 22% of freelancers work in software development and technology, followed by about 25% working in creative multimedia.

However, the jobs that require relatively lower skills such as writing and translation and clerical and data entry has employed around 10% of freelancers.^[5] More people can be trained to get involved in these works. The software development and technology category is dominated by workers from the Indian subcontinent, who command a 55% market share. The professional services category consisting of services such as accounting, legal services, and business consulting, is led by the UK-based workers with a 22% market share.^[6]

Towards Building an Effective Talent Pool

The Government of Bangladesh has exhibited determination to train the potential talent through its IT initiatives. Key ongoing initiatives taken by the government and the private sector to enhance the quality of the young talent include the following:

• The ICT Division in Bangladesh has undertaken a project, the Learning and Earning Development Project (LEDP) that gives training to fresh graduates for free.
• Top-up IT training program run by Leveraging ICT (LICT) is covering 10,000 IT and science graduates for IT-specific training.
• ITeS foundation skills program targeting 20,000 non-science graduates for ITeS-training.
• Mid-level management training program plans to build 1,500 future leaders for the IT-ITeS industry by training existing mid-level managers.
• Industry association skills training program covering 23,000 and 6,000 youths for extensive IT and ITeS training programs, respectively, with specialist tracks.^[2]
• BASIS institutionalized its training activities by setting up BASIS Institute of Technology & Management (BITM) with the support of World Bank to create a pool of qualified IT professionals.

BPO: A New Industry in the Horizon

The Business Process Outsourcing (BPO) industry started its journey in Bangladesh in 2009 and maintained a 20% growth year-on-year to about USD 300 million in 2017, currently employing 40,000 employees.^[7] BPO refers to the practice of contracting business-related operations that can be technical or non-technical to some external service providers.

The leading local BPO operators include Digicon Technologies, Graphic people, Tiger IT and Genex Infosys. There are currently three types of jobs in this sector- data entry, customer service and information analysis. The jobs regarding big data, Artificial Intelligence (AI) machine learning and Internet of Things (IoT) are still unexplored due to lack of skilled human resource.

To ensure sustainable growth, BPO sector requires emphasis on four pillars- legal documents, IT infrastructure, skilled human resource management and international business development. Despite making progress in enabling legislation and establishing IT infrastructure, domestic BPO companies still have a long way to go in building a vastly skilled human resources. Lack of proficiency in English language is a hindrance in taking this sector forward as it is a major requirement for communicating with international clients.^[8]

Key Issues Concerning the Sustainability of the Industry

As technology in the IT sector advances at full tilt, intensive training programs for building skilled human resources and keeping them updated about the changing demands of the global market, is the utmost requirement to keep up with the industry. According to A.T. Kearney’s Global Services Location Index, Bangladesh fell from its place at 21st in 2017 to 32nd in 2019, which is even lower than its position at 26th in 2014.^[9]

Even though Bangladesh scored well in ‘financial attractiveness’ category, it scored less in ‘business environment’ and scored the lowest in the fourth major category, the latest addition to the 2019 GSLI Index: digital resonance. This new digital resonance category was added to address the rising impact of automation and cybersecurity as it incorporates metrics in four areas- digital skills, legal adaptability, corporate activity and outputs.

Bangladesh scored the lowest in corporate activity metric indicating that the amount of capital invested in start-ups and the number of deals by VCs in 2018 was very low in comparison to the top 50 countries. Lack of focus on the development of these metrics can threaten the future of ICT industry in the country as the impact of automation in technology remains on increase.^[9]

The biggest problem the freelancers face is in money transaction process as PayPal, the most preferred and widely accessible transaction tool worldwide, is still not available in Bangladesh. Bangladesh has comparatively more costly and slower internet compared to its prime competitor, India. The average speed of mobile internet in Bangladesh is 9.06 Mbps and broadband internet is 25.08 Mbps whereas, for India, the numbers are 11.02 Mbps and 30.02 Mbps respectively.^[10]

Even with one of the highest number of freelancers in the world, Bangladesh fails to compete in certain categories of work such as writing and translation, professional services and data entry that indicates the existing skills gap in the industry. The government’s initiatives primarily focus on increasing the number of freelancers rather than the quality which will soon lead the freelancers to fall short in terms of quality of work.

The Way Forward

Access to well-developed infrastructure facilities, strong internet system and uninterrupted power supply remain major concerns for Bangladesh. However, with the establishment of high-tech, software and IT parks these issues are likely to be resolved and will play a crucial role in attracting foreign investment.

BPOs in Bangladesh should collaborate with IT institutions and also focus on on-the-job training and deployment to build an efficient workforce that is capable of delivering future service needs using sophisticated technology. In addition, there should be quality assurance mechanisms for the IT training initiatives.

Since Bangladesh can provide cheaper labor than the top BPO destinations (India, Philippines), technology related investments should be made by the government for building a ready-trained talent to take advantage of this competitive edge. The ICT division should mediate with Bangladesh Bank to launch hassle-free payment gateways for the freelancers. Furthermore, the embargo on PayPal should be lifted to facilitate international transactions.

As the global outsourcing industry is being progressively disrupted with automation, digital capabilities will be considered as an integral part of decisions about offshoring operations locations. Hence, Bangladesh being placed lower in rank from its previous position in the GSLI index 2019 should be addressed with serious concerns. Bigger investments should be made by the government to resolve the existing skill gap issues immediately in order to increase the scalability of the industry and help the country exploit the full potential of its demographic dividend.

Ishrat Jahan Holy, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

The post ICT Outsourcing: Catering to the Growing Demand appeared first on LightCastle Partners.

Fair Trade is an institutional arrangement which ensures ethical consumption by ensuring better prices, decent working conditions and a fairer deal for farmers and workers in developing and under-developed countries.^[1] Fair Trade products are usually sourced from developing or under-developed countries and are sold in developed countries. It works by charging a premium for its products which is distributed to the producers (farmers/workers). For example, Fair Trade charges an extra of USD 0.50 per kilogram of Black Tea in the United Kingdom.^[2] The producers have complete control over how they want to use the premium; be it to build schools or buy equipment.

Products that are sourced through Fair Trade practices are labeled so that ethical consumers can choose to buy their products and to justify the premium compared to other products. Fair Trade activities are undertaken and certified by a number of organizations but Fair Trade International and World Fair Trade Organization (WFTO) are the most notable ones.

Fair Trade: The Choice of the Younger Generation

Changing Consumer Demographic

The younger demographic is increasing worldwide and they are now a major portion of the consumer market.

Not only is the share of the younger generation increasing, they are also spending more than the previous generations. This indicates that their spending habits have significant importance in which products will be successful.

Alignment of Fair Trade with Spending Habits of the Younger Generation

Fair Trade ensures ethical sourcing of products and that is exactly what the younger consumers are looking for. According to a study by Nielsen, 70% of millennial (born from 1977 to 1995) consumers in the US  are more likely to associate themselves with brands which work for a social cause.^[3] Not only that, according to a global study of 30,000 consumers, 73% of millenials are willing to pay more for sustainable offerings which include factors like cruelty free and environmentally friendly production processes.^[4] Generation Z also has similar preferences as consumers and are more inclined to buy ethically-sourced products.^[5]

Thus, as consumers become more aware, the scope of Fair Trade products shall continue to increase globally.

Fair Trade: Making a Difference

Fair Trade has impacted globally in a wide array of sectors. The Fair Trade premium has contributed in improving the lives of the workers and farmers involved with the production of the products.

Contribution in attaining the Sustainable Development Goals (SDGs)

Fair Trade has made significant contributions in achieving the Sustainable Development Goals (SDGs). In case of small scale producer organizations like farmer cooperatives, the Fair Trade Premium has mainly contributed in achieving zero hunger.^[6]

However, in case of Hired Labour Organizations like large plantations, it is seen that, the Fair Trade Premium is channeled more towards the workers and their families which has resulted in improvement of the eight SDG goal which is Decent Work and Economic Growth. There has also been significant contribution in Quality Education and Poverty Eradication.

Contribution in Climate Action

Fair Trade workers are ever vigilant when it comes to adapting their production methods with the changing climate. In 2018, the Fair Trade Network of Asia and Pacific Producers (NAPP) launched climate schools for small-scale coffee organizations in Indonesia, Laos, India and Vietnam, with the aim of eventually scaling up across the entire region. A climate academy in Africa has reached 17000 coffee farmers in Ethiopia and Kenya to train them to adapt with the changing climate. Similar actions have been taken in Latin America.^[7]

Contribution in Ensuring Women and Children’s Rights

Fair Trade International has completed activities to encourage women to take leadership roles. They have also formed schools to ensure a more gender neutral society. Fair Trade International also works to reduce forced labour among children and ensure their rights are fulfilled.^[7] The Principle 5 and 6 of World Fair Trade Organization (WFTO) are Ensuring no Child Labor and Forced Labor and Commitment to Non Discrimination, Gender Equity and Freedom of Association which directly contribute to these causes.^[8]

Fair Trade in the Asia Pacific Region

A number of Fair Trade organizations already exist in this region and has been performing well. The products range from crops like coffee, tea to clothing and pottery. India and Indonesia has been doing notably well.

Despite 94% of the workers in the Asia and Pacific producing Tea, the highest amount of premium is earned from coffee with India, Indonesia, and Fiji being the most notable producers.^[11] This indicates that coffee is a very profitable product in Fair Trade.

Fair Trade in Bangladesh

A few Fair Trade organizations are operating in Bangladesh which include Prokritee, ECOTA Fair Trade Forum (EFTF), BaSE Bangladesh and Grassroots. Among them Proktitee, BaSE Bangladesh and ECOTA are certified by the World Fair Trade Organization (WFTO) while Grassroots itself is a global Fair Trade organization.

Fair Trade products from Bangladesh usually include handicrafts of different materials like bamboo, jute, wood, cotton, etc. However, if we look at the global trends, these are not ideal products for earning a significant amount of premium which will be enough to make a difference among the producers. Thus, it is evident that Bangladesh is failing to capitalize on the Fair Trade potential. Kazi & Kazi Tea has been an exception in this regard and have attained Fair Trade Certification.^[12]

Potential Industries for Fair Trade in Bangladesh

While Bangladesh is yet to make full use of the Fair Trade concept, there is a lot of potential in this sector. A few of them have been identified.

Smallholding Tea Farming

While it is more common to farm tea in large estates in hilly regions, Bangladesh has been seeing success in smallholding tea farms as well. Smallholding tea farms are farms supporting a single family. These small farms have been gaining popularity in areas like Panchagarh where the tea is planted on area as small as four decimal.^[9] A major advantage of such tea farming is that it does not require hilly areas and can be done on plain land.

Since these small tea farms are undertaken by individual and low income farmers, their tea can be exported as Fair Trade products and be used to bring positive changes in their lives.

Ready Made Garments (RMG)

The RMG industry of Bangladesh is on a decline and there is a possibility that it will be in ruins after Bangladesh’s LDC graduation.^[10] However, it is not necessary that attempts to revive this industry be given up. With the growing popularity of ethical fashion among the younger consumers in the West, the RMG sector can be revived by following Fairtrade regulations. This will also improve the working and living conditions of the garments workers. Bangladesh has already achieved remarkable improvement in Green RMG and achieving the other Fair Trade conditions are not far from possible.

Other Crops

As seen above, the majority of the Fair Trade premiums earned by other countries are through different crops. Bangladesh already boasts a big farmer workforce and it is very possible to utilize a portion of it to follow Fair Trade regulations. Crops like rice, sugarcane, herbs and spices and even coffee are grown at different scales in Bangladesh. These have significant potential in the Fair Trade market and can aid in the enhancement of the lifestyles of the farmers of Bangladesh.

The world is becoming more empathetic and people are willing to spend more to ensure their products are not produced through exploitation. From time to time, Bangladesh has been accused of not ensuring a sustainable lifestyle for its workers and farmers. Fair Trade can eradicate that problem and help build a more equitable society.

Kidwa Arif, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

The post Fair Trade: A Gateway to Equity appeared first on LightCastle Partners.

With the turn of the new decade, the global agenda of poverty eradication remains just as important a pursuit now as it ever was. The world continues to move towards an age in which the social business model is being reinvented with innovation at regular intervals, and industries are actively encouraged by their governments to make positive contributions to society through their core or ancillary activities. In spite of the prevalence of many new channels dedicated to the alleviation of poverty, the continual importance of Microfinance is undeniable.

Microfinance can be defined as the provision of financial services such as collateral-free loans and short-term credit to individuals or groups who are unable to avail traditional bank loans or similar services for reasons such as not having bank accounts, or having a lack of collaterals.

The origin of this service dates back to the mid-1970s in Bangladesh and parts of Latin America and was introduced as an attempt to meet the various financial needs of the low-income groups, which included but were not limited to asset accumulation and combatting exogenous shocks to their livelihoods.

Bangladesh: A Radiant Example of Microfinance’s Luminescence

The prominence of microfinance in Bangladesh surfaced in the early 2000s and today stands as an integral aspect of the nationwide financial system.

Principally, the providers of microfinance services are NGOs. There are over 500 operational NGOs in Bangladesh with over 19,000 branches between them  providing such services. However, the lion’s share of the branches, jobs created, and disbursed credit belongs to a much smaller number.

Grameen Bank, Association for Social Advancement(ASA) and BRAC alone have 7,671 branches, constituting about 40.03% of the total branches in the sector. The total number of active members of the microfinance sector from the aforementioned NGOs is 22.88 million (58.34% of the sector’s total). However, it is important to note that a number of other NGOs besides these major players, such as Sajida Foundation, Padakhep Manabik Unnayan Kendra (PMUK), Society for Social Service (SSS), and BURO (Basic Unit for Resources and Opportunities) Bangladesh, have shown significant growth trends in both these regards.^[1]

Microfinance on an absolute scale has seen growth in almost all important indicators.

Eligibility for Microfinance

Typically, microfinance serves the interests of individuals unable to avail traditional financial services and allows them to borrow smaller amounts at a typically higher rate of interest.

Individuals generally seek microfinance due to

• A lack of geographical mobility or means to access agents for financial services or banks directly.
• Insufficient accumulated collateral, making it difficult to avail loans.
• Low/insubstantial disposable income to be credible for bank loans.
• A lack of financial portfolios which makes it difficult for commercial banks to evaluate their credit worthiness and thus provide loans.

For these same reasons, the interest rates of microfinance loans are typically higher than those of commercial banks. The higher rate of interest is attributed to higher administrative costs for Microfinance Institutions(MFI) and larger provisions for bad debts and similar reserves. The Microcredit Regulatory Authority(MRA) set the interest rate cap at 27% in 2011 and currently the real effective interest rates for MFIs vary between 24% to 27%.^[2][3]

The Institute of Microfinance (InM) has segmented the target market of microfinance institutions and commercial banks based on their level of income.^[4]

Source: The Institute of Microfinance ^[4]

Market Segment for Credit	Notional Loan(BDT)	MFIs	Non-Bank Govt. Dept.	Banks
Extreme Poor	500-5,000
Moderately Poor	5,000-30,000
Small and Marginal Farmers	10,000-50,000
Microentrepreneurs	30,000-50,000

Microfinance’s Effect on Poverty: Hotly Debated

Despite the continued proliferation of microcredit in Bangladesh, it is often a divisive topic when it comes to its effectiveness in relieving poverty and the skepticism arises from the following issues:

• The high interest rates acting as a deterrent for borrowers
• The inflexibility of loan terms and borrower knowledge, resulting in them unable to pay up their loans and falling further into poverty.^[5]
• The tendency of women, who are the prime beneficiaries of microfinance, to be unable to utilize microfinance loans for their own use due to familial pressures and lack of societal empowerment.
• The lack of education prevalent among rural borrowers, preventing them from using microfinance productively.
• The growing penetration of agent banking into rural areas, as mandated and supported by the Government of Bangladesh has mitigated the problem of geographical immobility for many in rural areas.[6] As interest rates on loans disbursed from agent bankers are lower than those disbursed by MFI-s, this leads to lower microfinance activity.

Despite this, according to a panel-data based research undertaken by the World Bank which spans the period from 1991/92-2010/11, A positive effect on reduction of extreme poverty and a similar positive increase in farm and non-farm activities have been observed as a result of microfinance growth. The authors have also found the performance of Grameen Bank and BRAC to be comparable with the top MFI-s in India, Indonesia, Mexico, Thailand, and Vietnam.^[7]

Modern microfinance in Bangladesh has become diversified in its reach and now facilitates savings and insurance, microenterprises, and productive employment in addition to disseminating important information to help borrowers. Microfinance helps to smoothen the after-effects of environmental shocks such as flooding, hurricanes and otherwise, to which the poor of Bangladesh in both urban and rural areas are especially susceptible.

The Way Forward

In order to reap the greatest return from microfinance as a poverty-alleviating tool, there are a number of ways it can become more dynamic, effective, and inclusive.

The Digitization of Microfinance: This has the potential to significantly improve microfinance as a whole if implementation is timely and proper. It will allow for mobile and digital access to microfinance, improving efficiency of MFI-s through lower administrative costs and shorter processing times, which may in turn manifest as lower interest rates. It will  allow easier access for borrowers and improve the record-keeping and internal control for MFIs.

Better Policy Framework – Working to remove the daily transaction limit for digital transactions will supplement the effectiveness of the microfinance digitization process. Additionally, solving the conflict between the agendas of Agent Bankers and MFI-s can lead to improved overall societal gains and perhaps symbiosis between the two. It is also essential to have a strong regulatory framework in place to prevent client exploitation.

Discouraging Monopolies: It is also recommended that policies be in place so as to avoid monopolies in the microfinance sector, thus promoting healthy intra-industry competition.

Since its inception, microfinance has grown globally to include over 200 million people as direct or indirect beneficiaries.^[7] Despite there being recent skepticism, microfinance in Bangladesh has historically proven to be a powerful channel for uplifting the poor and holds immense future prospect if it can be made more dynamic and inclusive.

Sartaz Zahir, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

References

• 1. Bangladesh Microfinance Statistics, 2017. – CDFBD
• 2. MICROCAPITAL BRIEF: Bangladesh Microcredit Regulatory Authority (MRA) to Restrict Fees, Cap Microloan Interest Rates at 27%, Discourage Flat Interest Rates – Microcapital.org
• 3. The State of Digital Microfinance in Bangladesh – LightCastle Partners
• 4. State of Microfinance in Bangladesh – InM
• 5. The Challenges of Microfinance– INOMICS, 2019
• 6. Guidelines on Agent Banking for the Banks – Bangladesh Bank
• 7. Beyond Ending Poverty : The Dynamics of Microfinance in Bangladesh

The post Making a Dent in Poverty through Microfinance appeared first on LightCastle Partners.

Urbanization has been synonymous with the growth of the world economy and the improvement in human lifestyle. It is no surprise that 55% of the world population lives in cities and these cities generate 80% of the world’s GDP.^[1] However, while cities have been a powerful tool in the evolution of human civilization, they have also been a threat to environmental sustainability. Currently, the cities of the world consume two thirds of the world’s energy and accounts for 75% of the world’s greenhouse gas emissions.^[2] The rapid urbanization has also resulted in the growth of slums, rise in urban violence and often reduced quality of living.

However, regardless of the issues arising, urbanization cannot be stopped. To quote UNESCO, the issue is no longer the choice between urban and rural life, but the choice of “how to live well” with millions of others in megacities.^[3] And the answer to sustainable urbanization are Smart Cities.

The term Smart Living is defined as the inclusion of technology and different components of Internet of Things (IoT) in the lives of the citizens in a way which will improve the quality of their lives by reducing waste, resource consumption and will ensure environmental sustainability. ^[4]

Trends in Asian Smart Cities

• A number of Southeast Asian countries such as China, Japan, Korea among others have been working towards making their cities smart. However, South Asian cities are still lagging behind due to weak technology base which includes the availability of technology essentials like high-speed communication networks, sensors, meters, cameras, and open data portals.^[5]

An important observation here is that developing countries have not yet made any noticeable strides in making their cities smart.

• The Asian governments are concentrating on two types of policies regarding smart cities; which are, policies that enable the constituent technologies and policies that protect citizens’ rights.^[6] A proper balance between these two are necessary to ensure the basic rights of the citizens are not being infringed upon by rapid growth in the use of technology.
• Not all the outcomes of smart cities have been positive. The Chinese government has been accused of transgressing upon the freedom of their citizens by making surveillance on them and giving them a social credit score using Smart City technologies.^[7] If proper privacy laws are not formulated, this might be a major concern for the citizens living in Smart Cities.

Smart Trends in Bangladesh

While Bangladesh does not have a Smart City yet, a few growing trends indicate that Bangladesh is on its way to creating a Smart Society for its citizens.

Increasing Preference of Mobile Internet

Availability of internet connection is a necessity for the establishment of Smart Cities. Bangladesh is making gradual improvement in this sector.

The lion’s share of internet connections is in mobile internet. This shows that smart technology, if implemented, has to be mobile friendly. Moreover, with the introduction of 4G technology in 2018, the general people are getting access to high-speed internet. 4G internet is expected to reach 51% by 2025.^[8]

Popularity of Mobile Financial Services

With a market of 50 million users, Mobile Financial Services are gaining popularity in Bangladesh. Bkash leads the sector with a market share of 60%.^[9] In 2018, it was reported that mobile banking alone produced 994 crores or more than $188 million in daily transactions.^[10]

An important aspect of smart cities are that they are mostly cashless to ensure efficiency and ease among the citizens^[11] However, more than 70% of Bangladesh’s population is unbanked.^[12] Thus, to convert the Bangladeshi society into a cashless one, Mobile Financial Services need to play a pivotal role. Another important feature of Smart Cities is financial inclusion among the citizens. Since banks have failed to reach a major portion of the population, the Mobile Financial Services are contributing to create financial inclusion in the Bangladeshi society. ^[19]

Rise of Application based services

With the increase in mobile internet, Bangladesh has seen the rise in mobile application based services like Pathao, Uber, Shohoz, FoodPanda, Sheba.xyz etc. They are not only making the lives of the users easier but are also proving to be a source of employment for the workforce in Bangladesh. As of 2018, Pathao had around 100,000 riders and around 1 million users and it has only grown since then.^[13]

Falling prices leading to increasing smartphone penetration

There were 45 million smartphone users in Bangladesh in 2017 which was 31% of the total mobile phone market and the smartphone penetration is expected to reach 138 million or 75% of the total market by 2025.^[8] With the average smartphone price dropping to USD $130 in 2017 from USD $168 in 2012, this increasing popularity can be contributed to falling smartphone prices.^[8]

However, even this price is high for the lower income group which has resulted in the release of a number of low-priced models which cost around USD $50.^[20] This has resulted in Bangladesh having a uniform smartphone penetration with only a 7% gap among users of mobile phones in urban and rural areas.^[21]

To capitalize on the increasing popularity of smartphones among the general population, the National Apps Bangladesh by the Government of Bangladesh has developed a wide array of mobile applications for the general mass.

Hybrid Cars

A commendable act by the government of Bangladesh is the increased incentive to use Hybrid Cars instead of regular ones. While regular vehicles require to pay more than 100% and upto 300% of their price as supplementary duty, Hybrid cars have to pay as low as 20% and upto 45%.^[18] This has resulted in an increase in the import of Hybrid cars which are more fuel efficient and environment friendly compared to regular cars.

The Future of Smart Urbanization in Bangladesh

With the Vision-2021 of the Bangladesh Government, rapid digitization in various sectors is occuring which will eventually give birth to Smart Cities in Bangladesh. However, it is important that this growth is properly regulated so that it improves the lives of the citizens and does not give birth to new issues. Few important sectors which should be kept in mind have been determined.

Environmental Sustainability

Environmental pollution is one of the biggest concerns of the cities in Bangladesh with its capital being one of the most polluted cities in the world.^[16] Thus, the main concern for Smart Urbanization in Bangladesh should not only be to utilize technology in every sphere of life but to also use it ensure environmental sustainability. The tax breaks on Hybrid cars is a good way to encourage fuel-efficient and environment friendly cars but similar steps should be taken in other sectors as well.

Decentralization

 All major economic activities of Bangladesh are centered in the capital which has made it the third most densely populated city in the world.^[17] With the help of smart transportation and easy availability of technology outside the capital, it is possible to decrease the reliance of the population on the capital. It is obligatory to decentralize the population to ensure the quality of life in Bangladeshi cities.

Safeguarding the rights of the citizens

With the growth in usage of technology, the personal data of the citizens shall get more and more vulnerable. It is important that there are proper policies and guidelines in place so that the citizens are protected against technological malpractices.

Inclusion

A Smart City should be able to accomodate all its citizens and not just the privileged ones. It must be ensured that the lower income groups are also being benefited by the introduction of smart technologies in different sectors of the city. The use of 4G internet will reach only 51% of the internet users in 2025 at the current rate which means almost half the entire population will be using low-speed internet. This needs to be accelerated so that the majority can get access to smarter technology.

Kidwa Arif, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

References

• 1. The Future of Cities-UNDP
• 2. The Art Of A Smart City-Forbes
• 3. SMART CITIES SHAPING THE SOCIETY OF 2030-UNESCO
• 4. What does Smart City mean?-Techopedia
• 5. SMART CITIES IN SOUTHEAST ASIA-McKinsey Global Institute (MGI)
• 6. Trends to Watch 2019: Smart Cities in Asia Get Smarter– Access Partnership
• 7. China’s Big Brother smart cities– Asia & The Pacific Policy Society
• 8. Country overview: Bangladesh Mobile industry driving growth and enabling digital inclusion– GSMA Intelligence
• 9. Company Profile-Bkash
• 10. Mobile Banking in Bangladesh generates Tk 994cr daily: Muhith– The Daily Star
• 11. How Smart Cities Enable Cashless Access-Mobile Payment Conference
• 12. How Fintech is Reaching the Poor in Africa and Asia: A Start-Up Perspective– World Bank
• 13. How Pathao Was Created – Future Startup
• 14. Singapore firm invests $15m in Shohoz -The Daily Star
• 15. Bangladesh’s version of Go-Jek raises over $10M in a round …-TechCrunch
• 16.  Air quality and pollution city ranking-Airvisual
• 17.  The World’s Most Densely Populated Cities-World Atlas
• 18. Operative Tariff– Bangladesh Customs
• 19. Impact of Mobile Financial Services on Financial Inclusion in Bangladesh– Institute for Inclusive Finance and Development (InM)
• 20. Grameenphone launches Cobranded affordable smartphones with Symphony and itel-Grameenphone
• 21. AfterAccess: ICT access and use in Asia and the Global South-  LIRNEasia
• 22.  About Agriculture Information Service– AIS Website
• 23. Bangladesh houses 16.5 million farmer families– The Dhaka Tribune

The post Smart Urbanization: Is Bangladesh On The Right Track? appeared first on LightCastle Partners.

The sharing economy is one of the fastest-growing sectors and trends in the world, expected to be worth $335 billion by 2025.^[1] It is one of the many transformative trends created through the Fourth Industrial Revolution.

The sharing economy is an umbrella term that includes the gig economy, crowdsourcing, coworking, and freelancing, as well as collaborative consumption. While there is no one fixed definition, most definitions contain a few key elements, such as the sharing of idle resources on an on-demand basis, which is usually done via an IT platform.^[1] Personal interaction, trust, and community building are important tenets of the business models.

Bangladesh has had several business models thrive and grow under the sharing economy, but the ride-sharing industry stands out as a disruptive force that transformed the transport sector of Bangladesh. Others include peer-to-peer selling sites like bikroy.com, office space sharing platforms, and service platforms like Sheba.xyz.

The Next Global Giants Are Expected to Emerge From the Sharing Economy

The growth of the sharing economy has been marked by its expansion and the inclusion of new services and aspects, attempting to mark all aspects of human life with collaborative consumption. In 2013, the sharing economy’s contribution in five sectors where the business model was most prevalent was only $15 billion, and in 2025 is expected to be $335 billion, which is half of the expected total revenue. These sectors include crowdfunding, media streaming services, home and car-sharing, and online distance work platforms.^[1]

In the transportation sector, there are several international companies who operate in multiple countries, including Uber, DiDi, and Lyft. Uber is one of the largest businesses in the sharing economy globally and the pioneer of ridesharing. DiDi, operated by Alibaba Group, is a Chinese transportation company that operates in several countries and acquired Uber China in 2016.^[4] The hospitality sector is another where companies like Airbnb have redefined travel experiences, expanding globally.

For the sale or renting of consumer products, there are several businesses that offer peer-to-peer platforms. The largest of these is also one of the earliest e-commerce and sharing economy companies, which is eBay. It allows online auctioning of personal products. Etsy is a website that allows small business owners to sell homemade products online. In the fashion industry, Rent the Runway allows users to rent designer clothes, starting from wedding dresses to everyday clothes.

Currently, the most development in the industry is coming from the professional and personal services sector. Applications that support freelancing or the gig economy aim to connect skilled or semi-skilled seekers of work and those who need such workers. Here, one’s skill or time is shared, as ridesharing lets car-owners share their cars. Examples of companies in this field include Fiverr and Upwork.

The next frontiers for the sharing industry are the healthcare field. Innovations here include the sharing of underutilized medical equipment among hospitals and easier communication between healthcare professionals and patients. This includes firms like Cohealo and CrowdMed.

Unfortunately, the growth of the sharing economy has not translated into successful IPOs. Uber is one of the largest companies in the sector and the company’s current market value of $52 billion is lower than its previous private valuation of $76 billion.^[2] Lyft also suffered a poor IPO as it was unable to earn a positive operating profit. Its promise to earn profits by 2021 has not given investors much confidence either.^[3]

Ridesharing’s Growth Eclipses Other Sharing Economy Ventures

The transportation sector is where the sharing economy truly solidified its impact on traditional industry and business model. The system works by allowing people searching for a ride to connect with vehicle owners who can take passengers. Ideally, both parties will be headed in similar directions, allowing convenience, fuel-saving, and a match of demand and underutilized supply. Ridesharing offers multiple advantages over its alternatives like public transport and taxis, such as safety, comfort, and convenience.

In Bangladesh, the first mover was Pathao, which started operations in 2016. Uber joined later that year. In 2017 alone, the number of people who used ridesharing services increased 50 times over.^[5] The booming e-hailing market now has a number of players, including SAM, Shohoz, Amar Ride, and Dako.

There are several drivers for the popularity of ridesharing in Bangladesh. One of the most significant drivers is the high level of traffic, which commuters must deal with every day. Not only are motorbikes faster in cutting through this congestion, but they are also more convenient and comfortable than public buses and CNG taxis. The increasing usage of the Internet and digital literacy of the Bangladeshi population is another reason why people are more comfortable using applications and online services than before.

The target group of ridesharing is mainly the middle class, who can afford to choose ridesharing over cheaper forms of transport like public buses but may find it difficult to purchase cars or bikes of their own. Thus, the growth of the middle class has been adding to the growth of the ridesharing industry. From the supply side, ridesharing has become for many their primary source of income. The ease of earning money attracts a large pool of riders, which then increases the convenience of the apps for the users.

The rising popularity of ridesharing may cause car sales to fall as prospective buyers no longer feel the need to have one of their own. The entrance of other international players such as Ola from India and DiDi of China is being predicted in the next few years.

Innovative Start-Ups Advancing Sharing in Bangladesh

Although the ridesharing’s growth and impact have been unmatched by other sharing economy ventures in Bangladesh, more ideas are penetrating the market.

Co-working spaces involve renting office spaces to organisations and entrepreneurs who do not wish to go through the hassle of renting their own workplace. This is especially useful for entrepreneurs and start-ups. Companies in this sector include Moar, Hub Dhaka, and Office Suites. They are designed with all the facilities that a professional workplace would need.^[7] The demand for these services has been boosted by the rise of startups and freelancers.

There are over 650,000 registered freelancers in the country, who bring in about $100 million annually.^[8] This makes Bangladesh the second-largest provider of online freelance services after India. Freelancers use platforms like Upwork and Fiverr to source work from international countries, and local platforms are also being developed.

In the hospitality industry, Avijatrik works with the local community in various regions of the country to open their homes to tourists, creating a unique experience for visitors. This is similar to the model of Airbnb, but more focused on creating complete tourist packages and aiding the disadvantaged local community in the process. Airbnb has also entered the Bangladeshi market

A Unique Industry Has Unique Challenges

A major challenge faced by participants of the sharing economy is that of safety and trust. As interactions are designed to be peer to peer, there are certain risks involved. For example, stories of harassment and theft are often heard in the ridesharing industry. For peer-to-peer selling platforms, there is scope for dishonesty in terms of product quality and specifications, payment, and delivery. Even when complaints are made to the platform, there is dissatisfaction among customers about the speed or appropriate harshness of the punishment.

As the providers of products or services on the platform are not direct employees of the organisation, lack of control is also an issue. This is easily seen in the ridesharing industry, as often drivers are not appropriately trained and may drive recklessly. As they aren’t employees of the platform, it is also difficult for the company to have that level of control. Verification and screening processes for both users and ride providers must be strengthened, and separate labour law frameworks may need to be developed.

Externally, Bangladesh’s digital infrastructure is not on par with other markets, which limits the growth of a sector that relies on online communication. Only 65% of Bangladesh’s 150 million phone subscribers use smartphones, and this percentage needs to be increased to increase the scope for business.^[6]

The Way Forward

The core tenets of the sharing economy are mindset shifts and trust-building. Companies must focus on these, but the government has a role to play as well. Supporting the transition of Bangladesh to the Fourth Industrial Revolution is crucial here through proper digital infrastructure and incentives for organisations working to provide it. As for trust, there should be appropriate laws protecting the interests of consumers.

Regulation of the sharing economy is challenging as traditional legislation is not applicable and will restrict growth, but supportive policies to strengthen the business framework and platforms is needed. Inclusion of sharing economy value in taxation and other official statistics is important to make the sector less ‘informal’ and better monitored. As the sector includes a wide variety of players and services, individual agreements may be considered, or requirements for data reporting.

As the sector is growing, the ‘sharing economy’ is increasingly becoming just the ‘economy’, which is the true indicator of its success as it permeates everyday life. Holding to its original values of resource efficiency, community, and convenience will be essential through this expansion, as it continues to creatively disrupt new industries.

Mondrita Rashid, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

References

• 1. Sharing or paring? Growth of the sharing economy – PricewaterhouseCoopers
• 2. Kalanick’s Uber exit makes sense as shares struggle – The Financial Times
• 3. 5 IPO flameouts that defined 2019 – VentureBeat
• 4. Uber Wins by Losing in China – Bloomberg
• 5. Ride- Sharing in Bangladesh – IDLC Finance Limited
• 6. The other side of the coin – Dhaka Tribune
• 7. Sharing workspace – The Daily Star
• 8. A freelancing boom is reshaping Bangladesh and its economy – The Print

The post Emergence of the Sharing Economy Defined the Decade appeared first on LightCastle Partners.

Bangladesh’s startup ecosystem has picked up rapidly since 2013 – driven by participation from angels; rise of eco-system enablers like co-working space, community events, local and global incubators; and a growing active interest from government/development partners. However, major deals and growth have started happening since the end of 2017.

While a number of international/local funds have present operations along with incubator/accelerator programs for pipeline development in the economy, Series A funding is yet to properly kick off. The embedded presentation gives a high level overview of the current status, the story of evolution and growth, the promising and thriving sectors, the potential bottlenecks and the role of ecosystem enablers. The conclusion is clear: Bangladesh’s startup ecosystem is slowly, but surely, coming of age.

View Slides on SlideShare | Download as PDF

The post [Presentation] Startup Ecosystem: Bangladesh— Coming of Age appeared first on LightCastle Partners.

Once considered a luxury, mobile phones today are essential in every household and one of the most reliable factors for fast communication. People around the world spend an average of 3.25 hours on their phones every day, with the top 20% smartphone users spending upwards of 4.5 hours in a day.^[1] Mobile phones now foster our social connections, communications, entertainment and finances through different social media apps, enhanced connectivity features and other software features ingrained within the Operating Software (OS) that increase productivity on the go.

Internet penetration in many developing and underdeveloped countries is largely influenced by the use of and dependence on smartphones for daily work, social media platforms, managing calendars, checking emails and sometimes for the original purpose i.e. making phone calls. This irreplaceable role of smartphones has made it a very lucrative area for investment throughout the world. Moreover, a whole ecosystem has grown centering smartphones with emerging companies offering products and services related to smartphones.

The Global Market

The leading global smartphone vendors today are Samsung, Apple, and Huawei. Taken together the three technology companies account for about half of all smartphone shipments worldwide. All three shipped at least 200 million smartphones in 2018, with Samsung leading the way with more than 290 million smartphone unit shipments.^[2] The smartphone market has high growth potential with a penetration rate of around 70 percent in highly populated countries like China and India. The revenue of the global smartphone market continued to increase over the last few years, despite stagnating unit sales – due to a growing average selling price of  smartphones.^[2]

The biggest consumers of smartphones are in the Asia-Pacific region, with over 732 million units bought last year. China accounted for 60 percent of the region’s total market value and 54 percent of market volume – making it the largest contributing country in the global smartphone market. India is the second-largest Asia-Pacific market where more than 161 million smartphones worth over USD 28.5 billion were sold last in 2018.

Like other neighboring countries, smartphones have got nation-wide acceptance in Bangladesh and have made Bangladesh the 5th largest mobile market in the Asia Pacific.^[3] With the increasing popularity of smartphones, more companies now want to be a part of the smartphone ecosystem to stimulate business growth keeping up with technology.

The Smartphone Ecosystem and Its Components

The smartphone ecosystem encompasses smartphones’ hardware and software platforms, applications running on top of the platform as well as the infrastructural components ensuring connectivity. This ecosystem in Bangladesh can be broken down into the components as follows:

1. Manufacturers: Apple, Samsung, Sony, Microsoft, LG, Huawei, Xiaomi.
2. Service providers: Robi, Grameenphone, Banglalink, Teletalk
3. Apps: Facebook, LinkedIn, Twitter, Instagram, Uber, Pathao, Shohoz
4. Content service providers: BongoBD, Bioscope, Amazon, Netflix

The ecosystem is regulated by the device manufacturers as gatekeepers followed by the service providers, the apps and content services. One component has impact over the performance of the others.

For example, Grameenphone’s being one of the most prominent service providers has helped the other component My GP, an app in the ecosystem, to become one of the top 5 apps on the Google Play Store in Bangladesh. Subscribers of GP, who are more in number than that of any other telecom operator, started using the My GP app for services like buying data packs, talk-time and other exclusive offers that could be availed only through the app. Likewise, many other brands are trying to leverage their position in the ecosystem in order to push their products and services.

Key Players of the Smartphone Ecosystem in Bangladesh

Manufacturers

Samsung, a South Korea based company, is the market leader in the smartphone industry of Bangladesh.^[4] The company’s sales grew 203% YoY (year-over-year)in 2019 helping it capture the top spot for the first time in Bangladesh.^[5] New product models and optimized local assembly were the key reasons behind Samsung’s growth. Diversifying the portfolio also helped Samsung as the smartphones dominated their respective price bands. Galaxy J series operates in the entry-level market with affordable devices built with low-cost hardware whereas the Galaxy A series brings upper mid-range smartphones built with comparatively more expensive materials. The Galaxy S and Note series are the two flagship lineups of Samsung.

Symphony started its journey to become the general people’s local brand. Competitive pricing strategy, adaptation of innovation and the largest nation-wide distribution of over 17,000 outlets have contributed to the success of the company.^[6]

The Chinese firm Transsion has been looking for opportunities to scale up local assembling. In order to increase market share, the company is following a multiple brand strategy with brands like itel, Tecno and Infinix.

Walton offers locally manufactured smartphones with adaptation of the features in the best smartphone brands. The company offers industry-level features at an affordable cost taking advantage of local manufacturing and assembling with subsequent availability of cheaper alternatives.

Xiaomi of China is one of the prominent international players in the smartphone industry of Bangladesh. Consumers appreciate the brand for the perfect combination of affordability and quality it offers. This was reflected in the 165% YoY shipment growth of Xiaomi smartphones to Bangladesh in 2019.^[5]

System-on-a-chip vendors: Besides smartphone manufacturers, the chipset providers also play important roles in the smartphone ecosystem of Bangladesh. Chipsets in mobile phones are designed to perform one or a few dedicated functions, mostly with real-life computing constraints. Their CPU performance is important for the daily user experience. People today have become more aware of the different types of GPU (Graphics Processing Unit) chips that come as part of the mobile chipsets. These considerations today play significant roles in the decision making of buyers. Chipsets used by the brands vary across the world. The cost and eventually the target market is hugely influenced by the kind of chipset used.

In this market of chipsets, MediaTek is the leader with a 54% market share, followed by Qualcomm at 15%.^[5]

Increasing Investment in Local Manufacturing

The overall increase in demand for smartphones has created possibilities for local manufacturers to establish profitable businesses. The locally manufactured devices started to enter the ecosystem during the last quarter of 2018 creating new dynamics in the market. Consumers who sought affordability and efficient value delivery started buying locally made handsets. During the first quarter of 2019, the smartphone market in Bangladesh grew 45% year-on-year (YoY) due to the advent of locally manufactured devices.^[5]

The volume of locally manufactured devices makes up 41% of Bangladesh’s smartphone market.^[7] Prices of locally assembled devices are lower than that of the imported ones. Also, the defect ratio of the latest locally manufactured devices has also come down sharply in comparison to the earlier ones.

The government has been making efforts to promote local manufacturing. The local manufacturers can now take advantage of less cumulative tax rates than the imported handsets. Whereas the imported phones have a tax rate of 34%, the locally manufactured ones are imposed a tax rate of 17% (locally assembled) and 1% (locally manufactured). However, the local brands face competition from both affordable Chinese brands and high-value brands. A common challenge in local manufacturing/assembling is the absence of a robust backward linkage. Recently, however, several foreign brands like Oppo and Vivo are planning to continue manufacturing their smartphones in Bangladesh. This will create profitable opportunities for local assembly partners.

Service Providers

The manufacturers in the ecosystem started initiating partnerships with the service providers with the rising demand for mobile internet. 4G services were launched by the telcos in Bangladesh in Quarter 1(Q1) 2018 to upgrade the lower generation users to the 4G network.^[4] This worked as a strong catalyst for the smartphone category to maintain its ongoing growth from 2017. Moreover, telco as a channel also doubled its shipments in 2018.^[4]

The smartphone manufacturers leverage association with the service providers in the ecosystem to push their products and generate revenue. This gave rise to the number of co-branded smartphones in the market.

For example, companies place their products in Robishop (an e-commerce platform by the telecom operator Robi Axiata limited) where consumers can buy smartphones and get attached Robi and Airtel bundle offers. The leading mobile phone operator Grameenphone (GP) with the highest number of subscribers in Bangladesh offers smartphones of Nokia, Walton, Samsung etc with interesting bundle offers.

Apps and Content Services

With rising viewership of digital media, the service providers are focusing on making content streaming services available to the consumers. All the three service providers in the ecosystem have content services of their own (Bioscope from Grameenphone, Banglaflix from Banglalink and Robi TV from Robi). Besides these, other Bangladeshi companies like Bongo, 3rdBell provide on-demand services to the consumers. These services can be accessed through websites, mobile apps and other partnered platforms.

Besides these apps, ride sharing services like Uber, Pathao, Shohoz etc are key components of the ecosystem. The apps made owning smartphones a necessity for convenient, reasonably priced and fast lifestyle. Along with consumers, many riders/drivers also started buying smartphones to earn a living through the ride-sharing network. Consequently, other businesses from outside the ecosystem are coming in. Examples of this are the restaurants. Increase in the working class population and worsening traffic conditions are paving the way for food delivery apps like Foodpanda, HungryNaki, UberEats etc.

What The Future Looks Like

The mobile phone industry in Bangladesh is evolving fast and there is a rise in cheaper and affordable phones. There is huge potential for new companies to introduce products in this category as these are the kinds of phones consumers seek the most.

It is now easier than ever to buy a phone due to the aggressive expansion of retail outlets, buying options with EMI (Equated Monthly Installments) and online platforms. Hence, manufacturers should think about the product delivery channels and buying experience besides the products and features.

The business environment is becoming more conducive to the growth of new entrants in the Bangladesh market as the government and policymakers are trying to make more collaborative relationships with brands across the globe with events like the Digital Bangladesh Mela 2020 held recently. This may turn Bangladesh into a hub for technology in the future and decrease its dependency on imports from other countries. 

The future of smartphones is very likely to be impacted by the introduction of wearable/implant technologies, Virtual Reality (VR), Augmented Reality (AR) etc. Introduction of these technologies will in turn change how brands connect with smartphones, how the components in the ecosystem interact and eventually the whole ecosystem. So, the existing and new companies should continuously evolve keeping these factors in mind to integrate mobile experience into every element of customer journey.

Saim Ahmed Shifat, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

References

• 1. Cellphone screen time habits. – The Guardian
• 2. Smartphone users worldwide from 2016 to 2021 (in billions) – Statista
• 3. GSMA Country overview: Bangladesh. – GSM Association
• 4. Mobile Vendor Market Share Bangladesh. – StatCounter Global Stats.
• 5. Smartphone Market in Bangladesh Grew 45% YoY in Q1 2019. – Counterpoint Research
• 6. About – Official Symphony Website
• 7. Bangladesh smartphone shipments down 15% in 2018, vendors bet on Android Go for future growth. – IDC India

The post The Smartphone Market Ecosystem of Bangladesh appeared first on LightCastle Partners.

The ceramic industry has been one of the burgeoning manufacturing sectors of Bangladesh. Local demand for ceramic products continues to grow as the country experiences steady economic growth and urbanization. Not only is the industry catering to 85% of the local demand, but also serving a major portion of the export market: progressing towards being the third largest sector in the next five years.^[1] Total investment amounts to BDT 86,160 million and more than 50, 000 people are directly engaged in this sector.^[3] The industry that took its nascent steps in 1958 with only one small manufacturing plant in Bogra (Tajma Ceramic Industries), is now an arena of 66 local manufacturers in operation.^[1]

Global Outlook of Ceramics

The global market of ceramic products, according to a recent report, is predicted to be worth USD 407.72 billion by 2025.^[9] The key drivers of this market growth are basically the emergence of various applications of “advanced ceramics”. For example, use of advanced ceramics in 3D printing technology and dental implants. Raw materials and energy are the major constituents of the manufacturing cost structure of ceramics. Raw materials stand at 22%, followed by energy which is responsible for  21%, labor and overhead costs at 16% and 13% respectively. The remaining percentage, 28% is attributed to transport, distribution and depreciation.^[9] Manufacturers face constant criticism over energy consumption and carbon dioxide emission which is why the global market is on the pursuit of more sustainable methods of production.

The traditional ceramics product had the highest share in terms of revenue, about 59.6% in 2018. The leading segment, however, is advanced ceramics, mainly due to its biomedical applications. Asia Pacific was the region with the highest revenue, about 39.6% in 2018, driven by India and China mostly. Major players dominating the global scenario are AGC Ceramics Co.Ltd., Imerys Ceramics, Carbo Ceramics, Inc., 3M, Corning, and Kyocera Corporation.

Bangladesh Market Overview

The core products of this industry comprise of tiles, tableware and sanitary ware. The following table illustrates the annual production capacity of the local companies:

Source: BCMEA

Tableware	Tiles	Sanitaryware
250 million pieces	200 million square meters	9 million pieces

Total domestic market consumption for ceramic products was around BDT 54.5 billion in Fiscal Year 2017-18, of which 80% was locally produced and the rest imported.^[3] To keep up with these skyrocketing figures, the local companies have been amplifying their plants and operations. The sector has also lured foreign investment mainly from China and the Middle East. These joint venture partners include RAK Ceramics, Fu Wang and China-Bangla; the largest being RAK of the UAE, maintaining an 80% share of the local sanitary ware market. ^[6]

Exports on the rise

The sector earned  USD 68.8 million in the fiscal year 2018-2019 through exports according to Export Promotion Bureau (EPB), making ceramics the 7th most exported item.^[1] Moreover, the industry has been enjoying exponential growth in exports consistently, about a 26% growth in the last 3 years.

Ceramic products are currently exported to more than 50 countries including USA, Italy, Spain, France, New Zealand, the Netherlands, Australia and Sweden. The strengths of the exports of this industry is attributed to the variety of products at competitive prices, and the compliance to the international quality standards. Sector representatives stated that Bangladeshi ceramic products are earning more limelight globally, pertaining to the trade war between the US and China. Ceramic is amongst the 100 items from China that the US government has hiked tariffs on, allowing our ceramic industry to capitalise on this golden opportunity.^[7]  However, industry rivalry continues to thrive, with the largest rivals being China and India. The cheap labor costs however serve as a competitive advantage for our country.^[6]

Advanced Ceramics: An Emerging Trend

Ceramic industry has branched to a much wider array of applications, namely ‘advanced ceramics’. The value-added features of these ceramics allow it to be utilized for issues like energy conservation, water purification, electronic and biomedical applications. The global market for these products is experiencing a high growth momentum and is expected to reach USD 141.53 billion by 2025.^[8] Bangladesh is trying to explore beyond the traditional usage of ceramics and tap into this prospective segment. Companies and universities delve deep into research and development to explore the potential of advanced ceramics.

For example, Shinepukur Ceramics Ltd is working under a government project with the GCE department to develop heat-insulating ceramic fibres for industrial applications. The company has successfully produced ceramic fibres using a pilot plant installed at BUET and plans to mass produce in the near future. A low-cost ceramic water filter has also been produced by the department in collaboration with Shinepukur Ceramics. On the other hand, DBL Ceramics, with its own funding, is directing a project with the GCE department to produce solar-grade silicon wafers from quartz (sand).

Core Issues

While Bangladesh showcases promising advantages in this sector, there lie some inevitable issues:

• Inconsistent gas supply: Uninterrupted supply of natural gas is not only the key resource of this industry but also one of the determinants of quality standards. But insufficient supply has posed as a major hindrance in this sector which is why compressed natural gas (CNG) or liquefied natural gas (LNG) is being used as a substitute but these are not cost-effective.
• Over reliance on raw material imports: Companies are heavily dependent on raw material imports mainly clay, feldspar and quartz from overseas whereas the industry’s rivals, China, India manufacture their own raw materials.
• Heavy duties and taxes: Companies have to bear huge amounts of costs because of supplementary duties and taxes levied on raw material imports.
• Difficulty adjusting prices: Frequent spikes in gas prices cause increases in product prices owing to the fact that gas is the prime element of this industry. The fluctuations are not very well received by buyers, which is why they might opt for low priced Chinese goods.
• Shortage of resources: This industry suffers from paucity of superior industrial engineering techniques, adept workforce, required equipment and international standard laboratory for testing and quality control.

Road to Success

This sector, being a heavily import oriented one, needs immediate assistance from the government in providing zero duties on imports, export incentives and reducing supplementary duties. The RMG sector enjoys zero duty imports, and ceramic being the next potential sector should have similar opportunities for sustainable growth.

Moreover, methods that would rely on the national production of raw material production should be reinforced. For example, Mymensingh has a rich mine of white clay which can provide upto 2.57 million tons of clay, and white clay is one of the prime raw materials used for ceramic products and is still imported.^[4] In addition to that Chittagong, Sherpur and Netrokona districts are reported to produce surface deposits of white clay.

In order to retain local customers, manufacturers should maintain a consistent price range which in turn means that gas prices need to be stable.

Lastly, in order to bridge the yawning gap between availability and requirement of skilled manpower in the industry, this sector is in dire need of research and development and sufficient training programs. Bangladesh should be evolving persistently in order to serve the new realm of advanced ceramics so that the industry can truly maximize its potential in no time.

Afiya Tahsin, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com.

References

• 1. Ceramics – A rising star in industries – The Business Standard
• 2. Tiles manufacturing industry expands over the years – Financial Express Today
• 3. Local ceramic industry grows to fetch foreign currencies – Dhaka Tribune
• 4. Growth momentum building up  – The Daily Star
• 5. An overview of Bangladesh’s ceramics industry  – The Daily Star
• 6. Overview of Ceramic Industry of Bangladesh – BTC government portal
• 7. Ceramic Industry Booms  – Daily Sun
• 8. Advanced Ceramics offer huge growth potential  – The Daily Star
• 9. Ceramic Market Size – Grand View Research Inc [US]
• 10. Global Ceramics Market : Industry Analysis and Forecast 2019-2026 By Product, by application, By End User and By Region. – Maximize Market Research

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As a nation, we’re at a critical juncture, and the coming days will spell out the direction we would take in our fight against the Covid-19 pandemic. The crisis has an economic dimension, as major sectors, both export driven and domestic market focused, would be impacted by the fallout of the global pandemic. The LightCastle team has been analyzing the macro and industry level picture and possible impacts wrought about by the Covid-19 crisis. Over the following days, we’ll be covering the major sectors shedding light on the possible short and long term ramifications of the global pandemic. Read all the articles in the series.

The Corona Virus pandemic has been a ‘black swan’ event, particularly due to the extent and breadth of its impact. Starting in Wuhan, China, almost three months back, the virus has rapidly spread across the world in 180 plus countries infecting 351,198 and causing 13,361 deaths (as of 23^rd March). The contagion effect of Covid-19 epidemic might not only bring about a health crisis, but will cause a full blown global economic crisis.

Bangladesh, till date, has remained immune from the onslaught of the Covid-19 epidemic. But reported cases are increasing steady (three deaths), mostly infected by inbound migrants. In the upcoming weeks, community level transmission might lead to manifold increase in the number of the infected. Government is trying to curtain the movement of people across the country, fearing that the pandemic might spread in remote regions with inadequate health facilities.

As an export driven economy, spearheaded by apparel export and remittances, the country has already started feeling the heat. The domestic demand is stuttering, and local companies are experiencing supply chain disruptions, as most industries are dependent on Chinese raw materials. ADB has predicted Bangladesh to lose 1.1% of GDP (USD 3 billion) in 2020 due to the fallout of the coronavirus.

• The RMG sector has been suffering for the last couple of months due to supply chain disruptions. This coupled with the spread of Covid-19 pandemic in Europe and US, two major apparel markets contributing to 65% of Bangladesh’s apparel export, has further compounded the problem. The BGMEA President has claimed that global brands have already cancelled USD 1.1bn worth of orders, till date, and the association is fearing that this trend might proliferate in the coming days. In the event of large scale order cancellation, significant number of apparel workers might become redundant, while apparel companies might fail to payback bank loans. In the worst case scenario, the value of cancelled orders might quadruple to USD 4 billion.
• Majority of the migrant workers in the Middle-East and Europe are engaged in the informal sector and are usually fall under the un-skilled category. Many of these workers might experience a prolonged period of loss in wages, while some might even lose their jobs. This would result in a steep decline in incoming remittances in 2020 and beyond. Declining oil price might also dampen the economies of the GCC countries, where more than 70% of Bangladeshi migrant workers are currently employed. Global recession coupled with the tussle between Saudi Arabia and Russia on oil production might further depress oil prices and lower future remittances.
• A partial lockdown of the country and declining exports might result in job losses in the formal and informal sectors. According to BBS statistics, almost 80% of the working population is engaged in the informal sector. Many can’t afford to stay at home due to inadequate financial cushion. There might be large scale redundancies in the manufacturing and service sectors in the coming days, especially in apparel, leather and the jute sectors, which are mostly export dependent.
• The financial system might suffer a major jolt due to the impending financial crisis. Many companies would fail to repay their loans, which would result in higher NPLs and would contribute to a liquidity crisis. SMEs would be the hardest hit as they would be suffering from declining sales and cash flow mismatch. It would be imperative to maintain the credit line for SMEs, which would help preserve jobs across the economy.

Government’s primary goal would be to ensure the survival of the low income population, while propping up major export earners like the apparel and leather sectors. Given the already heavy budget deficit (close to 5% of GDP) and revenue shortfalls, Government might be unable to undertake a massive spending spree. However, policymakers need to take into cognizance the enormity of the upcoming challenge by instituting direct or indirect cash transfer schemes for the low income population. Alongside, GOB would have to engage in government to government dialogues with apparel exporting countries, in an effort to protect the interest of the apparel sector. In the medium term, policy makers have to undertake a stimulus package by increasing fiscal spending and undertaking an expansionary monetary policies. Policy makers should also consider depreciating the domestic currency to help regain some lost cost competitiveness for the exporters.

Author: Zahedul Amin, Co-founder and Director, LightCastle Partners

The post Bangladesh Economy at the Confluence of the Global Pandemic appeared first on LightCastle Partners.

The LightCastle team has been analyzing the macro and industry level picture and possible impacts wrought about by the Covid-19 crisis. Over the following days, we’ll be covering the major sectors shedding light on the possible short and long term ramifications of the global pandemic. Read all the articles in the series.

Bangladesh’s Fast Moving Consumer Goods (FMCG) industry has been one of the largest industry serving domestic consumer needs. The country’s middle-class population combined with rising per capita income has been a strong propagator for the growth of the industry. According to a study by BCG, the middle and affluent class (MAC) population of Bangladesh is expected to reach a total of 34 million within the next 5 years.

Compared to luxury products and other commodities, FMCG industry has remained considerably stable, with food and beverages, personal care and household care anchoring the industry in its growth trajectory. Similarly, with greater investment from the government on roads-highways infrastructure, the industry has managed to swiftly grow its last mile logistics and have established intricate distribution networks throughout the country serving SME level mom-and-pop shops. Globally, the market size of this industry is expected to reach $1.54 trillion within 2025. Consequently, the FMCG sector of Bangladesh grew 9 percent to $3.4 billion as of 2017. With the advent of e-commerce and a fast growing modern trade industry, the industry has some new mediums of growth laid out. Currently, Unilever, PRAN, Square are among the top players in the FMCG industry with BATB leading the tobacco segment.

Given the coronavirus lockdown and imminent economic recession of consumer demand, the FMCG industry has been hit hard on these major grounds:

1. Although there’s short-term high spike in demand of commodities and essential products, the industry is not equipped to meet unnatural growth in demand as such. Hence, most departmental stores and superstores are reporting stock-outs.
2. Given global supply chain disruptions raw material sourcing will become a challenge for most manufacturers, leading to shortage of products and a potential surge in pricing.
3. On the distribution end, the ramifications of coronavirus are much more prominent. Most FMCG companies are using third party distributors with Sales Representatives (SRs) distributing the end product to retail stores. Companies are yet to curtail their distribution field force in order to limit the spread of the virus. Most companies are still operating in full distribution mode, potentially endangering lives through local transmission.
4. Soap, handwash, hand sanitizer and personal care categories in general will see an artificial increase in demand, resulting in a temporary surge in pricing. More alarmingly, distributors might stock-pile products in order to take advantage of the price hike and this will impact the end consumers.

In order to tackle these challenges, the government needs to regulate the industry through strict supervision because a spiraling FMCG industry will have a detrimental impact in the long-term. First, the govt needs to limit the number of SR operating in the field level distribution and ensure that distribution houses or FMCG companies are following specific healthcare mandates, i.e. providing masks, gloves, etc. Secondly, the government needs to step in with pricing control through engaging local law enforcement authorities. Without ensuring sale price control, the industry will spiral and consumers will suffer.

In the long run, until global supply chain stabilizes, the industry will remain turbulent but not dead if certain interventions are taken as preventive measures. The major FMCG companies also need to start planning for the long-term forgoing short-term gains in order to survive. If the global lock down subsides in a few months and the spread of the virus flattens, the industry will be able to pick up given the right remedial initiatives taken now.

Author: Rageeb Kibria, Principal Consultant, LightCastle Partners

The post Bangladesh FMCG Industry Tackling COVID-19 Implications appeared first on LightCastle Partners.

Bangladesh PM’s speech on the 25^th was widely anticipated, owing to the onslaught of the Covid-19 induced health crisis and the resulting economic maelstrom. Citizens were keen on gauging the nature of the stimulus plan, expected to be unveiled during her speech. As a resource strapped emerging economy, the government has its fiscal limitations in implementing major interventions, but the unprecedented nature of the crisis requires sweeping responses. Unfortunately, the government announced measures, to some extent, have fallen short of expectations, and implementation of some of these policies remain a practical challenge.

Before delving further into Bangladesh’s stimulus plan, it’s imperative to look into the policies announced by some other countries in the context of the global pandemic.

India

The Indian government has earmarked USD 19.6 billion as stimulus package for supporting those affected by the pandemic.  The primary focus has been to back workers in the informal sectors who have experienced a steep decline in income or have lost jobs. The government plans on providing cash stipend directly to 100 million people from the low income strata, amid the 21-day lock-down initiated from this week. Alongside, the central bank is buying back treasury bills for increasing overall liquidity, popularly known as quantitative easing. The main goal remains to contain interest rates and maintain access to credit for SMEs and large corporates. India’s FM, Nirmala Sitharam, will formally announce the details of the stimulus package on 31^st March.

Italy

Guiseppe Conte, Italian Prime Minister, has initiated a Euro 25 billion (USD 28 billion) stimulus package for supporting those severely impacted by the spread of the pandemic and resulting lock-down. Following measures have been undertaken:

• In order to prevent the self-employed and seasonal workers such as tour guides from struggling financially, the government will be allocating each of them a payment of 600 Euro for the month of March.
• For the next two months, companies are prohibited from laying off workers without “justified objective reasons”
• For lower paid employees, the government will cover 100 Euro bonuses which are to be paid by the employers directly along with their regular wages in April.
• Self-employed and freelancers who have mortgages can ask to have their payments suspended considering they can prove that their incomes dropped by a third from what it was before.
• In order to compensate shop owners for forced closures, the government is offering tax credits to cover 60 percent of their rent payment for the month of March.

Canada

As a response to the COVID-19 pandemic, the federal government of Canada has announced several economic measures in order to support employers and their employees. A total of CAD 82 billion in financial aid was announced including CAD 27 billion in direct payments to Canadians who require support and CAD 55 billion in tax deferrals available to all taxpayers. Some other benefits include:

• The government will cover up to 10 percent of an employers’ remuneration costs for three months
• For people who do not qualify for EI sickness and also do not have access to paid sick leave, the emergency care benefit will provide up to 900 CAD for up to 15 weeks.
• Emergency support benefit will provide support for up to 14 weeks for people who do not qualify for EI and are unemployed.
• The government is providing a GST credit top -up, a one-time payment to be made in early May: CAD 400 for single individuals and CAD 600 for couples.
• Canada Child Benefit top-up is allocating CAD 300 per child, which is also a one-time payment.
• A six-month moratorium is provided on student loan payments which is also interest free.
• The British Columbia is providing a one-time CAD 1000 payment to people who have lost their income due to the outbreak.

USA

In response to the COVID-19 outbreak, the US federal government has recently passed (26^th March) a slew of legislation and executive orders. A few of them are mentioned below:

• The president announced a waiver on interest payments on student loans during the crisis.
• The government is initiating a payroll tax cut. However, this tax cut will only help people who are still receiving a pay check.
• The Families First Coronavirus Response Act provides USD 500 million in food assistance for low-income pregnant women and mothers with young children.
• The Families First Coronavirus Response Act is putting USD 400 million into food banks and USD 250 million into a senior nutrition program in order to address some food insecurity issues.
• The Families First Coronavirus Response Act is suspending work requirements for the Supplemental Nutrition Assistance Program (SNAP) for the duration of the crisis.
• The U.S. Department of Labor announced that they can provide unemployment benefits for temporary unemployment situations, however, the individual needs to qualify for this benefit after the verification of the cause of unemployment by the state.

Thailand

Thailand’s Deputy Prime Minister, Somkid Jatusripitak approved financial aid to help businesses and individuals affected by the virus. Some of the new measures are:

• Monthly allowances of 5,000 baht (USD 153) for three months for workers who are not covered by the social security system.
• For small and medium enterprises, especially tourism-related businesses, allowances worth 10 billion baht (USD 305 million) is approved.
• Thailand introduces measures including support fund worth 70 billion to 100 billion baht in order to reduce risk in the debt market due to the coronavirus outbreak.
• For six months (April to September), Thailand’s cabinet approved cutting the income withholding tax from 3 percent to 1.5 percent.

Philippines

The central bank of Philippines cut interest rates by 50 basis points in order to mitigate the damage to their economy caused by the lockdown of Luzon due to the pandemic outbreak.

The government is crafting a 173-billion-peso stimulus bill with an estimation that about 65 billion pesos is needed to assist Luzon’s 7 million “no-work no-pay” workers who are out of any livelihood due to the lockdown.

How has Bangladesh’s Stimulus Package Fared?

Government’s announcement of supporting the export driven sectors, to the tune of BDT 5000 crore, is a timely move. However, the modality of disbursement has to be defined, since the primary goal for the stimulus plan is to protect jobs for the workers and not to serve the interest of the owners. Government can initiate a Government to people (G2P) process using MFS providers for directly disbursing wages to the impacted workers. Alongside, a mechanism has to be in place for selecting factories eligible for government support. Commercial banks, which are closely engaged in serving exporters, and NBR can provide necessary information pertaining to the financial health of individual companies.

Informal sector workers are the hardest hit due to the pandemic. The government has rightly identified this challenge, and the PM has pledged to distribute food supplies for up to six months for the economically vulnerable. The government will also initiate selling rice at BDT 10/kg through the VGF schemes. The government claims to have adequate food stock (17 lac MT food grain) available for distribution and market stabilization. While this might sound fantastic in theory, implementation of this plan remains a genuine challenge, especially given the ‘social distancing’ rule being enforced countrywide for stemming the spread of the virus. Finding the right target audience might prove to be a bottleneck and there might be instances of corruption or system loss while disbursing food items to the affected population. Government can consider engaging reliable development agencies (e.g. BRAC) for making nation-wide distribution of food items to the low income population.

Bangladeshi SMEs play a pivotal role in contributing to economic growth and employment generation. While large export driven sectors have received commitment of support from the government, SMEs are yet to receive any firm policy backing. Access to cheap credit, direct cash support for making payroll might be critical for the survival of SMEs. The central bank can also aid the financial system by increasing SME loan refinancing and instructing commercial banks to increase allocation for SME working capital loans on an urgent basis.

The healthcare allocation in our latest budget (FY2019-20) is worth BDT 294 billion, which constitutes 1.02% of GDP and 5.63% of total budget allocations. The covid-19 scenario should ideally cause a paradigm shift in the thought process of policymakers pertaining to healthcare investments. The government should take into account the inadequacy of the current health infrastructure and resources and make hurried investments in hospitals equipped for treating coronavirus patients and other necessary resources like PPEs and ventilators.

Lastly, the government needs to chalk out a firm strategy for financing the stimulus package without causing too much disruption to the economy. The Indian government is planning to increase excise duties on petrol and diesel, as well as imposing incomes taxes on a section of non-resident Indians for financing the stimulus plan. Our government must also find avenues for raising revenues without depending too much on our banking system. CSR funding from the private sector and soft loans from multi-lateral agencies can also be harnessed for partially financing the plan.

At end of the day, all strategies are as good as how these are getting implemented. Government should collectively engage as many stakeholders as possible, including development agencies and private sector organizations, for tackling the ramifications of this healthcare and economic tsunami that we’re currently facing.

Authors: Zahedul Amin, Co-founder & Director and Dipa Sultana, Business Analyst, LightCastle Partners.

The LightCastle team has been analyzing the macro and industry level picture and possible impacts wrought about by the Covid-19 crisis. Over the following days, we’ll be covering the major sectors shedding light on the possible short and long term ramifications of the global pandemic. Read all the articles in the series.

The post Can Bangladesh’s Stimulus Package Stand against the impending Covid-19 Tsunami? appeared first on LightCastle Partners.

The Covid-19 pandemic has had a profound impact on the supply chain and demand for the apparel sector. Top exporters like Bangladesh have started feeling the heat due to raw material sourcing challenges and cancelled orders.

The performance of the RMG sector is more critical for an economy like Bangladesh, since apparel contributes 84% of the country’s export, employing close to 3.5 million people. While gauging the possible impact of the pandemic on the apparel sector, it is imperative to look into the demand side scenario by analyzing the European, US and the emerging markets for apparel export.

Global brands in Flattening the Curve

Major global fashion brands have taken prompt responses to help in flattening the Coronavirus curve and this has left significant impacts on worker employment, revenues and overall operations.

Nike has released a statement which outlines their halt in operations and closure of stores in the United States, Canada, Western Europe, Australia and, New Zealand to limit the spread of the Coronavirus (COVID-19). However, Nike-owned stores in South Korea, Japan, most of China and in many other countries remain open as per the current stage of the outbreak.[2]

UNIQLO had initially shut-down nearly 350 stores in China in late February. In the current stage of the pandemic, about 30 still remain closed, while most of its shops outside Hubei province, the epicenter of the coronavirus outbreak, have reopened. Globally, Uniqlo outlet closures have exceeded 100, with 27 in Europe. All 50 outlets in the United States have closed, following in the footsteps of other major fashion brands.[3]

The above figure, generated by UBS, is based on the company’s share of sales from China, the total value of products it manufactures in the country, and how quickly inventory turns over.[4]

The highest risk is observed for H&M which sources about 50% of its materials from China. Inditex, and its largest brand Zara, is also at high risk due to its highest rate of inventory turnover despite sourcing only 10% of materials from China.

Due to large scale closure of stores owing to the lock-down enforced by different governments, apparel sales for Bangladesh have plummeted, leading to brands postponing or cancelling orders. Bangladesh Garments Manufacturers and Exporters’ Association (BGMEA) have claimed that USD 1.5 billion worth of orders have already been cancelled or put on hold by the buyers.

Global Cotton and Yarn Supply Chain Dynamics

Global production of Cotton is largely dominated by India, China, the US, Pakistan, and Brazil.

The fall in cotton demand from China has led to demand-supply mismatch. Along with this, decrease in yarn exports for India to China will mean an even greater excess supply of yarn and lower prices in the international market. Raw (unginned) cotton in the Gondal (Gujarat) market shed almost 10 per cent to trade at Rs 4,280 a quintal in the first week of March from a level of Rs 4,755 a month ago. Cotton yarn lost 2-3 per cent over the last one month, while synthetic yarn declined by 4-5 percent during the past one month, following a fall in crude prices.[8]

Although Bangladesh had been a victim of yarn-dumping from India, with import prices quoted to be up to 30% lower than local production costs by India, before the Coronavirus outbreak, domestic prices have since rebounded. Bangladesh Garment Buying House Association (BGHA) has complained that spinners are now charging 15% higher compared to last month due to yarn import disruption from India. Supply chain disruption due to the Chinese lockdown has had negative repercussions across Bangladesh’s  textile and Garments value chain, as Chinese imports accounts for a significant portion of the sector’s total import (46% of USD 34 billion as of FY 2018-19).

The Possible Responses

While short term sourcing destinations have not undergone dramatic changes as of yet, employment layoffs as a result of government mandated shutdowns and quarantines are inevitable.

While countries that have incorporated some form of automation in their apparel industries are slightly cushioned from this impact, countries such as Bangladesh will suffer greatly given the large number of people employed in its apparel and textiles sector.

With China’s situation being on the road to recovery, it will require at least the first half of 2020 to bring itself back to pre-outbreak capacity levels.

The question then remains of how long global buyers are willing to wait before looking to other sourcing markets or opting to near-shore supply.

As can be judged by the fast-fashion cycle, COVID-19 since being declared a pandemic, has not yet spanned the cumulative of the Sell-in and Production Delivery Phases for the average global brand. Thus a hypothetical cut-off point for these companies has likely not been reached as to when they will switch supply sources.

It is expected with the progress of healthcare responses globally that the road to recovery may begin as soon as mid-April. However, there will likely be a price hike for global apparel products which will persist until equilibrium can be re-established over the coming months.

Bangladesh Apparel Quagmire

Bangladesh’s overdependence on apparel export might prove to be its achilles heel. Large scale order cancellation and deferment is causing a liquidity crisis across the sector, prompting the BGMEA President to appeal for support, both from international buyers and the government. The government has responded by announcing a stimulus plan of BDT 5,000 crore, explicitly geared towards the export led sectors. The primary goal of the stimulus package is to protect jobs, facilitate regular salary payment and ensure survival of the financially weak apparel factories. Details of the plan are still being worked out and timely deployment of the fund would be imperative to stabilize the sector.

The current lock-down would come to an end on 4th April and the government’s next directive on further extension of the closure will be dependent on the extent of contagion of Covid-19. By looking at the trajectory of the infected numbers in comparable countries, it’s likely that the number of infected patients in Bangladesh might increase sharply over the coming weeks. This would likely disrupt the production process further in apparel factories. Alongside, continued spread of Covid-19 in EU and US, the new epicentres of the disease, would further dampen demand for apparel and lead to another round of order cancellations.

Zahedul Amin, Co-founder and Director and Sartaz Zahir, Trainee Consultant at LightCastle Partners, has co-authored the write-up. For further clarifications, contact here: info@lightcastlebd.com.

The LightCastle team has been analyzing the macro and industry level picture and possible impacts wrought about by the Covid-19 crisis. Over the following days, we’ll be covering the major sectors shedding light on the possible short and long term ramifications of the global pandemic. Read all the articles in the series.

The post The Effect of COVID-19 on Bangladesh’s Apparel Industry appeared first on LightCastle Partners.

The Pharmaceutical sector has 257 licensed players, among which, 150 are functional. Bangladeshi manufacturers meet 98% of national demand for pharmaceutical products. According to IQVIA, the size of the sector as of  2018 stood at BDT 205.12 billion [1]. With a historical 5 years’ CAGR of 15.6%, the sector is predicted to grow to $5.11 billion by 2023. Currently, 98% of pharmaceutical demand is met locally, while only 2% are served via imports. Out of these, 80% are Generic drugs and 20% are Patented drugs. Bangladesh’s drug export is also growing at a healthy rate and contributed USD 120 million as of FY 2018-19.

Immediate term impact of the pandemic

On the demand side, the COVID-19 outbreak is expected to lead to higher demand of sanitizing chemicals, and other medications in the short-term, as healthcare professionals and patients alike seek prevention and basic treatment measures.

On the supply side, Active Pharmaceutical Ingredients (APIs), which are the raw materials for the pharmaceutical sector, are highly import-dependent. Bangladesh imports about 95 percent of all APIs worth Tk 5,000 crore annually from abroad, the largest quantity from China, followed by South Korea and India [2]. Although the COVID-19 outbreak has thus far not had a large impact on the local pharmaceutical sector, the spread of the pandemic is expected to lead to a shortage of APIs in the near-term. The ban on API exports from India [3] is a harbinger of hard times for the import-dependent industry.

In the forward market, the industry is not expected to suffer from any potential lockdown, as pharmacy counters are considered a part of essential services. However, a government enforced lock-down might disrupt production (factory closure), distribution and marketing.

Long-term ramifications

International drug prices have increased and If COVID-19 persists, the limited supply of APIs and formulations in the international market will drive up prices of raw materials further [4]. On the other hand, if the COVID-19 outbreak leads to a recession, or even a reduction in the economic growth of the country, pharmaceutical companies will have less room for passing on the price increases to the customers, which will eat into their profit margins. DGDA regulations will also make a price increase difficult to justify for the industry. The dependency on imports can also erode the sector’s international competitiveness and may lead to stunted growth in export.

Policy support and other means to mitigate the negative impacts of Covid-19

The government should encourage pharmaceutical players to invest in their R&D processes to increase their capacity to ramp up production of possible vaccines as soon as one has been proved effective after clinical trials. In this regard, the government can enable partnerships between the WHO and private sector pharmaceutical companies to bring these vaccines to market, making use of the TRIPS exemptions that the country enjoys.

Author: Saif Nazrul, Business Consultant, LightCastle Partners

The LightCastle team has been analyzing the macro and industry level picture and possible impacts wrought about by the Covid-19 crisis. Over the following days, we’ll be covering the major sectors shedding light on the possible short and long term ramifications of the global pandemic. Read all the articles in the series.

References

1. IQVIA Coverage 
2. A new horizon opens for pharma ingredient makers – The Daily Star
3. Covid-19: Export curbs on imported API drugs under review – Economic Times India
4. India Inc in a cold sweat as lockdown in China continues – Economic Times India

The post Bangladesh Pharmaceutical Sector Wading through the Pandemic appeared first on LightCastle Partners.

As per Bangladesh Bureau of Statistics’ Labor Force Survey 2016, 86.2% of employees aged 15 or older belongs to the informal sector. Given the level of employment generated by the informal sector, the growth and stability of the informal sector is critical for maintaining social cohesion and inclusive economic growth.

Immediate Ramifications in the informal sector because of Covid-19

As the pandemic finally hit the nation, precautionary measures in the form of supply hoarding, hygiene maintenance and social distancing were taken up by civilians, particularly in urban areas. The informal sector was the hit the hardest as citizens refrained from coming out of their homes, leading to lower income levels for the economically marginalized segments like hawkers and rickshaw pullers.

The major immediate ramifications for the informal industry of Bangladesh are as follows:

1. The biggest impact will be in the urban informal service sectors particularly the informal transport sector. With more than 500,000 rickshaw pullers and more than 25,000 CNG drivers in Dhaka alone, the informal workers in the transport sector will take the biggest hit due to the lock-down. Media reports have mentioned average daily income for transport workers have gone down by two third.
2. The next big hit will be for restaurants and small tea stalls as government looks to enforce lockdown till 4^th of April. Considering the extent of the virus contagion, the closure might be extended further.
3. As all formal business take an economic hit, this will trickle down and affect the informal workers involved with these businesses even further.
4. The informal workers in the agricultural sector are gradually getting impacted due to supply chain disruptions. Prices of poultry and livestock products like milk and eggs have started declining, which will hit the income levels of farmers and agriculture sector workers.
5. Lastly, the most concerning issue at hand is the lack of awareness about Covid-19 among the informal workers. Concepts of safe hygiene and social distancing can only be comprehended if the context and effectiveness of such measures are clarified. However, the majority of the workers are unaware of the repercussions that Covid-19 can have on their health and their community.

Long term consequences in the informal sector because of Covid-19

Once the nation recovers from this crisis, businesses will start operating at its usual pace. However, the informal sector will take the biggest hit among all the sectors in the country. Government has promised to support the economically vulnerable and plans to sell subsidized rice (BDT 10/kg) through VGF scheme and provide cash handouts to the ultra-poor segment. However, systemic level support is imperative for bringing about sustainable changes in the lives of the informal sector workers.

Author: Sanjir Ali, Business Consultant, LightCastle Partners

The LightCastle team has been analyzing the macro and industry level picture and possible impacts wrought about by the Covid-19 crisis. Over the following days, we’ll be covering the major sectors shedding light on the possible short and long term ramifications of the global pandemic. Read all the articles in the series.

The post Informal Sector Key to Maintaining Social Stability amid the Pandemic appeared first on LightCastle Partners.