Infrastructure - The Way To Bangladesh's Heart

Bangladesh's infrastructure industry is one of the most underdeveloped in the world, a factor which has impeded economic growth in the country. However, growing bilateral ties between neighboring China and India has brought with it investments into the country's infrastructure industry.

In the World Economic Forum's Global Competitiveness Report 2009-10, the country's infrastructure competitiveness was ranked 126th out of 133 countries, the lowest ranking among its South Asian neighbors, India (49th), Sri Lanka (79th) and Pakistan (101st). Transport facilities are severely lacking in Bangladesh, causing traffic bottlenecks that drive up the cost of business and goods. The country's capital, Dhaka, is notoriously crowded and port congestion is a major problem.

Power shortages are also a major drawback, illustrated by a 128th placed ranking for competitiveness of electricity supply in the Global Competitiveness Report the country's power stations are unable to meet the rising demand for electricity from increasing industrialisation, and its natural gas reserves are expected to dwindle over the next decade. Power brown-outs and black-outs are frequent problems for many industries and have led to economic disruption and public protests. This poor level of infrastructure is one of the contributing factors for Bangladesh's low score in BMI 's overall business environment ratings, achieving only 30.9 out of 100.

Bangladesh's need for infrastructure has not gone unnoticed by its two largest neighbours, India and China. Bangladesh serves as a buffer state between them, and both countries have tried to strengthen their bilateral ties with it through infrastructure investments. In 2009, China was Bangladesh's biggest source of imports at 17%, while 14% came from India. China has also used its massive currency reserves to meet many of Bangladesh's infrastructure needs. In addition to a road link between Chittagong and Kunming in the southern Chinese province of Yunnan, China has provided financing for seven bridges in Bangladesh. The country has also financed the construction of two new terminals at the port of Chittagong.

India has also used infrastructure investments as a means to strengthen ties with Bangladesh. According to Dredging News Online in July 2010, India agreed to work with Bangladesh on 14 infrastructure projects, all funded by a US$1bn loan from India announced in January 2010. This loan will support the building of railway and port infrastructure, the supply of broad gauge locomotives and passenger coaches, the construction of an internal container port at Ashuganj and the procurement of six high-powered dredgers, with one used to expand the Mongla Port.

Even with these infrastructure investments, Bangladesh will continue to need more foreign investment to improve its infrastructure. Yet, as long as China and India are interested in building a positive relationship with Bangladesh, BMI expects infrastructure investments to continue to flow into the country. We believe that this will be a long-term trend and as a result, BMIis forecasting, real gross fixed capital formation in Bangladesh to grow at 7.1% on average per year between 2010 and 2019.

This article is tagged to:
Sector: Infrastructure
Geography: Asia, Bangladesh

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