WHICH SECTOR TO INVEST IN

Course: International Financial Management (FIN444)

Supervised by

Mirza M. Ferdous
Senior Lecturer, DAF, North South University
Submitted by

Name ID

Sazzad Hossain Talukder 2111888630

Nuzhat Tabassum 2221489630

Farhat Samira 2122217630

Shouvik Sadman 2121763630

Date of Submission: 18th November, 2024

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BALANCE OF TRADE IN BANGLADESH

Balance of Trade is the net of exports, imports, and unilateral transfer of funds of a country.
These are usually found in the current accounts financial statement of any country. Bangladesh
recorded a trade deficit of 202.70 BDT Billion in August 2024. (Trading Economics, 2024) The
notable dips in BoT of Bangladesh are in 2020-21, mid-2022, and 2024.

Fig: Balance of Trade of

Bangladesh (In BDT
Billions)

The fluctuating BoT can be explained by Bangladesh's exports and imports in the last five years.
Holistically, while both imports and exports have seemingly increased throughout the last 5
years, the rate at which imports have increased during the period is much higher than that of
exports. Judging by Bangladesh's exports, the most significant contributor is the RMG sector,
followed by the leather industry and the agricultural sector. (Bangladesh Bank, 2024)
A few of the factors behind the fluctuations in those specific periods include The COVID-19
pandemic in 2020-21, the Dollar crisis of Bangladesh in 2022, the Russia-Ukraine conflict, and
finally, the political unrest of Bangladesh in 2023-24.
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ECONOMIC FACTORS
GDP: Gross Domestic Product measures the total value of goods and services produced within a
country during a specific period and can be used as a tool to analyze the growth of a country.

GDP (At Constant Market Prices) *In Billion BDT*

2020-21 28,339

2021-22 30,351

2022-23 32,104

2023-24 (Provisional) 33,972

Table- GDP of Bangladesh, from 2020 to 2024, in Billions BDT

Figure- GDP Sectoral Growth Rate of Bangladesh, from 2020 to 2024

If we examine the GDP by sector, we can see that there has been a subtle decline in
growth in our industries. Whereas, our service sector is progressing slowly. If we further break
down the highest two contributing sectors, we can see that -
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According to the Bangladesh Bureau of Statistics, In the Service sector - Human health
and social work, Education, and Information and Communication are the highest contributing
factors. (National Accounts Statistics, 2024)

Meanwhile, in the industrial sector, manufacturing and mining are the highest contributing
factors, with Mfg. of pharmaceutical products and preparations, Mfg. of coke, and refined
petroleum having seen the most substantial growth. (National Accounts Statistics, 2024)

Inflation: Inflation can be described as the progressive increase in the price of commodities and
services. Inflation can be utilized as a tool to assess a country’s economic health.

Figure- The Inflation Rate in Bangladesh, from 2020 to 2024, according to the Bangladesh Bank

Bangladesh has experienced a concerning level of inflation growth over the past 5 years. The
country has seen its most rapid hike in the inflation level from 2021-2022 to 2022-2023.
Bangladesh is among the most severely affected countries by the global commodity crisis, This
along with the depletion of foreign reserves, are the most concerning factors behind the rise in
inflation level. This might serve as a warning sign for foreign investors as the value of BDT
might depreciate even further in the future.

The interim government of Bangladesh has been trying to adopt a contractionary

monetary policy through open market operations and increasing the discount rate. If they are
successful in reducing the supply of money, the inflation rate might drop in the near future.
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THE SECTORS EXPERIENCING THE MOST

ECONOMIC GROWTH
As can be seen from the analysis of Bangladesh’s economic factors, Bangladesh's
fastest-growing sector is the service sector. Furthermore, according to Bangladesh Bank (2024),
GDP growth in FY 2023- 24 is mainly due to the growth of Information and Communication,
Financial and insurance activities, Real estate, Education, Health, etc. sectors.

Specifically, the education sector of Bangladesh has been growing consistently at a higher pace
every year since 2020, with the recent growth rate being 18.83%. Beyond that, accommodation
and food services have also seen significant growth recently. The human health and social work
activities sector has also consistently showcased a growth of around 16% since 2020, which is
trailed by the Agriculture, forestry, and fishing sectors.
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THE BEST BANGLADESHI INDUSTRY TO INVEST

IN (FROM A FOREIGN PERSPECTIVE)
According to the National Accounts Statistics published by the Bangladesh Bureau of Statistics
(2024), the sector with the best growth rate in Bangladesh is the education sector, which had a
growth rate of 18.83% between 2023 and 2024. The consistently increasing growth rate, coupled
with the vast and ever-growing population of Bangladesh and its demand for education,
continues to pressure the growth in this sector and guarantees a market for its services.

We also realized our potential in the pharmaceutical sector during the COVID-19. It is one of the
fastest-growing sectors in Bangladesh. According to the International Trade Administration
(2022), Bangladesh is the only least developed country, fulfilling 98% of its domestic
pharmaceutical product demand, with a market size of around $3 billion. This growth is also
backed by data from the National Accounts Statistics (2024). However, there are two massive
disadvantages. Firstly, the Bangladeshi pharmaceutical market is saturated with numerous
companies, and it would be difficult for a foreign firm to enter this sector. Secondly, according to
the TRIPS agreement, Bangladesh would no longer receive exemptions from certain intellectual
property rights obligations regarding clinical data and patents on its graduation from its status of
a least developed country, making pharmaceutical products more expensive and also increasing
regulations in this sector making it more challenging to operate.

Apart from these, another sector that has been showing consistent growth is the ‘Accommodation
and food service activities’ industry. The ever-growing population naturally alludes to a higher
demand for food and accommodating services. and the growth rate of this sector, according to
the National Accounts Statistics (2024), has gone from 10.67% to 16.90%. Big brands in the
food industry never tend to have their restaurants empty, which further shows how highly their
services are demanded. However, the saturated food market of Bangladesh signifies limited
growth potential, making it fall behind the other choices.
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ADVANTAGES AND DISADVANTAGES OF

INVESTING IN THE EDUCATION SECTOR
Advantages:

i) Branding: The education sector is the one in which a foreign approach to education would be
well appreciated. Foreign brand images often have the advantage of being regarded as of higher
quality in Bangladesh, making foreign investment in the education sector more secure. For
example, as can be seen in Bangladesh, international English medium schools often garner a
good reputation and are linked with quality education, and their services are highly sought after.

ii) Demand for Quality Education: Another significant advantage is the ever-growing demand
for quality education in the country due to the high population. Every year, many students leave
the country for better quality education and spend massive sums of money elsewhere. Foreign
investment in the education sector could help to catch this market by keeping a number of their
students home.

iii) New Projects: According to Dhaka Tribune (2024), two projects titled "Higher Education
Acceleration and Transformation" and "Improving Computer Software in Tertiary Education"
have been approved at a combined cost of Tk5,236.37 crore. These initiatives aim to enhance
higher education in the country and are expected to play a significant role in improving
inclusivity and equity in tertiary education. These projects signify further growth in Bangladesh's
education sector.

Disadvantages:

i) Shortage of Manpower and Capacity Limitations: According to Dhaka Tribune (2024),

Educationist Rasheda K Chowdhury said that each year, approximately 20% of the allocated
funds for the education sector remained unutilized due to capacity limitations and a shortage of
manpower. The limited capacity, paired with the lack of manpower, limits the growth potential
significantly for this sector, which can make it challenging for a foreign subsidiary to operate.
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REFERENCES

Abdullah, M. (2024, June 6). Challenges and commitments in education budget. Dhaka Tribune.
https://www.dhakatribune.com/bangladesh/education/348599/education-sector-to-see-rais
e-of-7.42%25
Bangladesh Bank. (2024). Economic Indicators - Inflation.
https://www.bb.org.bd/en/index.php/econdata/inflation
Bangladesh Bank. (2024). Export Receipts (Details). Bb.org.bd; Bangladesh Bank.
https://www.bb.org.bd/econdata/export/exprtindex.php
Bangladesh - healthcare and pharmaceuticals (2022) International Trade Administration |
Trade.gov. Available at:
https://www.trade.gov/country-commercial-guides/bangladesh-healthcare-and-pharmaceu
ticals
Bangladesh Bureau of Statistics. (2024). National Statistics Accounts.
https://bbs.portal.gov.bd/sites/default/files/files/bbs.portal.gov.bd/page/cdaa3ae6_cb65_4
066_8c61_d97e22cb836c/2024-08-28-08-45-2c85b27293fe10bd15f49c9e37095e26.pdf
Trading Economics. (2024). Bangladesh Balance of Trade. Tradingeconomics.com; TRADING
ECONOMICS. https://tradingeconomics.com/bangladesh/balance-of-trade