i

OVERVIEW OF THE ECONOMY OF BANGLADESH AND ANALYSIS OF THE

AUTOMOTIVE INDUSTRY

Prepared for:
Mrs. Tasneema Afrin
Assistant Professor
Institute of Business Administration
University of Dhaka

Course: Research Methods

Prepared by:
Group Name: Millennial Economists
Ferdous Jahan Ima (07)
Fatima Nafsia Taslim (14)
Irfan Ahnaf (29)
G.M. Asif Ahmed (54)
Khaled Atifi (55)
Saad Feroz Mehdi (58)

MBA 61st Day Batch

Institute of Business Administration

University of Dhaka

April 27, 2020

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April 27, 2020

Mrs. Tasneema Afrin

Assistant Professor

Institute of Business Administration

University of Dhaka

Dear Madam,

Subject: Managerial Economics term paper

I hereby present to you our Managerial Economics term paper, titled “Overview of the Economy of
Bangladesh and the analysis of the Automotive Industry”. In it, my team and I have tried detailing the
economy of Bangladesh at present, as well as mention the history of the economy of this land. We have
analyzed the automotive industries of India, Germany and USA and compared and contrasted with the
automotive industry of Bangladesh.

I hope you are pleased with the quality of work and I ask for your forgiveness if we failed to meet the
guidelines set by you or if I fell short in any other way.

Sincerely
_____________
(On behalf of team)
Saad Feroz Mehdi (Roll: 58)

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ACKNOWLEDGEMENTS
Unconditional gratitude and praise belong solely to the Almighty.

This report was prepared under the supervision of our esteemed faculty, Mrs. Tasneema Afrin.
The concepts she taught us throughout our Managerial Economics course were used in this report
and as such, the report would not have been possible without her invaluable contribution. We
hope we were able to do justice to her effort and expectations.

We would also like to thank our family members for supporting us through all walks of life and
enabling us to prepare this report in relative comfort.

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Table of Contents
ACKNOWLEDGEMENTS ................................................................................................................................ iv
List of Tables ............................................................................................................................................... vii
List of Figures ............................................................................................................................................. viii
Executive Summary...................................................................................................................................... ix
1.0 Introduction ............................................................................................................................................ 1
1.1 Origin of the Report ............................................................................................................................ 1
1.2 Objectives............................................................................................................................................ 1
1.3 Methodology....................................................................................................................................... 2
1.4 Scope and Limitations ......................................................................................................................... 2
1.5 Rationale ............................................................................................................................................. 2
Part 1: The Bangladesh Economy: A Global View ....................................................................................... 4
2.0 Historical Performance Analysis ............................................................................................................. 4
2.1 Economic Condition of Ancient Bengal ............................................................................................... 4
2.2 Economic Condition of British Bengal ................................................................................................. 5
2.3 Economic Condition of East Pakistan .................................................................................................. 6
2.4 Bangladesh as Independent Nation: Neoliberal Economy ................................................................. 7
3.0 Recent Performance Analysis ................................................................................................................. 9
3.1 Economic Indicator Analysis: ............................................................................................................ 10
3.1.1 GDP ............................................................................................................................................ 10
3.1.2 GDP Per Capita ........................................................................................................................... 12
3.1.3 GDP Deflator .............................................................................................................................. 13
3.1.4 GNI ............................................................................................................................................. 13
3.1.5 GNI Per Capita ............................................................................................................................ 14
3.1.6 External Debt ............................................................................................................................. 15
3.1.7 Real Interest Rate:...................................................................................................................... 17
3.1.8 Unemployment Rate .................................................................................................................. 18
3.1.9 Balance of Payment ................................................................................................................... 19
3.1.10 Foreign Direct Investment ....................................................................................................... 20
3.1.11 Currency Strength .................................................................................................................... 21
3.1.12 GDP Growth Rate ..................................................................................................................... 21
3.1.13 Inflation Rate............................................................................................................................ 22
3.1.14 Current Account ....................................................................................................................... 23

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 3.1.15 Balance of Trade ...................................................................................................................... 24
3.2 Monetary Policy ................................................................................................................................ 25
4.0 Forecasted Performance: Bright Future Ahead .................................................................................... 26
5.0 COVID-19 Crisis & Our Economy ........................................................................................................... 29
5.1 Adverse Impact on Specific Sectors: Mostly Affected ...................................................................... 30
5.2 What Experts Say .............................................................................................................................. 30
Part 2: The Automotive Industry ............................................................................................................... 32
6.0 Automobile Industry of Bangladesh ..................................................................................................... 32
6.1 Industry Overview ............................................................................................................................. 32
6.2. Statistics Representing the Industry and the Subsectors ................................................................ 34
6.2.1 Motorcycle ................................................................................................................................. 35
6.2.2 Private Vehicle ........................................................................................................................... 35
6.2.3 Commercial Vehicle ................................................................................................................... 36
6.2.4 Three-Wheelers ......................................................................................................................... 36
6.2.5 Two-wheelers............................................................................................................................. 36
6.3 Automobile Companies in Bangladesh ............................................................................................. 37
6.4 An Outlook on the Market Players.................................................................................................... 37
6.5 Market Share of the Key Players ....................................................................................................... 40
6.6. Contribution of Automobile Industry to Bangladesh....................................................................... 41
6.6.1 FDI .............................................................................................................................................. 41
6.6.2 Others......................................................................................................................................... 41
6.7 Growth Drivers of the Industry ......................................................................................................... 42
6.8 Environmental Implications of the Automobile Industry ................................................................. 42
7.0 Comparative analysis of automobile industry of Germany, USA, India, and Bangladesh .................... 43
7.1 Comparison of Basic Features of USA, Germany, India, and Bangladesh Market ............................ 43
7.2 Sales of Passenger Cars ..................................................................................................................... 44
7.3 Sales of Commercial Vehicles............................................................................................................ 45
7.4 Sales of Vehicle ................................................................................................................................. 46
7.5 Production of Passenger Cars and Commercial Vehicles.................................................................. 47
7.6 Vehicles in Use .................................................................................................................................. 48
7.7 Key Players in the Automobile Market ............................................................................................. 49
7.8 Employment in Automobile Industries of USA, Germany and India................................................. 51
7.9 Component wise country comparisons: ........................................................................................... 53

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8.0 Economic Structures of the Selected Countries ................................................................................... 57
8.1 Major Economic Indicators ............................................................................................................... 57
8.2 GDP Contribution: ............................................................................................................................. 59
8.3 Export and Import of BD with the Selected Countries...................................................................... 61
9.0 Critical Analysis ..................................................................................................................................... 62
9.1 SWOT Analysis................................................................................................................................... 62
9.1.1 USA ............................................................................................................................................. 62
9.1.2 Germany..................................................................................................................................... 63
9.1.3 Indian ......................................................................................................................................... 63
9.2 Scope for Improvement: ................................................................................................................... 64
10.0 COVID-19 impact on the automobile industry.................................................................................... 65
10.1 National perspective ....................................................................................................................... 65
10.2 Global perspective .......................................................................................................................... 65
11.0 Conclusion ........................................................................................................................................... 66
Bibliography ................................................................................................................................................ 67

List of Tables
Table 2. 1 Per capita income comparison between East Pakistan and West Pakistan ................................. 6
Table 2. 2 Income distribution in East and West Pakistan. ........................................................................... 7
Table 6. 1 Industry Overview ...................................................................................................................... 32

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List of Figures
Figure 3. 1 GDP Trend in Bangladesh ......................................................................................................... 11
Figure 3. 2 GDP Forecast ............................................................................................................................. 11
Figure 3. 3 GDP Per Capita .......................................................................................................................... 12
Figure 3. 4 GDP Per Capita Forecast ........................................................................................................... 13
Figure 3. 5 GDP Deflator ............................................................................................................................. 13
Figure 3. 6 GNI............................................................................................................................................. 14
Figure 3. 7 GNI Per Capita ........................................................................................................................... 15
Figure 3. 8 External Debt............................................................................................................................. 16
Figure 3. 9 External Debt as Percentage of GDP ......................................................................................... 17
Figure 3. 10 Real Interest Rate .................................................................................................................... 18
Figure 3. 11 Unemployment Rate ............................................................................................................... 19
Figure 3. 12 Balance of Payment ................................................................................................................ 20
Figure 3. 13 Foreign Direct Investment ...................................................................................................... 21
Figure 3. 14 Inflation Rate ........................................................................................................................... 23
Figure 3. 15 Current Account ...................................................................................................................... 24
Figure 3. 16 Balance of Trade ..................................................................................................................... 25

Figure 4. 1 Bangladesh Economy future ..................................................................................................... 26

Figure 4. 2 GDP rank: past, present and future .......................................................................................... 27
Figure 6. 1 Bangladesh Automotive Industry Market Size (in millions) ...................................................... 34
Figure 6. 2 Bangladesh Vehicle Market Share ............................................................................................ 40

Figure 7. 1 Sales of Passenger Car (2005-2019) ....................................................................................... 44

Figure 7. 2 Sales of Commercial Vehicles (2005 - 2019) ............................................................................ 45
Figure 7. 3 Vehicle Sales ............................................................................................................................. 46
Figure 7. 4 Production of Personal Cars and Commercial Vehicles ............................................................ 47
Figure 7. 5 Vehicle in Use (Total Number) .................................................................................................. 48
Figure 7. 6 German Market Share .............................................................................................................. 49
Figure 7. 7 USA Market Share .................................................................................................................. 50
Figure 7. 8 India Market Share ................................................................................................................... 50
Figure 7. 9 BD Market Share ....................................................................................................................... 51
Figure 7. 10 Employment in German Automobile Industry ....................................................................... 51
Figure 7. 11 Employment in Indian Automobile Industry ........................................................................... 52
Figure 7. 12 Employment in USA Automobile Industry ............................................................................ 53
Figure 7. 13 Country comparison based on automobile components ......... Error! Bookmark not defined.
Figure 7. 14 Import-Export of Engines by Selected Counters .................................................................... 56

Figure 8. 1 Population Wise Comparison of the Four Countries ............................................................... 57

Figure 8. 2 GDP of the Four Countries . ...................................................................................................... 58
Figure 8. 3 GNI Per Capita .......................................................................................................................... 58
Figure 8. 4 Trade Balance of Four Countries . ............................................................................................. 59
Figure 8. 5 Export and Import Economy of BD (wits, countrystats.as, 2019) ............................................ 61

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Executive Summary
Bengal was a prosperous land during ancient times. During, and before, the Mughal reign, Bengal
was one of the wealthiest lands of South Asia. Since then, due to mismanagement of wealth by
ruling parties such as the British during colonialism, the West Pakistanis after partition, and the
Bangladesh government post-liberation, the economy of Bangladesh relative to that of the rest of
the world has decreased drastically.

In current times however, the Bangladesh economy is steadily growing after many promising
policies and steps were taken in the ‘80s.

The Bangladesh economy is the 39th largest in the world in nominal terms, and 29th largest by
purchasing power parity; it is classified among the Next Eleven emerging market middle income
economies and a frontier market. In the third quarter of 2019, Bangladesh's was the world's seventh
fastest growing economy with a rate of 7.3% real GDP annual growth (IMF, 2019) COVID-19 is
currently having an adverse impact on the Bangladesh economy as it’s being difficult to keep a lot
of companies running in the present climate, and the healthcare sector due to misallocation of
budget is ill-equipped at dealing with this crisis, although this is gradually changing.

In the recent past, the demand for automobiles in Bangladesh has been increasing due to the
improving economy and the increased population. At present, Bangladesh are unable to meet the
demands and hence Bangladesh imports almost all of its automobiles. The growth drivers of this
industry include: efficiency factor, resource availability, effective cost controls, etc.

In the second part of this report we have compared the automotive industry of Bangladesh to that
of neighboring India, as well as that of global leaders USA and Germany. In these foreign
countries, the automotive industry is contributing largely to GDP and is a means of jobs for many
of the citizens of these lands. Bangladesh still depends largely on imports and has a long way to
go before establishing a strong automotive industry. Organizational and technological change

is the key characteristics of the US industry. The German industry relies heavily on networking
and the Indian industry is highly dependent on the revenue earned from its two-wheelers.

In comparison the Bangladesh automotive industry is still in an infantile stage. Bangladesh can
first look to emulate India – an emerging player that is doing better than a host of other countries

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in the automotive sector, since it won’t be possible for Bangladesh to emulate the world leaders in
her current condition. After establishing herself as an emerging player in the automotive industry,
Bangladesh can then look to emulate the global leaders like Germany and hope to compete with
the USA in the long-term future. That said, Bangladesh should not follow into the footsteps of
these country verbatim, but rather Bangladesh should learn from the good and avoid the bad and
adapt according to the changing requirements of the market.

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1.0 Introduction
1.1 Origin of the Report
This report is a partial requirement for the Managerial Economics course (Course Code: E501) as
assigned to us by our esteemed faculty – Mrs. Tasneema Afrin.

As per her instructions we have divided the report broadly into two parts – the first part deals with
the economy of Bangladesh. The second part deals with a sector of our choice – we have opted to
go with the automotive sector. In this second part we have compared and contrasted the automotive
sector of Bangladesh to that of global leaders in this field – USA and Germany – but also with that
of an emerging player – our neighboring country India.

1.2 Objectives
Somewhat unconventionally, this report has two broad objectives. They are:

1. To shed light on the past, present and future of the economy of Bangladesh.
2. To analyze the automotive sector of Bangladesh and compare and contrast it with the
automotive sectors of India, Germany, and USA.
The specific objectives of this report include:

1. Shed light to the economic condition of ancient Bengal.

2. Shed light to the economic condition of Bengal under Mughal rule.
3. Shed light to the economic condition of Bengal during the Colonial Era.
4. Shed light to the economic condition of East Pakistan.
5. Shed light to the economy of early Bangladesh.
6. Shed light to the current condition of the economy of Bangladesh.
7. Mention the impact of COVID-19 on the economy of Bangladesh.
8. Mention the impact of COVID-19 on the global automotive industry.
9. Do an analysis of the economy of Bangladesh, with special attention on why it is lagging
behind and how it can potentially be bigger.
10. Discuss the automotive sector of Bangladesh with special attention on the individual
players at play.

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 11. Compare and contrast the automotive sector of Bangladesh, India, Germany and USA in
detail.

1.3 Methodology
This report was prepared solely from secondary information.

The secondary information was taken from relevant reports, articles etc. online. Graphs, tables or
diagrams were taken from online sources to illustrate the points we were making with more clarity.

Diagrams were also formed by with the use of Microsoft Excel based off of information online to
better convey the information and make comparisons easier to grasp.

1.4 Scope and Limitations

The scope of this report is limited to the economy of Bangladesh (its past and present), the
automotive industry of Bangladesh as well as the automotive industries of India, Germany and the
USA.

The limitations of this study include (but is not limited to):

1. The entire work done is based on secondary information. As a result, this report is a rather
generic overview of the topics discussed.
2. None of the individuals preparing this report have a specialization in economics. This
might hamper the quality of the work done with regards to the concepts and principles of
this discipline.
3. The current lockdown has prevented individuals to work from the same geographic
location – this may impact the overall flow of the report to an extent.
4. The automotive industry of Bangladesh is not on par with that of the global players and as
such a superficial reading of this report may give its reader a misleading picture. Hence,
this report should be read with caution.

1.5 Rationale
This report was prepared under the instructions of Mrs Tasneema Afrin, Course Instructor of
Managerial Economics. This is a partial requirement for said course.

This report may benefit:

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 1. The Government of the People’s Republic of Bangladesh.
2. The economists of the Bangladesh.
3. The players in the automotive sector of Bangladesh.
4. Those interested in the global automotive sector.
5. The players in the automotive sector of India.
6. The players in the automotive sector of Germany.
7. The players in the automotive sector of USA.
USA and Germany are world leaders in the automotive sector, whilst India is an emerging player.
These countries pave the way of what Bangladesh as an LDC can do to achieve economic solvency
with regards to how to grow its automotive sector. This is not to say that Bangladesh should copy
into the footsteps of these countries exactly, but to learn from their mistakes and follow the steps
that are advantageous. Bangladesh can first look to emulate India, since it won’t be possible for
Bangladesh to emulate the world leaders in her current condition. After establishing herself as an
emerging player in the automotive industry, Bangladesh can then look to emulate the global leaders
like Germany and hope to compete with the USA in the long-term future.

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Part 1: The Bangladesh Economy: A Global View

2.0 Historical Performance Analysis

Bangladesh economy embodies every salient feature of developing economy; it is thriving, backed
by hard working labors and bestowed upon by natural resources (Sajjadur, 2016). It's the 39th
largest in the world in nominal terms, and 29th largest by purchasing power parity; it is classified
among the Next Eleven emerging market middle income economies and a frontier market. In the
third quarter of 2019, Bangladesh's was the world's seventh fastest growing economy with a rate
of 7.3% real GDP annual growth (IMF, 2019) .Dhaka and Chittagong are the principal financial
centers of the country, being home to the Dhaka Stock Exchange and the Chittagong Stock
Exchange. The financial sector of Bangladesh is the second largest in the subcontinent. Bangladesh
is one of the world's fastest growing economy.

In this section we will look into the Bangladesh economy into four different time period. Through
each section the story of Bangladesh economy will be unfolded its journey from agro based
economy to service depended one.

2.1 Economic Condition of Ancient Bengal

Bangladesh is mainly an agricultural country. Hence, the economy of the country developed
depending on agriculture. Paddy was the main crop. Besides, there was sugarcane. Molasses and
sugar made from the juice of sugarcane were exported and a lot of money was earned (Rachel,
2018). Many small industries grew in the ancient time. Earthen pots, gold and silver ornaments,
boats, the bullock carts, decorated wooden materials, etc. were made at that time.

East Bengal—the eastern segment of Bengal—was a historically prosperous region. The standard
of living is believed to have been higher compared with other parts of South Asia. As early as the
thirteenth century, the region was developing as an agrarian economy. Bengal was the junction of
trade routes on the Southeastern Silk Road (Lesser, 1988).

The Mughal Economy of Bengal began with the decisive victory of Akbar's army over the
independent Afghan ruler of the province Daud Karrani, at Tukaroi (near Danton, Midnapore
district) on March 3, 1575 (Eaton, 1996).

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Under the Mughals, Bengal Subah generated 50% of the empire's GDP, and thus had 12% of the
world's GDP (Khondokar, 2015) . Bengal was an affluent province that was, according to
economic historian Indrajit Ray, globally prominent in industries such as textile manufacturing
and shipbuilding (Roy, 2018) Bengal's capital city of Dhaka was the empire's financial capital,
with a population exceeding a million people, and with an estimated 80,000 skilled textile weavers.
It was an exporter of silk and cotton textiles, steel, saltpeter, and agricultural and industrial produce
(Esposito, 2005). Bengal's industrial economy in the Mughal era has been described as a form of
proto-industrialization (Singh, 2005).

Under Mughal rule, Bengal was a center of the worldwide muslin and silk trades. Bengal accounted
for 40% of Dutch imports from Asia, for example, including more than 50% of textiles and around
80% of silks (Sengupta, 2006). Bengal had a large shipbuilding industry. It has been estimated that
shipbuilding output of Bengal during the sixteenth and seventeenth centuries at 223,250 tons
annually, compared with 23,061 tons produced in nineteen colonies in North America from 1769
to 1771 (Sarkar, 1996).

2.2 Economic Condition of British Bengal

Pursuit of Trade and commerce to 1756 The discovery of sea-lanes to the eastern waters brought
the western maritime people into direct contact with Bengal. It was predominantly an exporting
country from ancient times; but curiously, its export trade was, for cultural reasons mainly,
conducted by mostly foreigners. Being encouraged by the Mughal government the Portuguese, the
Dutch, the French, the English and others came by sea to participate in the Bengal export trade. In
the competition among themselves in lifting Bengal goods for foreign markets, the English East
India Company had a decided advantage over all others. While all other companies were required
to pay 2.5 percent or more customs duties to government, the English were exempted from paying
any duty at all. They secured a nishan (1651) or patent from the Bengal subahdar, prince Shuja,
which allowed the English to trade in Bengal without paying any customs duties in return for an
annual tribute of Rs 3000 only (Banglapedia, 2014).

The development of East Bengal was thereafter limited to agriculture. The administrative
infrastructure of the late eighteenth and nineteenth centuries reinforced East Bengal's function as
the primary agricultural producer—chiefly of rice, tea, teak, cotton, sugar cane and jute — for
processors and traders from around Asia and beyond (Prakash, 2015).

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2.3 Economic Condition of East Pakistan
The partition of British India and the emergence of India and Pakistan in 1947 severely disrupted
the former colonial economic system that had preserved East Bengal (now Bangladesh) as a
producer of jute, rice and other agro commodities for the rest of British India. East Pakistan had to
build a new industrial base and modernize agriculture in the midst of a population explosion. The
united government of Pakistan expanded the cultivated area and some irrigation facilities, but the
rural population generally became poorer between 1947 and 1971 because improvements did not
keep pace with rural population increase. Pakistan's five-year plans opted for a development
strategy based on industrialization, but the major share of the development budget went to West
Pakistan, that is, contemporary Pakistan. The lack of natural resources meant that

Table 2. 1 Per capita income comparison between East Pakistan and West Pakistan

East Pakistan was heavily dependent on imports, creating a balance of payments problem. Without
a substantial industrialization program or adequate agrarian expansion, the economy of East
Pakistan steadily declined. Blame was placed by various observers, but especially those in East
Pakistan, on the West Pakistani leaders who not only dominated the government but also most of
the fledgling industries in East Pakistan.

Economic maltreatment of East Bengal, it is argued, was one of the factors that led to the
disintegration of Pakistan in 1971 leading to the creation of Bangladesh. Discriminatory allocation
of government budget across provinces arguably led to big – in the development of infrastructure

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facilities which, in turn, resulted in marked disparities in economic welfare. If true, similar
inequalities would have affected the social sectors. For instance, the supply of schools might have
been constrained as a consequence of tightened public budget, directly affecting educational
opportunities. A regional divide in educational quality could also ensue. Given allegations of
negative bias in economic policy towards East Bengal, a comparative study of the distribution of
educational resources and outcomes during the 24 years of united Pakistan is a natural line of
inquiry (ASADULLAH, 2015).

Table 2. 2 Income distribution in East and West Pakistan.

2.4 Bangladesh as Independent Nation: Neoliberal Economy

After its independence from Pakistan, Bangladesh followed a socialist economy by nationalizing
all industries, proving to be a critical blunder undertaken by the Awami League government. Since
Bangladesh followed a socialist economy by nationalizing all industries after its independence, it
underwent a slow growth of producing experienced entrepreneurs, managers, administrators,
engineers, and technicians (Lesser, 2015).

After 1975, Bangladeshi leaders began to turn their attention to developing new industrial capacity
and rehabilitating its economy. The static economic model adopted by these early leaders,
however—including the nationalization of much of the industrial sector—resulted in inefficiency
and economic stagnation. Beginning in late 1975, the government gradually gave greater scope to
private sector participation in the economy, a pattern that has continued. Many state-owned
enterprises have been privatized, like banking, telecommunication, aviation, media, and jute.
Inefficiency in the public sector has been rising however at a gradual pace; external resistance to
developing the country's richest natural resources is mounting; and power sectors including
infrastructure have all contributed to slowing economic growth. Bangladesh Became permanent
member of World Bank and International Monetary Fund in 1972.

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In the mid-1980s, there were encouraging signs of progress. Economic policies aimed at
encouraging private enterprise and investment, privatising public industries, reinstating budgetary
discipline, and liberalising the import regime were accelerated. From 1991 to 1993, the
government successfully followed an enhanced structural adjustment facility (ESAF) with the
International Monetary Fund (IMF) but failed to follow through on reforms in large part because
of preoccupation with the government's domestic political troubles. In June 2003 the IMF
approved 3-year, $490-million plan as part of the Poverty Reduction and Growth Facility (PRGF)
for Bangladesh that aimed to support the government's economic reform program up to 2006.
Seventy million dollars was made available immediately. In the same vein the World Bank
approved $536 million in interest-free loans. The economy saw continuous real GDP growth of at
least 5% since 2003. In 2010, Government of India extended a line of credit worth $1 billion to
counterbalance China's close relationship with Bangladesh (Levon, 2014).

Bangladesh historically has run a large trade deficit, financed largely through aid receipts and
remittances from workers overseas. In last decade, poverty dropped by around one third with
significant improvement in human development index, literacy, life expectancy and per capita food
consumption. With economy growing close to 6% per year, more than 15 million people have
moved out of poverty since 1992 (WorldBank, 2018).

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3.0 Recent Performance Analysis
Bangladesh defies economic and political gravity. Since its 1971 war of independence with
Pakistan, the country has been known for its tragedies: wrenching poverty, natural disasters and
now one of the world's biggest refugee crises, after the influx of 750,000 Rohingya Muslims
fleeing persecution in neighboring Myanmar (Ziauddin, 2018).

Yet, with remarkably little international attention, Bangladesh has also become one of the world's
economic success stories. Aided by a fast-growing manufacturing sector -- its garment industry is
second only to China's -- Bangladesh's economy has averaged above 6% annual growth for nearly
a decade, reaching 7.86% in the year through June. When it first became a country, in 1971,
Bangladesh was incredibly poor. The GDP growth rate was -14%, political instability was rife,
and the nation was devastated by floods and famine. Things have moved. Bangladesh now has an
average growth rate of 8% – well above the Asian average.

Bangladesh has been classed by the United Nations as one of the world’s least developed countries
(LDCs) since 1975, but its current trajectory means it is likely to shed that description by 2024.
Graduating from LDC status is a sign that a country’s per capita gross national income, human
assets, and resilience to economic and environmental shocks are robust enough to enable
sustainable development (ADB, 2019).

Bangladesh was 105th in the The Global Competitiveness Report 2019 from the World Economic
Forum (WEF, 2019). The more competitive a country is, the more likely it is that it will be able to
improve living standards. The garment trade that began in Bangladesh in the 1970s is now a $30
billion industry. But the economy is diversifying. The services sector – including microfinance
and computing – makes up 53% of the country’s GDP.

The success of the IT industry is central to the digital transformation and ongoing economic growth
of Bangladesh. It exports nearly $1 billion of technology products every year – a figure that the
government expects to increase to $5 billion by 2021. The country also has 600,000 IT freelancers.
Exports have also increased and diversified. Bangladesh’s exports grew by 4.5 percent in 2018
and is on track to increase by 10.1 percent this year. In addition, Bangladesh is now the fourth
largest rice producer, the second largest jute producer, the fourth largest mango producer, the fifth
largest vegetable producer, and fourth largest inland fish producer in the world. On top of that –

9
and surprisingly — Bangladesh also exported 12 industrial robots to South Korea and four ships
to India (Robert, 2019).

The garment industry remains Bangladesh’s economic backbone, and it too is booming. Thanks to
rising demand for Bangladeshi garments in the United States and newer markets in Australia,
Canada, India, and China, Bangladeshi garment exports rose 2.7 percent in 2018 and this year will
increase 11.5 percent from the year before. Hans Timmer, World Bank Chief Economist for the
South Asia Region, said, “In general, what we see in high frequency data is that Bangladesh is
doing better than the rest of the region, especially than India, Sri Lanka and Pakistan. We see that
in industrial production; we see that in exports.” (Ahmed, 2017)

3.1 Economic Indicator Analysis:

3.1.1 GDP
GDP at purchaser's prices is the sum of gross value added by all resident producers in the economy
plus any product taxes and minus any subsidies not included in the value of the products. It is
calculated without making deductions for depreciation of fabricated assets or for depletion and
degradation of natural resources. Data are in current U.S. dollars. Dollar figures for GDP are
converted from domestic currencies using single year official exchange rates. For a few countries
where the official exchange rate does not reflect the rate effectively applied to actual foreign
exchange transactions, an alternative conversion factor is used. GDP in Bangladesh averaged 56.90
USD Billion from 1960 until 2019, reaching an all-time high of 286 USD Billion in 2019 and a
record low of 4.27 USD Billion in 1960.

Components of GDP by expenditure:

GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports
(X – M).

Y = C + I + G + (X − M)

The Gross Domestic Product (GDP) in Bangladesh was worth 286 billion US dollars in 2019,
according to official data from the World Bank and projections from Trading Economics. The
GDP value of Bangladesh represents 0.24 percent of the world economy. GDP in Bangladesh is
expected to reach 315.00 USD Billion by the end of 2020, according to Trading Economics global
macro models and analysts’ expectations. In the long-term, the Bangladesh GDP is projected to
10
trend around 340.00 USD Billion in 2021 and 365.00 USD Billion in 2022, according to our
econometric models. (TrendEco, 2020).

Figure 3. 1 GDP Trend in Bangladesh

Figure 3. 2 GDP Forecast

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3.1.2 GDP Per Capita
GDP per capita is gross domestic product divided by midyear population. GDP is the sum of gross
value added by all resident producers in the economy plus any product taxes and minus any
subsidies not included in the value of the products. It is calculated without making deductions for
depreciation of fabricated assets or for depletion and degradation of natural resources. Data are in
current U.S. dollars. The Gross Domestic Product per capita in Bangladesh was last recorded at
1203.20 US dollars in 2018. The GDP per Capita in Bangladesh is equivalent to 10 percent of the
world's average.

Figure 3. 3 GDP Per Capita

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 Figure 3. 4 GDP Per Capita Forecast

GDP per capita in Bangladesh is expected to reach 1353.00 USD by the end of 2020, according to
Trading Economics global macro models and analysts expectations. In the long-term, the
Bangladesh GDP per capita is projected to trend around 1428.00 USD in 2021 and 1502.00 USD
in 2022, according to our econometric models. GDP per capita in Bangladesh averaged 522.13
USD from 1960 until 2018, reaching an all time high of 1203.20 USD in 2018 and a record low of
322.30 USD in 1972.

3.1.3 GDP Deflator

In economics, the GDP deflator is a measure of the level of prices of all new, domestically
produced, final goods and services in an economy in a year. GDP Deflator in Bangladesh increased
to 229.41 Index Points in 2019 from 219.37 Index Points in 2018. `

Figure 3. 5 GDP Deflator

3.1.4 GNI
GNI (formerly GNP) is the sum of value added by all resident producers plus any product taxes
(less subsidies) not included in the valuation of output plus net receipts of primary income
(compensation of employees and property income) from abroad. Data are in current U.S. dollars.
GNI, calculated in national currency, is usually converted to U.S. dollars at official exchange rates
for comparisons across economies, although an alternative rate is used when the official exchange
rate is judged to diverge by an exceptionally large margin from the rate actually applied in
13
international transactions. To smooth fluctuations in prices and exchange rates, a special Atlas
method of conversion is used by the World Bank. This applies a conversion factor that averages
the exchange rate for a given year and the two preceding years, adjusted for differences in rates of
inflation between the country, and through 2000, the G-5 countries (France, Germany, Japan, the
United Kingdom, and the United States). From 2001, these countries include the Euro area, Japan,
the United Kingdom, and the United States.

GNI (current US$) in Bangladesh was reported at 28.6B USD in 2018, according to the World
Bank collection of development indicators, compiled from officially recognized sources.
Bangladesh - GNI - actual values, historical data, forecasts and projections were sourced from the
World Bank on April of 2020.

Figure 3. 6 GNI

3.1.5 GNI Per Capita

GNI per capita (formerly GNP per capita) is the gross national income, converted to U.S. dollars
using the World Bank Atlas method, divided by the midyear population. GNI is the sum of value
added by all resident producers plus any product taxes (less subsidies) not included in the valuation
of output plus net receipts of primary income (compensation of employees and property income)
from abroad. GNI, calculated in national currency, is usually converted to U.S. dollars at official
exchange rates for comparisons across economies, although an alternative rate is used when the
official exchange rate is judged to diverge by an exceptionally large margin from the rate actually
applied in international transactions. To smooth fluctuations in prices and exchange rates, a special

14
Atlas method of conversion is used by the World Bank. This applies a conversion factor that
averages the exchange rate for a given year and the two preceding years, adjusted for differences
in rates of inflation between the country, and through 2000, the G-5 countries (France, Germany,
Japan, the United Kingdom, and the United States). From 2001, these countries include the Euro
area, Japan, the United Kingdom, and the United States.

Typically, GNI is calculated as:

GNI = GDP + Income earned from nationals living foreign countries – Income earned from foreign
nationals living in the country

GNI per capita, PPP (current international $) in Bangladesh was reported at 4570 in 2018,
according to the World Bank collection of development indicators, compiled from officially
recognized sources. Bangladesh - GNI per capita, PPP (current international $) - actual values,
historical data, forecasts and projections were sourced from the World Bank on April of 2020.

Figure 3. 7 GNI Per Capita

3.1.6 External Debt

Bangladesh's External Debt reached 37.8 USD bn in Jun 2019, compared with 33.5 USD bn in the
previous year. Bangladesh's External Debt: USD mn data is updated yearly, available from Jun
1997 to Jun 2019. The data reached an all-time high of 37.8 USD bn in Jun 2019 and a record low

15
of 14.4 USD bn in Jun 1997. External Debt Covers Government Debt only. External Debt is in
annual frequency, ending in June of each year.

In the latest reports of Bangladesh, Current Account recorded a surplus of 88.1 USD mn in Nov
2019. Foreign Direct Investment (FDI) increased by 1.1 USD bn in Sep 2019. Bangladesh's Direct
Investment Abroad expanded by 16.4 USD mn in Jun 2019. Its Foreign Portfolio Investment
increased by 7.4 USD mn in Jun 2019. The country's Nominal GDP was reported at 302.6 USD
bn in Jun 2019.

Figure 3. 8 External Debt

Bangladesh’s Outstanding External Debt as Percentage of GDP data was reported at 12.500 % in
Jun 2019. This records an increase from the previous number of 12.200 % for Jun 2018.
Bangladesh’s Outstanding External Debt as Percentage of GDP data is updated yearly, averaging
25.500 % from Jun 1997 to 2019, with 23 observations. The data reached an all-time high of 33.960
% in 1997 and a record low of 11.400 % in 2017. Bangladesh’s Outstanding External Debt as
Percentage of GDP data remains active status in CEIC and is reported by Bangladesh Bank.

16
 Figure 3. 9 External Debt as Percentage of GDP

3.1.7 Real Interest Rate:

Many interest rates coexist in an economy, reflecting competitive conditions, the terms governing
loans and deposits, and differences in the position and status of creditors and debtors. In some
economies interest rates are set by regulation or administrative fiat. In economies with imperfect
markets, or where reported nominal rates are not indicative of effective rates, it may be difficult to
obtain data on interest rates that reflect actual market transactions. Deposit and lending rates are
collected by the International Monetary Fund (IMF) as representative interest rates offered by
banks to resident customers. The terms and conditions attached to these rates differ by country,
however, limiting their comparability. Real interest rates are calculated by adjusting nominal rates
by an estimate of the inflation rate in the economy. A negative real interest rate indicates a loss in
the purchasing power of the principal.

The real interest = (i - P) / (1 + P),

where i is the nominal lending interest rate and P is the inflation rate (as measured by the GDP
deflator).

Real interest rate is the lending interest rate adjusted for inflation as measured by the GDP deflator.
The terms and conditions attached to lending rates differ by country, however, limiting their
comparability.

17
 Figure 3. 10 Real Interest Rate

The value for Real interest rate (%) in Bangladesh was 3.84 as of 2018. As the graph below shows,
over the past 42 years this indicator reached a maximum value of 34.76 in 1976 and a minimum
value of -11.64 in 1978.

3.1.8 Unemployment Rate

The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a
percentage by dividing the number of unemployed individuals by all individuals currently in the
labor force. During periods of recession, an economy usually experiences a relatively high
unemployment rate. Unemployment rate is one of the most closely watched statistics because a
rising rate is seen as a sign of weakening economy that may call for cut in interest rate.
Unemployment Rate in Bangladesh decreased to 4.20 percent in 2019 from 4.30 percent in 2019.
Unemployment in Bangladesh is attributed to various internal and external factors. The internal
factors that affect the labor market in the country are: extensive supply of labor force,
unavailability of skilled labor, concentration of jobs in the capital city of Dhaka and other major
cities, comparatively low salary in government institutions, low absorption of labor in private
sector, non-existence of practical policies and plans of government, administrative barriers to job
seekers, nepotism, information on job market, unemployment in women. The external factors
include, existence of large number of foreign workers, especially from neighboring countries,
decrease in projects, NGOs, imports- less investment.

18
 Figure 3. 11 Unemployment Rate

3.1.9 Balance of Payment

The current account on the balance of payments measures the inflow and outflow of goods,
services and investment incomes. Receipts from income-generating assets such as stocks (in the
form of dividends) are also recorded in the current account. The last component of the current
account is unilateral transfers. These are credits that are mostly worker's remittances, which are
salaries sent back into the home country of a national working abroad, as well as foreign aid that
are directly received (Pettinger, 2012). The balance of the current account tells us if a country has
a deficit or a surplus. A nation’s current account balance is influenced by numerous factors – its
trade policies, exchange rate, competitiveness, forex reserves, inflation rate and others
(Ramakrishnan, 2014).

19
 Figure 3. 12 Balance of Payment

Bangladesh’s Balance of Payment (BoP): USD: Current Account (CA) data was reported at -
582.000 USD mn in Dec 2019. This records an increase from the previous number of -765.000
USD mn for Sep 2019.

3.1.10 Foreign Direct Investment

Foreign direct investment (FDI) is an investment made by a company or individual in one country
in business interests in another country, in the form of either establishing business operations or
acquiring business assets in the other country, such as ownership or controlling interest in a foreign
company.

20
 Figure 3. 13 Foreign Direct Investment

Foreign Direct Investment in Bangladesh increased by 1583 USD Million in 2019.

3.1.11 Currency Strength

Currency strength expresses the value of currency. For economists, it is often calculated as
purchasing, while for financial traders, it can be described as an indicator, reflecting many factors
related to the currency; for example, fundamental data, overall economic performance or interest
rates. It can also be calculated from currency in relation to other currencies, usually using a
predefined currency basket. A typical example of this method is the U.S. Dollar Index. The current
trend in currency strength indicators is to combine more currency indexes in order to make forex
movements easily visible. For the calculation of indexes of this kind, major currencies are usually
used because they represent up to 90% of the whole forex market volume.

The USDBDT increased 0.0300 or 0.04% to 84.7600 on Thursday April 23 from 84.7300 in the
previous trading session. The Bangladeshi Taka is expected to trade at 85.00 by the end of this
quarter, according to Trading Economics global macro models and analysts’ expectations. Looking
forward, we estimate it to trade at 85.71 in 12 months’ time.

3.1.12 GDP Growth Rate

The Gross Domestic Product (GDP) in Bangladesh expanded 7.90 percent in 2018 fiscal year from
the previous year. Industry grew 12.1 percent (10.2 percent in 2017) with manufacturing surging

21
13.4 percent (11 percent in 2017). Services growth slowed to 6.3 percent (6.7 percent in 2017)
while agriculture was up 4.2 percent (3 percent in 2017).

GDP Annual Growth Rate in Bangladesh is expected to reach 7.50 percent by the end of 2020,
according to Trading Economics global macro models and analysts’ expectations. In the long-
term, the Bangladesh GDP Annual Growth Rate is projected to trend around 7.20 percent in 2021
and 7.30 percent in 2022, according to our econometric models. GDP Annual Growth Rate in
Bangladesh averaged 5.84 percent from 1994 until 2018, reaching an all-time high of 7.90 percent
in 2018 and a record low of 4.08 percent in 1994 (ADB, 2019).

3.1.13 Inflation Rate

In economics, inflation is a sustained increase in the general price level of goods and services in
an economy over a period of time (Rogers, 2007). When the general price level rises, each unit of
currency buys fewer goods and services; consequently, inflation reflects a reduction in the
purchasing power per unit of money – a loss of real value in the medium of exchange and unit of
account within the economy. The opposite of inflation is deflation, a sustained decrease in the
general price level of goods and services. The common measure of inflation is the inflation rate,
the annualized percentage change in a general price index, usually the consumer price index, over
time.

The annual inflation rate in Bangladesh rose marginally to 5.48 percent in March of 2020 from
5.46 percent in the previous month. Prices advanced further for non-food products (6.45 percent
vs 6.23 percent in February) while food inflation slowed (4.87 percent vs 4.97 percent). The
inflation rates for rural and urban areas were 5.47 percent and 5.49 percent, above February's
figures of 5.44 percent and 5.48 percent, respectively. On a monthly basis, consumer prices went
up 0.44 percent compared to 0.19 percent decrease in the prior month.

22
 Figure 3. 14 Inflation Rate

Inflation Rate in Bangladesh is expected to be 5.90 percent by the end of this quarter, according to
Trading Economics global macro models and analysts’ expectations. Looking forward, we
estimate Inflation Rate in Bangladesh to stand at 6.00 in 12 months’ time. In the long-term, the
Bangladesh Inflation Rate is projected to trend around 6.00 percent in 2021 and 6.50 percent in
2022, according to our econometric models. Inflation Rate in Bangladesh averaged 6.49 percent
from 1994 until 2020, reaching an all-time high of 16 percent in September of 2011 and a record
low of -0.03 percent in December of 1996 (BBS, 2019).

3.1.14 Current Account

Current Account in Bangladesh averaged 54.77 USD Million from 2005 until 2019, reaching an
all-time high of 1852 USD Million in the third quarter of 2015 and a record low of -3293 USD
Million in the second quarter of 2018. Current Account in Bangladesh is expected to be -150.00
USD Million by the end of this quarter, according to Trading Economics global macro models and
analysts’ expectations. Looking forward, we estimate Current Account in Bangladesh to stand at -
1800.00 in 12 months’ time. In the long-term, the Bangladesh Current Account is projected to
trend around -1800.00 USD Million in 2021, according to our econometric models.

23
 Figure 3. 15 Current Account

Bangladesh recorded a Current Account deficit of 1008 USD Million in the second quarter of
2019.

3.1.15 Balance of Trade

The balance of trade, commercial balance, or net exports, is the difference between the monetary
value of a nation's exports and imports over a certain time period. Sometimes a distinction is made
between a balance of trade for goods versus one for services. Economists use the BOT to measure
the relative strength of a country's economy. The balance of trade is also referred to as the trade
balance or the international trade balance.

Balance of Trade in Bangladesh averaged -30.49 BDT Billion from 1976 until 2020, reaching an
all-time high of 0 BDT Billion in April of 1977 and a record low of -209.80 BDT Billion in May
of 2018. Balance of Trade in Bangladesh is expected to be -60.00 BDT Billion by the end of this
quarter, according to Trading Economics global macro models and analysts’ expectations. Looking
forward, we estimate Balance of Trade in Bangladesh to stand at -145.00 in 12 months’ time. In
the long-term, the Bangladesh Balance of Trade is projected to trend around -150.00 BDT Billion
in 2021, according to our econometric models. Bangladesh recorded a trade deficit of 135.70 BDT
Billion in January of 2020.

24
 Figure 3. 16 Balance of Trade

3.2 Monetary Policy

The two key monetary policy objectives (inflation containment within targeted ceiling and
supporting attainment of targeted real GDP growth) were well archived in FY19(July 2018-June
2019); with end June 2019 CPI inflation at 5.47 percent (below the targeted 5.60 percent ceiling)
and strong 8.13 percent real GDP growth (against target of 7.80 percent). The urgency of
narrowing the sudden spiking (3.2 percent of GDP) in FY18 current account deficit was also
handled successfully (1.7 percent of GDP in FY19). Policy action in FY19 also eased off lingering
stresses from the FY18 liquidity crunch in private sector banks, restoring full normalcy in
interbank Taka and USD money markets (BB, 2019).

25
4.0 Forecasted Performance: Bright Future Ahead
Many see Bangladesh as a 'market’ of over 30 million middle- and affluent-class people and a
‘development miracle’ (Amartya, 2018). Bangladesh is quickly moving to a high-value,
knowledge-intensive society, beyond apparel manufacturing. Bangladesh also has 600,000 IT
freelancers – the largest freelancing community. This all speaks to a quiet transformation where
people have taken risks and faced challenges by becoming more innovative and adopting
technology. It is time that global investors, particularly Indian entrepreneurs, invest in Bangladesh
in areas like education, light engineering, electronics, the automotive industry and artificial
intelligence – beyond the conventional menu (Hasina, 2020).

Bangladesh’s economy will make one of the biggest jumps between 2020 and 2034 on the back of
demographic dividend and rising per capita income, according to the World Economic League
Table 2020. Bangladesh ranks 40th among 193 countries this year and will rise to 25th in 2034, a
spot currently held by Belgium, showed the latest edition of the WELT, produced by London-
based Centre for Economics and Business Research (CEBR), an international economic forecaster.

Figure 4. 1 Bangladesh Economy future

26
The WELT tracks the size of different economies and projects changes over the next 15 years, up
to 2034. The base data for 2019 is taken from the International Monetary Fund’s World Economic
Outlook and the GDP forecast draws on CEBR’s Global Prospects model to forecast growth,
inflation and exchange rates.

Figure 4. 2 GDP rank: past, present and future

Bangladesh is urbanizing fast. By 2030, 48% of our population will live in towns and cities. Most
will be young, energetic and digitally connected. They will be agile, receptive to new ideas and
look for new ways of creating wealth. In fact, this is already happening with over 110 million
active internet subscribers in Bangladesh. By 2025, mobile internet penetration will reach 41%
population. Rapid urbanization, fed by increasing consumption of electricity and more than 30
million middle class citizens, is indeed a huge market.

Some are concerned about the risks of investing in Bangladesh. Yes, we have challenges like many
other countries. But in Bangladesh we know how to transform challenges into opportunities. This
year, Bangladesh economy posted record high growth of 8.1%. Bangladesh is close to achieving
double-digit growth. Since 2009, Bangladesh’s economy has grown by 188% in size whereas per-
capita income has surpassed $1,909.

Remittances grew by 9.8 percent, reaching a record $16.4 billion in FY19. The contribution of net
export growth was positive, supported by a diversion of garment export orders from China and a
decline in imports. Agricultural and pharmaceutical exports led non-RMG export growth.
However, leather and leather product exports declined by 6 percent.

27
Net foreign direct investment (FDI) increased by 42.9 percent from a low baseline with
investments in the power, food, and textile sectors. Private consumption grew by 5.4 percent.
Private sector credit growth was weak and bank liquidity remains constrained. Non-performing
loans continued to rise in the banking sector (Worldbank, 2020).

Bangladesh agriculture production is no longer about subsistence. Beyond self-sufficiency,

Bangladesh is now the fourth-largest rice produce, second-largest in jute producer, fourth-largest
in mango production, fifth-largest in vegetable production and fourth-largest in inland fisheries in
the world.

Bangladesh has the fifth-largest internet user population in Asia-Pacific. It is fast becoming a
cashless society: last year, e-commerce transactions reached $260 million.

Today, Bangladesh offers the most liberal investment regime in South Asia – in terms of legal
protection of foreign investment, generous fiscal incentives, concessions on machinery imports,
an unrestricted exit policy, full repatriation of dividends and capital on exit. We are establishing
100 Special Economic Zones with one-stop service across Bangladesh. Twelve of the zones are
already functioning. Two zones are reserved for Indian investors. A number of high-tech parks are
also ready for technology and innovative enterprises.

In between Eastern and North-East India, China on the west and South-East Asia, Bangladesh
merits the attention of global and Indian business as a seamless economic space. It can serve as
the economic hub for the sub-region. Beyond our own 162 million people, Bangladesh can be the
connecting landmass to a combined market of nearly 3 billion people.

Last year, HSBC predicted that Bangladesh would be the 26th-largest economy in the world, by
2030. Two things are key: one is our open society, religious harmony, liberal values and secular
culture. The other is that two-third of our homogenous population is young – mostly under 25.
They are quickly skill-able, adaptive to technologies, and ready to engage at competitive wages.

Bangladesh is continuously learning in its journey towards development with its confident people,
able leadership and governance. Bangladesh offers you a stable and humanitarian state, where
leadership is responsive and responsible. That’s coupled with sound macro-economic
fundamentals - and its pragmatic and open economy shall continue to set global trends and the
example of a peaceful and progressive nation.

28
5.0 COVID-19 Crisis & Our Economy
The global economy has turned its way towards a massive downfall due to the spread of
coronavirus disease. Whereas developed countries having robust economic infrastructure such
as the USA, China, the United Kingdom, Germany, and others are failing to contain the disease
from spreading, for a developing country like Bangladesh the pandemic might be more
disastrous in effect than we can anticipate.

According to the sector-wise resource distribution of budget for the fiscal year 2019-20, the
healthcare sector has only 4.9% of the total allocation. (Bhuiyan, 2020) Due to poor healthcare
infrastructure and lack of investment, the Bangladesh government has no other way than a
nationwide lockdown to flatten the curve which is leading our economy to greater uncertainty.

As of now, Bangladesh's ready-made garment industry has faced a loss over order cancellation
of about $3 billion. There are fifty-nine banks and other financial institutes which might collapse
due to their sole dependency on the RMG and other manufacturing industries. These industries
are covering 85% of the export market. (Bhuiyan, 2020)

For the current month, the export earning has dropped by around $200 million within the first
two weeks. The demand for foreign currency has jumped in comparison with the loss of supply
due to the drastic fall in export and remittance. The excessive demand for dollars is influencing
banks to increase the bills for collection sale rate which ultimately decreased the exchange rate
of Taka against the dollar by 2%. (Rahman, 2020)

“In the current fiscal, the government projected a TK 1.45 deficit, or 5.0 percent of GDP, of the
TK 5.23 national budget”- Financial Express. (Kabir, 2020) .In the current fiscal year, revenue
collection has encountered a shortage of TK 450 billion till now- reported National Board of
Revenue. The government has to invest in new projects as well as for the regular expenditure of
the industries to back up the crucial situation. Moreover, it was said that in the upcoming fiscal
year 2021, the budget deficit would rise to 6% of the GDP due to increasing public expenditure
by the government to continue a constant growth rate. (Kabir, 2020)

No financial or medical institute can predict the possible duration of the crisis right now as
coronavirus is at a peak of contagion in a few of the countries and the spread cycle can prolong
beyond our assumption. Yet we are certain that we would bear the aftermath of the economic

29
downfall for at least the next two years even if the contagion is pacified. (Kabir, 2020) If the
contagion level goes up from moderate to any higher, our calculations might fail miserably.

5.1 Adverse Impact on Specific Sectors: Mostly Affected

Looking at the specific business sectors individually- RMG sector, Banks & Insurance
companies, and transportation are those three sectors that will encounter major negative impacts
of the pandemic. In the aforementioned chapter, it was mentioned that the RMG sector has
already faced a loss of $3 million because of order cancellation. Visibly impacting the RMG
sector root back to the backward linkage industries- 450 spinning mills, 850 weaving mills, and
250 dyeing factories including approximately 10 lakh employees. These garment industries are
indirectly driving the banks and other insurance companies which are also endangered to
collapse. Moreover, the RMG industry not only navigates the banks but also a bigger portion of
the transportation industry. Transportations are like wheels of the RMG chamber which would
also suffer due to the spillover impact. We can compare the RMG sector as the tip of the iceberg
and locate it through the cycle of consequences all over the business sectors. (Rahman, 2020)

5.2 What Experts Say

According to the World Bank report, the economic growth of Bangladesh will be plummeted
between 2 to 3% during the current fiscal year and will eventually dip as low as 1.9% in the next
fiscal year (WorldBank, 2020). WB said that the deceleration of the growth will be navigated by
the coronavirus crisis and the poor performance of exports and private investment through the first
half of the fiscal. WB also addressed that the main factor that instigates the growth in private
consumption which has decreased due to fall in household incomes provided by foreign
remittance. It also says that budget deficit will reach 7.7% because of the shortage in revenue
collection and the recurrent expenditure. If proper measures to alleviate the condition are not taken,
the poverty rate will climb substantially (Kabir, 2020) .“Earlier this month, the World Bank
approved a $100 million financing to help detect, prevent, and respond to the COVID-19 outbreak
and protect the people. We are committed to helping Bangladesh tackle the pandemic, accelerate
recovery, and build resilience”, said Mercy Tembon, World Bank Country Director for Bangladesh
and Bhutan. (bdnews24.com, 2020)

The international monetary fund has projected quite a similar growth rate around 2% during
current fiscal reported in ‘World Economic Outlook’. The ADB (Asian Development Bank) also

30
predicted that our economy might lose 1.1% of its GDP resulting in a loss of $3.02 billion as well
as 8.95 lakh unemployed people. (NEWAGE, 2020)
In developing markets, imports might decrease by 8.2% and exports might be reduced by
9.6%- reported IMF. (DhakaTribune, 2020)

31
Part 2: The Automotive Industry

6.0 Automobile Industry of Bangladesh

6.1 Industry Overview
Over the last two decades, the demand for automobiles has been increasing in Bangladesh due to
the increased use of vehicles with the increasing population, improved infrastructure along with
the increased mobility of people from one place to another for jobs or improved living standard,
and highly efficient mobility solutions across different customer segments offered by
manufacturers (Ahmed, 2020).

Table 6. 1 Industry Overview

Automobile Industry Heads Current Scenario

Local Demand $ 2.5 B
Raw material source(Local: Imported) 5:95
Future Investment possibility $ 2.5-3 B
Future employment option 1.5M
Import situation 2.01 B
Source: Board of Investment Bangladesh

Bangladesh mostly has to depend on import of cars from abroad as there is no official automobile
industry in the country (International trade Center, 2002). A huge number of vehicles are imported
every year, which includes reconditioned cars, spending a huge amount of foreign currency (Board
of Investment Bangladesh, 2017). These vehicles fall under wide variety of brands ranging from
commercial-heavy to light motor vehicles. The countries of origin for import mainly include
countries like Japan, India, South Korea, China, Germany, France, Malaysia, UK and USA
(International trade Center, 2002). Among the importing countries, Japan and India are the top
sellers of vehicles to Bangladesh.

Bangladesh is almost entirely sluggish in the production (Feredous, 2016) and manufacturing of
the automotive sector. However, the country has been producing auto-rickshaws since the 1980s
and the local production of the motorcycle has begun since early 2000.

32
The first Bangladeshi car has been made naming Sobari (Meaning: 'For All' in Bangla). The Sobari
family car has been made in Obhoynagor, in Jessore district, and costs only 6 lakhs and 45
thousand BDT. Apart from the engine, which was made in India, everything else in the Sobari
family car has been made locally (Kamal, 2014).

Bangladesh is also manufacturing locally designed three-wheeler motor vehicle, Mishuk, utilizing
an engine from Honda. Recently Bangladeshi Brand Walton is also coming in focus (with annual
production of 200,000 units) for motorcycles (Board of Investment Bangladesh, 2017). Even
though there is a lack of local car manufacturers, a state-run company named Pragoti Industries
Limited has been manufacturing vehicles for Japanese company Mitsubishi at a low rate (Kader,
2017). The country is currently assembling the Mitsubishi Pajero Sport, Hino bus, and also the
Tata bus and motorcycles.

To look at the auto parts market of Bangladesh, Bangladesh Automobile industry is not a big
industry and maximum auto mobile parts are imported from other countries. Besides there is no
well-organized and quality local manufacturer of parts and components. So, parts and components
are mainly imported from countries like Japan, UK, Taiwan, China, Korea, Malaysia, USA, India,
Indonesia, Pakistan, etc. Commercial importers import a bulk amount of parts and components
that are distributed through wholesaler and retailers (StudyMoose, n.d.).

The market of Bangladesh is alluring to investors at home and abroad and has the potentiality of
making a significant profit. There are foreign companies who are showing interest in investing in
the automobile industry in Bangladesh. Many Indian, Malaysian and Korean manufacturers such
as Tata, Proton, Hyundai are strategizing to launch assembly plants with local partners.

Tata Motors, in partnership with Bangladesh-based Nitol Motors, launched its Prima range of
heavy commercial vehicles (CVs) in Bangladesh (The Daily Observer, 2015). Furthermore, in
2015 three car manufacturing companies - Zinwa, BMG, & KRW, from South Korea have
collaborated with Ena Group to manufacture battery-driven auto car (automobile) in BSCIC
industrial estate in Rajshahi city. There will be Lithium battery in the car which will run at least
100 kilometers, charging only once. It will cost around US $18,000 or Tk.1, 200,000. Moreover,
Society of Indian Manufacturers (SIAM), an apex industry body representing leading vehicle and
vehicular engine manufacturers in India, is forwarding their helping hand towards Bangladesh to
strengthen their automobile manufacturing base. SIAM hosted the first-ever three days Indo-

33
Bangladesh Automotive Show in the city to unite automotive industries of both countries (The
Daily Sun, 2016). Another example is Swedish automobile giant Volvo Group which will market
new generation trucks in Bangladesh, in a joint venture with Indian Eicher Motors. With the
launch, the Eicher brand enters a new phase of growth and consolidation in the commercial vehicle
market. The distributorship of Eicher Trucks in Bangladesh is managed by Runner Motors
Limited, an arm of Runner Group (Business Intelligence Bangladesh, 2017).

6.2. Statistics Representing the Industry and the Subsectors

The current domestic market size for the automotive industry is approximately $13.89 billion with
an average positive CAGR of 21 percent in the last five years. The commercial vehicle market
holds the highest market share worth more than $7 billion. The private vehicle is placed second
with a total market size worth $6 billion. The market size of the motorcycle and three-wheelers
are $656 million and $78 million respectively. However, the motorcycle industry is expected to go
through steep growth in the next few years. With a similar growth trend, the industry is expected
to reach $32 billion at the end of 2023 (Inspira Extrapolation, 2019).

Assembly plants being automated do not require a lot of employees in the factories. There are
approximately 5,000 employees directly connected to the factory level work and 50,000 employees
in the post-production process (BBS, 2017) such as retailing, repair shop.

Automotive Industry
8000

7000

6000

5000

4000

3000

2000

1000

0
Motorcycle Private car Commercial vehicle 3 wheeler

Figure 6. 1 Bangladesh Automotive Industry Market Size (in millions)

34
6.2.1 Motorcycle
The current market size of Bangladesh motorcycle industry is approximately $656 million with 32
percent average growth from 2015 to 2018 (BRTA, 2018). With more than 400,000 motorbikes
sold in 2018, the subsector is expected to reach $3 billion by 2023 (Inspira Extrapolation, 2019).
The local production of the motorcycle has begun since early 2,000 and currently, more than 10
local companies are establishing SKD and CKD facilities such as Runner, Nitol Niloy, Rancon,
Uttara motors, PHP, mostly in association with foreign JV (Joint Venture) partner (The Daily Star,
2018).

At the same time, only around 19 percent of households in Bangladesh own motorcycles, which is
substantially lower than that of regional peers such as India- where 47 percent of households have
bikes or China- where 60 percent of households own a motorcycle (The Daily Star 2, 2018). This
further reinforces the fact that how the local motorcycle market will grow at a break-neck pace in
the next decade.

Not many local companies are envisioning export market entry but one particular Bangladeshi
private firm, Runner has exported 1,000 units of motorcycle in Nepal very recently and plans to
send 3,000 units every year (IDLC, 2017)

At the same time, Runner is targeting other emerging markets in Africa such as Nigeria and
Zimbabwe along with Asian markets such as Thailand and Cambodia. Interestingly, the same
company has been successful in high domestic value addition of 50 percent upon sourcing plastic
mold, chains, chassis, seats locally from Dinajpur and Faridpur. This indicates that local companies
with the incentivized strategies and market research are able to penetrate the export market while
creating a positive ripple effect on the domestic light engineering enterprises/component vendors.

6.2.2 Private Vehicle

With around 33,000 additional private vehicles (cars) registered in 2018, the current car market
size is approximately $6 billion. The private vehicle segment is growing with 15 percent positive
CAGR and expected to reach $12 billion in 2023 (The Daily Star 3, 2018). Unfortunately, the sub-
sector is mostly dominated by CBU import and among which Japanese brands dominate the
reconditioned import market with 88 percent market share (The Daily Star 4, 2018). Hence, the
local value addition and employment generation is comparatively lower. But, with the rise of

35
locally assembled cars, average cost of private vehicles will decrease and middle-income
consumers will be able to invest which will eventually lead to further growth of the subsector.

6.2.3 Commercial Vehicle

The commercial vehicle market refers to vehicles used to transport goods and passengers or
provide a service, and it includes trucks, buses, and coaches. At present, the market size of
commercial vehicle is more than $7.2 billion with a 16 percent positive CAGR in the last five
years. At least 55,000 units of commercial vehicles such as bus, truck, cargo van, human-hauler,
pickup, and tanker were sold in 2017 (BRTA, 2018). The commercial vehicle market has been
dominated by 5-7 local distributors of Indian CBU units until the last few years. The vehicles are
imported mostly from India mainly due to competitive pricing and availability of spare parts.

6.2.4 Three-Wheelers
Bangladesh has been producing auto-rickshaws and battery run vehicles since 1980 along with
manufacturing locally designed three-wheeler motor vehicle utilizing engines from Honda. The
market size of three-wheelers is approximately $80 million with a demand of 20,000 units per
year.

6.2.5 Two-wheelers
The market for 2 Wheelers is on the rise in Bangladesh riding on an increase in disposable income
among the general population. This is exemplified by the rise in the number of 2 Wheelers
registered with Bangladesh Road Transport Association (BRTA) from 114,616 in 2011 to 249,138
during January to August 31, 2018. During the last few years the aggregate number of motorcycles
registered more than doubled from 759,257 up to 2010 to 2,300,057 till August 31, 2018. Sales of
2 Wheelers in the country have boomed in remote areas in particular, helped by financing schemes.
The automobile industry in Bangladesh is largely dominated by imported 2 Wheelers primarily
from China, India and Taiwan. Recently local assembling has increased as local businesses have
begun collaborations with foreign companies such as Hero, Yamaha, and Honda. There are 14-16
large marketers in Bangladesh, among them 5-6 have their own assembling facilities. Others are
sole distributors or importers.

36
6.3 Automobile Companies in Bangladesh
In Bangladesh, there are few large car plants which assemble the Mitsubishi Pajero Sport, Hino
bus, Tata bus & motorcycles etc (WIKIPEDIA, 2017). Some top automobile assembling &
manufacturing companies are Uttara Motors Ltd, Nitol Motors Ltd., S.R Motors Ltd., Akij Motors,
Pragoti, Bangladesh Machine Tools Factory, Aftab Automobiles, TVS Auto Bangladesh Limited,
HS Enterprise, TATA Motors Bangladesh (Joint Venture with Nitol- Niloy Motors Ltd), Atlas
Bangladesh Ltd., Walton Hi-Tech Industries Limited, Runner Automobiles, Singer Bangladesh
Limited, Bangladesh Honda Private Limited, Rangs Motor's Ltd., Rahimafrooz Globatt Limited,
Chisti Engineering & Mechanical Works, Jonata Auto Mobile Parts, Ifad Autos Ltd .

6.4 An Outlook on the Market Players

The most renowned automobiles companies are as follows:

1. Pragoti Industries Limited (PIL)

Pragoti Industries Limited is a Bangladeshi car assembling and car parts manufacturing company
headquartered in Chittagong with a manufacturing plant in Agrabad. Founded in 1966 (Business
Habit, 2020). It is country's largest car assembling plant and it has assembled and marketed more
than 50,000 vehicles such as cars, Jeeps, Buses, Trucks, Pickups, Ambulances, Tractors of multiple
models by importing CKD (Complete Knocked Down ) kits from overseas. Pragoti mainly
assembles Mitsubishi Pajero Sports QX Jeep in its plant in Chattogram after importing the vehicle
at CKD (complete knock down) condition under a long-term agreement with Mitsubishi. It also
supplies jeeps, bus and truck of different brands of Japan, China and India on demand. At present,
Mitsubishi and Pragoti are manufacturing Mitsubishi Pajero Sports CR-45 and the L-200 microbus
under a joint venture. In the last fiscal year of 2018-2019 Pragoti assembled 1,473 vehicles and
sold 1,448 vehicles worth Tk 734 crore.

2. RUNNER Automobiles Ltd

Runner Automobiles Limited (RAL) is the subsidiary and flagship company of the Runner Group,
manufacturing motorcycles since its journey in the year 2000 (Business Habit, 2020). It has a state
of the art factory on 3800 decimal of land in Bhaluka capable of producing at least 100,000 units
in a year and 500 motorcycles per day. The products cover 4 series of motorcycles ranging from
80 cc to 150 cc, and about 12 models of 2 wheelers and scooters). Among them, the principal

37
category consists of the 2 Wheeler & 3 Wheeler. It is pioneering 2 Wheelers manufacturer and
assembler in Bangladesh and has become the market leader in sub 100 CC motorcycle segment in
the country. Its motorcycles are holding 8% of market share after Bajaj, TVS and Her Honda.

Recently BAJAJ Autos Ltd. of India appointed RAL as a distributor for famous BAJAJ RE brand
(LPG, Diesel, Passenger and Cargo) 3 Wheelers (3W) in Bangladesh. Moreover, RAL has been
one of the largest distributors in the trucks and light vehicles sector and sells a range of Volvo
Eicher trucks.

3. Walton Motors

Walton Motors is a Bangladeshi motorcycle manufacturer established in 1977 as a subsidiary

of Walton Group. Walton is the first motorcycle manufacturer in Bangladesh, its products being
chiefly motorcycles with displacements ranging from 80cc to 150cc, and has marketed and sold
them in a number of countries (Business Habit, 2020). Currently it has 0.15 million Motorcycle
capacity per annum.

4. Aftab Automobiles Ltd

Aftab Automobiles Ltd, a sister concern of Navana Group is mainly a vehicle assembling and
small parts manufacturing company. It was listed with Dhaka Stock Exchange Limited in the year
1987 and was converted into Public Limited Company later in 1981 which is now the lone largest
assembler-cum-progressive manufacturer of Toyota & Hino vehicles in the private sector of
Bangladesh.

The principal activities of the Company includes assembling of Toyota Land Cruiser soft top/ Pick-
up, Land Cruiser Prado, Hino Bus, Hino Mini Bus/ Truck with a yearly production capacity of
2400 units of vehicles in 3 shifts. The company also imports different passenger and commercial
vehicles. Currently, its sales amount to 2.82 B

Presently, the Company is engaged in assembling of HINO luxury bus of model RM2 which is in
great market demand now-a-days. It has also introduced environmental friendly (CNG driven)
AK1JMKA model HINO Bus for the first time in Bangladesh.

38
5. Atlas Bangladesh Ltd

Atlas Bangladesh Ltd was established in 1966 under private entrepreneurship and was nationalized
and placed under the management of Bangladesh Steel & Engineering Corporation (BSEC) in
1972 and converted into a Public Limited Company in 1987 when 49% of its share was sold to the
general public and 51% is retained with BSEC. The company mainly imports and distributes
motorcycles and spare parts for motorcycles in Bangladesh. It is also involved in the manufacturing
of motorcycle components for major motorcycle manufacturers. The main products of the
company are motorcycles of different models of world renowned Honda and Hero Honda Brands,
3-Wheeler Motorized Rickshaw (Mishuk). It is partner with Honda under Technical Assistance
Agreement Pakistan.

6. Uttara Automobile Manufacturers Ltd

Uttara Motors Limited (UML) was established in 1972. It is engaged in the sales and marketing of
different brands of automobiles throughout the country via her nationwide sales, service & spare
parts network. The company has established a two-wheeler manufacturing plant with a production
capacity of around 2.5 lakh motorcycles. Currently, it is the sole distributor of SUZUKI vehicles
in Bangladesh and is the distributor of a strong passenger car lineup starting from entry-level
hatchbacks to sedans to SUVs.

UML’s product range includes motorcycles, auto rickshaws and commercial vehicles which are
assembled here in Bangladesh by her other sister companies, and other products such as passenger
cars, SUVs, pickup trucks are imported in CBU condition from the respective manufacturers in
Japan, India, Pakistan, Indonesia & Thailand.

Recently, Uttara Motors Ltd launched “Bajaj Pulsar NS160”, the most powerful 160cc motorcycle
in the local market. It is the most sought-after bike of 2018.

7. HPM Auto Industries Limited

It is one of the Automobiles industries in Bangladesh which specifically deals in Motorcycle. Ir

produces high performance products by combining the best aspects of a traditional motorcycles
and tri-wheelers with today’s most advanced technology.

39
8. Bangladesh Machine Tools Factory Limited

Bangladesh Machine Tools Factory Limited (BMTF), founded on 11 February 1979, is a

commercial automobile assembly plant of the Bangladesh Army. It is mainly engaged to build and
modify automobiles especially for defense industry.

The main products of BMTF consist of specialized automobiles for military purpose and different
automobile parts. The company is involved in assembling Isuzu 3 ton trucks, Toyota Jeeps, Toyota
1.5 ton trucks for Bangladesh Army, prisoner vans for Bangladesh Police and various vehicles of
different government and non-government organizations.

There are other individual players: Ifad Autos Ltd, Jonata Auto Mobile Parts, Chisti Engineering
& Mechanical Works, Chittagong Building & Machinery Ltd, Bangladesh Honda Private Ltd,
TagAZ Bangladesh, Bangladesh Machine Tools Factory.

6.5 Market Share of the Key Players

The market for commercial vehicles is oligopolistic in nature, with high capital investment and
regulation under the BRTC. The market leader is Nitol Motors Limited, with a market share of
40%, closely followed by IFAD Autos with 38%. Runner Motors Limited is also a significant
player with a share of 10% and is due to open its own assembly plant later this year. The dominance
of these three companies over 88% of the market limits the buying power of consumers (IDLC
Finance, 2017).

Both IFAD and Nitol are investing in new plants,

Sales
and IFAD’s assembly plant is due to be the
largest automobile plant in Bangladesh, with the
capacity to build 4,000 trucks and buses
annually. Both of these plants will be built in
collaboration with the relative brands they
distribute in Bangladesh.

Nitol Motors Ifad Autos

Runner Motors Limited Others

Figure 6. 2 Bangladesh Vehicle Market Share

40
6.6. Contribution of Automobile Industry to Bangladesh
6.6.1 FDI
The total FDI in vehicle and transportation equipment was reported to be $2.81 million in FY
2016-17. The contribution of foreign direct investment adds more value in terms of knowledge
sharing and technology transfer compared to the money itself. Almost all FDI happened through a
joint venture or collaboration with locally owned companies. Among the recent investments, the
major collaboration happened with Niloy-Hero MotoCorp, PHPProton, IFAD-Ashok Leyland.
Hero MotoCorp and Nitol Niloy group jointly invested $35 million in Jashore factory. The
production started in 2017 and Hero MotoCorp owns the 55 percent of the manufacturing plant
and rest 45 percent is owned by Niloy Motors (Dhaka Tribune, 2016). PHP Automobiles Ltd, a
business conglomerate based in Chattrogram, has already joined with Malaysian automotive
manufacturer Proton to manufacture 1,200 cars per year. The company invested $450 million in
the project employing 250 employees including 50 engineers (Dhaka Tribune, 2015). PHP-Proton
collaboration has manufactured 120 units of the private car which are running successfully on the
street (The New Age BD, 2017). Uttara Motors have invested $250 million jointly with Bajaj,
Suzuki, Force, Isuzu, factory located in Ashulia, Dhaka to produce motorcycle (The Daily Star,
2019). In addition, Hyundai plans to make $450 million assembly plant in Chattrogram with the
capacity to produce 1,200 units of cars annually (BRTA, 2018). Recently ( November, 2018)
Japanese automobile giant Honda started manufacturing at Abdul Monem Economic Zone
(AMEZ) in Munshiganj. The company set up a plant on 25 acres of land and invested $270
million.

6.6.2 Others
Automotive/bus/truck assembly industry of Bangladesh currently has a domestic market size of
USD 13.89B. And the amount of export under this industry amounts to a whole of 1.5M USD
(Inspira Advisory & Consulting Limited. , 2019). Another indication of economic contribution is
the value addition to the country’s employment sector and the value derived from this sector is
0.5M for the industry. In addition to this, automobile manufacturers and distributors of Bangladesh
has estimated that the Bangladeshi automotive industry provides direct and indirect
employment to over 3 million people (Hossain & Haque, 2017). Direct employment includes
personnel working with automobile OEM’s and auto component manufacturers (about 30% to

41
40%). Indirect employment includes personnel working in the enabling industries, such as
vehicle finance and proceedings of the 1st International Conference on Industrial and Mechanical
Engineering and Operations Management (IMEOM), Dhaka, Bangladesh, insurance industry,
vehicle repair, vehicle service stations, vehicle maintenance, vehicle and component dealers,
drivers, cleaners etc. (about 60% to 70%) (Hossain & Haque, 2017)

6.7 Growth Drivers of the Industry

The Key growth drivers in the Motor Vehicle Manufacturing industry are:

1. Efficiency factor - Improve labor productivity, labor flexibility, and capital efficiency
2. Resource Availability - Quality manpower availability, infrastructure improvements, and
raw material availability
3. Effective cost controls - Close relationship with supplies and goods distribution channels.
4. Establishment of export markets - Growth of export markets
5. Having an extensive distribution/collection network - Goods distribution channels
6. Successful industrial relations policy - Ethical and tactical industrial relations
7. Access to the latest available and most efficient technology and techniques - The degree of
investment in technological improvements and product development
8. Optimum capacity utilization - The level of plant utilization
9. Management of high-quality assets portfolio - Understanding implications from
government policies

6.8 Environmental Implications of the Automobile Industry

The automotive production process leaves a moderately negative footprint in the environment
resulting in because of materials like steel, rubber, glass, plastics, paints. Now that the
environmental concern is high on the agenda, the country should have its priority right. Western
countries are in a race against time to bring out their electric cars on the road. Such initiatives have
had moderate success so far. But it can reasonably be expected that there will soon be a
breakthrough in electric car technology by which the automotive industry will be able to produce
economical and safe vehicles. Fortunately, the key players of the industry have referred that due
to government regulation. Most factories of Bangladesh adopted environment sustainable practice
in the work process.

42
 7.0 Comparative analysis of automobile industry of Germany, USA,
India, and Bangladesh
7.1 Comparison of Basic Features of USA, Germany, India, and Bangladesh Market

Characteristics USA market Germany market India market Bangladesh Market

Contribution In 2018, the U.S. The health of the The auto industry Bangladesh mostly has to
to economy automotive industry automobile industry is contributes 7.5 depend on import of cars
contributed 2.7% to U.S. critical to Germany’s percent of India’s from abroad as there is no
gross domestic product. economic strength. It GDP and a official automobile industry in
That's $545.4 billion out sustains 820,000 jobs whopping 49 percent the country. (Limited, 2017)
of the total $20.5 trillion domestically, produced of manufacturing
produced. Of that, total revenues of 423 GDP with a large
$327.1 billion was auto billion euros in 2017 and economic multiplier
manufacturing and contributes around 5 impact. (Bodke,
$218.3 billion was percent to German GDP. 2019)
vehicle retail sales. (Chazan, 2019)
(AMADEO, 2019)
Industry Organisational and The German automotive Two-wheelers The automobile industry is not
characteristics technological change market is comprised of a dominate the growing in Bangladesh in the
is the key concentrated and industry and make way that it should considering
characteristics of the Sophisticated global up 81% share in the the present per-capita income,
US industry. Of late, network, which includes domestic automobile GDP and economic
steps are taken to joint-ventures, sales in FY19. The development of the country.
increase its global cooperatives, Two Wheelers The cost is still too high
presence by productions and segment leads the relative to the affordability of
expanding global assembly sites. Like market in terms of the people in the country.
alliances and seeking USA, over capacity, volume owing to a Demand for brand new cars is
greater collaboration intense competition and growing middle lower due to higher costs
with other U.S. investment for class and a young compared to those for used
automakers. Productivity technology are general population. ('19, cars. The country is more
is more than EU but less features. The industry is 2019) dependent on imported cars.
than Japan. driven by MNCs. (Rahman, 2019)

43
7.2 Sales of Passenger Cars

Sales of Passenger Car (2005-2019)

9,000,000

8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Germany USA India Bangladesh

Figure 7. 1 Sales of Passenger Car (2005-2019)

(OICA, 2020)

The bar chart above shows that USA has been the leader in terms of Passenger car sales. There is
a drop in sales during 2007-2009 due to the recession. However, it picked up the growth and
reached peak again in 2014. While there is a steady decline of sales in USA from 2014 onwards,
Germany kept on growing during that time. Indian passenger car sales have always seen a steady
growth since 2005 and almost equaled the sales with Germany in 2018. Bangladesh is yet to put a
mentionable mark in this industry compared to these countries.

44
7.3 Sales of Commercial Vehicles

Sales of Commercial vehicles (2005 to 2019)

14,000,000

12,000,000

10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Germany USA India Bangladesh

Figure 7. 2 Sales of Commercial Vehicles (2005 - 2019)

(OICA, 2020)

The trend in commercial vehicles sales is almost the same as that in passenger car sales. In addition,
USA is way ahead of the other countries. Also, India sells more commercial vehicles than
Germany. USA has shown a remarkable growth in sales since the drop in 2009 due to recession.
The growth never reclined and kept growing till today.

45
7.4 Sales of Vehicle

Vehicle sales
20,000,000

18,000,000

16,000,000

14,000,000

12,000,000

10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

0
Germany USA India Bangladesh

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Figure 7. 3 Vehicle Sales

(OICA, 2020)

When it comes to comparing the total sales of vehicles, Germany has seen more or less stable
condition. India has emerged as a game changer since 2005 and has seen sharp growth till 2018
until the sales declined in 2019. USA is way ahead of the other 3 countries in terms of the total
sales of vehicles.

46
7.5 Production of Passenger Cars and Commercial Vehicles

Production of Personal Cars and Commercial

Vehicles
9,000,000

8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0
PC CV PC CV PC CV PC CV PC CV PC CV PC CV PC CV PC CV PC CV PC CV PC CV PC CV
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Germany India USA

Figure 7. 4 Production of Personal Cars and Commercial Vehicles

(wikipedia, 2020)

Germany and USA have always been competitor in production of passenger cars and commercial
vehicles. Especially, from 2007 to 2011, as far as passenger cars are concerned, Germany
combatted with recession pretty well compared to USA. Their production had an upward trend
throughout this phase. In terms of production volume, Germany has always been producing more
passenger cars than USA. However, after recovering from the recession, USA accelerated its
production of passenger cars like never before and kept its growth at a higher position.

In contrast, as far as the commercial vehicles are concerned, USA has been way ahead of others.

India has always experienced a steady growth, especially in passenger cars production.

47
7.6 Vehicles in Use

Vehicle in use (Total Number)

300,000

250,000

200,000

150,000

100,000

50,000

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Germany USA India Bangladesh

Figure 7. 5 Vehicle in Use (Total Number)

(OICA, 2020)

USA has always been the leader in terms of vehicles in use. Germany has been stable given the
number of population it has. However, as an emerging and fast growing nation, India has always
seen a continuous upward trend in the number of vehicles used. In spite of the tininess in number,
Bangladesh is also emerging and growing in terms of the uses of vehicles.

48
7.7 Key Players in the Automobile Market

Germany Market share

Volkswagen
Mercedes

19.00% Audi
24.70% BMW
Ford
10.00% Skoda
3.30%
Opel
3.70%
8.60% Seat
4.40% Renault
8.30%
5.30% 6.80% Hyundai
5.90% Others

Figure 7. 6 German Market Share

(focus2move, 2019)

The automobile market in Germany is currently lead by Volkswagen capturing 19% market share
followed by Mercedes, Audi, BMW, Ford, and others.

2.10% USA Market share

1.60%
2.10%
1.10% General Motors
3.80%
Ford Motor Company
4.10%
16.90% Toyota Motor Corporation
FCA/Chrysler Group
7.80% Honda Motor Company
14.10% Nissan Motor Company/Mitsubishi
8.60%
Hyundai-Kia Auto Group
Subary Corporation
9.50%
14% Voklswagen Group

13% Daimler
BMW Group

49
 Figure 7. 7 USA Market Share
(focus2move, 2019)

USA market is dominated by General Motors, followed by Ford, Toyota, FCA/Chrysler Group,
Honda, Nissan etc. :

India Market Share

7.30% Maruti Suzuki India

Nissan Motor India
7.90%
Renault India
5.20% Ford India
4.50% TOYOTA KIRLOSKAR
51.00%
Honda Cars India
2.90%
Tata Motors
2.40%
1.20% Mahindra and Mahindra

Figure 7. 8 India Market Share

(economictimes, 2018)

In India, Maruti Suzuki holds almost half of the total market share.
:

50
 Bangladesh Market Share

15%

37% Nitol Motors

14% IFAD Autos
Runner Motors
Others

34%

Figure 7. 9 BD Market Share

(databd, 2019)

Nitol Motors and IFAD Autos are competitors in the Bangladeshi automobile market.

7.8 Employment in Automobile Industries of USA, Germany and India

Germany automobile employement

900000
800000
700000
600000
500000
400000
300000
200000
100000
0
2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Years Number of employees

Figure 7. 10 Employment in German Automobile Industry

(statista, 2020)

51
This statistic presents the number of employees in the German automobile industry from 2005 to
2019. In 2019, Almost 832841 people worked in automobile manufacturing. (statista, 2020)

India automobile employement

1200000

1000000

800000

600000

400000

200000

0
2009 2015 2020

Years Number of employees

Figure 7. 11 Employment in Indian Automobile Industry

(statista, 2020)

The Indian automotive sector was estimated to employ over a million people in 2020. The
employment figures were relatively small compared to the EU automotive industry that employed
around 14 million personnel. In the United States, part dealers and motor vehicle sector had around
two million employees on their payrolls in March 2019. Even then, India had one of the largest
global automotive markets in 2019. The sector however, started facing the effects of a slowdown
in terms of sales and rising inventory numbers mid-way through 2019. (statista, 2020)

52
 USA automobile employement
2500000

2002300 2014700 2020000 2064000

2000000 1906100 1967300
1833000
1667500 1726800 1768400
1610900
1500000

1012000 996500
933200 950300 990600
1000000 806100 858800 895600
753700
660100 708900

500000

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Manufacturing Dealers

Figure 7. 12 Employment in USA Automobile Industry

(statista, 2020)

Motor vehicle and parts dealers in the United States had some two million employees on their
payrolls in February 2020. The number of motor vehicles and parts manufacturing employees
amounted to around 996,500 people in February 2020, down from more than one million in
February 2019. This downward trend in employment will likely extend into March, as most
automotive manufacturers have brought production to a halt. (statista, 2020)

7.9 Component wise country comparisons:

53
 Component wise country comparison
5,000,000.00

4,500,000.00

4,000,000.00

3,500,000.00
Trade Value 1000USD

3,000,000.00

2,500,000.00

2,000,000.00

1,500,000.00

1,000,000.00

500,000.00

0.00
German Export German Import India Export Indian Import USA export USA import
Axis Title

870710 : Bodies for passenger carrying vehicles

870810 : Bumpers and parts for motor vehicles
870870 : Wheels including parts and accessories for motor vehicles
841520 : Air conditioners used in vehicles
840731 : Engines, spark-ignition reciprocating, displacing not more than 50 cc
840732 : Engines, spark-ignition reciprocating, displacing >50 cc but not more 250cc

Figure 7. 13 Country comparison based on automobile components

(wits, trade/country-byhs6product., 2019)

From the above chart, USA exports the greatest number of vehicle bodies for passenger cars.
Germany exports the greatest number of bumpers, wheels, and associated parts for motor vehicles.
USA imports the highest number of AC and wheel components. India mostly imports AC
components from around the world. (wits, 2019)

54
 Germany imports Germany exports
Engines Engines
70 7
63.49 6.26
60 6

50 5

40 4

30 3

20 2
0.99
10 1
0.49
0 0
Trade Value 1000USD United States Croatia

China United States Trade Value 1000USD

USA imports engines USA exports Engines

1,600.00
900
1,404.43
782.3
800 1,400.00

700
1,200.00
600
1,000.00
500
800.00
400

300 600.00

200 138.9 400.00

100 36.51 27.57 23.56 208.22
200.00
0 79.13 44.16
40.04
Trade Value 1000USD
0.00
Italy China Trade Value 1000USD

United Kingdom New Zealand Mexico Canada Saudi Arabia

Japan New Zealand Israel

55
 India imports Engines India exports Engines
300
2,500.00

2,166.92
250 241.1
2,000.00

200
1,500.00

150
1,000.00

100

500.00

50
1.61 0.81 0.35 0.13
0.00 11.55
1.29 0.01
Trade Value 1000USD 0
China Germany France Trade Value 1000USD

Other Asia, nes Sweden Bangladesh Korea, Rep. Germany Tanzania

Figure 7. 14 Import-Export of Engines by Selected Counters

(wits, trade/country-byhs6product., 2019)

India exports its highest number of engines to Bangladesh.

56
8.0 Economic Structures of the Selected Countries
8.1 Major Economic Indicators
It is not institutions that cause growth; rather, it is a country’s economic structure that is the
fundamental cause of economic performance. Therefore, differences in economic structures across
time and space can explain the differences in economic development.

But what are economic structures? Some commodities like high-technology manufacturing
possess the scope for increasing returns, and others like bananas are notorious for demonstrating
diminishing returns. A given country has an increasing returns productive structure if it produces
high value-added commodities that are technically sophisticated and the reverse holds—a
decreasing returns economic structure is composed of low value-added commodities that are
technologically simple. Fundamentally, economic activities reflect an economy’s productive
capabilities and a country’s productive structure is simply the aggregate representation of its
technological capabilities.

Robust growth is realized when a country acquires an increasing returns economic structure, while
economic stagnation and sporadic growth are observed otherwise.

In this paper, we have used a few economic indicators which will explain and differentiate between
the selected countries: USA, Germany, India, and a comparative analysis of these countries with
Bangladesh.

Population
1,600,000,000
1,352,617,328
1,400,000,000
1,200,000,000
1,000,000,000
800,000,000
600,000,000
327,167,434
400,000,000
161,356,039
200,000,000 82,927,922
0
Population

Germany Bangladesh USA India

Figure 8. 1 Population Wise Comparison of the Four Countries

. (wits, countrystats.as, 2019)
57
The bar chart shows that in terms of population, India has the highest among these 4. While
Germany has the least.

GDP
25,000,000
20,544,343
20,000,000

15,000,000

10,000,000

5,000,000 3,947,620
2,718,732
274,025
0
GDP (current US$ Mil)

Germany Bangladesh USA India

Figure 8. 2 GDP of the Four Countries

. (wits, countrystats.as, 2019)
However, in terms of GDP, USA comes at top followed by Germany, India, and Bangladesh.

GNI per capita, Atlas method (current US$)

70,000.00 63,080.00
60,000.00

50,000.00 47,090.00

40,000.00

30,000.00

20,000.00

10,000.00
1,750.00 2,020.00
0.00
GNI per capita, Atlas method (current US$)

Germany Bangladesh USA India

Figure 8. 3 GNI Per Capita

(wits, countrystats.as, 2019)

58
The bar chart above shows USA has the highest GNI per capita followed by Germany, India, and
Bangladesh.

Trade Balance (current US$ Mil)

300,000.00
200,000.00
100,000.00
0.00
-100,000.00 Trade Balance (current US$ Mil)

-200,000.00
-300,000.00
-400,000.00
-500,000.00
-600,000.00
-700,000.00

Germany Bangladesh USA India

Figure 8. 4 Trade Balance of Four Countries

. (wits, countrystats.as, 2019)
In this graph, we see only Germany has a positive trade balance. (FocusEconomics, 2018).

8.2 GDP Contribution:

Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as
well. In the United States, for example, the government releases an annualized GDP estimate for
each quarter and also for an entire year. Most of the individual data sets will also be given in real
terms, meaning that the data is adjusted for price changes, and is, therefore, net of inflation.
(CHAPPELOW, 2020)

We have made a comparative analysis of the 4 countries and outlined the contribution of the 3
major broad categories of sectors such as: Agriculture, Industry, and Services in each of the
countries.

Germany is mostly Industry oriented, while the service sector is almost negligible. India is
extremely depended on Service sectors. Like its neighbor country India, Bangladesh is also heavily
dependent on Service sectors. We see a huge portion of GDP is dependent on Industry in USA.

59
 Germany GDP India GDP distribution
distribution (millions (millions of dollars)
of dollars)
29393
1458996

1289093
2179020
5826510
2880514

Agriculture Industry Service Agriculture Industry Service

Germany GDP Contribution. (sector, 2019) India’s GDP Distribution. (sector, 2019)

Bangladesh GDP USA GDP distribution

distribution (Millions of (millions of dollars)
dollars)
175410

98023
1559200

390020 202258
3722590

Agriculture Industry Service Agriculture Industry Service

BD GDP Distribution (sector, 2019) USA GDP Distribution (sector, 2019)

60
8.3 Export and Import of BD with the Selected Countries

Export and Import economy of BD

8000000

6000000
6139352.46 5882080.04
5160913.82
4000000 4673195.99
3810232.37

2000000

401 537 487 1843 3275 1832 517890.71 862963.62 978438.64

0
No Of exported HS6 No Of imported HS6 Trade Balance (US$ Export (US$ Import (US$
digit Products digit Products Thousand) Thousand) Thousand)
-2000000

-4000000
-5364189.32

-6000000

Bangladesh Germany Bangladesh India Bangladesh United States

Figure 8. 5 Export and Import Economy of BD

(wits, countrystats.as, 2019)
Bangladesh exports the greatest number of HS6 digit products to India. Same goes for imported
HS6 digit products.

Among industry classification systems, Harmonized System (HS) Codes are commonly used
throughout the export process for goods. The Harmonized System is a standardized numerical
method of classifying traded products. It is used by customs authorities around the world to identify
products when assessing duties and taxes and for gathering statistics. (Administration, 2020)

Bangladesh has a negative trade balance with India, which means BD imports more than exports
from India.

Among these 3 countries, Bangladesh exports the most to USA followed by Germany, and the
least to India. As far as imports are concerned, BD imports the most from India which explains the
trade balance deficit with this country.

61
9.0 Critical Analysis
9.1 SWOT Analysis
9.1.1 USA
Strength
 Increased demand of value for money
vehicles giving rise to demand for car
services.
 The industry being characterized by
continuous technological advancement
and product innovation.
 includes the largest automakers in the
world
Opportunities
 The developed nature of the US
automotive market facilitates the
industry to be a lucrative investment
hub.
 Increasing public awareness regarding
the need for clean environment
triggering demand for cars with
cleaner engine emissions.
 Increasing demand for vehicles
powered by alternative sources like
solar energy and electrical energy
Weakness
 High bargaining power by customers
given the shift from demand to supply
market in the industry.
 Customers bargaining power which is
attributable to intense competition.
 Controversies relating to technical
capabilities of vehicles.
 Government regulations specially fuel
price policies and excise duty.
Threat
 Decline in personal consumption from
Recession and its consequences
 Huge competition provided by the
Japanese automakers.
62
9.1.2 Germany
Strength
 Strong economy in the world
 Good infrastructure
 Competent workforce in both industrial
and service based sectors
 Positive reputation for what the country
produces.
Opportunities
 Growing industry of renewable energy
reduces cost and the country’s
dependence on fossil fuels.
 Europe’s leader in doing business.
9.1.3 Indian
STRENGTHS:
• Globally cost competitive.
• Adheres to strict quality controls.
• Adoption or Access to latest technology.
WEAKNESS:
• Low research and development capability.
• Industry is exposed to cyclical downturns in the
automotive Industry.
• Most component companies are dependent on
global majors for technology.
Weakness
 High labor costs even applicable for
unskilled laborers
Threat
 Eurozone crisis and other political
crises.
 Tariff and other regulations.
WEAKNESS:
• Low research and development capability.
• Industry is exposed to cyclical downturns in the
automotive Industry.
• Most component companies are dependent on
global majors for technology.
THREATS:
• Pressure on prices from OEM’s continues.
• Imports from FTA Regime Countries, in certain
component segments are a threat to local
industry.
• Smaller players, who do not upgrade to global
standards, would get extinct.
63
9.2 Scope for Improvement:
The commercial vehicle market is growing as the capacity of the Bangladeshi economy grows.
Bangladesh needs to put some effort to expand heavy industry as it can contribute to economic
development. The development in shipbuilding industry is an encouragement. The Automobile
Policy Guideline and Roadmap 2012-2021 has been completed by the Ministry of Industries
(MoI) aiming to boost up local automobile manufacturing sector and increase national GDP. We
propose below mentioned measures to boost up automobile sectors in Bangladesh:
a) The market must shift from Complete Built-Up (CBU) to Complete Knocked-Down
(CKD) vehicles, which will be more affordable in terms of import duties and will
incorporate local materials for tires, windows, etc.
b) The growth of this sector can be accelerated if proper government initiatives are taken to
increase the building of such plants, as well as support ancillary industries relying on the
commercial vehicle industry, such as the spare parts industry and the tire industry.\
c) Incentives needs to be given to increase production include infrastructural changes and
ease of obtaining construction permits.
d) In Bangladesh, the double role of the manufacturers as credit providers is also the biggest
challenge facing the industry as Nitol offers pay-as-you-earn programs for buyers and
IFAD has several medium-term credit options. Once the vehicle is acquired on credit
terms, it is possible for the purchaser to evade payment, often by stating a lack of funds
due to poor revenue. The process of communicating a customer who is evading such
communication can become too costly to be profitable, resulting in bad debts. Thus a
predicament is created where sales are high, but cash flow is poor. Govt. needs to
establish a proper auditing policy for Automobile sector and tighten the legislation
process if anybody has been found of committing such transgression.
e) Without appropriate roads and transportation facilities, the industry’s growth is limited.
The congestion in Dhaka alone costs the country over $4 billion annually. Light
commercial vehicles (LCVs), which weigh less than six tones, are becoming increasingly
popular as they make it easier to park, access narrow roads, and evade traffic – all
increasing accessibility and time and money saved. Globally LCVs account for 75% of
the commercial vehicle market revenue. The Bangladeshi market can focus on them to
deal with these issues as well.
f) The tariff policy needs revision, especially the supplementary duties has to be reduced.
For example, the bicycle industry gets 15 per cent cash incentives for exports, but
automobile sector is not getting any. The raw material procurement policy and
technology transfer mechanism should also be in place to rev up the industry growth.
The commercial vehicle market is valued at around $500 million in 2019, with an estimated
growth of 12.5%. This high growth is likely to be sustained in the future due to rising regional
trade, a booming economy that is feeding greater urbanization and industrialization, and road
network expansion. While it is currently dependent on imports, steps need to be taken to shift the
industry to local manufacturing.

64
10.0 COVID-19 impact on the automobile industry
10.1 National perspective
As aforementioned in the earlier chapter, the automobile industry of Bangladesh vastly depends
on imported cars and vehicles and car parts. Despite the absence of any manufacturers, there is a
massive demand for cars, motorbikes, and other vehicles as of a potential market. However, the
automotive industry worldwide has experienced the worst March in decades this year. Recently,
the coronavirus pandemic seeking industrial shutdown has disrupted all kinds of export and import
leading to a fall in demand and supply of automobiles. The repercussion of the lockdown might
not be as significant as that on the RMG sector in Bangladesh, yet it can be certainly anticipated
that the flourishing industry brimming with possibilities will suffer in the long run.

10.2 Global perspective

A global supply chain disruption has stemmed from the lockdown in China resulting in a downfall
in sales of vehicles worldwide. Vehicle sales reduced by 80% in China this February compared
with the same month of the previous year. (Wilmot, 2020) As Wuhan is the center of multiple car
plants, there is a production deadlock. For example, companies like Nissan, Volkswagen are in a
production halt due to reliance on China fully or partially. Practicing Just in Time inventory and
depending on suppliers for 75% of the production to make the production efficient reveals the
vulnerability of the intertwined supply chain. (Rashid, 2020) New car registration dropped by 35%
in the USA and according to Cox Automotive, new vehicle sales dropped by 55% in comparison
to the 27th of March 2019. 93% of the US auto production was offline as of 26th March. (Gilliland,
2020) Germany is shuttering its European plants of BMW, Volkswagen, Daimler to avoid a 10-
15% possible drop in sales. Volkswagen’s global deliveries dropped by 15% in the first two
months of the year. (Pandey, 2020) Germany has lost an estimated production of 553,767 vehicles
and 568,518 affected employees. (ACEA, 2020) Indian auto sector business accumulates around
7.5% of total GDP which is 49% of the manufacturing sector. Due to the unexpected production
halt, the industry is at risk of losing MRP 15000 crore. (Singh, 2020) Again, the supply chain
disruption has brought strong repercussions for the third largest auto industry, Japan which
contributes 20% of the exports. (Banker, 2020)

65
11.0 Conclusion
The economy of Bengal was prosperous in the bygone era – during ancient times before the
Mughal rule, as well as during the Mughal rule. Since then, due to foreign agents as well as
mismanagement on part of rulings parties, the Bangladeshi economy has taken a massive hit.
Despite that, in recent years, the economy of Bangladesh is growing at a steady rate contrary to
the expectations of many.

The automobile industry of Bangladesh is in its infantile stage still, but it can grow by following
(to some extent) the model of emerging player India. It will eventually aspire to be as large as the
German and the US automobile industries respectively. This will significantly improve the GDP
of Bangladesh and will cause for the creation of many jobs and will result in a lot of foreign
revenue earned.

66
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