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Local champion firms to lead Bangladesh's way to a trillion-dollar economy, US consultant says


Dec 31, 2010
Local champion firms to lead Bangladesh's way to a trillion-dollar economy, US consultant says


Mahfuz Ullah Babu
25 November, 2022, 12:15 pm
Last modified: 25 November, 2022, 12:21 pm

Local champion firms to lead Bangladesh's way to a trillion-dollar economy, US consultant says

The burgeoning consumer class along with ambitious local champion firms across industries that demonstrate the traits of being globally winning companies are set to make Bangladesh a trillion-dollar economy in the next one or two decades, forecasts global management consultant Boston Consulting Group (BCG).

Bold ambitious vision, focus on continuous transformation, better customer outcome through personalisation, social impact, improved productivity, a shift from process excellence to product innovation, and strategic international expansion for creating globally-recognised brands are among the keys that should let the rapidly growing, low-debt, emerging local champion firms lead Bangladesh economy's way to a developed one by 2041, the BCG pointed out in its November 2022 report titled "The Trillion-Dollar Prize: Local Champions Leading the Way".

Of its study of 2,400 firms globally, the BCG included 15 Bangladeshi emerging local champions having at least $300 million in annual revenue who are at the forefront of corporate transformation.

"These innovative companies have grown rapidly, created a structural advantage, and are ready to leverage their balance sheet to pursue their global ambitions," the BCG said.

Strengths of the Bangladesh economy

The country's $416 billion GDP in 2021 would ascend to $1 trillion by 2030 if it secures a growth rate of 10% or by 2040 with an even slowed-down growth rate of 5%.

It outpaced its major Asian peers including Vietnam, India, Philippines, Thailand, and Indonesia with an impressive 6.4% average growth over the 2016-21 period.

The BCG said Bangladesh's 3.4% GDP growth in 2020 defying the pandemic was equal to the earlier impressive growth story of the economy during the global financial crisis of 2007-09 when the GDP grew at a rate of 5.5% against the global average of 0.4% then.

The current economic climate has created some uncertainties, with liquidity challenges, foreign exchange risks, and inflationary pressures in the short-term, but the measures Bangladesh is taking should allow it to remain on its course towards a trillion-dollar economy, the BCG added.

Solid optimism, rising consumption, a growing young workforce, high economic resilience, digital momentum, the government's role in shaping the economy, a thriving gig economy, and very importantly a fast-growing private sector would be the eight major growth drivers here, observed the BCG researchers.

Like others, the BCG also counts on the country's optimistic population of 17 crore people, while one-fifth of them are set to ascend to the middle and affluent class by 2025 to lead Bangladesh's way to become the ninth largest consumer market by 2030.

Some 57% of Bangladeshis believe the next generation will have better lives, the BCG mentioned.

Alongside being the second largest apparel exporter, with a 15% global share Bangladesh has already emerged as the second largest supplier of online labour while the tremendous digital momentum continues to help boost telecommunication, digital financial services, and others are the reasons to keep betting on Bangladesh's economy.

The 34% national savings rate against the global average of 27%, the lowest among peers 35% national debt despite the fact that public spending in Bangladesh quadrupled in the last ten years shows a ground that offers huge room for the national leverage to pursue ambitions.

Bangladesh has a large well-managed private sector that saw the number of companies generating over $200 million in annual revenue triple to 28 in the five years till 2021.

How emerging champions are preparing to lead the way

The BCG spoke to leading Bangladeshi firms having an annual revenue range of $300 million to $3 billion, including multigenerational enterprises, tech startups, purely local companies, globally diversified companies, single-sector specialist firms, and conglomerates.

World's largest nongovernmental organisation Brac that runs gigantic social enterprises, top-tier lender Brac Bank, and mobile financial services giant Bkash, from shipbreaking to glass to automobile manufacturing house PHP, B2B e-commerce and smart logistics startup Shopup, ride-sharing and food delivery giant Pathao, home appliances and electronic market leader Walton, food giant Pran, power generation champion Summit Group, largest pharmaceutical firms Square, Renata, clothing exporter FCI, conglomerates Beximco and Meghna Group, cement, salt, paints, and power generation conglomerate Confidence Group are in the BCG's case studies.

The BCG expects their leap from domestic leadership to global success observing how they are gearing up for the future to succeed in a dynamic and disrupted modern operating environment and that should translate into an exciting economic future for Bangladesh.

The Bangladeshi champion firms are showing the common traits that have been observed in the DNA of globally winning firms, the BCG said.

Nearly eight of every ten Bangladeshi emerging champions are serious about the need for continuous transformation, be it in terms of organizational practices or transforming the business itself or operations.

Very inspiringly, 56% of firms have put the social impact of their business on top of mind which tends to help growth and sustainability most in the modern-day economy.

For instance, Beximco is investing heavily in green power, clothing operations, Brac changing lives in many countries, Brac Bank, Bkash, Shopup, and Pathao tremendously leveraging technology, and PHP investing for environmentally safe shipbreaking.

More firms have a bold ambitious vision while most of them are already pursuing their strategic international expansion to building globally-recognised brands.

Walton, achieving a dominant local market share, is now supercharging its global growth strategy with the purchase of three European brands, with trademark rights across 57 countries. This platform of global growth now sees the Bangladeshi electronics retailer looking to establish a contract manufacturing arm in Mexico to access the US market, BCG said.

Ecosystem development, a crucial aspect of succeeding in and sustaining big businesses, is also at the core of many emerging local champions' strategies now. 40% of firms are building their own ecosystem through investing in end-to-end vertically integrated operations or partnering with a wide variety of stakeholders.

Nearly half of the firms are investing in building manufacturing centers close to consumption hubs and that can be seen in their international path too.

Except for a very few, all the firms are having their offices abroad to strengthen their footprints with Square building a pharmaceutical factory at Kenya, Summit domiciling its holding company in Singapore, Renata improving its product development capabilities by partnering with firms in the US, UK & EU.

The Bangladeshi emerging champions have strategic imperatives to fuel their ambition—rising high-quality capital, searching for international partners, commanding a larger part of the global supply chain, shifting from process excellence to product innovation, improving productivity, leveraging digital technology and data, acquiring, upskilling and retaining talents, the BCG said.

The firms are seriously investing in those eying a brighter future.

Another strength of Bangladeshi emerging champions, like the country, is that their debt level is much lower than their international peers which left much room for them to borrow more for fueling their growth and ambition.

Mostly growing on their own capital to lead the local market, 42% of public Bangladeshi companies have a debt-to-capital ratio of less than 20% – a relatively modest ratio – in comparison to 15% of S&P 1200 companies.

The median debt-to-capital ratio for the S&P 1200 stands at 42%, compared to 27% for Bangladeshi companies, according to BCG.

In a display of their strong fundamental performance, powerful business and shareholder value creation, publicly listed local champions in Bangladesh are delivering an annual average total return of 16% in the last decade of the bearish stock market, which is higher than that from the S&P global 1200 companies, or Asia 50 Index, or the MSCI Emerging Markets.


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