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Bangladesh, designated as a least developed nation by the UN in 1975 with estimated gross national product (GNP) per capita at US$210, has surprised investors all around the world. With a population of nearly 150 million and having implemented measures to eradicate extreme poverty, it has doused all speculation that it is bound to fail in socio-economic terms. This was a place that Kissinger called a “basket case” in 1985. Since then, the GNP per capita has more than tripled.
Bangladesh has made major strides in its Human Development Index and received a UN award for its remarkable achievement in attaining the Millennium Development Goals. Remittances from Bangladeshis working overseas, mainly in the Middle East, and exports of garments and textiles have been the main sources of foreign exchange earnings. Bangladesh has been growing consistently at 5% to 6% for the past decade. Its national savings have also been growing steadily over time and are estimated to be about 30% of gross domestic product (GDP). Savings generated from domestic economic activity constitute 20% of GDP while the remainder is on account of the inflow of workers’ remittances, which have been growing in recent years.
On a recent recce trip, Malaysia Property Incorporated (MPI) discovered that it could be a new market for Malaysian properties and real estate-related sectors, including hospitality, tourism, education and health services. Drawing on the insights of the Malaysian diaspora and its research, MPI brings good news to Malaysians interested in doing business in the new market. Deeply impressed by opportunities for Malaysian property, hospitality, education and health, MPI is organising an expedition to Dhaka from May 23 to 26.
Unaffected by global crisis
You may ask, “Why Dhaka?” Its decade-long growth has never been interrupted by any major financial crisis or recession. Not unlike Indonesia, which was unscathed during the global crisis, Bangladesh was still growing at 5% in 2008. These are some of the countries Malaysia can count on to export its services to as the big developed markets continue to decline.
According to a recent report, HSBC’s The World in 2050 has included Bangladesh in a group of 26 economies, along with China, India and Malaysia, where it expects particularly strong growth. The US and much of Europe, by contrast, are likely to remain merely stable, according to HSBC’s projections.
Standard Chartered Bank economists are optimistic that Bangladesh can be included in the “7 per cent club” of economies, which expand at least 7% annually for an extended period. Current members of the “club” include China, Cambodia, India, Mozambique and Uganda, whose economies have doubled every decade.
For Malaysian companies targeting the consumer and service industries, half of the purchasing power is concentrated on Dhaka, the capital city. Another 15% to 20% is concentrated on Chitaggong, 250km or an hour’s flight away. New visitors to Bangladesh are put off by the massive traffic jams once they enter the city as 46.7 million of the country’s population live here, one of the most densely populated cities in the world.
Due to the low living standards and the inability to attract talent, salaries in Dhaka for professionals are higher than in Kuala Lumpur. While salaries of fresh graduates in Malaysia have not changed very much over the past decade, those of graduates in Dhaka have risen significantly. Despite the higher purchasing power, Dhaka offers little in terms of entertainment. Consumer products cater for the mass market and the available technology are mostly outdated.
Malaysia an attractive proposition for Bangladeshis
Slightly less than four hours’ direct flight away, Malaysia welcomes Bangladeshis through its Malaysia My Second Home (MM2H) programme. In fact, Bangladesh has consistently accounted for the second largest number of MM2H applicants. Last year, this figure more than tripled from 74 to 246. The strong connectivity and familiarity is a strong selling point. As the majority of the Malaysian community are Muslims, Bangladeshis find common ground in Malaysian culture, food and language. Although 98% of the population speaks Bangla, English is widely spoken in Bangladesh.
Malaysia has an attractive proposition with modern, well-designed residential apartments, quality education and healthcare for one of the lowest costs in the region. The quality of life is comparatively better.
Preference for Malaysian products and services
As many as 250,000 Bangladeshis have found employment in Malaysia while others have found business opportunities. Bangladesh received a high income remittance of US$11 billion in 2010. Malaysia is an attractive tourist destination, given the proximity, availability of halal food and presence of mosques for prayers.
Insufficient world-class hospitals and universities in Bangladesh also make Malaysia an attractive place for Bangladeshis to obtain medical treatment or to further one’s education.
Bangladeshis constitute one of the top 10 foreign student populations in Malaysia and many of their parents buy real estate in the country. The well-to-do have made significant capital returns on their property investments in Malaysia.
Trade has grown 10 times
Malaysia is beginning to reap the rewards of this good relationship and positive image. It has benefited from trading in goods with Bangladesh with the trade balance skewed in Malaysia’s favour. Today, Malaysia is Bangladesh’s largest Asean investment partner. Malaysian companies invested about RM4.1 billion (US$1.3 billion) in 59 projects in Bangladesh last year, mainly in telecommunications, power, textiles and the financial sector. Bangladesh is Malaysia’s third largest trading partner in South Asia. From 2001 to 2010, Malaysia-Bangladesh trade increased almost 10 times with an average growth rate of 24.7% per year.
Services is next
A potentially big market for Malaysia is providing services in Bangladesh. Private healthcare provider Parkway from Singapore has already been in the market for a few years and is constantly holding roadshows to promote Singaporean healthcare. Malaysian service providers should make a concerted effort to get in early before others do.
Veena Loh is currently the general manager of MPI. She has both public and private-sector experience in academic, government and financial markets. She was previously senior fellow at the Institute of Strategic and International Studies (ISIS), an economics consultant at the National Economic Advisory Council (NEAC) and a senior analyst at GK Goh Stockbroking Pte Ltd.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 910, May 14-20, 2012
