There was a lot of investor enthusiasm after the parliamentary elections took place in December 2018 with the DSEX rallying by 8% in January 2019. Since then, however, the regulatory impediments that have come up have been disappointing to investor confidence since expectations were for policy makers to further leverage the country’s growth prospects.
Bangladesh has a lot going for it in terms of more favourable macroeconomic metrics relative to regional neighbours. It has become the second largest garment exporter globally after China which is helping it to raise income levels and also build foreign exchange reserves. The current trade tensions have had a positive impact on garment exports to the U.S. but over the last few months, garment export growth has been weak which has also raised investor concerns. However, the European Union’s (EU) recent decision to revoke duty free rights for certain Cambodian garment products is a positive for the Bangladeshi garment sector since affected factories in Cambodia could look to relocate to Bangladesh as the country’s garment sector has duty free access to the EU.
Besides the garment sector, the country is doing very well in diversifying its manufacturing base with local assembly of automobiles and smartphones witnessing increased interest from foreign multinational companies. In 2018, Honda began local assembly of motorcycles with a 100,000-unit capacity while in the same year Samsung began assembly of smartphones for the domestic market. Furthermore, Bangladesh now meets most of its smartphone demand through domestically assembled handsets with 2 million smartphones locally assembled in 2019 compared to 0.7 million a year ago, with 65% of smartphone demand being met by local production.