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This letter was originally sent to LightCastle Bimonthly Newsletter subscribers.
Bangladesh’s growth over the last few decades has been driven by the proliferation of several sectors, some primarily export-oriented, while many others have developed more recently to cater to the needs of the burgeoning domestic economy. As GDP touches the USD 450 billion mark and the country stands on the cusp of becoming a middle-income nation, with aspirations to reach upper middle-income status within the next 15 years, the economy faces several structural challenges.
Although the economy has grown at a steady pace over the past few decades, employment opportunities have not kept up to absorb the growing workforce, around 2.2 million new entrants each year. This calls for a marked improvement in the business climate, one that supports the growth of SMEs as well as medium and large enterprises. The private sector must be positioned to fully leverage the demographic dividend that Bangladesh will experience over the next 15–20 years.
The government’s inability to provide quality services in healthcare, education, and social safety nets, particularly in rural area, is partly due to limited resources and weak institutional capacity. With a tax-to-GDP ratio of just 6.6%, the lowest in the region compared to the Asia-Pacific average of 19%, budgetary capacity remains extremely constrained. Development partners have historically filled this gap, with NGOs delivering basic services to the poor and contributing to partially cover the government’s budget deficits.
However, recent geopolitical shifts, like the prolonged war in Ukraine, the resurgence of right-wing populism in Europe, and economic downturns in major Western economies, have contributed to the de-prioritization of donor funding in developing countries. The dismantling of USAID operations, and the planned withdrawal of Swiss and other funders, have dealt a heavy blow to the donor-led development model. Consequently, the service delivery model run through national and regional NGOs is likely to unravel further as Bangladesh’s middle-income transition accelerates.
Amid this transition, the private sector must assume a more dominant role, both in expanding the government’s tax base and in holding the state accountable for transparent and efficient public spending. Medium to large corporates should embody the spirit of corporate citizenship, focusing on maximizing stakeholder value rather than solely shareholder returns.
Historically, successful western entrepreneurs and business leaders have channelled a part of their wealth into societal development through philanthropy, which gradually evolved into corporate foundations. Alongside, a portion of corporate profits began to be allocated to impactful mission driven projects through Corporate Social Responsibility (CSR) initiatives.
Today, in the face of the climate crisis and growing recognition of the private sector’s role in greenhouse gas emissions, corporate responsibility is becoming increasingly inward-looking. Sustainability-driven corporate strategy now demands rethinking product design, production processes, and adopting transformative initiatives to decarbonize operations.
CSR funding must also be redirected toward non-profits, as a substitute for declining donor aid, and addressing emerging socio-economic challenges such as the Rohingya crisis or maternal and child healthcare for vulnerable communities. The recent shift toward a private sector–led development model could further help consolidate the nexus between the private and development sectors.
To facilitate greater private sector participation in societal development, the government should introduce enabling policies that encourage the private sector to deploy more funds to non-profits. Tax incentives, public recognition (e.g. awards for top contributors), and other mechanisms can motivate profit-making firms to systematically invest a share of their earnings in societal development. The state could also consider making CSR contributions mandatory for all profitable listed companies and corporations above a certain revenue and profit threshold.
Finally, the government should promote sustainability reporting requirements among medium to large enterprises, while building the capacity of the ecosystem to conduct independent assessments aligned with international standards. This will not only enhance transparency but also position Bangladesh’s private sector as a key driver of sustainable and inclusive growth.
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