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Bangladesh’s growth journey has taken a detour toward the promised land of opportunity, sustainable development, and inclusive growth. Despite the optimism surrounding the regime change, concerns remain about our ability to reform governance structures, remittance optimization, revive struggling sectors like banking, and reduce corruption and red tape within our bureaucratic system.
Widespread crony capitalism over the last fifteen years has led to a skewed playing field, with biased policies, money laundering, and tax evasion. Needless to say, the ruling elite have greatly benefited from these corrupt practices.
Since the pandemic, the economy has been in a period of stagnation, worsened by international conflicts, shortsighted economic policies, and governance challenges. Stagnant export growth and soaring import payments over the past few years have depleted our foreign exchange reserves.
The government’s policy of maintaining an exchange rate of BDT 87-90 per USD by selling reserves and funding infrastructure projects through foreign currency borrowing has put significant pressure on external balances.
Rampant money laundering by private sector actors and unscrupulous government officials has further weakened the currency, widening the gap between the official exchange rate and the informal kerb rate. This has spurred a rise in remittances sent through informal channels.
Balancing international payments is crucial for ensuring long-term economic stability. While the RMG sector accounts for approximately 85% of our export earnings, 70-75% of this revenue is reinvested in importing raw materials for apparel production.
In contrast, remittance revenue can be entirely retained within the country and used for domestic investment. Given our demographic dividend and the economy’s limited capacity to generate new jobs, sending workers abroad for employment must be a cornerstone of our government’s strategy.
Remittances, the second-largest source of foreign currency after apparel, generated almost USD 24 billion through formal channels which is the highest in the last 3 fiscal years after Covid-19 pandemic. Most of our remittance workers are employed in the Middle East, contributing 52% of the total inflow, followed by 18% from Europe.
Despite being the 8th largest remittance-receiving country, the average remittance per worker is only USD 203 per month—the lowest among the top ten remittance nations. This is primarily because most of our (over 70%) workers fall into the unskilled or semi-skilled categories.
In an increasingly competitive global labor market, skill development is critical to improving remittance earnings. While many training centers focus on technical skills, soft skills, such as English language proficiency, are often overlooked.
On top of that, equipment and machineries for practical training are becoming obsolete compared to global standards. This leaves workers ill-equipped to secure higher-paying jobs directly. Many unskilled Bangladeshi workers rely on international third-party agencies that retain a significant portion of their wages as service fees.
The remittance ecosystem is fragmented and prone to exploitation, especially by middlemen who drive up the costs for outgoing workers. On average, it costs a Bangladeshi migrant 4-5 times more to go abroad compared to a counterpart from other South Asian countries. Information unavailability to aspirants and asymmetry also plays a significant role in this exploitation.
The government must take a central role in upskilling workers by reviewing and improving existing training curricula to meet international employer demands. The intervention of the Ministry of Foreign Affairs is also crucial in opening new job markets abroad. This strategy should include not only blue-collar workers but also professionals such as doctors, nurses, and engineers.
Manpower export agencies and middlemen must be held accountable for fraudulent practices, with strict penalties in place. Nonprofits should collaborate with BMET and other government agencies to educate aspiring migrants.
Aligning the formal exchange rate with the money market rate is essential to reduce the incentive for informal money transfers. Many expatriates are hopeful for the changes that Bangladesh 2.0 promises, and it is vital for the government to keep non-resident Bangladeshis (NRBs) engaged and invested.
Encouraging them to send remittances through formal channels, appealing to their patriotism, will significantly benefit the country. Even converting a portion of the USD 15-16 billion remitted through informal channels into formal avenues would yield substantial dividends for the nation.
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