Fast evolving digital landscape is transforming our societies and economies at unprecedented pace. Cutting-edge innovations led by advanced digital technologies have emerged as one of the key drivers of business growth, economic development and lifestyle improvements. People, organisations and machines interconnected with the Internet, Internet of Things (IoT) and mobile technologies is reshaping business processes, governance procedures, workplaces, markets, consumer experience, social interactions, and leisure and entertainment.
Since the appearance of the first digital platforms in mid-1990s, Bangladesh has been striding diligently alongside rest of the world to keep pace with the digital revolution. Improvement in internet speeds and increased availability of smartphones have boosted rapid growth of digital platforms in Bangladesh in the last decade, transforming our economic and social lives. Digital services, products, and solutions are enhancing our efficiencies, increasing productivity, generating insights through data analytics, expanding access to information and knowledge and facilitating communication across the globe.
To boost up the pace of development, it is imperative for Bangladesh to invest in digital infrastructures, research and development (R&D) for innovative solutions, services and products, and creative ingenuity of the young generations, to fully explore and harness the transformative powers of digital economy and transition to knowledge economy.
Components of Digital Economy
From initial its significance as a low-cost communication channel, the internet has developed into one of the most crucial components of business management, public service delivery, social interactions and communication. Organizations, devices and individuals interconnected with the Internet, loT and mobile technologies have laid the foundation of the evolving digital economy.
The digital economy overlaps with every sector of the economy heavily dependent on or significantly enhanced by the use of digital inputs including digital technologies, digital infrastructure, digital services, and data. A wide array of sectors are now dependent on or significantly enhanced by digital technologies and digital inputs for production and service delivery such as telecommunications, banking, insurance, tourism, agriculture, trading, health, education, and others. The most visible components of digital economy are:
1. ICT equipment, semiconductors industry;
2. Telecommunication and Internet services;
3. Data processing, software and other information services;
4. Online platforms, including e-commerce platforms;
5. Platform-enabled services (e.g. ride sharing, etc.).
According to estimates by the World Economic Forum (WEF), more than two-thirds of new value creation over the next decade is expected to come from digitally enabled platform business models. The Global Digital Economy Forecast 2023-2028 report released recently by the research and advisory company Forrester reveals that the digital economy is expected to reach US$16.5 trillion by 2028. The study estimates that the digital economy will see 6.9 per cent Compound Annual Growth Rate (CAGR) and capture 17 per cent of global GDP during the forecast period. The study points out that digital economies are predominately driven by consumers, tech spend, and information and communica- tion technology (ICT) exports.
Digital Infrastructure
High-speed, reliable and robust digital infrastructure is the key to digital economy. Digital infrastructure consists of connectivity through high-speed internet and related technologies, lot such as mobile devices, appliances, computers, sensors, geospatial instruments, machine to machine communications, etc. and data repositories such as data centers and cloud technology. Digital infrastructure provides the channel for people, businesses and governments to access online local and global digital services and connect them to the global digital economy.
Growing reliance on connectivity in the developing world is transforming economies, societies, governance, and interpersonal relationships. Digital transformation was accelerated by necessity during the COVID-19 pandemic when people, businesses, schools and governments had to rapidly adopt digital channels amid lockdowns, and social distancing guidelines.
In Bangladesh, growing demand for digital devices, connectivity and consumer gadgets among the emerging middle class have created a favorable environment for the growth of digital economy. Digitally competent and engaged companies and digitally willing and capable citizens, consumers and employees are vital constituents of the digital economy. Bridging the digital divide is crucial for developing an inclusive society in which digital economy can thrive.
Digital Inclusion
The mobile telecommunication technology thrives as the vital organ of the digital ecosystem. Key transformative power of mobile technologies lies in their role as the enabler of digital economy. According to the Association of Mobile Telecom Operators of Bangladesh (AMTOB), more than 98% of the population in Bangladesh is covered with high-speed 4G network. The Mobile Network Operators (MNOS) are playing a positively supportive role to bridge the digital divide by
providing fast and reliable connectivity, particularly in rural areas where other options are limited. The MNOS have invested heavily in their infrastructure with capital expenditure (capex), set to increase mobile broadband network deployments.
According to data from Bangladesh Telecommunication Regulatory Commission (BTRC), over 90% of the total internet subscribers in Bangladesh use mobile internet. For 117.47 million mobile internet subscribers, the MNOS are offering diverse digital services such as e-education, e-health, e-commerce, e-entertainment. The benefit consumers receive from mobile technologies is usually quantified by using an economic concept called consumer surplus, i.e., the value that consumers themselves receive, over and above what they pay for devices, apps, services and Internet
access.
A number of researches have shown that a 10 percent increase in mobile broadband networks adoption causes a 0.14 percent increase in GDP for non-OECD countries. And a 1 percent increase in mobile phone penetration leads to a 0.12 percent increase in human development index in South Asia.
However, certain barriers still exist for access to the digital economy and digital government services. More than 50% of the population in Bangladesh covered by mobile internet networks still do not subscribe to internet services. Afford- ability of digital devices and data as well as lack of digital literacy are the core reasons for such shortfall in digital inclusion.
Financial Inclusion
Mobile Financial Services (MFS) have successfully brought a substantial number of previously unbanked poor popula- tions into the formal banking system. MFS operators are supporting financial inclusion boosting the growth of digital economy in Bangladesh. Disbursement of government financial support under social safety net programmes and stimulus packages through MFS have broadened the range of including more unbanked people into the formal financial system.
Currently, 10 banks and 3 subsidiary companies in Bangladesh are providing MFS as an alternative payment channel. Among the more popular MFS providers are bKash, Rocket, Nagad and others. Initially confined to money transfers, the landscape of MFS has been changing with providers introducing digital credit and money-saving features through mobile applications, boosting a broader and more sophisticated financial ecosystem. The share of money transfers stood at 86% out of all transactions in 2022, whereas merchant payments, salary disbursements, government cash transfers to people, utility bill payments, talk-time purchases, and other usages accounted for more than 10% of all transactions.
bKash has been a leader in introducing innovative digital financial services in Bangladesh. bKash offers various bill payment services, including utility bills, internet bills, and mobile phone recharges. bKash has expanded its services to enable users to make payments at various merchants, allowing for cashless transactions at shops, restaurants, and other retail outlets.
bKash has collaborated with international partners to facilitate cross-border remittances, providing a streamlined and cost-effective way for Bangladeshi bKash expatriates to send money home. bKash pioneered digital nano loans and savings accounts through MFS, promoting financial inclusion and allowing users to access credit and savings services. bKash also introduced utility bill payment, ticket payment, government services and educational fee payment, insurance premium payment, government-to-person payment, salary disbursement of RMG and other organizations.
Mobile financial transactions are still dominated by point-to-point (through agents) and person-to-person (P2P) transactions. Payment for vast majority of e-commerce orders is still done on basis of cash on delivery (COD). MFS operators in Bangladesh need to come up with offers that are easy to use and inexpensive in terms of transaction costs. MFS providers need to work with financiers (Banks, NBFIs, and MFIs) to provide loans, insurance services, and innovative savings scheme. Inward remittance flow through MFS is a highly potential segment for Bangladesh.
The major MFS providers in Bangladesh have the potential to inject fresh investments to introduce new services and products. New investments are required for robust technology and skilled manpower. Quality investment, robust technology and distribution network, as well as quality management to maintain regulatory compliance will boost further growth of the MFS, ensuring financial inclusion to build a cashless economy in Bangladesh.
IT industry in Bangladesh has seen significant growth in the last decade, driven by such factors as increased internet penetration, growing pool of skilled IT professionals as well as initiatives on behalf of government. According to the Bangladesh Association of Software and Information Services (BASIS), the software and IT services industry has been growing steadily, with annual revenue reaching around $1 billion by 2020. According to the Export Promotion Bureau (EPB), earnings of domestic IT firms stood at $221.15 million in July-November of 2023-24.
IT industry in Bangladesh comprises software development and IT-enabled service (ITES) including business process outsourcing (BPO) service, which have high potential for exports. According to Bangladesh Association of Software and Information Services (BASIS), export earnings from software and IT services reached around $1 billion USD in the fiscal year 2020-2021. To gain competitive edge in the global market, IT firms in Bangladesh need to go for partnership with international partners for the sake of brand building and reduction of production costs through economies of scale.
Unlocking the Growth Potentials
Domestic e-commerce and f-commerce has been rising fast in Bangladesh in recent years, particularly since after lockdown during COVID-19 pandemic. According to the e-Commerce Association of Bangladesh, e-commerce sales increased by 70 percent in 2020 compared to a year earlier. The e-commerce retail sector is a significant source of foreign investment, which reportedly raised approximately $41 million dollars in 2020.
In 2016 Malaysia became the first country in the world to establish a Digital Free Trade Zone (DFTZ) to promote e-com- merce by providing a state-of-the-art platform for small and medium enterprises (SMEs) and others. Jack Ma, CEO of Alibaba, the largest e-commerce company in the world is reported to have committed major investments to the DFTZ.
India has successfully made technical advancements in diverse digital economy sectors such as Internet marketing services, e-learning initiatives, online banking capabilities, digitisation of the bus and rail systems, etc. Digitalisation is to boost Indian Railways to adopt many of the features planned for the Future Railway Mobile Communications System (FRMCS). GPS tracking, live bus locations, and mobile alerts have enhanced the convenience and safety of bus travel. Operators also benefit from technology in terms of fleet management, curbing speeding, and managing route deviations.
The Industry Development program (IDP) of Sri Lanka has been put forward with foresight. and designed localized projects to align Sri Lanka's tech ecosystem with global trends targeting to reach $ 3Bn of annual foreign exchange revenue generated via knowledge services sector and electronics sector.
Invest Opportunity in Digital Economy
As Bangladesh marches toward its official graduation from the LDC category in 2026, the nation faces transformative opportunities and challenges. The graduation from the LDC category marks a commendable leap forward, including notable advancements in digital economy. It is crucial for Bangladesh to take up viable strategic approach to boost growth in digital economy.
Education, IT Outsourcing, Digital Media, Telecommunication, and emerging (4IR) Technologies are the present and future categories of digital economy in Bangladesh. As Bangladesh strides towards knowledge economy, large scale investment is requisite for deployment and development of technologies such as 5G, AI, IoT, machine learning, Big Data, etc.
The MNOS are now digital service providers offering numerous digital services to diverse segments of customers. There is opportunity for investment in digital infrastructure including telecommunications towers and related infrastruc- ture; Data Centers and related equipment and services; eCommerce applications and solutions; and Fintech, as Bangladesh moves towards cashless society.
Bangladesh is a potential destination for the multinational and foreign industries to establish offshore development hub for software and application and captive BPO centers including call centers. Investment is required for State-of-the-Art Institution focused on Artificial Intelligence, Machine Learning and Data Engineering to create industry-ready human resource proficient in 4IR technologies to meet the demands of digital economy.
