Bangladesh is the most optimistic market among the 25 countries in which British banking giant HSBC operates in, highlighting its favourable economic and political environment.
“The short-term and long-term outlook of Bangladesh is interesting and fantastic,” Natalie Blyth, global head of trade and receivable finance at HSBC, told The Daily Star in an interview last week in Dhaka.
The recent strong performance of the Bangladeshi economy has left local firms in a very optimistic mood, she said quoting a report -- HSBC Navigator, which is based on a survey.
As much as 96 percent of the survey respondents expect Bangladesh's trade volume to increase over the next 12 months.
The favourable economic environment was quoted by over half of the firms as one of the top three factors contributing to trade growth, while a stable political environment is also noted as a key contributing factor.
Businesses need to capitalise on the favourable economic and political outlook by diversifying into new markets and new products.
“Diversification will be key to achieving strong growth over the long-term, with India, Indonesia and China expected to attract double-digit annual growth in services exports from Bangladesh over the years to 2030,” she said.
The HSBC Navigator survey is a quantitative indicator of the short-term outlook for global trade, compiled from responses by decision makers at more than 6,000 businesses -- from small and mid-market to large corporations -- in 26 markets.
The report, however, also sounded off caution as Bangladesh has a history of political instability, and the upcoming elections in 2018 may undermine the current level of stability.
Speaking about the global trade scenario, Blyth said trade and trade finance is probably the hottest topic economically and politically.
“In the past, noises about trade wars were largely rhetoric. But now, the rhetoric is turning into actions.”
Some of the actions are quite constructive because existing trade agreements such as the North American Free Trade Agreement (Nafta) are not fit for the current times as they were formulated a long time ago and does not cover services and digital matters, Blyth said.
“So, these agreements are ready for an upgrade. In a way I am very excited as these are going to be renegotiated because it is an opportunity for them to be encompassing just more than goods.”
The service sector is the fastest growing component of trade, she said.
As Bangladesh is perhaps ready to take on its next form of diversification, these trade negotiations and trade war discussions also encourage clients to review their options, she said.
Trade has reached a degree of maturity and complexity in the supply chain and people are doing more intra-regional trade.
“Therefore, I think there is a great opportunity for Bangladesh to actually look at what their options are if it moves towards Asia.”
Blyth particularly praised Bangladesh for making tangible progress as part of its journey to becoming a middle-income economy.
“It is not easy to do as countries around the world have failed to get out of the lower-income trap.”
Bangladesh must ensure that its policies are clear and transparent enough to spur growth, she said, while calling for putting the right physical infrastructure in place to make the most of capacity, capability and skill-sets of the country.
According to Blyth, HSBC has an exciting partnership with Bangladesh.
The bank is looking at making some substantial investment in trade business in Bangladesh in order to create products and services for clients in the country, she said.
“There is huge potential in the garment sector and in other sectors as well. So, I am excited and we definitely want to be part of the journey. If any of the clients decides to move overseas as part of the diversification, that's where we are good at too.”
HSBC's global network, product coverage and balance sheet strength make it uniquely positioned to help Bangladeshi companies. “It enables us to be at both ends of the import/export trade by bringing in greater efficiencies to the working capital cycle.”
Over the past five years, HSBC Bangladesh has arranged $200 million of export credit agency-backed financing in the private sector, creating a gateway to the international debt market for local conglomerates.
“Not only are we helping Bangladesh's businesses and entrepreneurs to capture global opportunities, we are also helping global players take advantage of the Bangladesh opportunity.”
HSBC is the only bank in Bangladesh with offices in all the export processing zones, facilitating about 10 percent of the country's international trade. Last year, it helped customers trade with more than 100 countries.
In the power sector, the bank has supported installation of new 1.3-gigawatt of power generating plants, which is about 11 percent the country's present power generation capacity.
HSBC is also supporting the country's first cross-border electricity import of 250MW from India.
In the telecom sector, it arranged €155 million credit to implement the country's first satellite project, the Bangabandhu-1.
“The difference that we can make and how we can offer something different compared to local banks and other international banks has just been demonstrated by the launch of the satellite,” she added.
This is a classic example of how an international bank can help implement a national project, said Md Mahbub-ur Rahman, deputy chief executive officer of HSBC Bangladesh.
Muhammad Shohiduzzaman, HSBC's country head of global trade and receivables finance, talked about the short-term outlook on Bangladesh as stated in the survey report.
He said China and India -- already the largest trade partners for Bangladeshi firms -- are viewed as having the best opportunities for export growth over the next year, with over 50 percent of respondents looking to expand operations in the markets.
Although Bangladesh's export mix is currently dominated by the large textiles industry, there are encouraging signs that firms are seeking to diversify into new markets and new products.
“Broadening the export mix will be vital to mitigate risks around an over-reliance on one sector and ensure a more sustainable growth trajectory,” Shohiduzzaman added.