Rising nonperforming loans-projected to reach nearly Tk 6.5 trillion by the end of 2025-alongside widespread graft allegations, growing debt burden, decreasing local value addition and other warning signs suggest that Bangladesh's economy is increasingly burdened by entrenched rent-seeking behaviour. Instead of generating new wealth, many individuals and entities appear focused on manipulating political and institutional frameworks to extract gains without contributing real economic value. This pattern undermines productivity, distorts incentives, and weakens long-term growth prospects. Transitioning from a rent-seeking economy to one driven by productivity, innovation, and value creation is no longer optional; it is an urgent necessity for sustaining economic stability, creating jobs and ensuring inclusive prosperity.
Transitioning to a productivity-led growth model remains a complex challenge for Bangladesh. Historically, the country has relied on technology imports to boost efficiency. While this strategy has improved output, it has often reduced local value addition and weakened domestic capacity building. The consequences are increasingly visible. Over the past decade, industrial production grew at an annual rate of around 10 per cent, yet the sector shed nearly 1.4 million jobs, according to a recent study. The readymade garment (RMG) industry-Bangladesh's export backbone-offers a striking example. In 2013, producing and exporting $1 million worth of garments required about 220 workers; by 2024, the same output needed only 94, largely due to automation and advanced technologies. This trend highlights a critical dilemma: productivity gains without parallel capability development risk eroding employment and limiting inclusive growth, underscoring the need for a more balanced and locally anchored strategy.
As Bangladesh continues to rely on imported technologies to drive productivity gains, a significant share of the resulting economic benefits flows out of the country. To reverse this pattern, the strategic focus must shift towards building domestic capabilities in technology development, automation and innovation. Strengthening local innovation ecosystems can help offset factory-level job losses by creating new employment opportunities in research, engineering, and development. However, translating R&D investment into increased local value addition remains a complex challenge with no automatic pathway.
Although investment in research is essential for both productivity and job creation, its impact in Bangladesh has been limited. Much of the academic community remains focused on publication counts and graduate output rather than producing industry-relevant innovations. Consequently, research outcomes often fail to contribute meaningfully to domestic value creation. At the same time, industry lacks the capacity for effective R&D and innovation management, compounded by the absence of specialised education in these areas. Moreover, prevailing economic policy frameworks offer limited guidance on linking research outputs to wealth creation, constraining the country's ability to convert knowledge into sustained economic growth.
The rise of China has made Bangladesh's development challenge more complex. Bangladesh's trade deficit with China-its largest trading partner-expanded by nearly 23 per cent to about US$20.66 billion (Tk 2.54 trillion) in FY 2024-25, driven largely by heavy imports of industrial raw materials. Although Bangladesh enjoys full duty-free access for exports to China, its exports remain below $1 billion annually, leaving the trade balance heavily skewed. A common estimate suggests that every additional $1 billion in trade deficit from industrial imports corresponds to the loss of 15,000 to 20,000 domestic industrial jobs. What is particularly striking is that despite rising wages in China, its trade surplus with Bangladesh and other least developed countries continues to grow. The underlying driver is China's rapid advancement in robotics and automation, which has reduced reliance on low-cost labour and strengthened its manufacturing competitiveness, making traditional labour-cost advantages less relevant in global production.
The central question for Bangladesh is not whether to pursue productivity, but how to do so effectively. Rather than relying on generic policy prescriptions and conventional indicators, the country must return to fundamentals. The priority should be fostering process innovation driven by local idea generation. Over time, such innovation will naturally take shape through robotics and automation, where value is created in laboratories through knowledge and design rather than solely through factory labour. This approach has broad applicability-from aquaculture to garments to software development. Once process capabilities are established, the next step is to advance towards product innovation through incremental improvements and reinvention. Consequently, economic thinking must shift away from labour-based replication towards idea-driven value creation through evolution of products and processes. To support this transition, incentive structures should evolve as well, rewarding improvements in performance, efficiency, and innovation rather than simply the volume of production.
A fundamental transformation of Bangladesh's education system is essential to support a shift towards idea-driven economic growth. The redesign should prioritise generating economic value from knowledge, ensuring that graduates are equipped not just with academic credentials but with the ability to create wealth through innovation. Rather than simply replicating the curricula of leading global institutions, Bangladesh must adopt a more adaptive approach-learning from diverse sources while developing its own context-specific education model. This system should emphasise problem-solving, experimentation, and the practical mechanics of value creation within local context by winning the global race. At the same time, economic thinking must evolve beyond labour-based replication and infrastructure-led growth towards knowledge and idea-driven development. In parallel, industrial strategy should move away from isolated sectoral expansion towards cluster-based development, where interconnected industries benefit from shared capabilities, scale efficiencies, and knowledge spillovers, ultimately strengthening competitiveness and fostering sustainable economic progress.
Bangladesh must decisively shift towards a value creation based growth model to generate sustainable jobs and long-term prosperity. This requires developing new indicators that measure not just output or volume, but the quality of value added through local knowledge and innovation. Equally important is building a new framework that links industry, academia, and government into a cohesive system of collaboration and feedback for winning the global race. In an era of deep global connectivity, Bangladesh must compete internationally, whether serving domestic markets or exporting abroad. The foundation of this transformation should begin with education-embedding a clear understanding of wealth creation through human competence, creativity, and problem-solving endeavours. Rather than relying solely on conventional economic theories and legacy metrics, the mechanics of value creation must guide decision-making at all levels. Individuals, families, firms, political institutions, and government policies should align around this principle to foster a resilient wealth creation-led growth model out of local flow of knowledge and ideas as process and product features.
M. Rokonuzzaman, Ph.D is academic and researcher on technology, innovation and policy. Zaman.rokon.bd@gmail.com
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