The Roads and Highways Department (RHD) is formulating a master plan to integrate the country’s road network through 12 expressway routes, aiming for enhanced internal and cross-border connectivity by 2041. This project, requiring an investment of Tk1.91 lakh crore ($17.28 billion), will expand 1,508km of roads.

Syed Moinul Hasan, RHD’s chief engineer, explained that the master plan aims to unify the nation’s highways into a cohesive network. The Asian Development Bank has drafted the “Highway Master Plan 2041,” and an implementation strategy will be developed once the draft is approved next year.

Funding and Implementation

The 12-expressway plan, spanning 10-12 years, requires annual funding of $1.5 billion. The government will prioritize public-private partnerships (PPP) for construction. Financing decisions will be managed by the Finance Division and the Economic Relations Division.

Previous efforts to construct expressways on the Dhaka-Chattogram route were abandoned due to high costs and the feasibility of a high-speed train line. Instead, the route was upgraded to a four-lane highway. Currently, the Dhaka-Bhanga expressway is the country’s sole access-controlled expressway, connecting the capital with southwestern regions via the Padma Bridge.

Expert Opinions and Future Prospects

Experts highlight the importance of such infrastructure for sustainable development. Neighboring countries implemented similar plans in the 80s/90s. Despite potential challenges, expressways are essential for Bangladesh’s growth.

The proposed expressways include:

• Dhaka-Chattogram (and elevated)
• Dhaka-Mymensingh
• Dhaka-Sylhet
• Dhaka Outer Ring Road
• Dhaka-Bogura
• Mirsharai-Cox’s Bazar (via Bangabandhu Tunnel)
• Mymensingh-Bogura
• Gabtoli to Paturia (upgrading existing)
• Feni-Barishal
• Paturia-Daulatadia
• Jhenaidah-Khushtia-Dasuria

Dr. Mohammad Yunus of BIDS emphasizes the need for infrastructural changes to achieve developed country status. He suggests that while the current economic situation precludes big projects, the master plan should be prepared for future implementation.

Mohammad Emdad Ullah Mian of the Planning Commission calls for integrated master plans covering road, rail, rural roads, and waterways. Communication expert Md Shamsul Hoque of BUET supports the strategic shift from traditional highway construction to elevated ways, maximizing land use without requiring additional space.

Cross-Border Connectivity

The master plan predicts a nearly 350% growth in cross-border goods flow, supported by developing value chains. It will consider multiple highways linking sea and land ports with major border points, aligned with the South Asia Subregional Economic Cooperation (SASEC) initiative.

Previous and New Plans

Past plans, including a Dhaka-Chattogram expressway and elevated expressway, were scrapped due to high costs and the viability of high-speed trains. The new master plan is more inclusive, addressing both internal and cross-border connectivity.

Source: TBS News

Understanding Bangladesh’s economy requires a comprehensive view of remittance flows. While the formal sectors like manufacturing struggle, the rural economy thrives significantly due to remittances.

Estimating Remittance Inflows

Accurate data is challenging, but remittances play a critical role. Estimates suggest Bangladesh receives between $30 billion and $60 billion annually, with official channels accounting for about $25 billion. The informal ‘hundi’ system potentially handles between $5 billion and $35 billion. Estimations of the number of people sending remittances range from 10 to 15 million, with a high-end estimate of 15 million workers abroad.

According to the 2022 Household Income and Expenditure Survey (HIES) by BBS, 8.3% of households receive remittances. With 38.3 million households, this means about 3.2 million individuals are sending money home. The average remittance was Tk 257,000 ($3,000) annually, and recent bank estimates suggest this has increased to $4,000.

For 2022, with 15 million workers, remittances totaled $45 billion: $22 billion via banks and $23 billion through hundi. By 2024, with 15.5 million workers and an average remittance of $4,000, total remittances could reach $62 billion, with $24 billion through banks and $38 billion via hundi.

The Role of the Hundi System

The hundi system’s substantial role indicates more than half of remittances come through informal channels. The projected $62 billion in 2024 aligns closely with expected exports. The remittances help alleviate poverty and mitigate inflation’s effects, especially in rural areas where $50 billion is directed, versus $12 billion in urban areas.

Economic Implications

Adjusting the 2022 balance of payments reveals a different economic landscape. Under-invoicing of imports, estimated at 20%, adds $20 billion, and capital flight through hundi accounts for approximately $1 billion. This suggests a more robust economy than perceived, driven by significant remittance flows that benefit rural development and reduce unemployment.

Challenges of Under-Invoicing

Under-invoicing imports result in revenue loss, higher foreign exchange costs, and customs corruption. Despite ending the Pre-Shipment Inspection (PSI) program, under-invoicing remains prevalent, particularly with imports from China and India. The government loses revenue, and importers may choose costlier sources, depleting foreign exchange reserves.

Conclusion

Bangladesh’s economy is more resilient than often recognized, thanks to the massive influx of remittances. These funds support rural construction and goods purchases, creating a multiplier effect that boosts local economies. Despite challenges like high food inflation, remittances significantly enhance rural living standards and economic stability.

Source: Dhaka Tribune

Visualizing The World’s Biggest Rice Producers

It’s hard to overstate the importance of rice to the world.

As a staple food, over half of the global population depends on the crop as a major part of their diet. In fact, rice is considered a vital part of nutrition in much of Asia, Latin America, Africa, and the Caribbean, and is estimated to provide more than one-fifth of the calories consumed worldwide by humans.

This graphic highlights the world’s 10 biggest rice-producing countries, using 2019 production data from the UN’s FAOSTAT and the USDA.

Which Countries Produce the Most Rice?

With 756 million tonnes produced globally in 2019, rice is the world’s third-most produced agricultural crop behind sugarcane and corn (maize), which both have a wide variety of non-consumption uses.

Just 10 countries are responsible for a bulk of global rice production:

At the top of the charts are China (#1) and India (#2), which produced 389 million tonnes combined, accounting for more than half of global production.

They’re significantly ahead of #3 and #4 countries Indonesia and Bangladesh, which produced around 54.6 million tonnes each. Almost all of the top producers are located in Asia, with the exception of Brazil (#10).

Feeding A Growing World

With 84% of rice being harvested in just 10 countries, it’s clear that many countries globally must rely on imports to meet domestic demand.

In 2019, India, Thailand, Pakistan, and Vietnam were large net exporters of rice, shipping out nearly $16 billion of rice combined. Other countries including Iran, China, Saudi Arabia, and the Philippines consume above production numbers and rely on imports to meet their needs.

And not everything makes it from plant to table. In developing countries especially, estimates of 8–26% of rice are lost due to postharvest problems and poor infrastructure.

As the global population continues to grow, rice will continue to be a key source of calories around the world—and as our diets change, it’ll be interesting to see how that role shifts in the future.

Visualizing the Shift in Global Economic Power

As the post-pandemic recovery chugs along, the global economy is set to see major changes in the coming decades. Most significantly, China is forecast to pass the United States to become the largest economy globally.

The world’s economic center has long been drifting from Europe and North America over to Asia. This global shift was kickstarted by lowered trade barriers and greater economic freedom, which attracted foreign direct investment (FDI). Another major driving factor was the improvements in infrastructure and communications, and a general increase in economic complexity in the region.

Our visualization uses data from the 13th edition of World Economic League Table 2022, a forecast published by the Center for Economics and Business Research (CEBR).

When Will China Become the Largest Economic Power?

China is expected to surpass the U.S. by the year 2030. A faster than expected recovery in the U.S. in 2021, and China’s struggles under the “Zero-COVID” policies have delayed the country taking the top spot by about two years.

China has maintained its positive GDP growth due to the stability provided by domestic demand. This has proven crucial in sustaining the country’s economic growth. China’s fiscal and economic policy had focused on this prior to the pandemic over fears of growing Western trade restrictions.

India is Primed for the #3 Spot

India is expected to become the third largest country in terms of GDP with $10.8 trillion projected in 2031.

Looking back, India had a GDP of just $949 billion in 2006. Fast forward to today and India’s GDP has more than tripled, reaching $3.1 trillion in 2022. Over the next 15 years, it’s expected to triple yet again. What is behind this impressive growth?

For starters, the country’s economy had a lot more room to improve than other nations. Demographics are also working in the country’s favor. While the median age in many mature economies is shooting up, India has a youthful workforce. In fact, India’s median age is a full 20 years lower than Japan, which is currently the third largest economy.

Over the last 60 years, the service industry has boomed to around 55% of India’s GDP. Telecommunications, software, and IT generate most of the revenue in this sector. IT alone produces 10% of the country’s GDP. India’s large tech-savvy, English-speaking workforce has proved attractive for international companies like Intel, Google, Meta, Microsoft, IBM, and many others, while the domestic startup scene continues to boom.

The Indian government is also pursuing “production-linked incentives” (i.e. subsidies) for multinational companies looking to diversify their production away from China. If these incentives prove successful, more of the world’s solar panels and smartphones will be produced within India’s borders.

How Will the Global Economy Look in 2031?

By the year 2031, there will be major changes in the global economic power rankings.

As we said before: China will have become the world’s largest economy in terms of GDP and India will be the world’s third largest economy. Let’s also take a look at the top 10 economies by 2031.

Rank	Country	Region	Projected GDP in 2031 (in Trillions of USD)
1	China	Asia	$37.6
2	United States	North America	$35.4
3	India	Asia	$6.8
4	Japan	Asia	$6.4
5	Germany	Europe	$6.3
6	United Kingdom	Europe	$4.6
7	France	Europe	$4.2
8	Brazil	South America	$3.1
9	Canada	North America	$3.0
10	Italy	Europe	$3.0

Out of the top five economies, three are located in Asia: China, India, and Japan⁠—a clear demonstration of how economic power is shifting towards large population centers in Asia.

Europe will have four countries in the top 10: Germany, the United Kingdom, France, and Italy. From South America, only Brazil appears in the top 10.

Under these projections, Russia sits outside the top 10 in 2031. Of course, it remains to be seen how crushing sanctions and global isolation will affect the economic trajectory of the country.

Now, the big question. Is it inevitable that China takes the top spot in the global economy as predicted by this forecast? The truth is that nothing is guaranteed. Other projections have modeled reasonable alternative scenarios for China’s economy. A debt crisis, international isolation, or a shrinking population could keep China’s economy in second place for longer than expected.

Factor Investing: How You May Experience it

Why do investments perform the way they do? This is a question many investment experts have been attempting to answer for years. Luckily, factor investing can provide investors with a data-driven understanding.

In this infographic from MSCI, we use scenarios from everyday life to explain how factor investing works.

What is Factor Investing?

Simply put, investors choose stocks based on the “factors”, or characteristics, that help explain investment performance. They are typically aiming for:

• Higher returns
• Lower risk
• More diversification

While you may not have actively incorporated factor investing in your current portfolio, almost everyone will be familiar with the underlying concepts in real life. Here are five common factors and scenarios where you likely experience their principles.

1. Low Volatility Factor

The low volatility factor attempts to capture excess returns to stocks with lower than average risk. This factor has generally performed best during economic slowdowns or contractions.

How you may experience it: If you want a writing career with relatively reliable income, you’ll likely choose to be a marketer at a large company rather than a self-employed author.

2. Quality Factor

The quality factor attempts to capture excess returns in shares of companies that are characterized by low debt, stable earnings growth, and other “quality” metrics. This factor has generally performed best during economic contractions.

How you may experience it: When you’re purchasing new tires for your car, you might consider characteristics like tread longevity, traction, and fuel economy.

3. Value Factor

The value factor attempts to capture excess returns to stocks that have low prices relative to their fundamental value. This factor has generally performed best during economic recoveries.

How you may experience it: If you want a good deal, you may look for items that are on sale.

4. Momentum Factor

The momentum factor attempts to capture excess returns to stocks with stronger past performance. It has generally performed best during economic expansions.

How you may experience it: When you’re deciding what to watch, you may choose a TV show that has high audience ratings. You’ll likely also recommend it to your friends, which further boosts viewer numbers.

5. Low Size Factor

The low size factor attempts to capture excess returns of smaller firms (by market capitalization) relative to their larger counterparts. It has generally performed best during economic recoveries.

How you may experience it: When you’re learning a new sport, you’ll see larger increases in your skill level than a professional athlete will.

Understanding Your Investments With Factor Investing

These simple concepts are at work in your everyday life and in your investments. Targeting these factors can help you meet your investing goals, including maximizing return potential and managing risk.

From 2000 to 2020, here’s how the risk and return of the above factors compared to the benchmark MSCI World Index.

​​Annualized risk and gross returns in USD from December 29 2000 to December 31 2020 for MSCI World Factor Indexes.

All five of the factors have had greater historical returns than the benchmark index, and some have also had lower risk.

With factor investing, you can better understand what drives your portfolio’s performance.

LightCastle Analytics Wing May 23, 2022

Digital Banking has redefined the financial landscape in Bangladesh during the Covid-19 pandemic. Overnight, people needed to figure out how to use banking services electronically because, despite a pandemic, the demand for credit did not disappear. While residents in the cities rushed to adopt digital banking, rural communities were still hesitant to embrace the technology. Therefore, innovation is paramount to ensure customer satisfaction and improve access to finance for minorities and marginalized communities.

The Beginning

Dutch Bangla Bank Limited (DBBL) is responsible for the inception of mobile banking in Bangladesh. DBBL introduced Rocket in May 2011, which was stipulated to be an alternative to traditional banking that caters to even the poorest members of the society and spreads out banking services outside urban regions. It triggered the usage of mobile banking at an unprecedented rate as the number of registered mobile financial services (MFS) accounts in Bangladesh increased faster than in any other country in 2013. [1]

For Rocket subscribers, an account had to be created through DBBL-approved agents around the country and with a fee of BDT 10. A user must have a cell phone with a registered SIM, NID, and recent photograph to use the banking service.

In the same year, bKash was also launched with the same view of reaching a larger population to improve access to finance for minorities and marginalized communities. In addition, the platform aimed at facilitating foreign remittance, emancipating women through financial independence, enhancing the overall living standards of rural communities, and developing SMEs. Since then, it has done wonders for the financial sector of Bangladesh with incremental innovation to promote financial inclusion, income distributions, and, consequently, economic growth. In retrospect, this was the first innovation in the Mobile Finance Services (MFS) industry.

Challenges in Digital Banking Industry

Digital technology, such as MFS, can improve the financial well-being of the citizens of Bangladesh, where more than four-fifths of the workforce are informal. However, prior to COVID-19, digital platforms were not utilized to their full capacity due to adoption resistance. While the growth was steady, it did not follow the trajectory of smartphone sales which skyrocketed from 86.56 million in January 2012 to 171.85 million in January 2021. [2] From smallholder farmers, and SMEs to enterprise owners, a smartphone has become an inherent part of everyone’s daily lives. However, the digital divide is still prominent due to asymmetric information, high operational cost, and inconsistent services. For instance, in comparison to India, Bangladesh’s cost of mobile data is significantly higher. [3] Moreover, many rural areas lack 24/7 electricity resulting in long network outages and unstable connections. The aforementioned challenges discourage, to some extent, restrict citizens to be aware of the available financial services and reaping the benefits of digital banking.

State of Digital Banking in Pandemic

For urban areas, the pandemic has been the main driving force for producers and consumers to indulge in e-commerce. Since shops and restaurants were closed, people shifted to purchasing products through f-commerce and e-commerce. F-commerce is a branch of e-commerce that acts as a medium for transactions of goods and services through the Facebook platform. While f-commerce facilitates transactions and communication between users and vendors, it also poses challenges for governments and for users. For instance, governments may not have full traceability of the transactions to impose a tax on goods sold, resulting in a loss of tax revenue.

Other than e-commerce, B2P transactions also embraced MFS during the pandemic. Most readymade garment (RMG) owners required their employees to open their own mobile banking accounts in order to receive their salaries and other benefits. Therefore, the garment workers had to get familiar with digital platforms and over time, learned how to avoid paying illegal fees to banking merchants resulting in more savings and improved personal finance. [4] According to a recent survey of garment workers, it has been observed that embracing digital payments aided them in developing knowledge in personal finance. This study also proved that while just a small percentage of the population is linked to the country’s official banking system, those who are left out may nevertheless obtain financial services using mobile phones. The study indicates that Digital Banking will be crucial in the future in developing a resilient economy and improving the lives of the citizens of Bangladesh.

Why Digital Banking is Crucial

Digital banking — whether it is in the form of mobile banking, telebanking, or internet banking – incubates transparency in payment, ensures better cash management, and upskills finance information for consumers. Additionally, it speeds up the rate of transactions and the cash cycle as loan sizes are less so people can borrow more frequently. For instance, bKash in collaboration with City Bank shelled out BDT 500 – 20,000 loans to 2,689 customers totaling BDT 68.3 lakh with a three-month repayment period. [8] More importantly, bKash customers with paper-based KYC were not entitled to the nano loan due to a regulatory embargo eliminating red tapes.

In addition, digital banking can promote access to finance for marginalized communities and minorities. For example, the agriculture sector employs roughly 40.6 percent of Bangladesh’s total workforce. [5] Their ability to access and use formal financial services is imperative as the sector contributes to approximately 13.6 percent of the country’s GDP. [6] One of the main hurdles to these industries’ expansion has been a lack of access to capital. Nano loan services similar to bKash can bridge the gap to provide access to finance for these smallholders and the unbanked population. Therefore, innovation in services, delivery, and technology in the Digital Banking industry will enable new revenue streams for financial service companies while improving access to finance for the mass population.

Innovation in Digital Banking

Technology, although a fickle friend, has become ubiquitous in almost all economies around the world. Artificial intelligence (AI), data analytics, machine learning, and digital channels are projected to drive several professional services into obscurity. Fintech offers digital financial services that automate the process of borrowing and reduces loan disbursement costs, facilitate SME owners to receive collateral for bank loans, maintain financial accounts and keep track of transaction records. However, these benefits require significant technological, social, and legal innovations to trigger adoption. For example, privacy regulatory mechanisms for data ownership and preventing cyber-attacks must be ensured. The platform must be secure while highly robust to address the needs of the mass population. Integrating Blockchain technology will enhance data security and instill trust in the informal workforce.
Blockchain technology is a digital log of transactions that is copied and distributed throughout its network of computer systems in a decentralized manner. It eliminates intermediaries and ensures that all transactions are encrypted, anonymous, and immutable. Those who are unbanked face difficulties sending and receiving money as they frequently lack the necessary documents such as a passport, proof of income, access to the Internet, and a smartphone to create an account. Blockchain technology could alleviate their pain by ensuring their personal identity is safe and secure.

Additionally, innovative digital financial tools can assist low-income populations with building financial resilience. According to CPD’s former senior research associate Md Kamruzzaman, Bangladesh’s digitally delivered services (DDS) trade volume has expanded from $599 million in 2005 to $4,005 billion in 2019. This number is not very impressive when we compare Bangladesh’s DDS trade as a percentage of GDP to neighboring countries. As the textile and garment sectors account for a large portion of the country’s total exports, these industries and their workers should be equipped with digital banking tools. One way to do this is through the use of blockchain applications. For instance, “Leaf” is a Rwandan startup that allows individuals to send and receive money straight from their phone, even if it isn’t a smartphone without any need for a passport or access to the internet. In the same vein, “Kotani Pay” allows Kenyans to send and receive cryptocurrencies and then convert them to Kenyan shillings by dialing a short number on their phone. For these services, the only extra charge for international transactions is the currency conversion. Digital Banking platforms in Bangladesh should establish a way that allows customers to use their own accounts instead of depending on external agents.

Furthermore, the complexity and high operational expenses of banks left many people, especially small-scale workers, and the unemployed behind. The income of farmers and textile workers is uncertain and often erratic. When farmers confront a crisis, such as a flood, drought, or natural disaster, it threatens to overrun their savings. In the case of garment workers, they might need to withdraw small payments instantaneously in an easy and affordable way which cannot be fulfilled by traditional means of banking. One solution to such a problem has been developed in Kenya. Community Inclusion Currencies (CICs), invented by “Grassroots Economics” ensures resilience during challenging times by leveraging blockchain technology. Tokens, backed by the commodities and services in a community, such as water, food, or labor, can be issued. The villagers can then use these tokens to acquire a line of credit secured by their own assets, which they can utilize during an emergency.

While technological innovation will improve user experience, policy innovation will instill trust among users. Obstacles to creating MFS accounts should be minimized to streamline the registration process and encourage both current and potential customers to open and utilize their accounts. A simple registration process could encourage an estimated 2.73 million registered small businesses to open MFS accounts. [7] Security can be maintained by introducing an alternative to the orthodox PIN system such as biometric security software which recognizes the users automatically based on their behavioral or biological characteristics. Daily transactions can also be restricted to prevent money laundering and abuse of technology.

In summary, Even though 85.1% of the labor force is part of the informal sector, most of them are unfamiliar with e-skills. [5] They also cannot access loans from banks as they do not have the necessary documents or collateral. If they’re not saving money in a financial institution, it leads to depreciation and makes people more vulnerable to inflation which is tragic. Digital Banking Platforms and MFS can make a tremendous impact to build financial resiliency in low-income, rural and marginalized communities, and technological and policy innovation can make the impact more effective and efficient.

Shaniz Chowdhury, Content Writer, and Abdullah Reza, Digital Product Manager, at LightCastle Partners, have prepared the write-up. For further clarifications, contact here: info@lightcastlebd.com