Recently, the World Bank unveiled two significant publications. One report focuses on Industrial Policy for Development: Strategies in the 21st Century, while the other delves into the South Asia Economic Update for April 2026, specifically addressing the relevance of working alongside industrial policy. Both reports deliver a clear message to Bangladesh: sustained growth necessitates immediate reforms.
The South Asia Economic Update paints a concerning picture. Bangladesh’s economic growth is anticipated to decelerate to 3.9 percent in 2026. Over the past three years, poverty levels have escalated, with approximately 1.4 million individuals slipping into poverty. Inflation remains elevated at 8.5 percent, while wages for low-income earners have stagnated. The financial sector is precariously fragile, with non-performing loans reaching 30.6 percent in December 2025 and several banks lacking sufficient loss-absorbing capacity.
Having been involved in numerous industrial policy initiatives for Bangladesh, particularly advocating for small and medium-sized enterprises (SMEs), I have observed the inner workings of the decision-making process. Drafts were altered abruptly due to external pressures, donors, and influential groups making sudden demands, consistently leaving small enterprises marginalized over the past two decades.
Despite the ambitious nature of the National Industrial Policy 2022, comprising 42 action points, minimal progress has been made on the ground, with SMEs continuing to be disregarded in practice.
The industrial policy report emphasizes the challenges faced by small businesses. SMEs encounter difficulties in accessing financing due to high costs and risks. Successful initiatives in Brazil, South Korea, and Romania, such as the “Simples” program, targeted support for SME growth, and tax incentives for the software industry, provide valuable insights for Bangladesh.
The World Bank’s economic update underscores the significant hurdles hindering SMEs, including exorbitant regulatory costs and unreliable power supply. Notably, only large export-oriented companies have thrived, while the tax-to-GDP ratio has plummeted below 7 percent, limiting investment potential in critical sectors.
Recent discussions globally have spotlighted the concept of “partial nationalisation” of industries, particularly pertinent in rapidly evolving sectors like AI. This strategy, involving the state acquiring a minority stake rather than full control, could enhance Bangladesh’s participation in strategic AI projects, potentially funded by returns on investments, akin to Norway and Singapore’s approaches.
Bangladesh faces a pivotal juncture in 2026 as it nears the end of its least-developed country status, leading to the cessation of trade preferences and stricter subsidy regulations by the WTO. The urgency to adapt to evolving AI technologies and combat rising global protectionism is imperative.
The Economist’s update also highlights the adverse impact of escalating global protectionism, with the United States imposing tariffs, including a hefty reciprocal tariff on Bangladesh, dampening export competitiveness. However, the potential for intra-South Asia trade expansion, tripling with tariff reductions, presents a lucrative opportunity.
The report advocates for immediate reforms, emphasizing the necessity for intelligent deregulation, robust competition policies, banking sector stabilization, and enhanced electricity supply reliability to secure sustainable growth.
It is imperative to resist external interference in policy formulation processes, ensuring the integrity of well-researched drafts. The era of outdated policy paradigms is over, as emphasized by the World Bank’s chief economist. Bangladesh must chart its course, aligning policies with the country’s needs, particularly prioritizing SMEs and exploring partial nationalization in strategic AI sectors for genuine progress.
Written by the coordinator of Ella Alliance and founder of Ella Pad
