The Evolution of ICT sector in Bangladesh (Part-1)

This article was originally published on The Daily Star.

Authors

Mustafizur R Khan, CEO of SD ASIA

Fayaz Taher, CFO of SD ASIA

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In the last 3 years Bangladesh has seen a tremendous growth in the information technology (ICT) sector. It has a market of 160 million+ people, where consumer spending is around USD 130 billion+ growing at 6% annually. After Teclo’s launched 3G services in 2013, internet penetration in Bangladesh grew by 22% by the end of 2014.  Of the 66.8 million active Internet subscribers (BTRC Sept 2016), nearly 96% are on mobile and 10 million use smartphones. With growing Internet connectivity, availability of cheaper smartphones, and rapid rise in social networking (23 million + Facebook users), we have seen increased emergence of digital savvy consumers.

 

Here are 3 main reasons for growth in ICT sector

 

  1. Gov’t policy and awareness 

In last 3 years the Government of Bangladesh has played a major role in promoting the ICT sector as the next growth engine for Bangladesh. Their election manifesto of Digital Bangladesh was championed by Sajib Wazeed Joy, Advisor to Prime Minster for Information and Technology and State Minister of ICT Zunaid AhmedPalak, M.P.  A major role was played by A2I,  the key driver from the Prime Minister’s Office in deploying the rapid expansion of technologies in delivering public services to citizens. Some of the key milestones of A2i have been the following:

  • 8.5 mil students learning from multimedia content developed by 100,000 teachers
  • 105 Digital Talking text books for all visually disabled students
  • 103 innovations incubated through Service Innovation Fund
  • $28.15 mil earnings for Digital Center Entrepreneurs

 

The ICT ministry played a phenomenal role in creating awareness and programs to transform ideas into reality through programs like Digital World, ICT Expo, National Hackathon, Connecting Startup Bangladesh etc.

 

Recent policy by the govt. have been very helpful in creating attractiveness of the ICT sector. Here are several key incentives:

 

  1. 100% foreign ownership of companies allowed
  2. Small-cap exchange to be implemented to allow easier raising/ listing on capital markets
  3. Software park which facilitated high speed Internet connection trade facility similar to Export Processing Zones (EPZ)

 

After 3 years, we now have a mix of community tech space, co-working space and accelerators. As an emerging economy we have fundamental gaps in infrastructure that impact digital entrepreneurship, connectivity and technology development. These hubs are providing that enabling infrastructure, and providing skills training in the IT sector. As a mandate government will try to bring ICT program throughout the country, but the impact will be less if certain areas of the country does not have surrounding ecosystem mature enough to support viable startup, and accelerator activities. For example, Dhaka has enough critical mass of all the right things –  access to funding, universities, international tech companies, media, entrepreneurs, etc., which allows the place to build a successful tech hub.

 

Building a thriving ecosystem requires close collaboration between the public and private sectors. As we move along this path, we predict that we will develop a closer working relationship between the public and private sector.

 

 

  1. BASIS policy and advocacy 

The software association of Bangladesh, popularly known as BASIS brought focus on startup activities in Bangladesh. Shameem Ashan ex-president of BASIS demonstrated tremendous leadership. They initiated well known program like BASIS Soft Expo, BASIS Student Forum, BASIS e-commerce alliance etc. to create awareness about startups and facility the growth of this sector. BASIS also helped shaped policy frame work for the ICT sector and few of the policies are outlined below:

  1. 7 year tax holiday for registered IT companies
  2. Private equity and venture capital policy frame work implemented as of July 2015
  3. Vat for e-commerce reduced to NIL

 

  1. Private sector movement at the heart
  2. Startups – There has been significant increase of new startup and founders joining the space which was not seen in the past. It is not limited to first time entrepreneur only, but people with professional work experience taking risk to join the startup life. A recent study by Light Castle Partners (LCP) identified top 3 sectors where startups are currently working now: e-commerce, tech and impact businesses.

 

  1. Telcos– Have played one of the major stakeholder as they built the Infrastructure investment in 3G that practically jump started the internet enabled businesses in Bangladesh. Local private device suppliers played the second biggest role in bringing the smart phone prices down locally manufacturing them.  Last year 3 major telcos either started an accelerator program or sponsored one to promote digital business in Bangladesh such as Grameenphone Accelerator which provided access to deal flow.

 

  1. Investment – We have few local angel investors who provides seed funding, however their numbers are very limited with a deal size below US$50,000. However there are larger financial institutions that have invested across various range. Few of the venture capital and private equity companies who are currently working in Bangladesh are : Fenox Ventures, IPE capital, BD Venture Limited, Aviskar, DEFTA Partners, Innotech Corporation, Bangladesh Venture Capital, Razor Capital, 500 startups, Segnel Ventures, IMJ Ventures, Mind Initiative, Brummer & Partners, Princestreet, Osiris Group VIPB, IFC etc.

 

A recent study by Light Castle Partners (LCP) identified preferred sectors by investors are MFS (83%), Health Tech (67%) and C2C Commerce (50%).

 

Few of the local startup that recently got fund are listed below to our best knowledge- , GObd, PayWell, Priyo.com, Solaric, SureCash, Styleline, Direct Fresh, AjkerDeal, Eshosikhi, Pathao, Bagdoom, Sheba, BPCL, Brian Station, Studio 71, Smart Compare, Light Castle Partners, Magnito Digital, Doctorola .

 

  1. Ecosystem Builders – The startup ecosystem originally started in 2013 with main advocates being Startup Dhaka also know as SD Asia, Team Engine, Hub Dhaka, EMK Center, Better Stories, Preneur Lab etc. Most these companies are involved in mentoring, coaching and accelerator program which help startup develop their business to next stage.

 

Authors
Mustafizur R Khan, CEO of SD ASIA
Fayaz Taher, CFO of SD ASIA
  • MUSTAFIZUR R KHAN

    Mustafiz is an entrepreneur, angel investor, startup community organiser and a marketer with over 17 years of experience of heading teams across diverse industries in Asia. He started his career as an entrepreneur managing an engineering SBU and later managed brand like HSBC in several countries. He co founded coolest co-working space in Dhaka, crowd funded and directed a documentary on tech startups in Dhaka which later pivoted to local a business news site called Startup Dhaka. He is passionate about technology and studies film in his spare time. He holds a double major in business and fine arts from COE College USA and an MBA from Nanyang Business School in Singapore

  • FAYAZ TAHER

    Fayaz is a serial entrepreneur, investor, mentor and a startup community advocate from Bangladesh and the current CEO of Fortuna, an innovative group of companies invested across various industries. Fayaz was one of the youngest Vice-Chairman of the Bangladesh Finished Leather, Leather Goods Manufactures and Exporters Association.

    Fayaz is also passionate about community building. Fayaz started his first venture at the age of 13 starting in retail and later went on to found Fortuna Fried Chicken while he was in High School. Fayaz was also a Director of Union Capital Leasing Ltd, and also helps set strategy with Peoples Life Insurance Company and Popular Life Insurance Company ltd. Fayaz is also an integral member & co-founder of Infrablue technology which as was announced as one of the winners of the Facebook Fund for their technology skills back in 2008, the only company from Bangladesh. Fayaz completed his undergraduate degree at Babson College in Entrepreneurship in ‘03 and completed his masters in International Development and Social Change at Clark University in Massachusetts, USA in ‘09. He is also a research fellow at Bangladesh Enterprise Institute and a fellow at Jaago Foundation.

 

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