Bangladesh power crisis yields investment opportunities

Up to USD100bn in infrastructure investment.

While Bangladesh’s power deficit is a well-known fact—known through the indicators of electricity consumption per capita, access to electricity, and the demand-supply gap in electricity—the good news is that significant investment will be required to improve infrastructure standards, in order to address the situation.

According to a research note from Standard Chartered, the situation in Bangladesh provides large scope for private-sector participation.

The World Bank estimates that Bangladesh will require USD 74-100bn of total infrastructure investment up to 2020, of which USD 11-17bn is estimated for electricity alone.

If this is achieved, the investment-GDP ratio should rise from 27% at end-2013 to a range of 33-40% by 2020 (all else equal).

Here’s more from Standard Chartered:

Achieving this ratio would also mean reaching the government’s target of an investment-GDP ratio of 38% by 2021.

In the long term, this incremental investment should also raise potential growth.

An academic research estimate of long-run elasticity of economic growth with respect to investment is c.0.8.

Hence, USD 74-100bn of incremental investment up to 2020 should boost nominal GDP by USD 60-80bn over the period (all else equal).

If we look at the investment requirement just for the electricity sector, the government estimates that c.USD 60bn of incremental investment will be required up to 2030.

This should raise nominal GDP by USD 50bn by 2030, again all else equal.