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Garment workers walk to work at their factories during a countrywide lockdown to try to contain the spread of Covid-19 on July 5, 2021 in Dhaka, Bangladesh.

Allison Joyce/Getty Images

Fifty years ago, George Harrison organized the Concert for Bangladesh, a rollicking rock revue that set the mold for many benefits to follow. It also fixed the just-born country’s image as an overpopulated basket case that would starve without massive outside assistance.

Subsequent, sporadic coverage of Bangladesh has focused on looming climate catastrophe—two-thirds of its land mass could be swamped by rising seas—or fatal fires at its low-cost garment factories.

All of which obscures one of the past half century’s more remarkable success stories. Bangladesh’s economy has expanded 270-fold, as far as anyone can figure, since independence from Pakistan. Growth was cruising at about 8% annually before the pandemic, and gross domestic product per capita overtook India’s. Government is stable and democratic, sort of.

Prime Minister Sheikh Hasina, daughter of the country’s first president, has been in power since 2009. “Bangladesh is a quiet but huge story of a government getting a lot of little things right over a generation,” says Alison Graham, chief investment officer at frontier markets investor Voltan Capital Management.

One growth driver has been microfinance, which was pioneered by Bangladeshi Nobel Peace Prize winner Muhammad Yunus. It’s fueled an entrepreneurial upsurge, particularly among women, Graham says. Bangladesh freed agricultural sales and inputs from state monopoly, a reform India is struggling with now. It created a network of so-called bonded warehouses, where burgeoning apparel exporters could import raw materials and packaging duty free.

It built a reliable power grid, something that is also a work in progress for India. “Lack of energy was the country’s biggest challenge 15 years ago,” says Rehan Rashid, Bangladesh country director for U.K.-government backed investor CDC Group. “Now we’re almost at a surplus level.” Safety at the garment factories has also improved markedly, he says, with some 90 manufacturers earning Leadership in Energy and Environmental Design, or LEED, certification.

There are even some stocks to buy.

Bangladesh’s next hurdle is diversifying away from clothing, which now accounts for about 80% of exports. One healthy harbinger is

Walton Hi-Tech Industries

(ticker: WALTONHIL.Bangladesh), a Dhaka-based appliance manufacturer that sells to more than 40 countries. Its shares have risen 20% this year in local currency terms.

An expanding pharmaceutical industry is also enticing some investors. Maurits Pot, chief investment officer of the

Asian Growth Cubs

exchange-traded fund (CUBS) names

Renata

(RENATA. Bangladesh), which took over

Pfizer’s

local operation, as his top Bangladeshi pick. Its shares have climbed 25% year-to-date. Competitor

Square Pharmaceuticals

(SQURPHARMA.Bangladesh) is about flat.

Bangladesh’s digital future also looks promising in theory. The population is young (median age 28), extremely compact (167 million people in a territory the size of Iowa), and educated about as well as India’s. The two biggest stocks in the sector, national telecoms incumbent

Grameenphone

(GP.Bangladesh) and start-up challenger

Robi Axiata

(ROBI. Bangladesh) have recovered from the global tech sell-off in February, and could benefit from the next updraft in sentiment.

Not all the trends in Bangladesh are positive. Hasina’s one-party state is prone to authoritarian meddlesomeness. The government has brought a series of legal actions against Nobel laureate Yunus, motivated by jealousy of his popularity, investors say.

Graft looks pervasive. Bangladesh ranked 146th out of 180 countries on the latest Corruption Perceptions Index from Transparency International. Finance has been hobbled by official floors and ceilings on interest rates, says Faisal Ghori, research director at frontier markets investor Consilium Investment Management. “The great shame about Bangladesh is economic policies that are mid-level,” he says. “They are holding back a country that could easily be growing 10-12% a year.”

Still, 8% annually is not too shabby, and Bangladesh can raise GDP per capita another four or five times before encountering any middle-income trap. Good news may be less interesting than horror and tragedy, but it happens sometimes, too.

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