Can Bangladesh Turn Economic Growth into Geopolitical Influence?

In December 1971, just before Bangladesh declared independence, U.S. Under Secretary of State for Political Affairs Ural Alexis Johnson predicted that the new nation would be “an international basket case.” At the time, Bangladesh was one of the poorest countries in South Asia, with a GDP per capita under USD 79, far below India’s 120 and Pakistan’s 226, according to the United Nations. Decades of famine, war, and political instability reinforced this outlook.

Yet, as of early 2025, Bangladesh is among Asia’s fastest-growing economies, ranking tenth in the region and second in South Asia by GDP. This rise has unfolded despite recurring political instability and democratic backsliding. In the wake of former Prime Minister Sheikh Hasina’s departure in August 2024, can Bangladesh leverage its economic rise to assert greater influence on the regional and global stage?

Bengal Subah was a Mughal province that included present-day Bangladesh, West Bengal, and surrounding regions. From the late 16th to early 18th centuries, Bengal Subah stood at the height of its prosperity, serving as the Mughal Empire’s wealthiest province, contributing a significant share of the GDP, and one of the world’s leading economic regions. It achieved global prominence in textile production, particularly silk and cotton, as well as shipbuilding and steel. Bangladesh's capital, Dhaka, became a thriving center of both agriculture and industry. From there, Bengal’s exports reached markets across Asia, the Middle East, and Europe, securing its place as one of the world’s foremost economic regions of the early modern era.

Since the 1990s, Bangladesh has reemerged on the global economic stage. Today, it is one of the world’s fastest-growing economies, with GDP growth often exceeding 4-6% since the beginning of the 2000s. The country’s growth has been closely linked to its export sector: since the 1990s, exports have consistently represented over 6% of Bangladesh’s GDP, reaching a peak of more than 20% in 2012. Bangladesh’s export sector is highly diversified, led by ready-made garments, jute, seafood, leather, home textiles, and agro-products. In 2021-2022, ready-made garments exports alone reached USD 31.46 billion, while pharmaceuticals, plastics, bicycles, and terry towels also contributed significantly. These industries have made Bangladesh a major exporter to the United States, Europe, and Asia.

Bangladesh has been among the top three global textile exporters since its renaissance in the 1990s. By the 2010s, it had firmly established itself as the second-largest exporter of textiles and apparel globally, behind only China, capturing over 6% of the world market. The country’s garment industry has grown dramatically, from USD 1.8 million in 1980 to USD 46 billion in 2024, according to Royal Europe Textile. Today, the industry employs over 5 million Bangladeshis.

The country’s transformation is striking when compared with its South Asian neighbors, other former territories of British India. Once seen as the poorer sibling, Bangladesh now surpasses Pakistan in GDP per capita. In 2024, Bangladesh’s GDP per capita reached nearly USD 2,600, compared with about USD 2,700 in India and USD 1,500 in Pakistan, despite Bangladesh having one of the highest population densities in the world. In 2023, the United Nations Committee for Development Policy (CDP) report highlighted Bangladesh’s trajectory toward developing country status and its classification as a lower-middle-income economy. Social indicators reinforce this trajectory: literacy rates have climbed sharply, from 58% in 2012 to 76% in 2021, life expectancy exceeds the South Asian average, and in contrast to India, women’s strong participation in the labor force (over 55% in the textile industry) has become a hallmark of the country’s export development model.

Remittances also play a vital role in Bangladesh’s economy, serving as one of the largest sources of foreign exchange. With a population of 173 million, Bangladesh also has a diaspora of over 7 million migrants who regularly send money home to support their families. According to the World Bank, Bangladeshis abroad sent home more than USD 18 billion in 2019, with 73% of these remittances originating from workers in India and Gulf Cooperation Council (GCC) countries, particularly Saudi Arabia. Remittances account for over 6% of GDP, making them the nation’s second-largest source of foreign income.

In addition, Bangladesh experienced rapid digital growth, driven by the expansion of IT outsourcing and the rise of a startup ecosystem. Like India, the country has positioned itself as a competitive destination for outsourcing services, supported by a young, tech-savvy workforce and government initiatives to promote the Information and Communications Technology sector. Bangladesh has over 4,500 IT companies employing around 400,000 professionals, a number projected to surpass one million in the coming years. This digital momentum is creating new opportunities for innovation, employment, and integration into the global digital economy.

Despite its economic gains, Bangladesh faces entrenched social challenges. These issues, such as the Rohingya crisis and indigenous marginalization, have implications for regional geopolitics. The Rohingya crisis has left over one million refugees in the city of Cox’s Bazar, straining Bangladesh-Myanmar relations, raising risks of border insecurity, and drawing in major powers from the United Nations to India, China, and the United States. In the Chittagong Hill Tracts, land disputes and minority marginalization complicate cross-border connectivity with India and Myanmar. These pressures show that inclusive governance is vital not only for stability but also for Dhaka’s credibility as a regional partner.

Once seen as aid-dependent, Bangladesh is now recognized as an emerging investment hub. Special Economic Zones, Chinese and Japanese infrastructure projects, and a vibrant startup scene have diversified its profile beyond garments. This transformation has shifted the regional balance: Bangladesh now wields leverage with both India and China, balancing their influence while pursuing its own development goals.

Bangladesh’s rapid economic and social transformation has significantly changed the regional balance of power in South Asia. Once considered a weak junior partner of India, Bangladesh now wields growing leverage with both India and China, leveraging its strategic location, economic clout, and growing industrial base. This new standing allows Dhaka to negotiate from a position of relative strength, balancing competing interests while advancing its national development agenda. Its ability to diversify partnerships reduces overreliance on any single power, giving Bangladesh wide diplomatic flexibility.

Bangladesh and India share deep historical, cultural, and economic bonds, reflecting a complex interdependence that continues to shape their relations. Bangladesh relies on India for energy imports, particularly electricity from cross-border power grids, as well as joint infrastructure projects such as rail links, road corridors, and river transport that enhance regional connectivity. In FY 2023-24, India was Bangladesh’s second-largest trading partner in Asia, while Bangladesh was India’s largest partner in South Asia. Bilateral trade totaled USD 14.01 billion, with Bangladesh exporting USD 1.97 billion worth of goods to India. Bangladesh has always maintained a pragmatic relationship with India, securing cooperation in key areas, including trade and counterterrorism.

Bangladesh has long maintained a neutral stance in regional geopolitics, balancing ties between India and China. However, the departure of former Prime Minister and Awami League (AL) leader Sheikh Hasina in August 2024, amid student protests and army involvement, created a power vacuum and political uncertainty. The AL had been the country’s dominant party for decades, continuously in power from 2009 until Hasina’s exit, shaping Bangladesh’s politics through an increasingly authoritarian style of governance and fostering a more consistent alignment with India. Her departure has opened space for China to expand its influence through various projects and agreements.

Since the 2010s, China has steadily increased its economic footprint in Bangladesh through the Belt and Road Initiative, establishing Special Economic Zones and financing major infrastructure projects. In 2025, this engagement intensified with initiatives such as the modernization of Mongla Port and the Rajshahi water treatment plant. These developments underscore China’s growing influence in Bangladesh and the Bay of Bengal region over the past decade and beyond.

Following Sheikh Hasina’s departure, an interim government was rapidly established on August 8, 2024, led by the non-partisan Muhammad Yunus, tasked with reinstating democratic norms and upholding human rights ahead of a free and fair general election. The interim government now faces difficult choices: aligning more with India and the West risks Chinese pushback, while closer ties with China could strain relations with India and Western partners, complicating Bangladesh’s regional strategy. Amid political uncertainty, Bangladesh’s strategic location and growing economic clout have yet attracted attention from external powers, notably the United States.

With its strategic location in the Bay of Bengal and a rapidly growing economy, Bangladesh is emerging as a key actor in the Indo-Pacific. The United States has actively courted Dhaka as part of its strategy to counterbalance China, engaging through trade, security dialogues, and development assistance. Washington provides military training, counterterrorism cooperation, and professional military education, while also serving as Bangladesh’s largest export market, particularly in the ready-made garments sector. In 2024, U.S. imports from Bangladesh reached USD 8.4 billion, a 1% increase from the previous year. Despite a 20% tariff on garments imposed under Donald Trump, Muhammad Yunus reaffirmed his commitment to strengthening bilateral ties, signaling Dhaka’s determination to preserve the partnership. At the political level, the United States supports the interim government while urging a swift return to elected leadership, expecting Bangladesh to remain a stable, strategically aligned partner that upholds democratic norms, contributes to regional security, and stays open to trade and investment.

Alongside engagement with the United States, Bangladesh has also recalibrated its relations within the region, notably strengthening ties with Pakistan. While the two countries share a complicated history stemming from the 1971 independence war, Bangladesh’s post-Hasina government views Pakistan as a strategic partner to diversify its diplomatic and economic ties. Shortly after Sheikh Hasina’s departure, Bangladesh was reported to have ordered a weapons shipment from Pakistan, including 2,900 high-intensity projectiles and 40,000 artillery shells, in a deal seen as reviving defence ties between the two countries after years of strained relations. Closer ties with Pakistan help Dhaka balance India and China’s regional influence and expand its voice in South Asian multilateral forums like the South Asian Association for Regional Cooperation (SAARC).

Beyond its revived defense ties with Pakistan, Bangladesh has diversified its military procurement to strengthen strategic autonomy. In recent years, the country has acquired equipment from Turkey, China, and the United States, including maritime patrol aircraft, frigates, and unmanned aerial systems. This diversification reduces overdependence on any single supplier and enhances interoperability with multiple partners. A stronger defense capability gives Bangladesh greater leverage in negotiations with its neighbors while reinforcing its credibility as a responsible security actor. It also strengthens Dhaka’s role in international peacekeeping operations, where Bangladesh remains one of the world’s largest troop contributors to United Nations missions. By coupling modernization with active participation in global security efforts, Bangladesh positions itself not only as a regional balancer but also as a contributor to international stability.

Bangladesh’s geography makes it a natural connector between South and Southeast Asia. Initiatives such as the BBIN (Bangladesh-Bhutan-India-Nepal) Motor Vehicles Agreement, the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), and broader Indo-Pacific connectivity corridors highlight Dhaka’s role as a transit hub. Improved road, rail, and port infrastructure not only promises to boost trade and energy flows across the subcontinent but also enhances Bangladesh’s geopolitical value by tying regional economies more closely together. This connective role strengthens Dhaka’s bargaining power with neighbors and external partners alike.

Yet, economic growth alone does not automatically translate into geopolitical influence. Bangladesh continues to grapple with systemic challenges, including bureaucratic inefficiency, corruption, and political volatility. These factors can undermine investor confidence, slow infrastructure development, and limit the country’s ability to leverage its economic clout in negotiations with regional and global powers. Moreover, Bangladesh’s geographic vulnerability to climate change, particularly rising sea levels, poses risks to long-term economic stability and regional credibility. Addressing these structural and environmental challenges is essential if Dhaka hopes to transform economic success into lasting strategic leverage.

Bangladesh’s economic rise has transformed it from an aid-dependent nation into a serious regional player. Its garment exports, remittances, digital economy, and improved social indicators provide real foundations for influence. But turning growth into sustained geopolitical power will depend on two things: whether its interim leaders restore democratic stability, and how skillfully Dhaka balances India, China, the United States, and other partners abroad. At a crossroads once again, Bangladesh has the chance not only to shed the shadow of the “basket case” label but also to define itself as a pivotal actor in South Asia and the wider Indo-Pacific.