Countries like South Korea, Malaysia, and Rwanda once relied heavily on aid too, but they made the shift to self-sustained growth. Now, it is Bangladesh鈥檚 turn to do the same, writes Sohana Samrin Chowdhury
IN BANGLADESH, the recent USAID funding freeze and the UK鈥檚 aid cuts have alarmed concerned stakeholders. Foreign assistance has long played a crucial role in healthcare, education, humanitarian aid, and climate adaptation. The fear is that without foreign aid from the giants, essential programs could collapse, leaving vulnerable communities at risk. But rather than viewing these cuts as a crisis, Bangladesh must see them as an opportunity, a moment to redefine its economic future. As of now, the country stands at a crossroads: it can either cling to aid dependency or embrace self-reliance and innovation.
In a rural clinic outside Sylhet, Dr Shusmita sees the consequences firsthand. 鈥榃e rely heavily on donors鈥� money to keep essential medical programmes running,鈥� she says. 鈥業f funding disappears, it鈥檚 not just numbers, its real people who will suffer.鈥� Her concerns reflect a broader reality. Foreign aid to Bangladesh has already been declining, from a peak of $10.97 billion in 2022 to $9.27 billion in 2023, with a further drop to $7.91 billion projected for 2024. Humanitarian aid alone saw a cut of over $100 million, largely due to shifting global priorities. As Bangladesh prepares to graduate from Least Developed Country status by 2026, concessional loans and grants will continue to shrink. What was once a financial lifeline will soon be a distant privilege.
However, this shift is not unique to Bangladesh. Across the world, specifically in the Global South, donor priorities are changing, with Western governments redirecting resources toward domestic crises, geopolitical conflicts, and security concerns. The US, for example, has significantly increased aid to Ukraine ($48.6 billion) and Israel ($91.2 billion), while reducing development aid elsewhere. Bangladesh can no longer afford to pin its future on external generosity. The choice is clear: resist change and risk stagnation or embrace a long-overdue transformation.
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A lesson from South Korea鈥檚 rise
BACK in the 鈥�50s and 鈥�60s, South Korea relied heavily on foreign aid; more than 80 per cent of its total investments used to come from outside donors, namely the US. Instead of settling for long-term dependency, South Korea made smart use of that foreign aid, channelling it into industrialisation, education, and export-driven growth. By the 鈥�80s, they had flipped the script 鈥� going from an aid recipient to a donor nation, fuelling their economy with manufacturing, technology, and innovation.
Bangladesh now finds itself at a similar turning point. For decades, foreign aid has helped fund healthcare, infrastructure, disaster relief, and governance. But with that money dwindling, the country now has to chart a new course 鈥� one powered by private investment, tech innovation, and stronger regional trade ties.
South Korea kept its economy from stagnating by moving beyond low-cost manufacturing and expanding into new industries. By the 鈥�80s, it had shifted toward shipbuilding, automobiles, and semiconductors, which still drive its economy today. Bangladesh needs to make a similar move. It needs to start immediately transitioning from low-wage production to high-value, tech-driven industries like ICT, pharmaceuticals, and renewable energy. Instead of seeing the USAID funding freeze as a setback, it should be seen as the push the country needs to make this shift.
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A track record of resilience
THE Covid-19 crisis showed just how resourceful Bangladesh can be. When global supply chains fell apart, the country suddenly faced a massive shortage of medical gear, PPE, and test kits. At first, hospitals had to rely on international aid, but that was not enough. So local industries stepped up. Garment factories quickly shifted to making PPE, biotech firms developed affordable test kits, and engineers designed low-cost ventilators to fill the gap. This kind of resilience proves an important point. When outside help is not an option, Bangladesh has what it takes to find solutions on its own.
This way of thinking needs to go beyond healthcare and into every part of the economy. With donor funding shrinking, Bangladesh has to take charge of its own economic future by investing in local industries, digital innovation, and workforce development. The real challenge is not the lack of foreign aid. It is whether Bangladesh can harness its own resources effectively to build a future that lasts.
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Charting a new economic path
IF BANGLADESH wants to succeed without relying on aid in the medium-to-long term, it needs to tackle a few key areas. First, it has to diversify where its funding comes from. Instead of depending mostly on Western donors, it should build stronger ties with emerging economies like China and Gulf nations while also boosting public-private partnerships to bring in more investment. Rwanda is a great example of how this can work. When foreign aid started drying up, the country turned to China and the Middle East for investment, which helped grow its infrastructure and fintech sectors.
While Bangladesh should seek alternative investments, it must also recognise that all external aid comes with conditions. Over-reliance on any country, including China or the Gulf states, could create economic and political challenges. Instead of replacing one dependency with another, Bangladesh should focus on self-sufficiency by strengthening local industries, fostering innovation, and improving governance to attract diverse investments.
Second, Bangladesh has a huge opportunity to tap into the digital economy. With digital payments expected to hit $48.4 billion by 2025, the country is in a prime position to shift toward a knowledge-based economy. Supporting tech startups and IT-enabled services can create high-paid jobs and can also help move away from dependence on low-wage industries. India鈥檚 Digital India initiative is proof that this strategy works, driving growth in IT, fintech, and e-commerce while creating millions of jobs and expanding financial access.
Remittances also need to be put to better use. With $23.91 billion flowing into the country in FY 2023-24, Bangladesh鈥檚 overseas workforce is one of the greatest economic drivers. However, we are letting most of that money go toward everyday spending. Instead, the government should introduce investment programmes for expatriate workers. The Overseas Filipino Bank is a great example, channelling remittances into national development projects. Bangladesh could pilot and contextualise a similar model to turn this income stream into something more sustainable.
On top of all this, stronger local governance and smarter economic policies are imperative. If Bangladesh wants to rely less on foreign aid, it has to take better control of its own revenue. That means improving tax collection, cutting unnecessary red tape, and encouraging domestic philanthropy to keep public services funded. Chile has done this well by digitising its tax system to reduce evasion and increase revenue. It is time for Bangladesh to rethink this area.
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Role of the private sector
BUSINESSES must also step up. Economic transformation cannot be left entirely to the government. Organisations like the Bangladesh Garment Manufacturers and Exporters Association and the Federation of Bangladesh Chambers of Commerce and Industry should push for industry-wide sustainability standards, workforce development, and policies that attract investment. At the same time, businesses and universities/academia need to work together to make sure students are learning the skills that today鈥檚 job market actually needs. Malaysia鈥檚 public-private partnership model could be a good practice for us to learn from. Malaysian businesses have played a direct role in shaping national skills policies and driving industrial growth. Bangladeshi businesses need to take charge of economic progress instead of waiting for the government to act.
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Bangladesh鈥檚 moment to lead
BANGLADESH is indeed at a crossroads. It can either keep depending on foreign aid or take charge of its own economic future. For me, the USAID funding freeze is not a setback; it is a wake-up call. Countries like South Korea, Malaysia, and Rwanda once relied heavily on aid too, but they made the shift to self-sustained growth. Now, it is Bangladesh鈥檚 turn to do the same. Dr Shusmita鈥檚 words say it all: 鈥榃e鈥檒l find a way. We always do. But now, we need solutions from within, not from outside.鈥�
The time to act is now. Foreign aid was never meant to last forever. The real question is not whether Bangladesh can survive without it. It is whether the country will rise and thrive beyond it.
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听Sohana Samrin Chowdhury, an international development professional, has over a decade of experience managing UN, non-profit, and donor initiatives on economic development, humanitarian crises and youth employment projects.
