How Bangladesh's central bank uses tech to navigate geopolitics
The central bank of Bangladesh is leveraging technological solutions to enhance its management of $26 billion in foreign exchange reserves while reducing traditional currency dependencies, according to Mohammad Mahbub Alam, director of Forex Reserve and Treasury Management at Bangladesh Bank.
"All our indicators point towards further technology integration. I strongly support this direction as it is data-driven, more accurate, dynamic, and risk-adaptive to new market trends,” Alam said at AsianInvestor's 14th Southeast Asia Investment Forum in Bangkok on Nov. 8.
A tech-driven approach greatly enhances the practicality and efficiency of managing Bangladesh's international reserves, he added.
"Although our reserves aren't extremely large, they're of an average size globally, we see this approach as very cost-effective compared to using external managers," he explained.
TECH-DRIVEN DIVERSIFICATION
The central bank's modernisation efforts align with a regional trend toward data-driven reserve management, particularly useful for adapting to shifting currency movements and trade patterns.
With the Bloomberg dollar index showing sustained weakness through 2024, officials have sought to explore alternatives beyond traditional dollar holdings, according to Alam.
"The US and Eurozone are in dominant positions but appear to be reaching saturation points," he said.
"As a central bank and asset owner, we're exploring alternative currencies and currency basket approaches for our reserves, particularly considering currencies like CNY or JPY given our bilateral trading relationships," Alam said, referring to the Chinese yuan and the Japanese yen.
The bank’s use of tech-enabled management has resulted in more responsive approaches to currency diversification, allowing for quicker adjustments to market shifts and regional trading patterns.
"We're also looking at fixed income securities, government bonds, and supranational bonds for investment," said Alam. "The timing appears right for bond investments compared to other options."
REGIONAL OPPORTUNITIES
Private investors, meanwhile, have also found new opportunities in the shifting investment landscape, particularly in areas such as shipping, energy, and manufacturing, said Shiraz Poonevala, director of investment at Thai single-family office GP Group.
GP Group
The firm, which manages investments across multiple Asian markets, has observed significant changes in regional investment patterns largely driven by geopolitical tensions.
"Shipping has benefited immensely from the problems in the Middle East and use of the Red Sea, with ships now going around the Cape of Good Hope and increasing their shipping miles,” Poonevala said at the same forum.
Recent political developments have also reinvigorated traditional energy sectors, he said.
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"Following the recent US election, we're seeing renewed enthusiasm in fossil fuels,” Poonevala noted. “While our renewable energy investments have seen less momentum, traditional sectors like coal and oil are experiencing a strong revival."
MARKET OPPORTUNITIES
GP Group operates across 23 geographies, and the varying regulatory environments across Asian markets present distinct challenges and opportunities.
"Each market is different," Poonevala shared. "We just did a deal in Singapore, which is pretty seamless. And in a similar industry, we're looking at a deal in Indonesia which is proving to be a very, very different experience from the due diligence to the legal advice."
China's evolving role in global trade has also created new regional opportunities, he said.
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"The other big one is sanctions and what trade barriers may bring to China, which could mean reshoring to Thailand," Poonevala said.
"There's always opportunities that come with geopolitics, as long as you model right," concluded Poonevala, emphasising the importance of local market understanding in navigating the evolving landscape.