ISSUE BRIEF
Governance & Democratic Resilience

Digital Sovereignty in the AI Age: Bangladesh's 2026 Policy Crossroads

Navigating Data Colonialism, Economic Opportunity, and National Security

Inqilab Delta Forum | Governance & Democratic Resilience | January 5, 2026

Key Findings

  • Bangladesh’s digital economy is projected to reach $25 billion by 2030, but AI-powered services increasingly capture value that would otherwise flow to domestic firms
  • Currently, 85% of Bangladeshi user data is processed on servers located outside Bangladesh, creating security vulnerabilities and economic leakage
  • China offers AI infrastructure investment at attractive terms but raises surveillance and dependency concerns
  • India’s Digital Public Infrastructure (DPI) model provides an alternative but comes with political entanglement risks
  • Bangladesh has a window to craft a third path: open standards with domestic data sovereignty

The AI Colonialism Question

The global AI economy is creating new patterns of dependency that mirror historical colonial relationships. Just as raw resources were once extracted from the Global South to feed industrial factories in Europe and North America, today data is extracted from developing countries to train AI systems that create value elsewhere.

Bangladesh sits at a crossroads:

The choice made in 2026 will determine Bangladesh’s digital trajectory for a generation.

The Stakes

Consider the parallel to natural resources:

  • Countries that export raw bauxite earn pennies per ton while aluminum companies capture the value-add
  • Countries that process bauxite into aluminum capture more value but remain dependent on foreign technology
  • Countries that develop their own aluminum industry from mine to manufactured good capture full value

Data in the AI economy works similarly. Bangladesh must decide where it sits on this value chain.

The Data Extraction Economy

Bangladesh’s rapid digitalization has created valuable data assets:

User Data at Scale

Data Flows Today

Currently, approximately 85% of this data leaves Bangladesh for processing on servers located in:

This creates several problems:

Economic Leakage

When data is processed abroad, the economic value from AI development flows elsewhere. The AI models trained on Bangladeshi data become proprietary assets of foreign companies, which then sell AI services back to Bangladesh at premium prices.

Security Vulnerabilities

Data stored outside Bangladesh is subject to foreign jurisdictions, meaning:

Dependency Risk

If foreign companies control the digital infrastructure that Bangladesh depends on, they can exert leverage during political disputes. We’ve seen this with Russia’s exclusion from SWIFT, Iran’s isolation from global payment systems, and Venezuela’s difficulties accessing international markets.

The Dependency Dilemma

Digital dependency creates vulnerabilities that didn’t exist in the analog age. When Bangladesh depended on imported agricultural equipment, the worst case was supply chain disruption. When Bangladesh depends on foreign-controlled digital infrastructure, the worst case is economic paralysis during geopolitical conflicts.

The Chinese Offer: Silk Road for AI

China has positioned itself as Bangladesh’s partner for digital infrastructure development, expanding Belt and Road Initiative (BRI) cooperation into the technology domain.

The Package

Chinese tech companies, with state backing, have offered Bangladesh:

The Attraction

Chinese offers are attractive for several reasons:

The Risks

But Chinese digital partnerships carry specific risks:

Surveillance Backdoors: Chinese equipment and software have been found to contain surveillance capabilities that allow data access to Chinese state agencies. This isn’t theoretical—network equipment in multiple countries has been documented with these capabilities.

Standards Lock-in: Chinese technology often uses proprietary standards incompatible with global systems, creating dependency on Chinese ecosystems.

Political Pressure: If Bangladesh becomes dependent on Chinese digital infrastructure, China gains leverage during disputes. This matters given Bangladesh’s delicate relationship with India, which China sees as a rival.

The Sri Lanka Experience

Sri Lanka accepted Chinese investment in smart city infrastructure, only to find that:

  1. Equipment costs for expansion were higher than market rates
  2. Technical support required Chinese personnel with security clearances
  3. Data sharing agreements were more expansive than disclosed initially
  4. Political disputes led to service disruptions

This experience offers lessons for Bangladesh.

The Indian Alternative: Digital Public Infrastructure

India has proposed an alternative model based on its Digital Public Infrastructure (DPI) experience—open, interoperable systems that can be adapted for Bangladesh.

The DPI Model

India’s DPI consists of:

The Proposition

India has offered to help Bangladesh implement similar systems, with:

The Benefits

The Indian model offers genuine advantages:

The Concerns

But Indian cooperation carries its own risks:

The Third Path: Sovereign Digital Foundations

Rather than choosing between Chinese or Indian digital dependency, Bangladesh can pursue a third path: building sovereign digital foundations that enable partnerships on equal terms.

Data Residency Requirements

Bangladesh should establish clear data residency rules:

This creates economic opportunity: Bangladesh becomes a location for data centers serving not just domestic needs but regional markets.

National Cloud Infrastructure

Bangladesh should develop state-sponsored or state-regulated cloud capacity:

This allows foreign companies to operate in Bangladesh while ensuring data sovereignty.

AI Capacity Building

Rather than importing AI services, Bangladesh should build domestic AI capacity:

The Economic Case

Building domestic AI capacity makes economic sense:

  • AI services exported to Bangladesh cost foreign exchange
  • Domestic AI companies retain value within Bangladesh
  • AI-trained professionals can work remotely for global companies, earning foreign exchange
  • Bangladesh can export AI services to other Muslim-majority countries with similar needs

The question is whether Bangladesh will be an AI consumer or an AI producer.

Policy Recommendations for 2026

The interim government should establish the framework for digital sovereignty before elections transfer power to the next government.

Short-Term Actions (2026)

Data Protection Law: Pass comprehensive data protection legislation that:

National Cloud Initiative: Launch the Bangladesh National Cloud with:

AI Skills Fund: Create a $50 million fund for:

Medium-Term Framework (2026-2030)

Digital Sovereignty Strategy: Develop a comprehensive strategy covering:

Regional Cooperation: Work with other South Asian countries to:

The Bottom Line

Digital sovereignty is not about isolation—it’s about agency. Bangladesh can engage with Chinese, Indian, American, and European technology companies on equal terms only if it has domestic capacity and legal frameworks that protect national interests. 2026 is the year to establish those foundations.

Conclusion

The AI age is creating new patterns of global inequality. Countries that establish digital sovereignty early will capture the benefits of the AI economy. Countries that remain data colonies will export raw data and import expensive AI services, perpetuating economic dependency.

Bangladesh has a brief window to choose its digital future. The decisions made in 2026 will determine whether Bangladesh becomes a digital sovereign or a data dependency in the AI age.

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Inqilab Delta Forum

Governance & Democratic Resilience

Digital Policy AI Sovereignty Technology Economic Development Data Protection

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