Frequent policy changes deter investment: Rising Group MD

Frequent and abrupt policy changes in a country deter investors as investment decisions are largely based on the policies of the government in power, said Mahmud Hasan Khan Babu, managing director of Rising Group, one of the leading industrial conglomerates in Bangladesh with investments in textiles, garments, accessories, finance and economic zones.

In a recent interview with TBS, Mahmud Hasan, who is also a former vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said law and order in the country remains a significant concern for businesses. He emphasised that immediate improvements are necessary to boost investor confidence.

The interview was conducted by TBS Senior Correspondent Reyad Hossain.

How do you see the investment environment in the current situation?

The law and order situation is improving, but very slowly. It needs to improve more rapidly. Additionally, entrepreneurs want a clear picture regarding elections and the future government structure. What will the next government's plans be? In an uncertain environment, not only foreign investors but also local investors hesitate to make investments.

Broadly speaking, there are two types of businesses: traders and manufacturers. While traders can somewhat adapt to any situation, manufacturers face greater challenges.

Once production begins, factors like infrastructure, the political environment, government policies and utility services like gas and electricity become critical. Even if the environment becomes unfavorable, manufacturers cannot simply shut down operations. Therefore, they have to carefully assess all factors before investing.

Are investors waiting for supportive policies?

Yes, investment decisions are largely based on the policies of the government. It's not a matter of deciding to invest today and starting production tomorrow. After making an investment decision, it can take about a year to implement it.

For example, if I decide to invest now, it would take until the end of 2025 for the investment to materialise fully.

During this time, local investors might make some decisions, but foreign investors are holding back. If decisions are made after the new government takes office next year, implementation will take another year.

This means that investors are still in a state of uncertainty, and significant investments in 2025 seem unlikely.

We want to know what the business environment or policies will look like. Unfortunately, Bangladesh has a reputation for frequently changing policies.

How supportive are Bangladesh's policies for investment?

In sectors like economic zones, certain tax and VAT incentives are provided to attract investments. However, once investments come in, these incentives are gradually being withdrawn, which discourages investors.

If incentives are not going to be offered, this should have been clarified beforehand. There might not be any legal barriers to removing these incentives after investment, but this sends a message to both local and foreign investors that "policies in Bangladesh are not consistent." Policies can change at any time, and in such an environment, investors become reluctant.

Recently, we saw that midway through the fiscal year, VAT and supplementary duties on several products and services were increased. There are also discussions about removing tax exemptions for some industries. Such abrupt tax hikes midway through the year are unprecedented. These decisions discourage both local and foreign investments in Bangladesh.

Bangladesh is graduating from LDC status; how prepared are you?

One of the key challenges we face now is maintaining the momentum of export trade after graduating from Least Developed Country (LDC) status. To do this, we need to enter into Free Trade Agreements (FTAs) with several countries. However, the necessary groundwork for this is not being done.

Are garment orders declining due to recent events in Bangladesh?

There have been claims that garment orders are declining due to recent happenings in Bangladesh. I would say, no, orders are not decreasing. However, the shift in orders from China that could have been captured by Bangladesh is not happening. These orders are going to Vietnam, India and other countries.

Are you getting the real price from buyers?

If I go for excessive capacity, buyers will take advantage of the opportunity to purchase at a lower price. Additionally, if a supplier becomes overly dependent on a particular buyer, it can lead to challenges. A supplier should not rely on any single buyer for more than 25% of his or her capacity.

Furthermore, pricing is a strategy; it cannot be raised openly. To charge higher prices from buyers, new styles and fashion elements must be introduced. Additionally, the pressure of higher costs can be managed by improving efficiency.

By enhancing efficiency in supply chain management, factory operations and production management, we can maintain competitiveness. While we are making some progress in this area, more attention is required.