Plummeting demand, rising costs dampen business confidence: EIB

The business sector is facing sinking domestic demand, escalating operational costs, and restricted financing options, according to a comprehensive survey by the Economic Intelligence Bangladesh (EIB), a research publication of The Business Standard and DataSense.

The research, included in the sixth issue of the EIB released on 10 November, assessed business confidence of 20 leading companies from five different sectors amid a deteriorating business climate over the past six months, driven by political, regulatory, supply-side, and environmental challenges.

The survey focuses on six critical areas affecting business – demand, operational costs, access to financing, regulatory barriers, macroeconomic factors, and supply constraints.

Almost half – 45% – of respondents reported that demand for products and services in domestic markets is declining. In contrast, they expressed optimism about demand for their products in foreign markets.

Of the business leaders, 95% and 90% blamed utilities and transport, respectively, for the highest increase in operational and business costs.

Regarding barriers to accessing financing, 85% of the leaders cited higher interest rates on business loans, followed by fewer local investment opportunities and limited loan facilities.

The lengthy process of licensing and permits in Bangladesh is the most significant regulatory and legal problem faced by businesses, according to half of the respondents, followed closely by the inefficiency of VAT/Tax process.

In terms of supply-side constraints, issues like insufficient transportation infrastructure, expensive raw materials, and unavailability of raw materials are increasing.

The survey additionally featured a Business Confidence Index (BCI), where five sectors were evaluated based on factors that boost confidence or act as disincentives for business operations.

The findings paint a broadly pessimistic picture of Bangladesh's business landscape, with each sector scoring negatively on the BCI scale, which ranges from -100 (extremely low confidence) to +100 (high confidence).

Businesses showed the lowest confidence in the banking sector, which scored -18.11, followed by the agriculture, food processing, and agricultural tools sector at -15.52, and the RMG sector at -14.14.

Other sectors, such as services and ICT/software, registered relatively higher but still negative confidence scores of -8.62 and -2.3, respectively.

These figures suggest that businesses across sectors are struggling with low confidence, likely due to persistent economic and regulatory challenges.

The latest issue of EIB, which further explores the current state and prospects of foreign direct investment, the condition of economic zones, and the role of startups in attracting investment while featuring two case studies on how work culture impacts RMG productivity, is available at https://intel.tbsnews.net/6th-issue/.