Turnover tax and high interest rates threaten business competitiveness: Experts

The country's current tax and financial policies are eroding competitiveness, discouraging diversification, and punishing compliant businesses, experts have warned. 

They argue that the combination of a turnover tax, high borrowing costs, and bureaucratic inefficiencies is undermining the long-term sustainability of export growth.

Speaking at a panel discussion on "Protecting Market Share of Current Exports and Driving Diversification" during the Economic Reform Summit 2025 in Dhaka today (27 October), Syed Nasim Manzur, managing director of Apex Footwear, said Bangladesh's tax structure and policy environment have created a "bias against exports."

Manzur criticised the 0.5%-1% turnover tax levied on exports, which applies regardless of profit or loss. "This is an anti-export bias that effectively penalises exporters," he said. "In Bangladesh, those who pay taxes are the ones who get taxed more, while those who evade taxes are indirectly subsidised by compliant businesses."

He noted that the prevailing 13.5% lending rate makes it impossible for export-oriented industries to remain competitive globally. "No manufacturing industry can survive at that rate when India offers loans at 7% and Vietnam at 4%," he said.

Manzur added that weak tax administration, restrictive customs practices, and an "anti-export mindset" within regulatory agencies have further worsened the business climate.

'Diversification now a survival strategy'

M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, presented the keynote paper at the programme.

Nasim Manzur said sustaining Bangladesh's export growth now requires two concurrent strategies: market protection and diversification.

He said the economy has reached a crossroads. "Our export base remains dangerously concentrated in the garment sector. Any global market shock or policy shift could destabilise the entire economy," he warned.

Manzur said entrepreneurs seeking to enter non-RMG sectors face unnecessary scrutiny. "For example, a stuffed toy exporter is often questioned just because they're not in apparel. This mentality discourages diversification."

Citing post-pandemic market shifts, he said global demand for outdoor gear and toys has surged, yet Bangladesh has failed to seize those opportunities. "China managed to transition millions of agricultural workers into simple industrial jobs like garments, footwear, and assembly lines. Bangladesh could follow the same model."

Emerging sectors face barriers

Umma Nazia Rasha Khan, CEO of RMS Corporation, said Bangladesh's bag manufacturing industry has strong export potential but faces severe compliance and financing barriers. "Obtaining international certification costs over $5,000 per facility – unaffordable for most startups," she said. "With 90% of raw materials imported from China, local value addition remains limited."

Taslima Miji, CEO of Leatherina, said the leather sector must invest in better design, quality, and automation to compete globally. "Local entrepreneurs face intense competition from imported goods," she said. "Sustainability, efficient supply chains, and ERP-based procurement and quality control systems are essential for progress."

Sadaf Saaz, founder and CEO of EskeGen, noted that Bangladesh's pharmaceutical industry – 99% locally owned – exports generic medicines to 150 countries. She said the next growth frontier lies in biosimilars, as many biologic drugs will lose patents in the next five years, expanding the global biosimilar market to $100 billion. "Bangladesh can leverage its generics expertise to build biotechnology capabilities for R&D and production," she said.

Shahrukh Islam, CEO of Bondstein, highlighted the challenges faced by Bangladesh's technology sector, particularly limited global exposure and weak skill development. "Foreign clients demand up to four times more due diligence, forcing firms to open offices abroad," he said. "Unlike India or Vietnam, we don't have early-stage government sponsorship for international expos."