Restoring confidence of the private sector comes first

The index of all manufacturing enterprises – covering large, SMEs, and cottage industries – fell to 188.80 in October 2024, down from 197.75 in September and 195 in August, according to the latest BBS data. This drop marks a sharp contraction in industrial production, with the index standing at 203.33 just three months earlier in July, the first month of the fiscal year.

The decline is more than just a number; it reflects a significant contraction in economic activities within Bangladesh's industrial backbone. Manufacturing, a key contributor to GDP, is now visibly under strain, dragging the country's growth prospects. The situation is grim: GDP growth in the July-September quarter plummeted to 1.81%, the lowest in 15 quarters.

The impact on businesses has been profound, eroding both investor and consumer confidence. Syed Nasim Manzur, managing director of Apex Footwear and former president of MCCI, painted a bleak picture: "I have never experienced such a difficult time in my 34-year business career." His remarks at a public meeting on 18 January resonated with many in the private sector.

Inflation, high interest rates, demand slowdown and energy uncertainty have become the major challenges crippling businesses. The private sector, already grappling with the fallout of taka devaluation and declining export demand, now faces unsustainable financial pressure.

Take the case of JMI Group, a diversified business involved in LPG and medical devices. The group's monthly interest payments have more than doubled over the past year, soaring to Tk40 crore in December 2024 from Tk18 crore a year ago, said its managing director, Md Abdur Razzaq. This crippling burden reflects the wider issue of rising borrowing costs.

The economic slowdown is evident in consumer markets, too. Motorcycle sales, a key indicator of middle-class spending power, have plummeted. Biplob Kumar Roy, CEO of TVS Auto Bangladesh, revealed that bike sales halved to 3 lakh units in 2024, compared to 6 lakh units in 2022. Meanwhile, the industry's installed capacity stands at 10 lakh units, leaving factories underutilised and workers vulnerable.

Amid this situation, businesses are now calling for urgent government intervention. With persistently high inflation, energy insecurity, and an increasingly fragile banking system, the private sector fears the economic crisis could deepen further unless decisive steps are taken.

Bangladesh's private sector stands at a crossroads. Without immediate measures to address these systemic challenges, the industrial and economic backbone of the nation risks further deterioration. As Syed Nasim Manzur aptly said, "Economic stability is fundamental. Without it, there can be no long-term stability for Bangladesh."

Rizwan Rahman, former president of the Dhaka Chamber of Commerce and Industry (DCCI), offers a different perspective on the challenges faced by the business community.

According to Rizwan, over the past decade and a half – and particularly in the last ten years – business organisations in Bangladesh have failed to effectively protect the interests of businesses.

"Not only have trade bodies remained ineffective, but they have also been silent on the economic bleeding that the country has experienced," he said. "The primary reason for this is their partisan alignment with the then government, which has undermined their independence and effectiveness."

This failure, Rizwan explained, has weakened most business organisations, allowing predatory groups to gain strength. These groups have syphoned off billions of taka from banks unchecked, further harming the economy.

While preventing such exploitation is the responsibility of relevant government departments, the inability of trade bodies to fulfil their roles has ultimately hurt genuine businesses, he added.

What's the way forward? 

The pressing question now is how the private sector can recover and thrive.

Analysts and business leaders agree that restoring confidence in the private sector should begin with ensuring a stable law and order situation. Without this foundation, local and foreign direct investment (FDI) will remain scarce, and new employment opportunities will not materialise.

Diversifying industries is another crucial step. The ready-made garment (RMG) sector currently accounts for 85% of Bangladesh's exports, leaving the economy vulnerable to over-dependence on a single sector. Diversification would help reduce this risk and create new growth opportunities.

Anwar-Ul-Alam Chowdhury, president of the Bangladesh Chamber of Industries (BCI), highlighted three major challenges holding back businesses: energy shortages, inefficient banking systems, and labour unrest.

"We are yet to see any tangible improvements in these areas, and there's uncertainty about whether conditions will improve in the near future," he said.

Adapting to global standards 

Bangladesh must also prepare for emerging global challenges, such as the European Union's Corporate Sustainability Due Diligence Directive (CSDDD).

Trade economist Mohammad Abdur Razzaque said nearly half of Bangladesh's exports go to EU markets. The new directive, aimed at aligning supply chains with rigorous sustainability standards, could be a game-changer for the garment industry and other export-oriented sectors.

"This directive has the potential to reshape corporate practices globally, posing both challenges and opportunities for Bangladesh," Razzaque said.

To boost its economy and remain competitive in global markets, Bangladesh must address these critical issues, invest in diversification, and align with international standards – all while restoring confidence in its private sector, he said.