From policy to practice: The missing link in Bangladesh’s industrial transformation

^{The National Industrial Policy 2022 of Bangladesh envisions a competitive, inclusive and export-oriented industrial sector, with a clear motivation to increase skills, productivity and employment, aiming to contribute 40% to the GDP by 2027.} 

^{The policy outlines a clear mission and vision, supported by strategies that reflect its commitment to industrial development. It emphasises the development of backward and forward linkages, the adoption of Fourth Industrial Revolution (4IR) technologies, sectoral diversification, SME and startup support, access to finance, and the establishment of special economic and high-tech zones to foster long-term industrial growth.}

^{To operationalise its goals, the policy includes a well-articulated, time-bound action plan detailed in Chapter 21. This plan breaks down actions across eighteen thematic areas, specifying clauses, activities, responsible ministries, divisions, organisations, and their respective implementation timelines. Supporting organisations are also listed, with forty-two specific activities identified — each relevant and supportive of the policy's broader targets.}

^{However, a critical review reveals that very few of these forty-two planned activities have been implemented or even initiated. Notably, while the policy advocates for a mapping exercise of innovative industries and the formalisation of informal enterprises — key steps requiring a comprehensive database, planning, research, and human resources — little progress has been made.}

^{The recently announced CMSME Refinancing Master Circular 2025 by Bangladesh Bank (BB) includes provisions for informal enterprises, allowing them to access loans up to Tk5 lakh using documents such as a Unique Business Identification (UBID), Digital Business Identification (DBID), or a Personal Retail Account (PRA). However, banks have yet to recognise these alternatives in place of a traditional trade license. They have requested the Ministry of Commerce to issue a formal directive to Bangladesh Bank, asking that these documents be accepted. The Ministry of Industries should actively follow up on these developments to support the survival of micro-enterprises.}

^{A startup financing scheme was also introduced by Bangladesh Bank, but implementation remains sluggish. A new scheme has been announced recently, and the national budget for FY 2025–26 has allocated Tk100 crore for startups. Yet, a clear implementation strategy is still pending. Special allocations for women entrepreneurs (WEs) were also included, both in the CMSME master circular and the 2025–26 budget. However, stringent conditions are likely to hinder their ability to access these funds, casting doubt on the effectiveness of these measures.}

^{Other initiatives — such as cluster-based industrial development, establishing industrial parks in underprivileged areas, promoting linkage industries in economic zones, providing bonded warehouse facilities, cash incentives for export-oriented industries, and duty drawbacks — were also included in the policy. Yet, these remain largely unimplemented.}

^{The policy also highlights reforms for state-owned industries, aiming to enhance their efficiency, profitability, and productivity. It emphasises green productivity, resource efficiency, and regional industrial development. Yet again, implementation has been minimal.} 

^{Despite government commitments to green initiatives and the need for skilled manpower, these goals require budgetary support and coordination with other policies. The implementing authorities named in the action plan need to be energised, and the policy must move beyond being a wish list to functioning as an actionable legislative framework.}

^{Further, the policy calls for the implementation of TRIPS, harmonisation of standards, encouragement of import-substitute industries, supportive tax policies, improved utilities for export-oriented industries, and export diversification. It also emphasises the role of embassies and commercial counsellors, foreign investment, 4IR technologies, R&D, branding, inter-ministerial coordination, and monitoring and evaluation.}

^{Though the Industrial Policy 2022 offers a meticulously drafted action plan, its monitoring and evaluation mechanisms are weak, and the implementation strategy has not been robust enough to show meaningful results in the two years since its adoption.}

^{The policy lists 180 industry sectors under various categories: export diversification sectors (15), special development sectors (18), priority sectors (17), services sectors (34), reserved sectors (4), controlled industrial sectors (22), agricultural sectors (41), tourism sectors (12), and logistics sub-sectors (21). Each of these sectors requires tailored strategies. Merely listing them is insufficient. A single ministry cannot realistically cater to the distinct needs of all these sectors. Overlapping policy mandates discourage ministries and agencies from taking ownership. For instance, small and micro entrepreneurs involved in manufacturing agricultural machinery report not knowing which ministry is responsible for supporting them.}

^{Since independence in 1971, Bangladesh has adopted twelve industrial policies — the most recent being the Industrial Policy 2022. However, effective policy coherence and alignment with fiscal and developmental priorities remain absent. A review by BUILD (Business Initiative Leading Development) highlighted a disconnect between declared policies and their implementation. The country's industrial growth models have repeatedly shifted directions, stumbling towards a clear strategic path.}

^{Bangladesh's structural transformation has been significant, with the share of agriculture in GDP dropping from 29.2% in 1990 to 11.02% in 2023. Over the same period, the industry's share nearly doubled — from 21% to 37.95% — while the service sector has maintained a relatively stable and growing share, underscoring its resilience.}

^{Despite efforts to diversify, over-reliance on the readymade garment (RMG) sector persists. Most new industries remain heavily dependent on imported raw materials. According to the World Bank (2021) and UNIDO (2022), poor institutional coordination, weak industrial innovation, and insufficient support for SMEs and green technology are major impediments to transformative industrialisation in Bangladesh.}

^{National budgets over the years have attempted to reflect strategic alignment with goals of industrial diversification, green transition, SME support, and inclusive growth. However, execution has been inconsistent. For example, the FY2022–23 budget of Tk6.78 trillion focused on post-pandemic recovery and infrastructure development under PPP models to serve industrial zones. But it lacked targeted support for green transition, R&D, or technology transfer. Similar patterns persisted in the FY2023–24 budget of Tk7.61 trillion, which emphasised digitisation and automation, yet environmental and green innovation received negligible attention.}

^{The FY2024–25 budget, totalling Tk7.97 trillion, made a more concerted attempt to align sustainability, digital transformation, and industrial development. It introduced a green taxonomy framework, commitments to ESG standards in industrial financing, and improved support for technical education, skills, and export readiness. Yet, performance evaluations are missing, and questions remain about whether allocations are effectively used for implementing policy objectives.}

^{Bangladesh's industrial landscape is dominated by micro and small enterprises — 87% of all establishments (36% micro and 51% small). Large industry growth peaked in FY2021–22 at 18.33% due to post-Covid recovery but declined to 13.03% by FY2023–24. SMEs experienced their highest growth in FY2020–21 (19.39%), followed by a dip and a recovery in FY2022–23 (16.71%), then a slight moderation to 12.45% in FY2023–24, still outpacing large industries. Cottage industries remained consistently strong, with growth ranging between 13.27% and 17.51%, peaking in FY2022–23 due to strong rural demand and support initiatives. These sectors represent a critical pillar of industrial strength that must be nurtured through innovation and technology support.}

^{Following the July 2024 uprising, several large corporate owners have left the country, exacerbating unemployment. Investor confidence remains low, and existing investments are stalled. Until national elections restore stability, the industrial investment outlook will likely remain sluggish.}

^{In this context, full implementation of the Industrial Policy 2022's action plan must be prioritised. A coordinated strategy and its visible enforcement could restore confidence among industrial stakeholders and pave the way for inclusive and resilient industrial transformation.}

Ferdaus Ara Begum is the CEO of BUILD — a public-private dialogue platform that works for private sector development

^{Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.}