The country鈥檚 businesses are currently facing three major challenges: law and order and security concerns, contractionary monetary policy and associated economic trends, and energy supply disruptions, said Ashraf Ahmed, president of the Dhaka Chamber of Commerce and Industry.
In an interview with 抖阴精品 recently, he said that these challenges were significantly affecting business climate in the country.
The business leader expressed the need for the government to move away from a contractionary monetary policy as soon as practicable.
He suggested that borrowing from foreign sources would be necessary to finance the budget deficit.
Ashraf emphasised that improving the investment climate would be crucial to fostering economic growth and sustaining employment.
He said that the current economic condition was deeply affected by the law and order scenario, and despite significant improvements since August, it was yet to reach the desired level of stability.
鈥楤usinesses are affected by indiscriminate allegations and lawsuits, disruptions in economic activities, sometimes caused by labour and other unrests, which depresses economic capacity,鈥� the DCCI president said.
He also mentioned that without a stable and predictable security environment, new investments which create jobs, were difficult to come by.
Ashraf pointed out that the performance of 10 largest listed manufacturing companies, which are indicative of the overall sector, between July and September of 2024 painted a concerning picture.
He explained that margin compression was evident, as sales increased by 1 per cent while costs rose by 2 per cent. Consequently, after accounting for higher interest payments, operating profit declined by about 11 to 12 per cent, he said.
Ashraf highlighted that certain sectors, such as building products, including steel and cement, were experiencing a more pronounced decline in sales. In some cases, sales volumes had dropped by 20 to 25 per cent, which indicated a very challenging for the next few months, he observed.
The DCCI president said that the recent contractionary monetary policy was creating additional challenges for the economy.
He said that inflation was affecting consumer demand, which was already evident in lower demand for non-food consumables.
鈥楨xchange rate depreciation and rising interest costs have pushed the import costs upward, despite reductions in duties, and this is creating price pressure on the supply side,鈥� the business leader said.
He also said that a contractionary monetary policy had constrained the flow of working capital to businesses, reducing their capacity to keep the markets supplied appropriately.
He suggested that the government should look at reversing the contractionary monetary policy for inflation control after December and increase the supply side support.
Ashraf also said that the increase in non-performing loans in banks was a major concern, and the recent increases in interest rates and changes in regulations on classification were likely to increase the level of NPLs further.
He also said that the ongoing energy crisis was a significant issue.
Ashraf said that without a reliable and uninterrupted energy supply, industries would not be able to maintain their productive capacity.
鈥榃e need to invest in increasing local production, but also need to continue expanding our capabilities to improve energy efficiency, and a better import, transmission and distribution network,鈥� the DCCI president said.
Ashraf said that ADP disbursements had dropped significantly over the past three months, warning that a decline in public investments, coupled with low private sector investments, could pose serious challenges to economic growth.
The DCCI president discussed the issue of revenue generation in the context of the budget, emphasising the need to increase the number of taxpayers without raising the tax rate.
He suggested that to increase tax net effectively, automation projects would need to be properly implemented.
The business leader argued that a country like Bangladesh could not function without a deficit budget, as investments were necessary for growth.
He recommended that the government focus on sourcing deficit financing from external sources rather than relying on loans from local banks and avoid crowding out private sector investments.
Ashraf emphasised that, regardless of whether Bangladesh graduates from LDC status, the country must increase its economic and governance efficiency and domestic support measures.
He pointed out that Bangladesh lacks natural resources for exports and, therefore, industrialisation and exportable services are essentially the only way to fully utilise the country鈥檚 human resources.
He highlighted the crucial role that subsidies in the export sector play in bridging the capacity gap and enabling businesses to compete.
He said that if incentives were to be removed, the cost of doing business would need to be reduced in order to maintain competitiveness, otherwise, exports could decline.
Regarding the challenge of automation, Ashraf said that automation was an unavoidable trend, and structural unemployment resulting from technological transitions was also inevitable.
He suggested that the country should focus on upskilling and diversification where possible.
