Amid mounting pressures, the private sector remains the principal driving force of the country’s economy. Prolonged high inflation, uncertainty in energy supply, elevated lending rates and a deterioration in law and order have pushed industrial enterprises into severe stagnation. According to entrepreneurs, at least 500 small and large factories have been closed over the past 18 months, leaving hundreds of thousands unemployed, while the industrial production index has fallen by 12 per cent. In such circumstances, mere assurances will not restore confidence.
Business leaders are calling for clear policy direction, realistic action plans and long-term reform strategies to halt the haemorrhaging in industry. They say they had long hoped for an elected and stable government to overcome the investment slowdown. Following the BNP’s landslide victory in a festive election, the business community is set to have an elected government under the leadership of Tarique Rahman. The private sector accounts for around 80 per cent of GDP and the bulk of employment.
Restoring confidence and momentum in this sector will therefore be the new government’s greatest test. Without swift policy reforms, an investment-friendly climate and stronger institutional capacity, it will be difficult to keep the overall economy moving, stakeholders warn.
Deepening wounds in industry
Entrepreneurs in the ready-made garment sector—the country’s principal export earner—as well as in real estate, steel, cement and leather acknowledge that the internal damage to industry is now profound. Analysis of data from Bangladesh Bank and the Export Promotion Bureau (EPB) shows a worrying decline in new investment in recent quarters. Many factories are operating at less than half capacity.
At a meeting on 4 January with BNP Chairman Tarique Rahman, industrialists presented what they described as a bleak picture. They said production costs had risen geometrically, while policy support had not kept pace. Instead, high lending rates and energy uncertainty were leaving industry enfeebled.
Following the meeting, former FBCCI President Mir Nasir Hossain said energy shortages, law and order concerns, weaknesses in the education system, high business costs and excessive reliance on bank financing were among the issues raised. He stressed the need for improved security for both industry and the public, as well as infrastructure development, without which neither industry nor employment can grow. He added that assurances had been given that bureaucratic harassment and policy obstacles would be addressed if the BNP formed the government.
Anwar-ul-Alam Chowdhury, President of the BCI, said respect for businesspeople was essential. “They are too often branded wholesale as dishonest. Yet to expand the economy, the government must work with them,” he said.
Entrepreneurs argue that restoring stability in the energy sector and reducing unbearable lending rates are urgent to increase the flow of industrial credit. They also emphasise modernising labour laws and strengthening security in industrial zones. Policy pronouncements alone will not suffice; administrative harassment must end and a genuinely investment-friendly climate must be created.
Crisis of confidence and a roadmap of expectations
In recent years industrialists have faced successive challenges: disrupted production due to energy shortages, soaring lending rates, worsening law and order and labour unrest. Together these have constrained output.
Business associations say the greatest obstacle to long-term investment is now a crisis of confidence. Beyond improvements in security and energy supply, investors seek overall stability in economic strategy. They expect a clear economic roadmap from the new government. Consistency in tax policy, exchange rates, interest rates and import regulations would enable investors to make informed decisions.
Taskin Ahmed, President of the Dhaka Chamber of Commerce and Industry (DCCI), said increasing employment is impossible without boosting private investment. He urged the new government to prioritise restoring law and order and rebuilding business confidence, alongside reforms to ease of doing business, supply chain development, energy stability and banking sector reform.
Former BGMEA director Mohiuddin Rubel said the export sector cannot survive without stability. “Foreign buyers want to know how reliable the supply chain is. If the new government strengthens economic diplomacy and swiftly undertakes structural reforms in power, energy and banking, confidence will grow,” he said.
Inflationary pressure and shrinking demand
Food inflation has at times reached double digits, eroding real incomes for middle- and lower-income groups. As consumption contracts, market demand has weakened, affecting businesses.
Mustafa K. Mujeri, former Director General of BIDS and former Chief Economist of Bangladesh Bank, said that high inflation combined with low investment inevitably slows the economy. If the new government uses its political mandate to initiate rapid policy reforms, he added, it would send a positive signal to the market.
Economic challenges and a three-point prescription
According to the latest report from the General Economics Division of the Planning Commission, the economy faces five key challenges: stagnant investment, a large revenue shortfall, instability in trade, declining purchasing power and growing dependence on public debt.
Entrepreneurs seek a clear roadmap from the government and the central bank in three areas. First, uninterrupted gas and electricity supply must be ensured. While prices have risen, quality and reliability have not improved. A long-term energy policy guaranteeing availability over the next five years is needed.
Second, lending rates have exceeded 15 per cent, an unsustainable burden for SMEs. Entrepreneurs argue that well-performing businesses should not be penalised for the problem of non-performing loans.
Third, administrative harassment and bureaucratic complexity must end, and the ease of doing business must improve. The promised one-stop service should be implemented in practice, not merely on paper.
The way forward
Economists stress that the roadmap must be participatory. Policies imposed unilaterally will not suffice; stakeholder consultation is essential. Investors must be convinced that their capital is secure.
Analysts warn that without sustained political stability, investors will remain cautious. Without higher investment, growth will slow, employment will decline and inflationary pressures may persist. As business leaders put it, restoring confidence depends not only on economic decisions but also on administrative and policy reforms.
The election verdict has opened a new political chapter. Attention now turns to the economy. Restoring confidence in the private sector and accelerating investment and employment will be the new government’s greatest challenge.
Dr M. Masrur Reaz, Chairman of Policy Exchange Bangladesh, said weaknesses in law and order and the failure to involve the private sector in policymaking have stalled growth drivers. Recent incidents of attacks and violence have severely undermined the investment climate, he added, calling it a major and festering obstacle to economic progress.
