A mixed bag for interim rulers from businesses

It's a mixed bag for the interim government in the first year in office as business leaders appreciate some policy progress while expressing frustration over persistent structural bottlenecks, law-and-order problems, and a widening government-private-sector gap.

Such split views come from the basic industrial and potential technological sectors and Bangladesh's main export industry, as business leaders list high corporate taxes, inadequate private credits, inflationary pressures, high interest rates and shrinking consumer spending among causes of concern.

Metropolitan Chamber of Commerce and Industry, Dhaka President Kamran Tanvirur Rahman has said law and order has improved compared to last year, but challenges remain.

He terms rising non-performing loans (NPLs), now exceeding Tk 4.2 trillion, "alarming," blaming longstanding weaknesses exposed by the IMF's strict conditions.

Mr Rahman acknowledges improvements in foreign-currency reserves and exchange-rate stability at Tk 122-123, but notes that rising foreign-debt repayments and stubborn inflation remain pressing issues.

He also warns of an "exit-policy" vacuum, declining capital-machinery imports, high interest rates of 13-14 per cent, and persistent non-fiscal hurdles such as bribery and extortion.

He has said industries are also suffering from inadequate energy supplies, as gas production has not been explored or expanded in recent years. "Importing gas at a high cost to run industries is not an ideal approach."

Remittance inflows are increasing, thanks to the large overseas labour market, which is, however, dominated by unskilled workers.

Over 65 million people are in the labour force, with around 2.5 million young entrants joining each year. "We are not able to generate enough employment for them," he told the FE.

Referring to expatriate income levels, Mr. Rahman points out that the per- capita income of Indian expatriates is about double that of Bangladeshi expatriates, while Sri Lankans earn three to four times higher. He has attributed this to the larger proportion of skilled workers in those countries.

Although many Bangladeshis have skills, they lack certification. He suggests that the government undertake a massive programme to develop skills before workers go abroad, terming the current initiatives insufficient.

On investment trends, he notes that imports of capital machinery have declined as businesses are reluctant to invest, given high interest rates.

The compound effective rate is even higher, he said, making it difficult for businesses to sustain operations. Without local investment, foreign direct investment (FDI) is also unlikely to come.

He further mentions that some non-fiscal factors - such as bribery and extortion - have not improved and, in some cases, have become "Very alarming."

President of DCCI Taskeen Ahmed has said over the past year, the interim government made notable progress in reducing the current-account deficit to $432 million in the first 11 months of FY2025, easing dollar shortages, lowering inflation, and securing a reduction in US reciprocal tariffs from 35 per cent to 20 per cent.

These steps have strengthened business confidence and export growth. Yet, GDP growth has slowed, and challenges persist in restoring law and order, ensuring reliable gas supply, addressing high NPLs, boosting private sector credit growth, reducing high interest rates, and sustaining competitiveness, he added.

The Dhaka Chamber president urges the government to maintain policy consistency, implement energy-sector reforms, lower interest rates for CMSMEs, ensure political stability, and pursue targeted skills and export diversification to create a transparent, competitive, and investment-friendly economy.

Political leaders also expressed concerns over governance problems and corruption.

BNP Secretary-General Mirza Fakhrul Islam Alamgir recently claimed that bribe rates increased fivefold in the past year, and that there is "no good governance or control anywhere".

While acknowledging that overnight reform is unrealistic, he stressed that democratic institutions must be restored promptly to facilitate lasting reforms.

Former Dhaka Chamber of Commerce and Industry (DCCI) president Rizwan-ur Rahman says the business climate is still hampered by high corporate taxes, negative private-sector credit growth, inflationary pressures, high interest rates, and shrinking consumer spending.

"Access to finance remains very difficult, and financial-sector reforms have stalled," he told The Financial Express Tuesday.

He laments the failure of successive governments to replicate the ready-made garment sector's success in other potential industries such as footwear, agriculture, ICT and light engineering.

Law and order, he argues, has seen no real improvement, citing the law adviser's recent admission that 'mob justice' remains a major governance failure.

Rizwan also accuses the post-uprising interim administration of bypassing business consultation in key policy changes, including amendments to DTO rules, which have triggered multiple legal disputes.

"We have never seen such a gap between an unelected government and the private sector," he says, noting that even in 2007-08, the caretaker administration regularly engaged business leaders through the "Bangladesh Better Business Forum".

One of the government's major shortcomings, in view of the former DCCI leader, is the widening gap between the government and the private sector.

The interim government has amended laws and regulations, including changes to DTO rules, without prior consultation with business leaders, resulting in legal disputes across the country.

Such disconnect, he notes, was absent from previous unelected administrations. Even during the 2007-08 caretaker government, the "Bangladesh Better Business Forum" was formed to engage with leading business bodies at least once a month.

He also believes vested interests may be contributing to this growing distance between the Chief Adviser and the business community - a development they described as a "serious minus point" for the current government.

Mr Rahman also points out that no private-sector representatives have so far been included in the Chief Adviser's official delegations, though they were brought in at the last moment during recent negotiations on US reciprocal tariffs.

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) President Mohammad Hatem has said the government has tried to improve the ease-of-doing-business ambiance, but in some areas, the situation remains unchanged - and in certain cases, has deteriorated.

He deplores that "unnecessary harassment from customs officials" has increased, citing an incident at Chattogram Customs House where raw materials imported under a duty-free facility were withheld due to an HS code mismatch. Although the High Court ordered their release two months later, the buyer had already cancelled the orders.

"Many exporters are facing similar challenges," he said, adding that customs officials now ignore verbal directives from senior National Board of Revenue (NBR) members, which previously resolved such issues promptly.

Mr Hatem welcomes the government move to remove import barriers on certain man-made and specialty fibres, calling it a "significant step" towards diversifying the apparel-export basket.

However, he expressed concern over the law-and-order situation in industrial zones, where labour unrest is reportedly disrupting operations.

He also notes continuing difficulties with utility supply and urges further progress in reducing reciprocal US tariffs, which have recently been lowered following negotiations.

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