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As Bangladesh's economic and regulatory landscape continues to evolve, businesses across sectors are having to adapt to new challenges. As one of the highest tax-paying companies in the country, BAT Bangladesh has been navigating through unique circumstances and has recently reported their half yearly results. Nirala Singh, Finance Director of BAT Bangladesh, in an interview with The Financial Express provides a detailed perspective on the underlying factors impacting the company's performance, its broader implications for the legal tobacco industry.
Question (Q): How would you describe the role of the tobacco industry in Bangladesh's economy?
Answer (A): Over the years, the tobacco sector has significantly contributed to the economic growth of Bangladesh and supported national development. In the 2023-24 fiscal year alone, the tobacco industry deposited approximately Tk 400 billion (40,000 crore) to the national exchequer. As the highest taxpayer in the country, the sector plays a critical role in revenue generation for national development. As per the Oxford Economics Report, approximately 4.5 million livelihoods across the country are directly or indirectly dependent on this sector -- spanning from leaf cultivation to manufacturing, distribution, and retail. The industry is also a leading employer, providing structured employment and skill development opportunities to a large workforce.
Additionally, this sector also contributes to foreign currency inflow through exports. Besides internal revenue contribution, the industry significantly contributes to earning foreign currency through approximately USD 200 million in exports. The industry is a key contributor to foreign direct investment (FDI) and supports inflow of USD, playing an important role in Bangladesh's overall economic resilience.
Beyond economic contributions, the industry also invests heavily in corporate social responsibility initiatives, particularly in areas like water, environment, and community welfare.
Q: How has the industry been impacted by the sudden tax increase in the January 2025 interim budget?
A: The interim budget imposed a steep and unexpected Supplementary Duty hike -- the second in just seven months -- without prior stakeholder consultation. This abrupt move has destabilized business planning and created serious concerns around policy unpredictability.
Business sustainability of the country's highest tax-paying sector is severely undermined by such fiscal shocks. The resulting surge in production and sales costs is hindering long-term viability, with knock-on effects on employment, investment, and future revenue flows. A recent Ernst & Young report confirms that cumulative price increases from back-to-back duty hikes have reached approximately 35%, leading to an estimated 30% decline in industry volume since January. Moreover, this unpredictability erodes investor confidence and threatens Bangladesh's reputation as a stable investment destination. Without a more consultative and consistent fiscal approach, foreign investments could be disrupted -- placing the country's economic balance at risk. Illicit cigarette trade -- i.e., duty-not-paid and international transit brand cigarettes -- is expected to rise, further distorting the market and undermining both tax collection and regulatory control. The probable increase in such illicit products, coupled with weak enforcement, poses a serious risk of further revenue erosion from the sector. While the operating environment remains highly challenging, the company is taking necessary measures to stay compliant and navigate the impact.
Q:The government's intention behind this move was to boost revenue collection from the sector. Has that goal been achieved in your view?
A: Preliminary indicators and media reports suggest that the anticipated revenue growth has not materialized. For the first time in a decade, excluding the COVID impacted year, revenue growth from the cigarette sector has fallen to single digits. On the contrary, the steep tax hike may have inadvertently fueled the expansion of illicit trade, thereby eroding the formal tax base and putting long-term revenue sustainability from this sector at risk.
Without a balanced, long-term fiscal approach, such abrupt policy measures risk undermining not only government revenue but also the viability of the legitimate industry. Short-term revenue ambitions must be carefully calibrated against the broader objective of ensuring predictable and sustainable contributions from the sector over time.
Q: BAT Bangladesh's H1 business update shows a 55% decline in profit compared to last year. What were the key reasons behind this drop?
A: The first half of 2025 has been particularly challenging for the tobacco industry, mostly due to a combination of regulatory, operational, and macroeconomic factors. The most immediate and impactful of these have been the sharp increase in excise duty and back-to-back price increases within the span of just six months. This regulatory change has directly led to a steep rise in product prices, reducing consumer affordability across key segments. Faced with higher costs, many consumers have shifted toward cheaper or illicit alternatives, such as non-duty-paid and counterfeit products. This shift has contributed to a noticeable expansion of the illegal market, which continues to undercut legal industry players and has significantly eroded legitimate sales volumes.
Moreover, the rise in illicit trade not only affects company performance but also leads to a substantial loss of revenue for the government through reduced tax contributions.
Compounding this challenge is the recent closure of BAT Bangladesh's Dhaka factory site. While part of a longer-term operational strategy, the closure has had short-term consequences, including disruptions to production efficiency and the incurrence of transitional costs related to the shift in operations. These costs have further weighed on the company's bottom line during this period.
Adding to these internal and regulatory challenges is the broader macroeconomic backdrop. High inflation continues to pressure household budgets, limiting consumers' purchasing power and affecting demand across sectors
Taken together, these intersecting challenges have made it increasingly difficult to sustain previous profit levels. The situation underscores not only the immediate impact of taxation and operational shifts but also highlights deeper structural issues within the market. Addressing these concerns will require urgent policy attention, including on ground efforts to curb the illicit trade and create a more stable and predictable regulatory environment to support long-term business sustainability and economic growth.
Q: As the only listed tobacco company in Bangladesh's stock market, how do you plan to protect shareholder value and confidence in the coming days?
A: BAT Bangladesh has been listed on both the Dhaka and Chattogram stock exchanges since 1978 and is currently the third-largest company by market capitalization on the DSE. We have a strong track record of delivering consistent dividends to our shareholders, even during challenging periods.
Despite current headwinds, we remain committed to long-term value creation. This includes continued investment in our operations -- such as the recent expansion of our Savar factory, one of the most advanced facilities in the region. Our business is guided by principles of transparency, responsible practices, and alignment with the government's broader economic goals. Growth in Shareholder value remains central to our strategic agenda, and we are executing a long-term plan that reflects Bangladesh's importance within the BAT Group's global portfolio and continuing to drive growth responsibly.
Q: What policy measures or structural reforms do you believe are essential to ensure a sustainable revenue stream from the tobacco sector?
A: First and foremost, a multi-year fiscal roadmap is essential to bring predictability and allow both the government and industry to plan effectively. The current tax framework for the tobacco industry needs to be simplified. A simplified structure will remove administrative complexity and allow all investors in the sector, both local and foreign, greater predictability. It is important for the National Board of Revenue (NBR) to engage in transparent and regular dialogue with industry players on this front, as the current structure appears to be exhausted and offers limited room for mutual benefit.
There needs to be significantly enhanced transparency in tax laws, and application of those laws consistently over the years. Such transparency allows investors to navigate the tax framework in a predictable and compliant manner. Any fiscal reform should be based on evidence-based dialogue, involving all stakeholders, to ensure it balances public health and economic considerations.
The Smoking and Usage of Tobacco Products (Control) Act should be realistic, time-befitting, and aligned with the socio-economic context of Bangladesh. Its implementation must be effective and balanced, ensuring that it supports public health objectives without disproportionately impacting the legitimate industry. Policy stability and regulatory consistency across the industry will be key to unlocking the sector's full contribution to national revenue.
Q: What would be your recommendations to ensure consistent growth in FDI inflow in the country?
A: Bangladesh has strong potential to attract FDI, but this requires a stable, transparent, and predictable policy environment. Avoiding abrupt changes and introducing a multi-year fiscal and investment roadmap would give investors' confidence to commit long-term. Investment procedures must be simplified. A fully operational One-Stop Service through BIDA and greater digital coordination between government agencies would improve ease of doing business and reduce red tape. In terms of incentives, moving away from blanket tax holidays and focusing on performance-based incentives -- such as those tied to exports or local value addition -- can attract quality investment aligned with national priorities. Infrastructure improvement, especially in logistics, power, ports, and digital connectivity, is equally important to reduce operational costs and scale industrial growth.
Most importantly, no foreign direct investment (FDI) strategy will be effective without long-term planning and inclusive policymaking. Unfortunately, past experiences show that key government agencies have often proceeded with decisions without adequate consultation with relevant industry bodies. If this continues, even generous incentive packages may fall short, as investors seek predictability and assurance. To rebuild investor confidence, government institutions must prioritize regular, structured dialogue with stakeholders and ensure transparent, forward-looking policy frameworks. In this context, business chambers and trade associations can play a vital role in facilitating engagement and bridging gaps between policymakers and industry players.
To further strengthen investor confidence and uphold the country's investment reputation, there is also a growing need to enhance legal and institutional frameworks -- particularly in the areas of timely contract enforcement, effective dispute resolution, and anti-corruption efforts. Together, these reforms will help position Bangladesh as a more compelling and reliable investment destination in an increasingly competitive global market.