Bank loan shortage, gas-power crisis major challenges for industries: DCCI
He noted that the crisis is not limited to the readymade garment sector, but was also severe in non-RMG sectors
A lack of bank loans, coupled with a crisis in gas and electricity supply, posed significant challenges for running industries in the first six months of this year, Dhaka Chamber of Commerce and Industry (DCCI) President Ashraf Ahmed said today (28 September).
To sustain exports through continuous production, he called for urgent initiatives to resolve these crises and strengthen law and order in industrial areas to restore entrepreneurs' confidence.
Ashraf Ahmed made these observations while presenting a keynote paper on the state of the private sector during January-June 2024 at a seminar, titled "Bi-Economic State and Future Outlook of the Bangladesh Economy: Private Sector Perspective," organised by the DCCI.
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"There is still a problem with gas and electricity supply. If the ongoing labour unrest and energy problems are not resolved and factories cannot run continuously for at least four hours a day, there will be a big blow to exports," he said.
Production is decreasing not only in large industries but also in Micro, Small, and Medium Enterprises (MSME), he said, adding that if it cannot be stabilised, there will be a big blow to employment.
"In the meantime, we are getting news that gas reserves are decreasing. But by the end of this year, there will be a positive change if the production of the nuclear power plant comes into the supply system. However, to overcome this situation, quick alternative measures are needed," said the DCCI president.
He said labour unrest was only in Ashulia; it is now seen beyond it. In this situation, if confidence cannot be restored by changing the situation, it will also hurt investment. Already private sector investment growth has been stuck around 24% for the past three-four years.
The keynote presentation mentioned that it is important to increase the flow of credit to the private sector. It will expand local and international investment in the country. Effective steps should be taken to continue exports through continuous production of goods so as to increase the flow of foreign exchange.
On reforms
According to the keynote paper, the interim government has already undertaken some reform proposals in the financial reform. If these are implemented properly, they will have a positive effect on the economy. Maybe it takes time. If the government can increase tax revenue now, the ability to service the existing global debt will increase. For this, emphasis should be placed on revenue collection.
The Bangladesh Bank is attempting to control inflation by increasing the policy rate, but it will take three to six months to see the results. Furthermore, the DCCI president recommended that the impact of the reform on the 10 to 12 weak banks should not affect the entire banking sector, and loans to industries and MSMEs should be kept at normal levels.
Ashraf Ahmed stated that bank depositors are protected, but borrowers – especially good borrowers – do not enjoy the same protection. While large borrowers may be able to switch banks through negotiation, smaller borrowers do not have that option. Policies should be designed to ensure that small borrowers are not adversely affected by banking issues.
Focus needed on good governance
KAS Murshid, an economist and former director general of the Bangladesh Institute of Development Studies, emphasised the need to increase confidence in the private sector through enhanced transparency and accountability to tackle financial challenges.
He highlighted the necessity for new policies in the pricing process to guarantee uninterrupted energy supply to industries.
"Now we need to focus not only on increasing GDP growth but also on good governance, law and order improvement, and advancements in health and education. Additionally, it is crucial to develop educational programmes that ensure food security, a stable energy supply, and create skilled human resources," he added.
Professor Abu Yusuf of the department of development studies at Dhaka University said, "The reform plans by the interim government are being developed with the country's population estimated at 170 million. I believe it is essential to base the planning on an analysis of the actual population numbers."
"We should focus on sectors with potential instead of getting stuck on GDP growth. For example, the leather sector has the potential to generate $10 billion in exports, but it requires proper planning," he added.
He also remarked, "Recently, we have observed that despite the reduction in duties, there has been little impact on product prices in the market. In this regard, coordination between monetary policy, budget management, and market regulation needs to be enhanced."
Md Salim Al Mamun, director (Research) at the Bangladesh Bank, stated that monetary policy and exchange rate stability are essential in reducing instability in the product supply chain. An integral part of the ongoing reform programme is the implementation of financial sector reforms, which must ensure private sector participation.
"Additionally, the central bank is following a contractionary monetary policy to protect low-income individuals in the country from the effects of inflation. If inflation comes under control to some extent, the flow of money will increase again," he hoped.
