Govt, political parties lose sight of critical economic challenges: Biz leaders
BCI president says without a democratic govt, there can be no long-term stability
Businesses are increasingly concerned as neither the government nor political parties appear to be addressing pressing economic issues, business leaders said at two separate events yesterday.
Their remarks follow warnings from economists last week about the interim government's lack of a clear vision to address mounting economic challenges and restore macroeconomic stability.
Anwar-Ul-Alam Chowdhury, president of the Bangladesh Chamber of Industries (BCI), criticised the government and political parties for prioritising other issues over critical economic issues.
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Speaking at a press briefing at the BCI office in Tejgaon, Dhaka, he outlined a grim outlook for businesses. "We are grappling with numerous challenges, including the shock of taka devaluation, rising energy costs, and high inflation, which have exacerbated unemployment."
The BCI president said that around 100 garment factories have already been shut down over the last one year, with another 200 factories on the brink of closure this year. Also, orders are shifting to other countries including India, he claimed.
Due to inflation, energy shortage, foreign currency crisis, and hurdles in LC opening, the overall production in the manufacturing sector dropped by 30-40%, he said, adding that there is also policy inconsistency, such as tax hike in the middle of the year.
"If local entrepreneurs are hesitant to invest, how can we expect to attract foreign investment?" he questioned.
Anwar, an apparel entrepreneur, said that without a functioning economy, no future government could manage the country effectively. And without a democratic government, there can be no long-term stability.
"Economic stability is fundamental. Without it, no democratic government can achieve long-term stability," he said.
At another programme organised by the Federation of Bangladesh Chambers of Commerce & Industries (FBCCI) at its Motijheel office, business leaders warned that failing to address these issues could lead to deeper economic instability, calling for urgent action from the government and political parties to prioritise the economy.
Humayun Rashid, managing director of Energypac, said at the FBCCI event that new investments are not coming in, so, there is no new employment. Energy insecurity already remains a big barrier to fresh investments.
What BCI says
BCI outlined three major obstacles hindering business growth: energy shortages, inefficiencies in the banking system, and labour unrest. But BCI is yet to see any tangible improvements in these areas, and there's uncertainty about whether conditions will improve in the near future.
BCI President Anwar-Ul-Alam said that salaries in the garments sector saw a 56% increase in 2023, followed by an additional 9% increment in 2024. However, during the same period, operational costs rose sharply: gas prices surged twice by a staggering 286%, electricity costs increased by 33.50%, diesel prices went up by 68%, freight costs rose by 40-50%, transportation expenses climbed 50%, and bank charges increased by 9-10% within a year.
We are grappling with numerous challenges, including the shock of taka devaluation, rising energy costs, and high inflation, which have exacerbated unemployment.
Despite these rising costs, it has been announced that wages in the garments sector are set to increase further in April. This comes at a time when global prices are declining, the energy crisis persists, and there has been no significant improvement in law enforcement or overall efficiency.
Meanwhile, India has set an ambitious target of achieving $100 billion in exports by 2030 and is actively diverting orders from Bangladesh to its own market.
Besides, interest rates and energy prices continue to rise, and VAT has been increased abruptly. When the government claims that these hikes will not impact the industry, such misleading statements only heighten concerns among entrepreneurs, said the BCI president.
Anwar also raised concerns about the upcoming graduation from the Least Developed Country (LDC) status, warning that it could further increase business costs and push many businesses into a state of existential crisis.
"We strongly urge the government to postpone the LDC graduation by at least three years to allow businesses the time and space to adapt," he concluded.
Businesses call for energy assurance, policy reforms
At the FBCCI event, Humayun Rashid, managing director of Energy Pack, said, "We want relief from the uncertainty surrounding energy supply by 2025, as we are currently facing a very challenging time."
Commenting on the current energy situation, he said, "There is no scope to create new entrepreneurs under these circumstances. Our second generation is losing confidence to venture into business."
"We need a positive signal from you [energy adviser] to restore and boost the confidence of the next generation," Rashid added.
On the rising popularity of LPG, Rashid, who also serves as vice president of the LPG Association, said, "LPG is gaining traction in industrial use, and private sector users are growing more confident in its application."
He further explained that the country currently imports 1.2 million tonnes of LPG annually, but with relaxed policies, demand could rise to 4 million tonnes.
"In the current situation, power system losses are widespread. If we can address these inefficiencies, it will significantly contribute to ensuring energy security," he emphasised.
Rashid also urged policy reforms to tackle future challenges in maintaining an uninterrupted electricity supply. "While we are currently able to access electricity, to avoid potential disruptions in the future, we need policy reforms under your [energy adviser] leadership."
He also raised concerns about the Bangladesh Petroleum Corporation (BPC), questioning whether it operates as a business entity or a regulatory body. "BPC's operational costs are excessively high due to inefficiencies," Rashid said.
We want relief from the uncertainty surrounding energy supply by 2025, as we are currently facing a very challenging time.
However, unnecessary government intervention could undermine this confidence, he added
Md Ali Zaman, president of the Small and Medium Enterprises (SMEs) Owners Association of Bangladesh, said that gas and electricity prices should be set considering the ground realities; otherwise, businesses will face significant challenges.
He also urged the interim government to take proactive steps to ensure energy security.
Md Abdur Razzaq, managing director of JMI Group, said that the government increased VAT on LPG, and then partially reduced it. However, a circular was issued suggesting that the price was reduced, which he considered unfair.
Govt to initiate trials for energy-related crimes
Addressing the FBCCI event as the chief guest, Power and Energy Adviser Muhammad Fouzul Kabir Khan said the government will initiate trials for energy-related crimes.
"A team led by retired justice Moyeenul Islam Chowdhury is already working to identify crimes in the energy sector. The team has also advised us to review certain energy contracts to help reduce costs," he said.
"The Consumers Association of Bangladesh's adviser [Shamsul Alam] made the right proposal [to hold energy sector offenders accountable]. However, he omitted a major offender's name from the list," said Fouzul Kabir Khan.
"Due to such crimes, we are now forced to procure electricity at a high cost but, so far, we have not increased electricity prices. However, we are uncertain about how long we will be able to continue providing subsidies for it," Fouzul said.
At the event, the Consumers Association of Bangladesh's (CAB) Energy Adviser Shamsul Alam demanded the trial of four top former officials from the ousted Awami League (AL) government for their alleged involvement in energy-related crimes.
The officials in question are former prime minister Sheikh Hasina's energy adviser Tawfiq-e-Elahi, her former principal secretaries Abul Kalam Azad and Ahmad Kaikaus, and former Power Division secretary Monowar Islam, he said.
"A mass signature campaign has been carried out nationwide to support this demand, and a memorandum will be presented to the chief adviser. A special tribunal needs to be formed for this purpose," he said.
Mentioning that there is a provision for prosecuting such crimes under the Energy Regulatory Commission Act, Shamsul Alam urged the interim government to take strict actions against them.
Govt for open tendering in the power sector
"During the previous government's tenure, there was no competition in the power-energy sector. Now, competition has been ensured by mandating open tenders for all projects. As a result, the import of fuel oil has already saved Tk800 crore in transportation costs," Fouzul Kabir said.
Energy Regulatory Commission Chairman Jalal Ahmed emphasised the urgency of addressing the country's gas crisis by bringing Bhola gas to Dhaka through a pipeline over the Padma Bridge. He noted that the gas pressure in Bhola indicates the potential for significant reserves.
Ahmed further advised drilling wells as per a structured schedule rather than setting overly ambitious targets for an excessive number of wells.
Highlighting past mistakes, he said, "More than 700 million cubic feet of gas should not have been extracted from Bibiana field. Instead, 1,200 million cubic feet were extracted, which caused damage to the reservoir. Such practices must not be repeated."
Jalal also stressed the importance of accurately determining the country's total gas reserves as a critical component of future energy planning.
Solar investment – an alternative for energy solutions
Presenting the keynote paper at the FBCCI event, Ijaj Hossain, a retired BUET professor, said that installing solar plants could reduce the country's energy expenditures by up to $1 billion.
To meet the country's growing energy demand, investment in both coal-based power and solar energy could be viable alternatives.
He said that solar power could be a low-cost alternative to oil-based electricity generation, with costs potentially as low as Tk25, including solar panels and batteries.
He also criticised the previous government for increasing capacity with flawed planning and failing to invest in transmission and distribution. In some cases, they also allocated capacity with a three-year charge, despite no production.
Professor Ijaj Hossain said, "To meet the country's growing energy demand, investment in both coal-based power and solar energy could be viable alternatives."
He also stressed the need to improve efficiency to reduce energy wastage.
Mostafa Al Mahmud, president of the Bangladesh Sustainable and Renewable Energy Association (BSREA), said that many garment factories are installing solar plants due to buyer requirements.
He suggested that if the government allows the private sector to utilise the roofs of government establishments, it could create an opportunity to add 5,000 MW to the national grid.
