[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Talks on trade deals show no major progress

Talks on preferential trade deals with a dozen countries have stalled since the political changeover in August last year, potentially adding to the challenges related to Bangladesh’s graduation from the club of Least Developed Countries (LDCs) in 2026, according to economists and business leaders.

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Talks on trade deals show no major progress

Talks on preferential trade deals with a dozen countries have stalled since the political changeover in August last year, potentially adding to the challenges related to Bangladesh's graduation from the club of Least Developed Countries (LDCs) in 2026, according to economists and business leaders.

Apart from the turmoil stemming from the ouster of the Awami League government by a mass uprising last year, experts also blamed ongoing rapid and dramatic changes in the geopolitical landscape and the reluctance of participating countries as reasons for the slow progress in bilateral trade negotiations.

Under the interim government, which assumed office in August last year, authorities have only made progress in negotiating Economic Partnership Agreements (EPAs) with Japan and South Korea.

EPA talks with Japan entered their third and fourth rounds of meetings in Tokyo and Dhaka this month while negotiations with South Korea were launched in Seoul in November last year.

However, negotiations to sign trade deals with other countries such as India, Thailand, Malaysia, Indonesia, China, and Turkey, have hit a virtual deadlock.

After graduation from LDC status, scheduled for November next year, Bangladeshi exports will no longer be eligible for many preferential market benefits. However, bilateral trade deals could help retain these benefits even after graduation.

To prepare for graduation and ensure a smooth transition, the commerce ministry has been attempting to negotiate bilateral trade agreements, including Free Trade Agreements (FTAs), Preferential Trade Agreements (PTAs), Economic Partnership Agreements (EPAs), and Comprehensive Economic Partnership Agreements (CEPAs), with several countries and blocs.

The Awami League government was holding similar talks with major trading blocs, such as the Association of Southeast Asian Nations (ASEAN) and the Regional Comprehensive Economic Partnership Agreement (RCEP), to retain trade benefits.

However, Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, said the progress in this regard has not been encouraging.

The economist identified an inability to negotiate complex trade issues as a key reason for this trend. "Besides, signing trade deals also takes a lot of time as such topics are complicated," Rahman added.

However, Commerce Adviser Sk Bashir Uddin begged to differ.

He stressed that progress in signing trade deals with major countries has not been halted, saying that communications through official channels are ongoing.

To support that stance, the businessman-turned-adviser referenced trade agreement talks with Japan.

After the fourth round of negotiations this month in Dhaka, Japan's foreign ministry stated that both sides had a fruitful discussion on the way forward and areas such as trade in goods, rules of origin, customs procedures, trade facilitation, trade in services, investment, electronic commerce, and intellectual property.

According to the statement, both sides decided to work on scheduling dates for the fifth round of negotiations through diplomatic channels.

Bashir Uddin added that the government first needs to examine whether the country will benefit before signing such deals.

However, other promising negotiations appear to have fallen by the wayside.

Under the previous regime, Bangladesh and neighbouring India made progress in signing a CEPA, even conducting a joint feasibility study more than two years ago. However, no formal meeting has been held since then.

In the case of China, a joint feasibility study was conducted and formal negotiations were supposed to be launched during former prime minister Sheikh Hasina's visit to China last year. But those formal negotiations have not yet commenced.

Bangladesh's imports from China -- mainly comprising raw materials, capital machinery, textile fabrics, chemicals, yarn, woven fabrics, garment articles, and food items -- declined to $16.63 billion in the fiscal year 2023-24 from $17.82 billion the previous fiscal year.

According to Rahman, the progress of negotiations with Japan is positive since an EPA with Japan would enhance Bangladesh's image and could be leveraged to sign deals with other countries.

Acting Commerce Secretary Abdur Rahim Khan also said the progress on talks for bilateral trade agreements has not been halted. Apart from Japan, he said preliminary negotiations with Singapore and South Korea are ongoing.

"If any country shows interest in negotiations, then talks can occur. Negotiations do not take place unilaterally," Khan said.

In the case of Japan, the negotiations have been progressing according to the previously set roadmap, with Japan insistent on strictly following the timeline, he added.

Bangladesh has long been negotiating with countries to sign trade deals, but so far, only a PTA with Bhutan was signed in December 2020.

Currently, Bangladesh also enjoys trade benefits from the South Asian Free Trade Area (SAFTA) and the Asia-Pacific Trade Agreement (APTA).​

 

[Saif]

Boosting NBR's tax collection capability

The revenue authorities as usual failed to reach their tax collection target in the first half of the current fiscal year. According to a report carried in the FE, tax collection during the period since July 2024 till February 16, 2025 declined 1.53 per cent despite extension of the tax return subm

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Boosting NBR's tax collection capability
Sarker Nazrul Islam
Published :
Feb 21, 2025 23:49
Updated :
Feb 21, 2025 23:56

The revenue authorities as usual failed to reach their tax collection target in the first half of the current fiscal year. According to a report carried in the FE, tax collection during the period since July 2024 till February 16, 2025 declined 1.53 per cent despite extension of the tax return submission deadline thrice and an increase in the number of returns by 150,000 with a growth rate of 4.11 per cent. The overall tax receipt by the revenue board lags behind the target by a big margin. During the said period, the National Board of Revenue (NBR) received Tk 62.44 billion from returns against Tk 63.42 billion in the same period last year, official data showed. The reason behind this poor achievement might be that a section of the well-off taxpayers were on the run for crackdown on corruption and, like in every year, some 60-70 per cent individuals submitted tax returns showing zero income.

Whenever the revenue authorities fail to fulfil tax collection target, the country's economic growth is seriously hampered. The government will have to be dependent more on bank borrowing and loans from foreign sources, the adverse impacts of which are known to all. Massive bank borrowing of the government will exert more pressure on financial institutions that are already in liquidity crisis, which has already hamstrung some of the lenders. Panic withdrawals and investment in government security market have led even to waning of the banks' cash from deposits. Further aggravation of bank's liquidity crisis will reduce or stop flow of loan to private sector entities. To print notes to meet government needs will have severe implication on the inflationary market situation.

The annual budgets in Bangladesh are marked by a wide gap between earning and spending --- revenue earning target is far short of revenue expenditure plan. To make up for this shortfall of funds, every budget sets before itself a huge revenue collection target that has proved to be much beyond the ability of the tax collection authorities. The NBR has never been successful in reaching targets. The performance of the revenue authorities in collecting taxes has not been as pleasant and encouraging as it should be. Its actual revenue collection is usually less than even the revised target, which again is smaller than the original target. Instead of narrowing down the deficit, its failure actually widened the same.

In a resource-constrained country like Bangladesh, revenue collection efforts are crucially important to mobilise domestic funds in order to meet budget expenditure. Successful implementation of the financial programme of a government depends almost absolutely on the volume of the revenue collected. Thus, revenue mobilisation authorities are like the breadwinner of a family; if he/she earns better, family members will have enough food, clothes and a shed over their heads but if his/her earning is not up to the level, they may have to starve. This brings forth the need for enhancing the earning capacity of this breadwinner.

The most effective way of coming out of the tax collection debacle, as stakeholders suggest, is the collection of VAT and all other taxes based on optimum expansion of the tax net much beyond its present limit. Many individuals and companies having taxable income still evade taxes. According to another report of this daily, Finance Adviser Dr Salehuddin Ahmed expressed his concern that at the village or upazila level there are many businesspeople who earn a lot but are reluctant to pay taxes. Doctors and many other professionals often make cash transactions but do not give receipts to the payers. Thus, these transactions remain out of accounts and the purview of tax. He said that there are around 5.0 million industrial units but only 0.5 million of them pay tax. What a colossal failure of the revenue authorities! If these errant industry owners were brought under the tax net, the tax collection target could nearly be fulfilled.

Regarding the urgent need for widening tax net further, the adviser said the NBR may launch special drives in the respective areas while the DCs help in identifying the tax-dodgers in their areas. The government would try to cast the tax net wider but not increasing the rate but keeping it at a tolerable level in the upcoming budget. Such a step would lessen the burden on taxpayers. He added that the government will now consider lowering indirect taxes and try to generate more direct taxes. Even a significant number of TIN holders reportedly evades tax return submission and refrain from paying taxes. They must be made to submit returns and pay tax. Punitive measures should be taken against tax dodgers and those who submit false or misleading statement of their income and business transactions. Strict punishment should be awarded to corrupt tax officials who are allegedly in an unholy alliance with tax evaders. Tax return submission process must also be simplified.

However, beside the above negative growths, the rosy side of the tax collection scenario is that the tax return submission, as mentioned before, grew by a significant margin. The NBR received 3.9 million returns against 3.8 million in the corresponding period last year. Moreover, 35 per cent of individual taxpayers submitted returns online, signifying a progress of the digitisation process and a growing acceptability of the new system. If efficiently utilised, these positive growth trends along with measures like widening of the tax net, skill development of tax officials and opening of tax offices at upazila level will help increase tax collection in the future.​

 

[Saif]

https://thefinancialexpress.com.bd/views/export-diversification-of-bangladesh-through-fta

Export diversification of Bangladesh through FTA
Mohammad Navid Safiullah
Published :
Feb 21, 2025 23:37
Updated :
Feb 21, 2025 23:37

Bangladesh is often touted as a successful case of export-led growth among the least developed countries (LDC). Bangladesh has consistently prioritised export diversification, as reflected in its key national policy documents. These strategies focus on identifying potential sectors ripe for diversification and propose strategic interventions designed to bolster and diversify the country's export industries. While the ready-made garment (RMG) industry stands out as an outstanding example of Bangladesh's export prowess, other sectors have lagged, resulting in an export portfolio that remains heavily concentrated in the RMG sector rendering the economy vulnerable to shocks affecting this sector.

CURRENT STATUS OF DIVERSIFICATION: For Bangladesh, export concentration has emerged as a major and long-standing challenge. Before the 1980s, a few primary products dominated Bangladesh's exports. The growth of the RMG industry resulted in a short-lived phase of diversification in the late 1980s, during which time garment and non-garment exports held nearly equal shares. However, while non-RMG exports grew at a compound annual rate of 7.6 per cent, from $1 billion in the early 1990s to just over $8 billion by 2023, garment exports surged from $1 billion to $47 billion in the same period, with an annual growth rate of 14.6 per cent. Bangladesh's heavy reliance on a single export product makes its export basket one of the least diversified globally.

LDC GRADUATION AND COMPETITIVENESS OF BANGLADESH: As Bangladesh approaches its graduation from LDC status in 2026, its export competitiveness will face challenges, potentially due to higher tariffs in major export markets. Bangladesh has greatly benefited from the generous market access provisions extended to LDCs by countries such as Australia, Canada, China, the European Union, India, Japan, and the United Kingdom, which have provided tariff-free access. However, the anticipated tariff rise could hinder Bangladesh's export growth. The heavy reliance on a concentrated export basket means that any negative effects on the garment sector could have significant consequences. Enhancing Bangladesh's export competitiveness and intensifying diversification efforts should be top priorities as the country prepares for LDC graduation. A key strategy for Bangladesh for addressing challenges related to graduation is to sign FTAs with countries having significant trade potential. In this regard, initiatives have been taken by the government to sign Preferential Trade Agreements (PTAs), Free Trade Agreements (FTAs), and Comprehensive Economic Partnership Agreements (CEPA) with several commercially important countries.

STRATEGIES FOR EXPORT DIVERSIFICATION: EXPLORING THE POTENTIALS OF FTA : Maintaining strong export performance requires investing in and modernising trade, infrastructure and transport logistics. Although there is no one-size-fits-all solution for promoting diversification, a wide range of policies may be necessary to develop and sustain new export products. It's important to recognise that the diversification challenge may be specific to each country's context, although certain common factors can always be identified. In the case of Bangladesh, a tailored approach may be required to address the challenges outlined below.

First, the import system must be streamlined to ensure the smooth flow of imported inputs for exports; second, the structure of export incentive needs to be properly aligned (i.e. removing anti-export bias); third, reducing the costs of trade-related services (improved trade and transport logistics); fourth, given significant governance challenges, proactive policies that support exporters in upgrading existing products, entering new geographic markets, and establishing or expanding new business lines abroad could be crucial; fifth, even subsidies of the kind calling for strategic government intervention that encourage investment in bottleneck areas or non-traditional domains, might be required, but those must have sunset provisions to weed out investments that fail.

Finally, signing FTA could be an effective instrument to combine all the strategies as contemporary FTAs cover almost all issues for trade and investment facilitation. In essence, FTAs serve as catalysts for export diversification by combining market access, investment promotion, knowledge sharing, competitive forces, supply chain integration, market comprehension, and policy development. Studies indicate that Peru's FTAs with Japan, Thailand, and Singapore led to a gradual decrease in the concentration of its exported goods over time. The Canadian Ministry of Foreign Affairs and International Trade reported that the Canada-Chile Free Trade Agreement led to 90 per cent of the net increase in value of Canadian exports to Chile and over 76 per cent of the net rise in imports by products previously not traded before the agreement. These instances may encourage policy makers of Bangladesh to emphasise more on signing FTA for promoting export diversification and thereby sustaining the economic growth.

Mohammad Navid Safiullah, Chief Executive Officer (Additional Charge), BFTI, Additional Secretary, Ministry of Commerce​

 

[Saif]

Large listed RMG makers secure higher profits

Most listed readymade garment (RMG) producers secured higher profits during the October-December period of this fiscal year, buoyed by global demand even amidst the myriad challenges plaguing Bangladesh’s overall business climate.

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Large listed RMG makers secure higher profits

Most listed readymade garment (RMG) producers secured higher profits during the October-December period of this fiscal year, buoyed by global demand even amidst the myriad challenges plaguing Bangladesh's overall business climate.

Companies that are relatively large, based on their export volume and capital, staged improved performances but small companies continued to struggle.

Among the 40 listed companies from this sector that published the data, 25 saw higher profits while 15 saw lower profits. However, 15 companies that have been in the Z category for many years have not published any data yet.

The combined profit of the 40 companies that shared reports showed the continuation of a rising trend after being hit hard during the politically volatile July-September quarter last year.

Their total profit soared 50 percent year-on-year to Tk 197 crore in the October to December period of last year, according to data compiled by Sandhani Asset Management Ltd.

The RMG sector has been facing difficulties since 2023 when salaries were hiked and energy prices almost doubled, said Shams Mahmud, managing director of Shasha Denims Ltd.

That year, it was decided that the RMG workers would get a 9 percent annual wage increment whereas earlier it was 5 percent, he said.

Simultaneously, the minimum wage for an entry-level garment worker was raised to Tk 12,500 from Tk 8,000, he added.

Many companies, especially small establishments, could not absorb the rise in costs.

Their situation deteriorated further as political and industrial unrest and floods hampered production last year, Mahmud said.

Above all, factories were not supplied with adequate gas and electricity, so most fell into "deep problems", he said.

Only large companies managed to absorb the shock, continued to get export orders and shipped products properly, he said.

Bangladesh's RMG exports grew 13.28 percent year-on-year to $19.88 billion in the current financial year of 2024-25, according to Export Promotion Bureau.

Envoy Textiles Ltd saw a 161 percent rise in profits, while Square Textiles Ltd reported 58 percent and Malek Spinning Mills Ltd 22 percent.

One of the ways that large companies managed to absorb the shock was by using their financial strength, said Mahmud, who is also a former president of the Dhaka Chamber of Commerce and Industry.

Large companies usually keep a huge amount of cash on hand and can also borrow funds from their sister concerns. So, they have low dependency on bank loans, which charge high interest rates, he said.

Spinners struggling

An analysis of the financials of the sector's companies shows that spinning mills struggled the most.

The spinning mills were troubled by a gas supply shortage. As they did not perform well, the country had to import yarn from India to meet demand, added Mahmud.

Bangladesh's textile sector experienced profit fluctuations in 2024, reflecting challenges in global trade, inflationary pressures, and shifting demand patterns.

While some companies demonstrated resilience, others struggled to maintain profitability amid economic uncertainties.

An analysis of quarterly profit data for major textile companies reveals the stark contrast.

Stylecraft Limited suffered significant losses in the first half of 2024 before rebounding slightly in the two subsequent quarters with profits.

Saiham Textile Mills Ltd exhibited a more stable trajectory, recovering from moderate losses in early 2023 to post a steady rise in profits.

However, companies such as Tallu Spinning Mills Ltd faced persistent financial difficulties and widening losses, highlighting ongoing operational challenges. Meanwhile, Dulamia Cotton Spinning Mills Ltd displayed an inconsistent profitability trend.​

 

[Saif]

Private sector struggling under mounting pressure

The private sector is facing increasing uncertainty as stubbornly high inflation, stagnant investments and inconsistent energy supplies continue to weigh on businesses, according to industry leaders.

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Private sector struggling under mounting pressure
Businesses say at seminar

The private sector is facing increasing uncertainty as stubbornly high inflation, stagnant investments and inconsistent energy supplies continue to weigh on businesses, according to industry leaders.

"In recent months, business sentiment has been significantly affected by inflationary pressures, high borrowing costs and exchange rate volatility," said Taskeen Ahmed, president of the Dhaka Chamber of Commerce & Industry (DCCI), at an event in Dhaka yesterday.

He called for policy stability and structural reforms to restore business confidence.

Red-hot prices remain a key concern for both individuals and businesses, with inflation hovering at over 9 percent since March 2023. Making things worse, Bangladesh's foreign exchange reserves have been under strain for nearly three years, leading to a depreciation of the local currency against the US dollar.

For manufacturers, rising commodity prices usually result in reduced demand, while a weaker taka increases operational costs. Besides, authorities have raised interest rates to battle inflation, further pushing up borrowing costs for businesses.

In his keynote address at the event, titled "Bi-Annual Economic State and Future Outlook of Bangladesh Economy – Private Sector Perspective," the DCCI president said that industries are already under pressure due to inconsistent energy supplies, which they fear will worsen during the upcoming summer.

"Industries are struggling with frequent power shortages and an unpredictable energy supply. The cost of gas has increased, yet supply is inconsistent," Ahmed said.

"If this continues, businesses will find it difficult to remain competitive."

The DCCI president mentioned that private investment has stagnated at 24 percent of GDP almost since the pandemic, while foreign direct investment (FDI) has dropped to a six-year low.

"Without urgent interventions, sustaining economic momentum will be challenging."

Regarding the financial sector, Ahmed pointed to the growing liquidity crisis, especially its impact on businesses.

"The central bank hiking the policy rate to 10 percent has made credit inaccessible for small and medium enterprises. Private sector credit growth fell to 7.28 percent in December 2024, well below the target of 9.8 percent for the fiscal year 2024-25. The high cost of borrowing is discouraging investment."

Ahmed called for policy consistency, tax reforms and investment in infrastructure to support private sector growth.

"The private sector is ready to drive economic expansion, but we need clear and stable policies. If inflation, energy crises and financial instability drag on, businesses will struggle to sustain operations," he mentioned.

M Masrur Reaz, chief executive officer of the Policy Exchange Bangladesh, said the country's macroeconomic situation has been in a fragile state since 2022 due to high inflationary pressures.

He believes macroeconomic stability will remain elusive if the foreign exchange reserves do not increase by $7 to $8 billion by the end of this year. As such, the economist requested the government to secure $5 to $6 billion from multilateral lenders by June to stabilise forex reserves.

Reaz also advocated a stable and sufficient energy supply.

Sayera Younus, executive director (research) of Bangladesh Bank, said inflation would decline to around 6 percent by the end of the current fiscal year.

She hoped that the foreign exchange reserves would increase by at least $5 billion by the end of June, driven by growing exports and remittance inflows.

Mohammad Abu Eusuf, a professor of development studies at the University of Dhaka, said financing a deficit by borrowing from the banking sector would hurt private sector credit flow.

Mohammad Yunus, research director at the Bangladesh Institute of Development Studies, highlighted the potential for FDI and joint ventures, especially in the leather and pharmaceutical sectors.

Md Abdur Rahim Khan, additional secretary (export) of the commerce ministry, said export diversification remains a significant challenge, with garments accounting for more than 85 percent of export earnings.

Khan, who is currently the secretary of the commerce ministry, said the local light engineering sector holds immense potential, though exports in this sector declined in the last fiscal year.

Regarding Bangladesh's graduation from least developed country (LDC) status, which is scheduled in 2026, he said that despite the phasing out of subsidies and incentives, reducing business costs by 10–15 percent could enhance global competitiveness.

However, he pointed out that access to financing poses a challenge for entrepreneurs. Besides, it is important to attract foreign investment to build a diversified economy.

Referring to the current tax-to-GDP ratio of 8 percent, Khan said, "$40 billion in revenue collection for a $450 billion economy is completely unacceptable."

He also expressed concerns over the lack of full automation of government services and the inadequate implementation of the National Single Window system.​

 

[Saif]

Bangladesh on the path to recovery, says Finance Adviser

Finance Adviser Dr Salehuddin Ahmed on Saturday stressed collective efforts to move Bangladesh forward, aiming to provide a better and more dignified life for all citizens. "We want to ensure a quality life for all," he said at an event unveiling the second edition cover of his book, "Go

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Bangladesh on the path to recovery, says Finance Adviser
UNB
Published :
Feb 22, 2025 22:02
Updated :
Feb 22, 2025 22:02

Finance Adviser Dr Salehuddin Ahmed

Finance Adviser Dr Salehuddin Ahmed on Saturday stressed collective efforts to move Bangladesh forward, aiming to provide a better and more dignified life for all citizens.

"We want to ensure a quality life for all," he said at an event unveiling the second edition cover of his book, "Govornorer Smritikotha", followed by a discussion meeting at the Institute of Chartered Accountants of Bangladesh (ICAB) Auditorium in Dhaka. The book's first edition was published in 2019.

Dr Salehuddin recalled that the country had nearly plunged into a severe crisis during the previous regime. "Bangladesh was almost on the brink of falling into a ditch," he noted, "but now it's turning around, thanks to the sincere efforts of the government and support from all stakeholders."

Emphasising responsibility over mere power acquisition, Dr. Salehuddin remarked, "We did not just assume power; we took responsibility. You cannot imagine the state Bangladesh was in previously; only those involved closely knew the depth of our troubles."

Reflecting on his experiences, the Finance Adviser described the background behind writing his memoir, which sheds light on critical periods in Bangladesh's banking sector and economy. He emphasized that he never compromised his principles during his tenure as Governor of Bangladesh Bank and earlier as a public servant.

Dr Salehuddin called for enhanced honesty, integrity, and skill development among human resources to drive the nation forward. "Now more than ever, we need honesty, integrity, and competent human resources," he urged.

He added that Bangladesh enjoys a positive impression internationally. "We should all strive to uphold our country's dignity and self-respect."

Encouraging constructive criticism, Dr Salehuddin cautioned citizens to remain vigilant against forces that may exploit criticism to harm national interests.

Highlighting the importance of balanced growth, the Finance Adviser emphasized, "We hope to rapidly move the country forward by ensuring quality life. High growth and income alone won't suffice; quality education and health care are equally crucial. We are relentlessly trying in this direction."

Dr Salehuddin further called upon everyone, irrespective of class or creed, to support the interim government in swiftly addressing the nation's pressing challenges.

Speaking at the event, distinguished guests, including Editor and Publisher of the daily Bonik Barta Dewan Hanif Mahmud, CPD Distinguished Fellow Dr Mustafizur Rahman, Dhaka University Professors Dr Kazi Marufur Rahman and Dr Rashed Al Mahmud Titumir, former NBR Chairman Abdul Majid, Professor Dr Mahbubullah, and writer Faruk Saifuddin, emphasized the need for the interim government to guide the economy towards recovery from near collapse.

They expressed cautious optimism, saying it would be unrealistic to expect full recovery within six months but emphasised the current leaders' potential to pave the way forward. They also underscored the pressing need to establish a society rooted in non-discrimination, equality, and justice.

Dr Salehuddin hinted that his forthcoming third edition would expand beyond his memoirs as the former Governor. "I want to write about diverse contemporary experiences. Since I have taken an oath, I cannot divulge much now," he said.​

 

[Saif]

Growth to remain sluggish for a while

Bangladesh's economy is likely to witness another year of low growth and high inflation, thanks to the revolutionary change in the political arena half a year ago. The student-led mass uprising, which forced the autocratic regime of Sheikh Hasina to fall on August 5 last year, led to a critical tra

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Growth to remain sluggish for a while
Asjadul Kibria
Published :
Feb 22, 2025 22:43
Updated :
Feb 22, 2025 22:43

Bangladesh's economy is likely to witness another year of low growth and high inflation, thanks to the revolutionary change in the political arena half a year ago. The student-led mass uprising, which forced the autocratic regime of Sheikh Hasina to fall on August 5 last year, led to a critical transition in the country's power structure. This mass movement also significantly disrupted economic activities, leading to a bearish quarterly growth of 1.81 per cent against 3.91 per cent in the last quarter of FY24. However, economic activities rebounded modestly in the second quarter of the current fiscal year, as reflected in several proxy indicators.

Nevertheless, there is little scope to be optimistic that the economic growth in the second half of the current fiscal year would see a mighty comeback. The latest half-yearly Monetary Policy Statement (MPS), released by Bangladesh Bank in the third week of last month, made it clear. "The growth outlook for the second half of FY25 for Bangladesh does not appear optimistic due to the existing challenges," said the central bank in the MPS announced for the January-June period of 2025. "It will be hard to regain growth momentum in the near term since the government is focusing on improving fiscal discipline, and the central bank is working to control inflation," it added.

The central bank projected that economic growth might remain sluggish at around the 4.0-5.0 per cent range in the current fiscal year. In other words, the growth in FY25 will be similar to FY24, when output expanded by 4.22 per cent in the final count. The growth rate was 5.78 per cent in FY23.

Looking back, the country's annual economic growth came down to the lowest level in FY20 due to the Covid-19 pandemic-driven contraction of economic activities. GDP registered a modest 3.45 per cent in FY20, which was lowest in the last decade. In the later years, GDP bounced back, registering 6.94 per cent and 7.10 per cent in FY21 and FY22, respectively. The robust pace of growth could not be sustained in the later years. The previous regime blamed external factors, such as the negative fallout of the Russia-Ukraine war, to be precise.

Though the external factors played a role, economic mismanagement and extensive corruption of the Hasina regime, coupled with the manipulation of growth statistics, made things worse. During the last decade, several economists and experts raised some questions about the growth figures, but the autocratic regime did not pay any heed. Instead, it became gradually difficult to question the authenticity of growth, and anyone who expressed apprehension was at risk of backlash. Constructive debate on growth, as well as different economic indicators, was not welcomed. The fallen regime and its loyalists rather used to tag any such debate or discussion as a move to undermine the country's persistent development. The regime became unaccountable and set a trend of not responding to questions raised by experts and media. So, getting access to information from national statistical agency or the central bank was complex. It also continued its manipulative effort to manufacture economic growth to show that the country is moving ahead at a rapid rate. Nevertheless, growth started to fall, and the downward trend continued for three consecutive years, showing the systematic weakness of the economy.

Against the backdrop, it is clear that the size of Bangladesh's economy has not grown as high as recorded in the last decade. The expansion or the growth rate of the economy, as estimated by the Bangladesh Bureau of Statistics (BBS), requires careful examination and should not be taken at face value. For instance, in FY21, GDP at the current market price was recorded at US$416 billion, which increased to $450 billion in FY24. Economists and experts who have tried to estimate the GDP alternatively observed that the official figure is around $50 billion more than the real GDP. The previous regime used the inflated GDP figure to create an artificially colourful picture of development and push the country's graduation from the Least Developed Country (LDC) status without adequate preparation.

It is crucial to re-estimate or re-calculate the GDP figures to determine the actual size of Bangladesh's formal economy. This task, though daunting, is necessary for the national statistical agency. Nevertheless, BBS needs to do so for at least two or three years and provide a more authentic picture of GDP, as some corrective steps have already been taken. The modest growth in FY24 reflects that.

In the current year, the central bank's projection of GDP growth rate between 4 to 5 per cent range seems realistic. After a significant disruption in economic activities, followed by a slow pace of recovery, there is no scope of registering a high growth of 6 per cent or more. That's why the MPS said: "Despite the modest slowdown in economic activity, the projected growth should be viewed as remarkable, given the numerous challenges facing the economy."

The major challenges include curbing inflation, stabilising the exchange rate, rebuilding the foreign exchange reserves, and most importantly, restoring public confidence in the banking system. Due to a series of irregularities patronised by the ousted regime, the country's banking sector became vulnerable, which is reflected in the high amount of default loans. Depletion of foreign exchange reserves was driven by higher payments of imports and debt servicing against lower earnings in exports and a modest inflow of foreign investment. Again, despite some manipulation to keep the inflation rate low, it was impossible to suppress the real situation at one stage. Double-digit inflation continues to erode real income, and the central bank has been struggling to bring it down for the last six months.

In the latest MPS, the central bank rightly stressed containment of inflation without worrying much about growth. Keeping the higher policy rates unchanged is a step in that direction.

Sacrificing growth may not be desirable, though it is necessary for the time being to tame the excessive pressure of inflation.​

 

[Saif]

Beza developing 3-phase plan for economic zones

The Bangladesh Economic Zones Authority (Beza) is developing a comprehensive three-phase implementation plan to develop economic zones across the country, ensuring balanced industrialisation, employment generation, and sustainable infrastructure development.

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Beza developing 3-phase plan for economic zones

The Bangladesh Economic Zones Authority (Beza) is developing a comprehensive three-phase implementation plan to develop economic zones across the country, ensuring balanced industrialisation, employment generation, and sustainable infrastructure development.

As part of a draft "National Master Plan of Economic Zones", Beza is prioritising establishing 20 economic zones by 2046, strategically phasing the implementation for resource optimisation and to attract local and foreign investment.

Beza disclosed this during a workshop on "Economic zone prioritisation and phasing, offsite infrastructure planning and development mechanism" at its office in Biniyog Bhaban at the capital's Agargaon yesterday.

According to the master plan, which is currently being formulated through financing from World Bank, the phased approach helps mitigate challenges related to land acquisition, infrastructure readiness, and investor confidence.

The first phase, spanning from FY25 to FY30, will prioritise economic zones that are already under development or at an advanced planning stage

This in turn ensures that economic zones develop in a structured and sustainable manner, states the master plan.

Only 10 economic zones have become operational since Beza rolled out a massive industrialisation plan in 2015.

Of the 10 economic zones, two – the National Economic Zone in Chattogram and Sreehatta Economic Zone in Sylhet -- are government-run while eight are under private management.

The private ones are City Economic Zone, Meghna Industrial Economic Zone, Meghna Economic Zone, Hoshendi Economic Zone, Abdul Monem Economic Zone, Bay Economic Zone, Aman Economic Zone, and East West Economic Zone.

According to a Beza report, the 10 economic zones employ around 60,000 people. Some 7,000 people are working in government-run zones and 53,000 in the private zones.

Products worth $14.47 billion were produced in the 10 economic zones in the last fiscal year of 2022-23, it said.

Addressing the workshop, Ashik Chowdhury, executive chairman of Beza, reaffirmed his commitment to turning the master plan into a blueprint for success, driving growth, innovation, and sustainable industrialisation.

"Whenever I am given a big project, I know it is a huge responsibility. There are many challenges, but I see them as chances to learn and grow," he said.

"Beza has grown because of hard work, good planning, and always aiming for the best."

Speaking about Bangladesh's economic growth, Chowdhury said, "A long time ago, we chose Narayanganj as an important place for development. We made that decision after careful study, and now we see the results.

"We are creating a space where businesses can succeed, new ideas can grow, and young people can dream big," he added.

Beza is not just building economic zones, it is shaping the future of Bangladesh, he said.

"We must create more jobs, grow our economy, and make Bangladesh even stronger. Let us work together for a better future," Chowdhury said.

Gayle Martin, country director of World Bank, emphasised the importance of rationalising economic policies to foster sustainable growth.

From the international financial institution's perspective, a well-functioning private sector is crucial for innovation, entrepreneurship, job creation, and sustainable management of natural resources, she said.

World Bank has been supporting Bangladesh in its economic progress, analysing growth trends, and enhancing policy frameworks, she said.

In collaboration with the International Finance Corporation, World Bank is preparing a private sector diagnostic, set to launch in the coming weeks, Martin informed.

According to her, another critical area is tax policy and administration. Bangladesh has one of the lowest tax-to-GDP ratios in the world and tax exemptions account for 6 percent to 7 percent of the GDP.

Rationalising these policies is essential for fiscal sustainability, she emphasised.

While the strong growth trend of the past has lost steam, strategic private sector investment can revitalise the momentum, said Martin, adding, "The World Bank remains committed to supporting structural reforms that maximise economic zones' impact."

According to a presentation on the master plan, the first phase, spanning from FY25 to FY30, will prioritise economic zones that are already under development or at an advanced planning stage.

Beza is focusing on the construction of roads, power supply, water management, and telecommunications to attract investors.

It is also offering incentives and ensuring a "favourable" business environment by focusing on select industrial sectors such as agro-processing, textiles, and light engineering due to their low capital requirement and high employment potential.

These zones being prioritised have already been provided land, face minimal legal disputes, and have high investor interest, making them ideal for early implementation.

By 2030, these zones are projected to generate over 300,000 jobs and contribute significantly to export earnings, thereby strengthening Bangladesh's position in global trade.

The second phase, running from FY31 to FY35, will focus on introducing large-scale industries such as automobile manufacturing, pharmaceuticals, and heavy engineering.

In this phase, railway and expressway connectivity will be strengthened, and more public-private partnerships (PPP) and government-to-government (G2G) collaborations will be promoted.

Work is currently underway for the issuance of legal and environmental clearances for the land of these economic zones, and by 2035, these are expected to house large-scale industrial parks that will contribute to Bangladesh's growing manufacturing and export sectors.

The final phase, extending from FY36 to FY46, aims to transform Bangladesh into a global industrial hub by introducing AI-driven logistics, automated factories, and IoT-based infrastructure.

It will set up green economic zones with eco-friendly policies, renewable energy, and circular economies.

In this stage, specialised clusters will be created to compete with global industrial zones in Vietnam, India, and China.

The master plan states that despite efforts toward structured rollouts, land acquisition issues, environmental regulations, and policy inconsistencies remain key challenges.

Through successful implementation, the master plan seeks to transform Bangladesh into a regional industrial powerhouse, creating millions of jobs and boosting economic diversification beyond Dhaka and Chattogram.​