Uncertainty shrouds business recovery

The uphill battle to restore confidence among the business community is progressing slowly as the Prof Muhammad Yunus-led interim government marks its second month in office.
Businesspeople, who now adopt a “wait-and-see” approach, say they are worried but still optimistic that the situation will improve soon. Meanwhile, business expansion, foreign direct investment (FDI) and new local investment plans remain on hold.
After weeks of fierce nationwide protests and mass uprisings, the Awami League government was ousted on August 5. Subsequently, the interim government led by Nobel laureate Yunus was sworn in on August 8.
The new government inherited at least half a dozen business challenges, such as corruption, persistent high inflation, gas and power crises, dollar shortages and a sharp depreciation of the taka.

These challenges already translated into declining FDIs, slumping capital machinery and raw material imports, according to official data.
Even before the new government could begin confidence restoration work, widespread labour unrest, deteriorating law and order, arson, factory looting and the arrest of businesspeople added to the existing challenges.
“We expected a higher level of business confidence from the incumbent government,” said AK Azad, chairman and managing director of Ha-Meem Group, a leading garment exporter. “The future of business and investment depends on the government’s restoration of law and order.”
The apparel exporter said the student movement in July and August impacted their fashion orders from Western buyers. At the time of the movement and soon after the government’s fall, timely shipment of export orders became very difficult.
Apart from exports, the opening of letters of credit (LCs) for imports declined by 4.76 percent in July-August compared to the corresponding period last year, according to Bangladesh Bank data.
In late August and early September, labour unrest erupted in major industrial belts, disrupting production lines that were already struggling to meet tight deadlines.
Although the situation has now improved largely, Azad said international clothing retailers and brands placed fewer work orders for the next seasons due mainly to the inability to contain labour unrest promptly.
“Amid this turmoil, the investment climate is almost missing,” he commented. “We are worried, but not entirely disappointed. We hope the business and investment climate will improve soon.”
Ashraf Ahmed, president of the Dhaka Chamber of Commerce and Industry (DCCI), said three key factors diminished the business confidence after the political changeover.
Those are poor state of law and order, labour unrest and energy shortages in industrial units.
In such a situation, the DCCI president said new investment is unimaginable, as it is difficult to protect existing investments. “We are under immense pressure and need rapid improvement.”
While Azad and Ahmed worried about law and order, Abdul Hai Sarker, chairman of the Bangladesh Association of Banks (BAB), said investment primarily depends on an adequate supply of gas and power to industrial units.
He said inconsistent supplies of these industrial inputs are worsening business optimism.
Regarding foreign investment, Sarker said foreign investors choose their investment destinations based on whether the country has a well-functioning capital market.
Supporting the government’s stance, the BAB chairman said only corrupt businessmen are currently being arrested.
Mohammed Amirul Haque, managing director and CEO of Premier Cement Mills Limited, believes that the business and investment climate will not recover until the financial sector is corrected.
He said, “Many businesses are becoming bankrupt as they cannot pay bank instalments timely because of low business turnover centring the political changeover.”
“Besides, banks are charging a 2 percent penalty for late loan repayments, further worsening the financial conditions of the businesses,” he added.
“Business and investor confidence has not settled down yet,” said M A Jabbar, managing director of conglomerate DBL Group.
He held poor law and order and overall uncertainty responsible for the low confidence of businesses and investors.
Requesting anonymity, a spinning mill owner, meanwhile, complained about inconsistent gas supplies and the sharp depreciation of the local currency Taka. Due to gas shortages, he said his factory is currently running at 40 percent of its total capacity.
The spinner said the government should take new initiatives to attract new investment and protect existing investments.
Khandoker Rafiqul Islam, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said new investment and expansion plans are currently completely stalled.
“At this moment, business confidence is low,” Islam acknowledged. “If stability is restored, investment and business expansion will occur.”
Masrur Reaz, an economist who works on business confidence and the investment climate, said the country’s decision-making and policy lack stability.
Arrests of businessmen should be very targeted if anyone is found corrupt and arresting businessmen indiscriminately sends a negative message to the business and investment climate, he told The Daily Star over the phone.
“Indiscriminate arrests of businesspeople will unnecessarily hurt business confidence,” Reaz said.
“Those who have committed crimes should be brought to book, but there should not be unnecessary harassment of businesspeople just for their political involvement,” he added.