Business climate improves, but remains challenging
The country's business climate showed slight improvement in the fiscal year (FY) 2024-25 after a decline the previous year, according to the Bangladesh Business Climate Index (BBX).
Several factors that had weakened the business environment in FY 2023-24, including inflationary pressure, higher interest rates and global uncertainty, continued to trouble local industries in the following year.
For all latest news, follow The Daily Star's Google News channel. In FY25, political and investment uncertainties, along with exchange rate volatility, added to the existing challenges facing businesses, according to the index prepared by the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) and Policy Exchange Bangladesh (PEB).
Published yesterday, the report said the overall business climate score rose to 59.69 in FY25 from 58.75 a year earlier. MCCI and PEB reached out to 800 businesses across 12 sectors in all eight divisions of the country. The initiative was supported by the Department of Foreign Affairs and Trade (DFAT) of Australia. The launching of the latest BBX took place at the MCCI Gulshan office.
Responses from the firms classified the business climate in FY25 as "Several Bottlenecks Remain", which is better than the "Difficult" category but falls below the "Improving Business Environment" and "Business Friendly Environment" levels.
At the launch event, leading business figures urged the government to cut bureaucratic red tape and curb corruption. Attending it as the chief guest, Commerce Adviser Sk Bashir Uddin admitted that corruption continued to make business operations difficult but said it was impossible to eliminate graft overnight.
The BBX assessed the business landscape across 11 pillars, such as starting a business, access to land and availability of regulatory information. Five of these pillars showed improvement, while the remaining six deteriorated last year.
Notable progress was seen in access to finance, which rose by 43 percent from the previous year's 28.11 to 40.07 in FY25. This suggests liquidity has improved and targeted refinancing programmes are producing positive results.
Among the improving gauges were starting a business, dispute resolution and paying taxes, due mainly to digital reforms, reduced political interference in the courts and simpler tax processes, according to the index.
However, business infrastructure and labour regulation, though still the highest-scoring pillars, declined.
Scores for trade facilitation, technology adoption and environmental regulations and standards saw their scores fall, pointing to continued inefficiencies in ports, a widening digital divide and rising compliance costs, according to the report.
Sectoral performance varied widely. Agriculture and forestry, pharmaceuticals and chemicals, and food and beverage were the best-performing sectors, while construction, electronics and light engineering, and textiles lagged behind.
Despite being the country's main source of export strength, the ready-made garments (RMG) sector scored only 59.24, highlighting operational and regulatory constraints even in this key industry.
BARISHAL LEADS IN BUSINESS CLIMATE
Geographically, Barishal ranked top among the divisions with a score of 62.8, followed by Sylhet at 61.5 and Mymensingh at 61.3.
In contrast, traditional economic hubs of Dhaka and Chattogram were in the second-lowest performance tier. The capital scored 59.0, while the port city registered 60.1.
Neither Dhaka nor Chattogram secured the top position in any of the 11 pillars.
The BBX noted that this highlights the need for decentralised economic activity and reduced congestion in these primary growth centres.
"Both Dhaka and Chittagong cities have also seen frequent and major disruptions to economic activities and supply chain operations due to frequent protests, processions, and sit-ins in the past 12 months, diminishing the ease of doing business in these important geographies," it said.
INTERMEDIARIES GONE AFTER POLITICAL CHANGEOVER
The report said uncertainty and frequent changes in government offices following the political changeover last year negatively affected the availability of regulatory information.
On a positive note, it pointed to the "absence since political changes in August 2024 of predatory behaviour of politically-linked intermediaries," which had previously made the business environment more complex and exploitative, especially in areas like land access.
The BBX 2024-25 found that the business environment is still recovering from the political transition and unrest in 2024, which caused supply chain disruptions, protests and significant losses in sectors such as apparel and pharmaceuticals.
"National elections and subsequent political unrest, labour strikes, and industrial disruptions, particularly in apparel and pharmaceuticals, led to up to 10 percent business losses in some sectors," it said.
The report identified several priorities. Those include simplifying business registration and land acquisition, expanding digital infrastructure in rural areas, reforming the banking sector to improve credit access and reduce non-performing loans, strengthening environmental compliance with technical and financial support, and focusing on consistent implementation of existing reforms rather than introducing new ones.
On reforms, it said, "Reform initiatives, even if incremental, render a positive impact on the investment climate," citing improvements in tax and finance as evidence.
However, the report said that without deeper structural reforms, the country's competitiveness, especially as it graduates from least developed country (LDC) status in November 2026, will be at risk.
'CUT RED TAPE, REDUCE GRAFT'
At the event, Rupali Chowdhury, managing director of Berger Paints Bangladesh Ltd, said difficulties like graft and bureaucratic hurdles exist in doing business in countries like Bangladesh.
She called for a paperless and contactless system to reduce human interaction, which she believes would help curb corruption.
Businesses, she added, must also take responsibility for compliance, which may come at a cost initially but ensures long-term continuity.
Anwar-Ul-Alam Chowdhury (Parvez), president of the Bangladesh Chamber of Industries (BCI), said businesses are struggling to stay competitive as costs continue to rise.
He said interest rates have climbed from 9 percent to 16 percent, while inconsistent gas supply, higher raw material import costs and rising port charges have further pushed up trade costs.
"The bureaucrats are not working; they are not cooperating. It is being said that those who worked under the previous government were sent to jail, and now there is a perception among bureaucrats that they would not face jail if they simply avoid work," said Parvez.
He added that without political stability and an improved environment, investment would not come.
Kazuiki Kataoka, country representative of the Japan External Trade Organization (Jetro), also spoke at the event.
Kamran T Rahman, president of the MCCI, said the BBX reflects Bangladesh's economic realities, and it helps policymakers, investors and development partners understand both the opportunities and the challenges in the private sector.
He said ongoing reforms must lead to structural transformation, adding that progress is needed in financial inclusion, digitalisation, infrastructure, skill development and regulatory governance.
M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, said the country's trade and business sectors are facing several challenges that require urgent attention and reform.
He added that the BBX would support the government with data and insights to identify priority areas for improving the business environment.
Commerce Adviser Sk Bashir Uddin said the interim government has inherited major economic challenges and it has to implement a tight monetary policy that is "painful but necessary" to avoid "serious serious problem".
He expressed hope that interest rates would come down early next year.
While admitting that corruption could not be completely eradicated, he said the focus should be on making it more difficult.
Ben Carson, Australian trade and investment commissioner at the Australian Trade and Investment Commission (Austrade), Bangladesh, attended the programme as the guest of honour.
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