The business and investment environment in Bangladesh is facing mounting pressure, as a series of internal and external crises converge, severely impacting the country’s economic stability and growth potential.
Internally, the private sector is grappling with a rise in interest rates on loans, escalating fuel prices, and an overvalued dollar, all of which have contributed to skyrocketing production costs. The recent gas price hike, which has affected industries across the country, has further complicated the already fragile business environment. Entrepreneurs are expressing deep concerns that the continued increase in gas prices will undermine the competitiveness of Bangladesh’s industrial sector.
High fuel costs, combined with an overvalued dollar, are eroding the financial viability of many businesses. At the same time, political uncertainty continues to cloud the outlook, with investors wary of the potential for instability. The ongoing global tariff war has exacerbated the situation, with uncertainties in export markets adding to the strain. With inflation hovering close to 10%, there are fears that the country’s inflation rate may exceed 12.67% in the coming months due to the impact of rising energy prices.
Industrial entrepreneurs have warned that the industrial sector cannot survive the continued surge in energy costs. They believe that new investments will dry up and the country’s export sector may face significant setbacks. “Increasing gas prices by 33% in the industrial sector will have a catastrophic impact on the entire industry,” said one industrial leader. Economists also caution that the competitiveness of Bangladesh’s private sector is at risk.
“The country is already burdened by high inflation, depreciation of the currency, and an unstable political landscape,” said Dr. Selim Raihan, an economist. “These challenges will only deepen if the energy crisis is not addressed, and the cost of doing business continues to rise.”
The Bangladesh Chamber of Industries (BCI) President, Anwar-ul-Alam Chowdhury (Parvez), stated that the law and order situation in the country, combined with high interest rates, is discouraging new investments. “The rise in gas prices is like a ‘sore on the back’ for businesses that are already struggling with high production costs,” he added.
Meanwhile, Taskin Ahmed, President of the Dhaka Chamber of Commerce and Industry (DCCI), stressed that the combined effects of the gas price hike and increased loan interest rates have made the business environment increasingly difficult. “The industrial sector is facing an environment of unequal competition, which is deterring new investments and hindering industrial progress,” he said.
The Bangladesh Steel Manufacturers Association has reported a 40% decrease in investments due to the depreciation of the taka, with Sheikh Masadul Alam Masud, its founding chairman, warning that the increase in gas prices will discourage both domestic and foreign investments in the sector.
The private sector’s growing concerns are supported by recent data from the Bangladesh Bank, showing a decline in imports of capital equipment and intermediate goods. The country’s fragile import situation highlights the difficult position the private sector finds itself in.
Mohammad Hatem, president of the Bangladesh Knitwear Industry Owners’ Association (BKMEA), reiterated that the increase in gas prices for new industries will not result in industrial growth. “There will be no investment, and supply will remain insufficient,” he said.
Policy experts such as M Mashrur Riaz, Chairman of the Policy Exchange, have emphasized the need for reforms to improve the competitiveness of the country’s industrial sector in the face of rising business costs and a lack of political stability.
The Business Initiative Leading Development (BILD), a private sector think tank, has urged the government to reconsider its approach to energy pricing and address the multiple internal and external crises that are threatening to stifle Bangladesh’s economic growth. With the business and investment climate under increasing pressure, it remains to be seen how the government and the private sector will navigate these crises and chart a path toward sustained economic growth.
Bangladesh’s business and investment environment is under mounting pressure due to a convergence of internal and external crises, as industrial leaders warn of deepening trouble following the latest 33% hike in gas prices. The move, they say, is poised to erode competitiveness, stall new investments, and spike inflation above 12.6%.
The private sector is grappling with high interest rates on loans, record fuel prices, a depreciating local currency, and an overvalued US dollar. Political uncertainty, energy supply disruptions, and declining capital machinery imports are further exacerbating the situation. Global uncertainties, including the ongoing tariff war and rising raw material prices, have only worsened the outlook for exporters.
“Industrial Sector cannotsurvive”: “The industrial sector will not survive this continuous increase in gas prices. New investment will dry up, and existing employment will be at serious risk,” said several entrepreneurs. In 2023, gas prices in the industrial and power sectors were increased by 179%. With inflation already hovering near 10%, the latest increase in gas prices is feared to push it past 12.67%, according to analysis by the Business Initiative Leading Development (BID).
Economists caution that without guaranteed energy supply, even at higher costs, private sector competitiveness will diminish further. “Local industrial entrepreneurs are struggling to survive due to rising production costs,” said Dr. Selim Raihan, adding, “New entrepreneurs are being discouraged from entering the market due to the high cost of borrowing.”
Foreign and Domestic Investment Hit: “The increase in gas prices is like a sore on the back,” said Anwar-ul-Alam Chowdhury (Parvez), President of the Bangladesh Chamber of Industries (BCI). “The law and order situation hasn’t improved, LC openings are declining, and new investments are limited. Until we address these structural issues, sustaining the industrial sector will be difficult.”
Echoing this sentiment, Taskin Ahmed, President of the Dhaka Chamber of Commerce and Industry (DCCI), stated that the increased cost of doing business-driven by both rising fuel costs and loan interest rates-has created an environment of “unequal competition” and stagnated industrial progress.
According to Sheikh Masadul Alam Masud, Founding Chairman of the Bangladesh Steel Manufacturers Association, investments in the steel industry alone have declined by 40%, largely due to the depreciation of the taka and now the added burden of higher gas bills. “This is a major deterrent for new domestic and foreign investments,” he warned.
Mohammad Hatem, President of the Bangladesh Knitwear Industry Owners’ Association (BKMEA), said, “If supply doesn’t increase with price, the hike is counterproductive. It will not spur industrial development-it will strangle it.”
Imports Data Paint Grim Picture: Data from Bangladesh Bank reflects the fragile state of the private sector. From July to February of FY2024-25:Capital equipment imports fell by 25.22%, Intermediate goods imports declined by 8.50%, Petroleum imports rose slightly by 1.59%, Industrial raw material imports increased by 10.41%, Consumer goods imports declined by 1.29%. These figures, experts say, underscore declining industrial investment and production activity.
M Mashrur Riaz, Chairman of the think tank Policy Exchange, emphasized that Bangladesh’s cost of doing business remains higher than in competing economies. “Political instability, energy unreliability, and inadequate reforms have stalled investor confidence,” he said.
Consumer Prices to Soar: BID estimates suggest that if gas makes up 10% of total production costs, and with a 26% value addition rate, the total price of industrial goods may jump from Tk 8.23 trillion to Tk 9.28 trillion-a sharp increase that will feed directly into consumer prices.
A Tipping Point: Economists and industry leaders agree: the latest gas price hike could be the tipping point for many struggling businesses. Without immediate policy intervention, including stabilization of energy supply, rationalization of fuel costs, and access to affordable financing, Bangladesh’s path to industrial recovery and growth may face a long and uncertain delay.
BIDA Calls Gas Price Hike “Discriminatory,” Urges Reconsideration: The Bangladesh Investment Development Authority (BIDA) has expressed serious concerns over the government’s decision to increase gas prices by 33% for new investors, calling the move discriminatory and a potential hindrance to foreign investment in the country.
In a letter sent to the Bangladesh Energy Regulatory Commission (BERC) on Tuesday, BIDA Executive Chairman Chowdhury Ashiq Mahmud Bin Harun emphasized that the decision could significantly undermine efforts to attract new foreign investments. “We believe this decision will hinder the flow of foreign investment into the country,” Harun stated in the letter.
While BIDA acknowledged the government’s need to reduce subsidies, it called for more transparency and public discussion around the reduction in subsidies. “The issue of reducing subsidies can be made public,” Harun suggested, urging reconsideration of the newly implemented gas pricing structure.
The Foreign Investors Chamber of Commerce and Industry (FICCI) echoed similar concerns, urging BERC to revise the gas price hike. FICCI President Javed Akhtar stated, “We urge BERC to reconsider this new gas pricing structure, keeping in mind the demand for energy and its proper management, and demand that the policy be formulated with priority given to the larger goals of the country’s overall economic development and attracting foreign investment.”
Both BIDA and FICCI are worried that the increased cost of energy will deter potential foreign investors, especially in a period when the country is facing other economic challenges such as high interest rates, inflation, and political uncertainty. The organizations are calling for a more balanced approach to energy pricing that considers the long-term goals of economic growth and industrial development.
