TDS Desk:

The import of capital machinery has dropped significantly, reflecting stagnation in investment across the country.

According to Bangladesh Bank data, during the first five months (July–November) of the current fiscal year 2024–25 (FY25), the opening of letters of credit (LCs) for capital machinery fell by 26%, while LC settlements decreased by around 22%.

The value of LCs opened for machinery imports during this period stood at $713 million, down from $969 million during the same period in FY24. Similarly, LC settlements for machinery imports dropped to $865 million from $1,107 million last fiscal year.

The import of intermediate goods also declined during this period, with LC openings falling by 11.52% and settlements by 15.38%. Conversely, imports of industrial raw materials showed slight growth, with LC openings rising by 5.58% and settlements increasing by 7.13%.

BROADER ECONOMIC CHALLENGES

High interest rates, instability in industrial zones, and energy shortages are compounding this decline, contributing to a lack of new investments and halting industrial production. Entrepreneurs are struggling with these challenges as Bangladesh faces growing demands for large-scale job creation to tackle youth unemployment.

On 5 August 2024, the authoritarian Awami League government was overthrown in a student-led mass uprising, leading to the formation of an interim government headed by Prof Muhammad Yunus. However, political uncertainty, labour unrest, and an unstable law-and-order situation continue to deter investment. Labour movements have disrupted factory production, and protests in Dhaka by various groups with differing demands have become routine.

Business leaders emphasise that under such conditions, investor confidence diminishes.

Dr Zahid Hussain, former lead economist at the World Bank’s Dhaka office “I don’t think there will be much change in investment this year. If these issues are not resolved, no one will be interested in new investment. This uncertainty will not end until it is clear what the new political system will be.”

Abdul Awal Mintoo, former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and vice chairman of the BNP, underscored the importance of stability for investment.

“To increase investment, a stable social and political environment is necessary. There needs to be harmonious coordination between political and social organisations. Collaborative relationships must be built. Along with this, financial capital is essential. If this is achieved, everyone will come forward for new investments.”