Beyond the façade: White Paper to expose true state of economy

The country's economic pressures are mounting in the first quarter of the new year, with a clearer picture expected once the government releases its white paper, says Kamran T Rahman, President of the Metropolitan Chamber of Commerce and Industry (MCCI) and Chairman of the Bangladesh Tea Association. Kamran, who also leads The Kapna Tea Company Limited and Pubali Jute Mills and serves as an independent director at Advanced Chemical Industries (ACI) and its affiliates, shared insights on the current business climate and potential strategies for recovery in an exclusive interview with Jago News’ Md Samiur Rahman Sazzad.

Jago News: What is the current business climate, especially in terms of the challenges facing the private, service, and manufacturing sectors?

Kamran: We’re navigating through a period of economic instability. Over the last decade and a half, widespread corruption and mismanagement have led to high inflation, with food inflation reaching 14% at its peak, though it has recently eased slightly.

Domestic and foreign debt levels have surged significantly. Funds have been siphoned off through corruption, and while efforts are underway to recover them, the faster this happens, the better. Our foreign exchange reserves have dropped, and the dollar rate has fluctuated drastically—from Tk 84 to Tk 130 in the open market, now around Tk 115—which has affected the entire economy.

Organisations like the World Bank, IMF, and ADB have projected GDP growth at 4%, while the target for the FY2024-25 budget was set at 6.75%. We may receive some budgetary support from the World Bank and IMF.

The banking sector faces major issues due to high levels of non-performing loans. Tax and revenue collection is only 8-9%, one of the lowest not only in South Asia but globally. However, there are positive signs: remittances are increasing, and the balance of payments is currently favorable.

Approximately 80-85% of our employment comes from the informal sector. Limited job opportunities within the country have pushed many to seek work abroad, especially in the Middle East. However, due to a lack of skills, remittance inflows are not as high as they could be.

The government has established a committee to prepare a white paper aimed at delivering a transparent view of the economic situation, challenges, and solutions. We anticipate seeing this information soon, which should provide a clearer path forward.

Jago News: Given the current circumstances, what should be prioritised now?

Kamran: The primary concern right now is stabilising law and order. The situation will not normalise unless we have a robust and efficient police force. Currently, many personnel have not returned to their duties, and those who have are not performing optimally. Until this is resolved, many areas of the economy will remain unsettled.

In the short term, we should focus on addressing the police shortage by adopting a recruitment strategy similar to the post-independence short-term, training-based approach used for the military. This could help fill the gaps quickly and effectively.

Jago News: As a successful entrepreneur in the tea and jute industries, what are the main obstacles to growth in these sectors in Bangladesh, and what solutions would you suggest?

Kamran: The tea industry’s primary challenge is low pricing. We are forced to sell at prices below production costs, and rates have been steadily falling over the past five years. This has led to sustained losses, with even the National Tea Company Limited having to shut down 12 government-owned tea gardens. Unfortunately, workers from these gardens often lack opportunities to transition to other professions.

In 2022, the tea industry faced a 19-day shutdown due to labour unrest, resulting in nearly Tk 400 crore in losses. Wages were then increased by around 42% to Tk 170 per day. While everyone focuses on this wage increase, few mention the additional benefits tea workers receive. This financial burden falls solely on the garden owners, despite very narrow profit margins. To illustrate, producing tea leaves for a single Tk 10 cup costs only 42 paisa; the rest goes to sugar, water, fuel, and other costs.

Since independence, our tea production has grown from 30 million to 103 million kilograms, while domestic demand stands at 95 million kilograms. This surplus has driven down prices, creating pressure to export tea. However, for exports to become viable, government support is essential.

The jute industry faces ongoing challenges as well. A law mandating the use of jute bags was intended to support the sector, yet it has rarely been enforced, causing export rates to decline. Without a comprehensive ban on plastic bags, jute usage won’t increase. India enforced this law in 1987, which has helped their jute mills thrive. Strict enforcement in Bangladesh could similarly revive our jute industry.

Jago News: The country's manufacturing sector is struggling due to a lack of investment. What steps can be taken to address this?

Kamran: Building trust among businesspeople is essential to encourage investment. Without confidence in the local market, even domestic investors will hesitate, and foreign investors won’t feel secure bringing their funds here. Foreign investment often follows local investment; when they see local investors are comfortable and confident, they are more likely to invest.

Another key issue is the poor condition of the power and energy sector. Gas pressure in industrial areas is very low, and many businesses are forced to rely on costlier alternatives like CNG and LPG. Experts estimate that our natural gas reserves may be depleted by 2030. If we fail to discover new gas fields, industrial gas pressure will continue to drop, further hampering production.

The government needs to intensify efforts to find new gas reserves. Although some exploration is underway, it’s far from sufficient. This work should expand fivefold to mitigate energy security risks and ensure the stability needed to attract investors.

Jago News: The weak financial sector is putting pressure on the entire economy. What are your thoughts on this?

Kamran: The financial sector has weakened for several reasons. To alleviate our debt burden, we must identify and eliminate corruption. It's also crucial to lower inflation and focus on enhancing skills to improve employment prospects.

There are significant concerns regarding the reliability of economic data, and the government must address these issues. We anticipate gaining further insights on this matter from the upcoming white paper. Additionally, the central bank has initiated reforms aimed at strengthening the financial sector.

Jago News: Have you held any discussions or made any plans with the interim government to protect the interests of businesspeople?

Kamran: The government has established various task forces that are actively engaging in discussions with different stakeholders in the private sector. These discussions include economists, industry leaders, academics, and representatives from various levels to collaboratively identify solutions.

Jago News: According to MCCI's September PMI Index report, the economy performed better than in August but is still under pressure. What’s the solution?

Kamran: While the economy showed slight improvement in September compared to August, it remains under pressure, although the trend is encouraging. Reforms are currently in progress, and we will gain a clearer understanding of the situation once the white paper is published, but that will take time.

Jago News: What types of short, medium, and long-term measures can the interim government take to address these issues?

Kamran: If the interim government effectively tackles the issues we've discussed in this interview, we can expect the economy to improve. The trajectory of the economy—where it has been, where it stands now, and where it aspires to go—will depend on the success of these reforms.