Industry in a bind

A chronic energy shortage, coupled with rising costs, a shortage of finance and global economic headwinds, has forced many factories to shut down in recent years, taking the steam out of the country’s economic engine.

Factories across key industrial belts are operating well below capacity because of the gas shortage, while many newly built plants remain idle with no clear timeline for starting production.

Tap here to add The Daily Star as a trusted source

As machinery sits unused, businessmen continue to repay mounting bank loans. Besides, thousands of jobs that these factories were expected to create have never appeared.

Workers affected by factory closures move from one mill to another in search of work, while shuttered businesses are adding to the country’s growing burden of non-performing loans (NPLs).

At the centre of this cycle is the prolonged energy crisis, which continues to feed wider economic problems even as the government tries to revive growth through investment.

Although the government is seeking fresh investment, especially from overseas, local manufacturers say they are not receiving fair treatment when it comes to energy supply.

“Bangladesh seeks foreign investment, but those of us who have already invested are treated like beggars,” said Mostafa Kamal, chairman of Meghna Group of Industries (MGI), one of the country’s largest industrial conglomerates.

Industries have faced gas shortages for years, but business leaders say the situation deteriorated after the US-Israel war on Iran triggered fresh shocks in global energy markets.

The crisis worsened further after an accident at a floating liquefied natural gas terminal in Cox’s Bazar cut the country’s pipeline gas supply by more than 17 percent.

GROWTH SLOWS AS NEW INDUSTRIES SIT IDLE

The prolonged energy crisis, combined with the disruption that followed the political changeover in August 2024, has left clear marks on the industrial sector.

Industrial growth slowed to 2.86 percent in fiscal year 2025-26 from 3.71 percent a year earlier, according to provisional estimates by the Bangladesh Bureau of Statistics (BBS).

Fazlee Shamim Ehsan, president of the Bangladesh Employers Federation, said their dying units managed to operate at about 78 percent of capacity before the latest round of gas crisis. Now many are running at roughly half of their normal capacity.

“Still, we are in a much better situation in comparison with other factories. Factories in Kanchpur to Narsingdi industrial belt are facing the worst,” he said.

Amid these constraints, business leaders describe the energy crisis as the “biggest obstacle” to achieving Bangladesh’s target of $100 billion in exports by 2030.

As of mid-July, more than 1,850 applications for industrial gas connections were awaiting approval after the government instructed Petrobangla to suspend all new gas connections.

The decision has dealt another blow to large industrial groups and garment manufacturers that have spent years seeking gas connections for completed factories.

MGI, for example, has invested Tk 7,320 crore in glass and steel rod factories at the Comilla Economic Zone. Construction finished between one-and-a-half and two-and-a-half years ago.

The factories were financed largely through domestic and foreign loans, but they cannot begin production without gas. As a result, the group is paying about Tk 45 crore a month in interest.

MGI Chairman Mostafa said, “In the Comilla Economic Zone, seven factories in total were supposed to create jobs for 15,000 people. But now everything is stalled due to the lack of gas.”

“If we had been told from the beginning that gas would not be available, we would not have made such massive investments,” he commented. “The government now seeks foreign investment, but if investors face this situation, given Bangladesh’s poor rating, the risk will only worsen.”

City Group faces a similar problem. It has invested about Tk 14,000 crore in six factories, including sugar, salt and cement plants, at Hoshendi Economic Zone at Gajaria of Munshiganj.

City Group even spent about Tk 110 crore to build its own gas pipeline, yet it has still not received a gas connection. The factories have been ready since 2022 but cannot begin operations because of the lack of gas.

The company is paying nearly Tk 5 crore a day in bank interest.

According to a City Group official, who requested anonymity, the six factories would directly employ around 10,000 people if they were operational.

DWINDLING SUPPLY FUELS RISING NPLS

An entrepreneur in Narsingdi, who requested anonymity, said he invested Tk 600 crore in a spinning mill after being promised a gas connection by 2024. Following the fall of the Awami League government that year, the connection never came.

He said he has had to seek additional bank loans while continuing to pay interest on expensive machinery that remains idle inside the factory.

The entrepreneur has also been hit by the depreciation of the taka, which has lost about 40 percent of its value against the US dollar over the past three years. He opened letters of credit (LCs) when the exchange rate stood at Tk 85 to the dollar. By the time payments were due, it had climbed to more than Tk 123, leaving him with heavy losses and a shortage of working capital.

Many big businesses with political links also ran into trouble after the Awami League government fell in August 2024.

Large groups including S Alam Group, Beximco Group and Nassa Group defaulted on their loans after their businesses shut down and production stopped as owners fled, became fugitives or were arrested.

Other major industrial groups faced difficulties because of delayed gas connections, exchange rate volatility and supply chain disruptions linked to the global economy.

As these companies failed to repay their loans, bad debt in the banking sector rose sharply. At the end of 2024, NPLs stood at Tk 345,765 crore, up from Tk 211,392 crore six months earlier.

By the end of March this year, total NPLs climbed to Tk 588,704 crore, equal to 32.26 percent of the Tk 1,824,668 crore in outstanding loans, according to the Bangladesh Bank.

To ease the pressure, the central bank under the interim government introduced more flexible loan restructuring and rescheduling facilities for businesses affected by factors beyond their control.

After taking office, the BNP-led government made economic growth and employment its priorities. As part of that effort, it sought to reopen closed factories and industries, while the central bank introduced a series of support measures, including a Tk 60,000 crore stimulus package.

Anis A Khan, former chairman of the Association of Bankers Bangladesh (ABB), told The Daily Star that many industrial groups had fallen into distress because of circumstances beyond their control rather than poor business decisions.

“Take City Group, for example. If it had received a gas connection for its economic zone on time, it would have been able to repay its bank loans on schedule.”

Anis, also the former managing director of Mutual Trust Bank, said the company would not have ended up in its current situation. “To keep the economy on track, these businesses need to be supported.”

[The Daily Star Staff Reporter Asifur Rahman contributed to this report]