It’s time for survival. Growth can wait

The government should focus on stabilising businesses in the upcoming budget for fiscal year 2026-27 rather than chasing ambitious growth targets, according to a top business leader, as he says confidence remains fragile at home and global risks are rising.

“The immediate target should be survival. Growth can come later,” said Anwar-Ul-Alam Chowdhury (Parvez), president of the Bangladesh Chamber of Industries (BCI), in an interview with The Daily Star.

He said the first priority of the new budget should be to restore business confidence, followed by reducing the cost of doing business and ensuring policy consistency.

“For businesses, stability matters more than headline incentives,” he said.

“Tax incentives alone can’t yield much if uncertainty persists,” said Chowdhury, adding that the FY27 budget should provide the country’s private sector with decisive policy support to improve the fragile business confidence.

The business leader said confidence has improved since the national election in February, which brought the BNP to power in a landslide.

The forthcoming budget will be the new government’s first. But he commented that business sentiment has not fully recovered.

“There was an expectation that political stability would bring economic stability. But people are yet to feel that improvement fully,” he said, pointing to law-and-order concerns and a “mob culture” that “continues to unsettle investors”.

He said the new government has inherited a difficult economic backdrop, including high inflation and rising non-performing loans. While discipline in foreign exchange management has improved, broader macroeconomic stress is still constraining business expansion.

At the same time, private sector credit appetite has weakened, and unemployment is rising, adding to social and economic pressure.

Global developments are compounding those strains. Volatility in oil markets has pushed up import costs and heightened uncertainty over energy supply.

After war broke out in the Middle East in the last week of February, oil prices crossed $100 a barrel. Even with a truce currently in place, prices are above $90, compared with around $69 before the conflict.

Chowdhury said a prolonged war could intensify fiscal pressure for the government, with industry bearing the cost of higher energy financing.

Against that backdrop, he called for a comprehensive effort to lower business costs.

“High interest rates, unreliable energy supply, logistics bottlenecks and complex regulation are all squeezing companies,” he said.

At the centre of the problem, in the view of the BCI president, is bureaucracy. “Procedural complications and harassment are major barriers. If those are reduced, costs will fall naturally,” he said.

He cited arbitrary disallowance of expenses, inconsistent interpretation of tax rules and complications in self-assessment procedures, which often force companies into repeated explanations and audits.

In some cases, he said, effective corporate tax rates climb far above the official rate, reaching 42 percent to 50 percent because of hidden costs and disallowances.

“One of the most striking concerns is the narrow tax base,” he added.

Bangladesh has around 1.18 crore business entities and millions of professionals, yet only about 32 lakh taxpayers actively contribute, according to Chowdhury. “This is not because people do not want to pay tax. They simply avoid it because the system feels complicated and punitive.”

To widen the tax net, he proposed a simplified, slab-based tax system for small businesses, similar to India, under which firms with lower turnover would pay a fixed amount instead of navigating complex compliance rules.

“This would encourage voluntary compliance and expand the tax base,” he said.

For local businesses, Chowdhury said, liquidity pressures are also mounting. He said high rates of tax deducted at source (TDS) often exceed actual profit margins, leaving firms short of working capital.

“Companies also face scrutiny from multiple authorities, including joint commissioners, intelligence units and audit teams, sometimes reviewing the same file repeatedly over several years.”

“This slows down operations, increases manpower costs and reduces efficiency,” he said, calling for a “single assessment, single closure” system to prevent tax files being reopened without cause.

High lending rates are another deterrent to investment, said the business leader.

“Banks are charging 14 percent to 15 percent, which is not sustainable for most businesses,” Chowdhury said. “The underlying cost of funds is closer to 5 percent to 6 percent but is inflated by inefficiencies and bank margins.”

High interest rates, unreliable energy supply, logistics bottlenecks and complex regulation are all squeezing companies. At the centre of the problem is bureaucracy. Procedural complications and harassment are major barriers. If those are reduced, costs will fall naturally

He also talked about a crowding-out effect for the private firms as banks shift towards government securities. “Why take risks with businesses when treasury bonds offer safe returns?” he said.

To ease borrowing costs, he urged the government to act decisively, including reducing the policy rate to bring down lending rates.

Energy security, he said, is equally critical. Industry needs uninterrupted and reasonably priced power to survive. The government should maximise domestic energy sources, expand solar generation and ensure adequate gas supply for industry and fertiliser production, especially as food security concerns grow.

He said logistics costs are another drag on competitiveness. Higher port charges and transport inefficiencies have raised production costs.

“Reducing logistics costs could significantly improve competitiveness,” said Chowdhury.

He argued that weak implementation of the budget, not poor policy design, is the deeper problem. “But, without strong commitment, even the best policies will fail.”

He also called for closer coordination between policymakers, businesses and economists. “Every stakeholder sees only part of the picture. Real solutions require a combined effort,” he said.