The country's stock market extended its winning streak for a fifth consecutive trading session today (29 June), with late-session buying helping the benchmark index finish in positive territory despite experiencing volatility for most of the day.

The rally, which began on 23 June, has lifted the benchmark DSEX index by a cumulative 168 points over the past five trading sessions, signalling a gradual improvement in investor sentiment after weeks of subdued market activity.

At the close, the benchmark DSEX gained nearly 3 points to settle at 5,723. The DSES Shariah Index slipped 0.23 points to 1,157, while the blue-chip DS30 Index advanced 4 points to close at 2,166.

Turnover, however, eased slightly. Total transactions on the Dhaka Stock Exchange (DSE) stood at Tk1,351.52 crore, down 1.42% from the previous trading session. Despite the lower turnover, the DSE's market capitalisation rose by Tk874 crore to Tk6.97 lakh crore.

Market breadth remained positive. Of the 399 issues traded, 178 advanced, 158 declined and 63 remained unchanged.

Market participants said the session began with mild selling pressure as investors booked profits following the market's recent gains. The benchmark index remained volatile through the middle of the session as buying and selling pressure balanced each other. However, renewed buying interest emerged during the final trading hour across several sectors, allowing the market to close higher.

Among the day's top gainers, Rahim Textile climbed 8.73% to Tk225.30 per share. JMI Syringes & Medical Devices rose 7.43%, followed by IPDC Finance, which gained 6.55%. CAPM IBBL Islamic Mutual Fund advanced 6.18%, while Indo-Bangla Pharmaceuticals added 6.02%.

On the losing side, People's Leasing and Financial Services dropped 7.63% to Tk1.20 per share. Other major losers included BD Thai Aluminium, SS Steel, Familytex (BD) and Saif Powertec.

The Chittagong Stock Exchange (CSE) also experienced a mixed session. The CSCX Selective Categories Index edged up 0.8 point, while the benchmark CASPI (All Share Price Index) slipped 2.3 points at the close. Trading activity at the port city bourse remained significantly lower than that of the DSE.

In its daily market review, EBL Securities said the benchmark index managed to settle in positive territory after a modest early-session pullback, as late-session buying support emerged across the trading board following extended intraday volatility.

According to the brokerage, investors remained active on both the buying and selling sides throughout the day. While corrections in several large-cap stocks weighed on the indices during most of the session, renewed buying interest in the final hour helped the market recover and end with modest gains.

Sector-wise, the banking sector dominated turnover, accounting for 12.8% of the day's total transactions. The textile sector followed with a 12.6% share, while the general insurance sector contributed 12.4%.

Sectoral performance was mixed. The jute sector posted the strongest gain, rising 2.1%, followed by information technology, which advanced 1.2%, and general insurance, up 1.1%. On the downside, the ceramics sector fell 1.2%, making it the day's worst performer, followed by the services sector, which lost 0.8%, and the miscellaneous sector, down 0.5%.

BRAC EPL Stock Brokerage also reported mixed performances among the large-cap sectors. Fuel and power led the gainers with a 0.37% increase, followed by non-bank financial institutions (0.20%), telecommunications (0.18%) and engineering (0.07%). In contrast, the food and allied sector declined 0.37%, pharmaceuticals lost 0.26%, and banking fell 0.23%.

Meanwhile, block trades accounted for 5.5% of the day's total market turnover.

The central bank has announced a one-time offer to help borrowers who are behind on their loan payments. Under the plan, banks can make deals with these borrowers to settle their overdue loans.

Only borrowers whose loans are classified as "bad/loss" will be eligible for the facility. Those classified as "substandard" or "doubtful" will not be allowed to avail the benefit.

The goal is to reduce bad loans, make banks financially stronger, and free up money so banks can give more new loans to businesses, the central bank said in a circular today (29 June).

It allows banks to offer the facility to borrowers whose loans were classified as bad and loss of 30 June 2026, subject to board approval and banker-customer relationship. It will remain effective until 31 December 2026.
The move comes at a time when the country's banking sector is grappling with over 32% of non-performing loans, which has constrained banks' capacity to extend fresh credit to businesses.

The circular said productive sectors need greater access to financing to support investment, production and employment generation. However, the rapid growth of overdue loans has weakened banks' asset quality, liquidity management, and lending capacity.Under the facility, eligible borrowers must repay their outstanding liabilities in a single lump-sum payment to qualify for the settlement. Banks will be allowed to provide the facility based on individual borrower-bank relationships and after obtaining necessary board approvals.In the case of waiving all charged and uncharged interest for borrowers, the previously enforced conditions of 'ensuring recovery of cost of funds' and 'not waiving interest by debiting the income accounts of state-owned banks' have been relaxed.However, not all classified loans will qualify for the scheme. Borrowers whose loans were fully rescheduled between 6 August 2024 and 30 June 2026 will not be eligible for the special facility.

In addition, short-term agricultural loans and loans extended to cottage, micro, small and medium enterprises (CMSMEs) have been given priority to the programme.

Bankers say the initiative could encourage some borrowers to settle long-standing liabilities, also helping banks recover cash and improve the quality of their loan portfolios.

Classified loans are grouped into substandard (overdue 3-6 months), doubtful (overdue 6-12 months), and bad/loss (overdue 12 months or more). According to Bangladesh Bank data, there were Tk5.51 lakh crore bad/loss loans in the banking sector as of March 2026.

Governor's emergency meeting with MDs over exit policy

The central bank held a meeting today to discuss offering an exit facility for defaulters. A private bank managing director said the governor called an emergency meeting of commercial bank MDs through the Association of Bankers, Bangladesh (ABB) chairman.

He said defaulters would be able to exit the classified loan category by paying the principal amount in full. If the bank's board waives the interest, borrowers can avail the facility by repaying only the principal.

A senior Bangladesh Bank official said eligible borrowers would also be able to access fresh loans after availing the facility.

Another bank managing director said the policy aims to recover money from wilful defaulters and reduce classified loans. However, its effectiveness will become clear over time.

"Those who took loans with no intention of repaying them are unlikely to avail the facility," he said.

Md Main Uddin, banking and insurance professor at Dhaka University, said no matter how many facilities are provided, wilful defaulters will not repay loans.

"Around 60% of loans in the banking sector are currently in a risky position. Instead of broad policies, strict action against the top 20-25 defaulters through special tribunals could help recover some money," he added.

2019 special exit facility failed to deliver

To reduce non-performing loans and speed up recovery of overdue loans, the Bangladesh Bank introduced a major loan rescheduling and one-time exit facility in 2019.

Under the policy, defaulters could reschedule loans with a 2% down payment and repay the remaining amount over up to 10 years, with a one-year grace period. Banks were also allowed to waive a significant portion of accumulated interest.

The facility drew criticism after allowing large defaulters, including borrowers with loans exceeding Tk500 crore, to regularise loans by paying only 2% upfront.

Critics said many beneficiaries failed to return to regular repayment and later became defaulters again. Economists argued that repeated concessions created a culture of leniency rather than solving the banking sector's NPL crisis.

The 2019 initiative aimed to recover stuck funds and support genuine businesses. However, its effectiveness remained questionable as NPLs continued to rise in subsequent years.

The government has made it mandatory for businesses to submit proof of Business Identification Number (BIN) registration to open and operate bank accounts, obtain loans and access several other financial and regulatory services.

The provision was incorporated through amendments to the Finance Bill 2026, which was passed by voice vote in parliament today (29 June) after Finance Minister Amir Khosru Mahmud Chowdhury placed the revised bill before the House.

Under the amended law, businesses will be required to present proof of BIN registration when opening or operating current accounts or short-term deposit (STD) accounts with banks, non-bank financial institutions (NBFIs) and other financial institutions, notwithstanding any conflicting provisions in other laws.

The same requirement will apply when businesses seek loans from banks, NBFIs or other financial institutions. Proof of BIN registration will also be mandatory for renewing trade licences, opening merchant accounts with Mobile Financial Services (MFS) providers, obtaining or renewing membership of trade organisations, securing electricity and gas connections, and registering vehicles in a company's name with the Bangladesh Road Transport Authority (BRTA).

Bangladesh’s gross foreign exchange (forex) reserves crossed US$37 billion-mark on Monday after receiving around $700 million loans from different development partners.

The country’s gross forex reserves rose to $37.05 billion on the day from $36.31 billion of the previous day as disbursement of the fund by the development partners, officials said.

As per the International Monetary Fund (IMF)’s Balance of Payments International Investment Poisson Manual-six edition, generally known as BMP6, the forex reserves rose to $32.48 billion during the period under review from $31.74 billion, according to the central bank’s latest data.

Earlier on June 14 last, the country’s gross forex reserves rose to $36.10 billion from $35.80 billion of the previous day as disbursement of a fund worth $320 million by the Japan International Cooperation Agency (JICA).

The settlement rate for letters of credit (LCs) reached Tk123.55 per US dollar at several commercial banks yesterday, marking an increase of as much as Tk0.70 over the past 15-20 days.

Several of the country's leading business groups settled their LCs at Tk123.55 yesterday, The Business Standard understands after discussions with business groups, senior commercial bank officials and the central bank. The findings indicate that the dollar rate has been rising steadily over the past two weeks.
A senior official at one of the country's largest business conglomerates told TBS that the dollar has appreciated by about Tk0.70 over the past 15 to 20 days. "We are now paying significantly more for every dollar than before. The settlement rate used to be Tk122.85."
The business group also shared an estimate of the additional cost. It said settling a $2 million LC now costs about Tk1.4 crore more than before, substantially increasing import costs. The company warned that the higher dollar price could further fuel inflation.

A senior Bangladesh Bank official told TBS that a handful of commercial banks are driving up the dollar rate. According to the official, when one bank purchases dollars from exchange houses at higher rates, the exchange houses seek to sell dollars to other banks at the same price, creating instability in the foreign exchange market.The official added that the dollar rate also rises when a bank purchases more dollars from exchange houses than it actually needs. Since banks buy dollars from exchange houses and then sell them for LC settlements with a profit margin, higher purchase prices ultimately translate into higher settlement rates.Senior officials at several commercial banks acknowledged that a few banks are paying above-market prices for dollars, influencing the broader foreign exchange market. They said the Bangladesh Bank should take appropriate action against those institutions, noting that aggressive dollar purchases by several banks in late 2022 had similarly destabilised the market.

Bankers, on the other hand, said demand for dollars has been driven primarily by payments for government fuel imports. Although the volume of fuel imports has remained largely unchanged, the cost of settling those LCs has increased because global oil prices surged during the Iran conflict, affecting payments for fuel import contracts opened about two months ago.

They also noted that remittance inflows slowed considerably in June. During the first 28 days of the month, remittances exceeded $2.5 billion. By comparison, Bangladesh received more than $3 billion in remittances in each of the previous six months.

At the same time, export earnings fell by 7.07% year-on-year in May. According to the latest data from the Export Promotion Bureau (EPB), Bangladesh exported goods worth $4 billion in May, down from $4.73 billion in the same month last year.

Bankers said the government is currently facing heavy demand for dollars to finance fuel imports while foreign currency inflows remain comparatively weak.

They also warned that pressure on the dollar market could intensify in the coming months. Private sector credit growth currently stands at just 4.75%, indicating subdued business activity. However, as businesses expand and import demand recovers, LC openings are expected to rise, placing additional pressure on the dollar market. Bankers expressed concern over how high the exchange rate could climb under such circumstances.So far in the current fiscal year, Bangladesh Bank has purchased around $6.5 billion from commercial banks.Bankers said there is now a significant gap between Bangladesh Bank's published inter-bank dollar rate and the actual rates prevailing in the market. While the rate remains at Tk122.85 per dollar, they argue that the market is trading well above that level, making the official rate non-reflective of actual transactions. The reference rate is Tk123.18.

Yesterday, the BC selling rate quoted by various commercial banks ranged between Tk123.55 and Tk123.60 per dollar.Former Bangladesh Bank governor Ahsan H Mansur said, "Bangladesh Bank has a tendency to keep the dollar rate artificially fixed. That should not be the case because the exchange rate should be determined by the market. The price at which banks are currently buying remittances reflects the true value of the dollar. However, the central bank continues to show an average rate of Tk122.85, which is not reflective of the real market."

He added, "It is essential to activate the interbank foreign exchange market. However, the interbank market has yet to become fully functional."

The treasury head of one commercial bank said interbank foreign exchange transactions remain very limited because banks are instead buying dollars directly from exchange houses at rates between Tk123.50 and Tk123.60.

According to Bangladesh Bank data, a total of $63.5 million was traded in the interbank market over the past five working days.

The treasury head of another private commercial bank said the exchange rate published by Bangladesh Bank is significantly below the actual market rate and therefore does not accurately reflect prevailing market conditions.

South Korea will invest nearly $1.2 trillion -- equivalent to more than two-thirds of its GDP -- in a new chip-building hub and AI data centres over several years, as it seeks to profit from soaring demand while developing previously neglected regions.

The enormous cash injection comes as Asia’s fourth-largest economy rides high on a global AI boom -- with South Korean memory chipmakers emerging as a crucial cog in the fast-moving industry.

“Speed is the only path to survival. We must secure the core elements of artificial intelligence faster than any other nation,” President Lee Jae Myung said in Seoul at an event to unveil the public-private collaboration.

Samsung Electronics and SK Hynix will make a record investment of 800 trillion won (around $520 billion) in a new semiconductor fabrication hub in the country’s southwest, the government said.

Both companies have seen profits and share prices skyrocket in recent months, as frenzied demand for AI infrastructure squeezes the global supply of memory chips.

The government also announced a separate investment of a quadrillion won (around $650 billion) in AI data centres over the next 10 years.

The plans are in line with Lee’s agenda for industrial development in regions outside the capital, and Industry Minister Kim Jung-kwan said the Samsung-SK Hynix project will comprise four fabrication plants.

“We will develop the southwestern region into a second semiconductor production hub,” he said. Samsung Electronics and SK Hynix will each build two plants under the 800 trillion won project, according to Kim’s presentation slide.

“Permit approvals and construction timelines will be dramatically shortened to rapidly expand production capacity,” Kim said.

“Through this, we will maintain an overwhelming market leadership and a decisive technological gap in the memory semiconductor sector.”

Science Minister Bae Kyung-hoon announced that the country will invest 550 trillion won on AI data centres by 2029.

“By 2035, an additional 10-gigawatt AI data centre will be built, with a total investment exceeding 18.4 gigawatts and 1,000 trillion won.”

The new investment is by far South Korea’s largest.

The southwestern region of Honam -- a traditional liberal stronghold encompassing Gwangju and the Jeolla provinces -- has long lagged behind the more industrialised southeast.

This disparity dates back to rapid economic development under former president Park Chung-hee in the 1960s and 70s.

But without incentives for companies to voluntarily relocate, the massive investment could backfire, warned Kim Dae-jong, a professor of Business Administration at Sejong University.

This could, in turn, hurt the nation’s semiconductor competitiveness.

“It is essential to minimise the financial burden, amounting to hundreds of trillions of won, as well as the time-related risks faced by companies,” said Kim.

RENEWABLES

Analysts say there are abundant renewable electricity resources in the southwest, making it possible for companies to meet their commitments to boosting green energy use.

But they caution that building an entirely new semiconductor manufacturing ecosystem away from the existing industrial base around Seoul would require significant time and investment.

“Establishing production lines from scratch could take more than five years,” Lee Jong-hwan, a semiconductor engineering professor at Sangmyung University, told AFP.

“The biggest challenge is that most skilled workers and suppliers remain concentrated around the Seoul metropolitan area.”

Concerns were also raised about heavy demand for water. President Lee wrote on X on Saturday that “assessments indicate it is possible to supply one million tons of industrial water per day” in the region.

The announcement comes as South Korea debates how the enormous profits generated by the global AI-driven semiconductor boom should be shared more broadly across society.

Kim Yong-beom, the president’s chief policy secretary, in May suggested using excess AI-related tax revenue to fund startup support for young people, basic income programmes for rural and fishing communities, and assistance for artists.

The boom has also fuelled worker demands over pay packages, with Samsung averting a major strike in May by agreeing a deal on bonuses with its largest union.

Veon, the parent company of Banglalink, has proposed a $1 billion investment initiative in Bangladesh, with an immediate commitment of $250 million, as the global digital operator seeks to expand its presence in the country’s digital economy.

The proposal was discussed during a meeting between Prime Minister Tarique Rahman and Veon Chairman Augie Fabela at the Prime Minister’s Office in Jatiya Sangsad Bhaban yesterday morning.

Called “Invest in Bangladesh NOW!”, the initiative is a joint public-private proposal with the Ministry of Post, Telecommunications and ICT aimed at attracting more foreign direct investment into the country’s digital sector.

According to a public official familiar with the discussions, the initiative will focus on next-generation digital infrastructure, digital services, digital banking, artificial intelligence and mobile financial services.

In general, the goal is to position Bangladesh as a leading destination for global digital investment, according to the official.

In a statement issued in the evening, Banglalink said that, beyond its own investment, Veon plans to use its global network to encourage other international investors to explore opportunities in Bangladesh’s rapidly growing digital economy.

Augie K Fabela II, founder and chairman of the Board of Veon Group, said, “We are a long-term partner in Bangladesh’s journey toward becoming a trillion-dollar economy. Through the ‘Invest in Bangladesh NOW’ initiative, Veon is prepared to serve as the anchor investor in an ambitious programme designed to help attract $1 billion in foreign direct investment.”

“Alongside our own investment, we will actively engage international partners to unlock Bangladesh’s tremendous potential. We are fully aligned with the government’s vision for digital and financial transformation and stand ready to support that vision through long-term investment, innovation, and partnership,” added the Veon board chairman.

During the meeting, Prime Minister Tarique Rahman urged Banglalink to make smartphones more affordable and consider further reducing internet prices so digital services become accessible to people from all walks of life.

According to a media release from the Prime Minister’s Press Wing, the PM stressed the need to expand digital inclusion by ensuring that people from all socioeconomic backgrounds can own smartphones and access affordable internet services.

Post, Telecommunications, Information Technology and Science and Technology Minister Faqir Mahbub Anam, Prime Minister’s Adviser on ICT Rehan Asif Asad, Veon Board Member Michiel Soeting and Banglalink Chief Executive Officer Johan Buse also attended the meeting.

The investment proposal comes as Veon seeks to expand its presence in Bangladesh through strategic partnerships and acquisitions.

In a recent letter to the prime minister, the Dubai-headquartered company expressed interest in a strategic combination with state-owned mobile operator Teletalk as part of its broader expansion plans. It also said it was prepared to significantly increase its investment in Bangladesh and requested discussions on potential collaborations involving strategic public assets.

The proposal also includes a possible acquisition of Nagad from the Bangladesh Post Office.

According to sources, Veon is among several foreign companies that have expressed interest in investing in or acquiring a stake in Nagad.

Veon said it has already applied for a digital bank licence and received a no-objection certificate from the Bangladesh Bank to operate as a payment service provider.

The company said it has invested more than $2.5 billion in Bangladesh over the past two decades through Banglalink and contributed more than $4 billion to the national exchequer during that period.

The government is likely rolling back several budget proposals for FY2026-27, including a package VAT on retail businesses and a mandatory TIN for opening bank accounts, while raising the personal tax-free income limit to Tk4 lakh.

The government may also abandon its plan to introduce a new package-style VAT, known as a "specific VAT," on small retail businesses. The move comes amid concerns over inadequate implementation preparedness and the risk of harassment of small traders at the field level.

The government is also considering raising the tax-free income threshold for individual taxpayers from Tk3,75,000 to Tk4 lakh for the next tax year, with the same threshold likely to remain in place for 2027-28. It may be further increased to Tk4.5 lakh for tax years 28-29 and 29-30, and Tk5 lakh for 30-31.

In addition, the proposed 15% capital gains tax on landowners in land development projects may be reduced to 5%.

TIN for new bank accounts may go

The proposal included in the Finance Bill to make a Taxpayer Identification Number (TIN) mandatory for opening bank accounts is also likely to be withdrawn. Sources involved in the budget process at the National Board of Revenue (NBR) said changes may also be made to the personal income tax slabs.

Low chance of VAT on retail businesses

Speaking to The Business Standard on condition of anonymity, a senior NBR official said, "The likelihood of implementing the proposed specific VAT at the retail level this year is low."

He said the initiative was part of a broader plan to expand the VAT net but acknowledged that the necessary groundwork has not yet been completed.

"The required preparations are still lacking. There are concerns that implementation could create confusion, lead to harassment of businesses and ultimately increase consumer prices. As a result, the proposal may not be implemented for now," he said.

"The government may conduct further studies before moving ahead with the proposal," he added.

Under the plan, businesses with annual sales or turnover below Tk50 lakh would have been required to pay a fixed monthly VAT based on their location. The NBR also planned to simplify VAT registration for such businesses and automatically deduct the tax from their bank accounts. A new regulation was expected to be issued to facilitate the scheme.

The proposed monthly VAT ranged from Tk1,000 to Tk10,000.

During the budget discussion in parliament on 24 June, Finance Minister Amir Khosru Mahmud Chowdhury said the government planned to bring 16 retail and service sectors, including grocery and cosmetics shops, under the specific tax regime in FY2026-27.

The proposed specific tax is essentially a package VAT system that had previously been in place but was later abolished.

Mustafizur Rahman, distinguished fellow at Centre for Policy Dialogue (CPD), welcomed the government's latest plans as positive steps.

"There is a need to expand the VAT base by bringing the retail sector under the VAT net. However, this should be preceded by further study to ensure that implementation does not create unnecessary complications" he told The Business Standard.

Referring to reports that the government may raise the tax-free income threshold, he said, "The proposal is reasonable. We (CPD) had recommended setting the tax-free income threshold in line with inflation."

He added, "The 5% tax on low-income taxpayers should also be retained. Otherwise, the tax burden on middle-class taxpayers will increase."

He also said the proposal to make TIN mandatory for opening bank accounts should be dropped, noting that many people do not have taxable income. "Making TIN compulsory for opening a bank account would create an unnecessary burden on them."

Meanwhile, the Bangladesh Shop Owners Association held a press conference yesterday demanding that the government withdraw the proposal.

Association leaders warned that, if implemented, the measure would expose small and micro businesses to widespread harassment by VAT officials. They also argued that it could create serious disruption in the small and medium-sized enterprise (SME) sector, ultimately undermining the government's public support.

Speaking at the press conference held at the association's office in Moghbazar, association president Md Helal Uddin and other senior leaders urged the government to reverse its decision and abandon the proposed tax regime.

The government, for the first time in Bangladesh, has announced tax rates for five years to provide businesses with greater policy certainty and help create jobs, said Rashed Al Mahmud Titumir, the prime minister’s adviser on planning and economic affairs.

Businesses need stable tax policies to plan investments, and the announcement of tax rates for five years in advance will be instrumental in this regard, he said yesterday.

Speaking at a discussion titled “Youth in National Budget 2026-27: Education, Employment and Entrepreneurship” at Dhaka University, he said the budget seeks to build a state centred on public welfare and democracy.

To help reduce borrowing costs and encourage entrepreneurship, the government is working to lower lending rates, Titumir said.

“We are ensuring liquidity at a 3 percent rate so that entrepreneurs can get loans at interest rates of 5 to 7 percent,” he said.

“Our manifesto clearly states that socioeconomic development and sustainable state capability must be achieved,” he said.

The PM’s adviser said the government has given priority to energy, education, health and social protection in the budget for the next fiscal year.

The government has set a target of generating 20 percent of the country’s energy from renewable sources and plans to establish emergency energy reserves, he said.

Titumir said the government aims to increase public investment in education.

He said hospitals established during the tenures of former president Ziaur Rahman and former prime minister Khaleda Zia would be expanded to 101 beds.

Kidney dialysis centres and coronary care units will also be established in every district.

On social protection, he said the government was replacing what he described as a politically biased welfare system with a “lifecycle-based” approach to support citizens at different stages of life, including children, older people, widows and people with disabilities.

At the event, DU Treasurer Prof M Jahangir Alam criticised the budgetary allocation for university research.

He said the University Grants Commission has taken full control of research funding, leaving Dhaka University with no independent research allocation.

“With a 2 percent allocation, can one become a research university?” he said, questioning how the government’s vision of building an innovation-driven economy could be achieved without allowing the country’s leading university to manage its own research funds.

Crude prices fell by more than 3 percent on Friday, on course for steep weekly losses, as oil tankers kept exiting the Strait of Hormuz, easing supply concerns the day after a cargo vessel was hit near Oman.

Brent crude futures settled at $71.99 a barrel, down $3.27, or 4.34 percent. US West Texas Intermediate finished at $69.23 a barrel, down $2.69 or 3.74 percent.

Since the market closed last Thursday, the Brent benchmark fell 10.86 percent, while WTI fell 9.62 percent for the week. The market closed for a public holiday last Friday.

“There is a growing sense that oil is going to keep moving through the Strait of Hormuz,” said Phil Flynn, senior analyst with Price Futures Group. Prior to the agreement on 60-day ceasefire, markets worried supplies would fall short of demand, but those fears seem to be passing.

“The predominant view, it appears, remains one of imminent oversupply,” said PVM analyst Tamas Varga. “We’re going to get a flood of oil,” Flynn said. “I think we’re going to see a huge flood of products.”

Oil giant Saudi Aramco resumed oil loading on Friday at its Ras Tanura terminal in the Gulf after a nearly four-month halt, shipping data from LSEG showed.

Two very large crude carriers (VLCCs), which can load cargoes of 2 million barrels, took on crude at the terminal while another waited nearby, the data showed.

“There is a general selloff as the market reacts to the increased flows exiting the Strait of Hormuz and China not yet picking up crude demand,” said June Goh, senior oil market analyst at Sparta Commodities.

UNKNOWN PROJECTILE HITS VESSEL

On Thursday, both benchmark contracts jumped more than 2% after a cargo vessel was hit by an unknown projectile near Oman, prompting the U.N.’s shipping agency to suspend its voluntary evacuation scheme. Two US officials told Reuters that Iran fired on the cargo ship as it attempted to pass through the strait.

Iranian authorities said the security of vessels passing outside designated Hormuz routes is not guaranteed. On Friday, Iran reasserted its right to control shipping through the Strait of Hormuz and warned Gulf states against siding with the US.

Data on Thursday showed that crude shipments through the strait rose this week to their highest since the US-Israeli conflict with Iran began at the end of February. Despite the ceasefire deal that reopened the waterway, overall traffic is far below the pre-war daily average.

Meanwhile, Russian authorities are considering a diesel export ban for several months, state news agency TASS said on Friday. Russia, a major diesel exporter, faces fuel supply issues after Ukrainian drone attacks extensively damaged its oil refineries and other energy infrastructure.

Bangladesh’s first-ever short-term shariah-based sukuk drew overwhelming interest from individuals and institutions at its debut auction yesterday.

Investors submitted bids worth Tk 56,607 crore for the 273-day sukuk, more than 10 times the issuance target of Tk 5,500 crore.

The shariah-based bond, issued by the government to finance the Important Rural Infrastructure Development Project-2 (IRIDP-2), carries an annual rental rate of 9.36 percent. The Bangladesh Bank (BB) held the auction in Dhaka on behalf of the government.

Shariah-based banks and financial institutions, Islamic banking branches and windows of conventional banks, institutional investors, and individual investors participated in the auction, the BB said in a statement. Given the overwhelming demand, the sukuk was allotted to investors on a pro-rata basis.

Interest in shariah-compliant instruments has been rising since their launch in December 2020. With yesterday’s auction, the total amount raised by the government through sukuk has exceeded Tk 53,000 crore.

The BB said the introduction of a short-term sukuk, alongside existing long-term Islamic securities, would strengthen liquidity management for shariah-based banks and financial institutions. The central bank plans to issue more sukuk bonds in days to come.

In this regard, Istequemal Hussain, director of the Debt Management Department at BB, told The Daily Star that they plan to raise Tk 30,000 crore in the next fiscal year through the issuance of various sukuk bonds, which will be open to individual investors.

The BB said the issuance expands shariah-compliant investment opportunities for Islamic financial institutions and individual investors.

The short-term sukuk will qualify as a Statutory Liquidity Reserve (SLR) asset for eligible banks and financial institutions, while Islamic banks will be able to use it as collateral to access the central bank’s Islamic Banks Liquidity Facility (IBLF).

Trading of the sukuk in the secondary market will begin today, allowing banks, financial institutions, insurance companies, provident and mutual funds, and individual investors to buy and sell the instrument. According to the BB, 727 successful bids from individual investors, provident funds, mutual funds, and deposit insurance entities were allotted sukuk worth around Tk 87.37 crore.

Bangladesh's gross national savings (GNS) are projected to decline to 26.93 per cent of gross domestic product (GDP) in the outgoing fiscal year-hitting a five-year low,Demographics

The latest savings figure collated by Bangladesh Bureau of Statistics (BBS) marks a decline of 0.74-percentage points from the estimated 27.67 per cent recorded in the past FY2024-25, extending a downward trend that began after the post-pandemic peak.

Economists attribute the fall in national savings to mounting pressure on household finances amid persistently high inflation, slower income growth and subdued private-sector investment.

The country's GNS stood at 29.25 per cent of GDP in FY2021-22 before rising to a five-year-high 29.95 per cent in FY2022-23.

Since then, it has steadily declined to 28.42 per cent in FY2023-24, 27.67 per cent in FY2024-25 and an estimated 26.93 per cent in FY2025-26.

In terms of volume, gross national savings are estimated at Tk 15.26 trillion in the current fiscal year.

Gross national savings measure the portion of national disposable income that remains after total consumption expenditure is deducted.

It is a key indicator of an economy's capacity to finance investment from domestic resources without relying excessively on external borrowing.

Economists say the dip in savings reflects deeper structural challenges facing the economy.Economics

"Households are increasingly spending a larger share of their income on essential goods and services because of prolonged inflationary pressure," Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, told The Financial Express.

"When inflation remains elevated for a prolonged period, particularly since the outbreak of the Ukraine war, families dip into their savings to maintain consumption. As a result, aggregate national savings tend to decline."

Bangladesh has experienced inflation above the government's comfort range for several years. Rising food, transport and utility costs have significantly eroded purchasing power, particularly among low- and middle-income households.

Weak private investment has also contributed to the decline in savings.

Economists note that savings and investment are closely linked. Lower profitability, an uncertain business environment, foreign-exchange constraints and higher borrowing costs have discouraged fresh private investment, reducing incentives for businesses and households to save.

Dr Mohammad Yunus, research director at Bangladesh Institute of Development Studies (BIDS), told the FE that actual household savings could be much lower as a significant share of national savings comes from corporate entities and autonomous and semi-autonomous government organisations.Business News

He says the decline in savings should serve as a warning for policymakers.

"A sustained decline in national savings reduces the pool of domestic resources available for investment. If investment demand recovers while savings remain weak, the economy may become increasingly dependent on foreign borrowing," he notes.

The latest figures also highlight a widening gap between Bangladesh's long-term development ambitions and current macroeconomic realities.

Historically, high domestic savings have been a key driver of rapid economic growth across Asia. Countries such as China, South Korea and Vietnam maintained high savings rates during their industrialisation, enabling them to finance large-scale investment programmes.

Although Bangladesh's savings rate remains comparatively strong by regional standards, the recent decline suggests growing stress in the economy.

Dr M Masrur Reaz, chairman and chief executive officer of Policy Exchange Bangladesh, thinks restoring macroeconomic stability would be crucial to reversing the trend.Demographics

"Bringing inflation under control, improving investor confidence, ensuring stable energy supplies and strengthening financial-sector governance are among the measures needed to improve the situation," he suggests.

He adds that there is a direct relationship between macroeconomic stability and household saving behaviour.

"When people are confident about future income prospects and inflation is moderate, they are more likely to save. Conversely, prolonged uncertainty discourages savings and long-term investment decisions."

The government and Bangladesh Bank have recently adopted tighter monetary and fiscal measures aimed at containing inflation and stabilising the external sector.

Dr Md Ezazul Islam, director-general of Bangladesh Institute of Bank Management (BIBM), says inflation could have been much higher without the central bank's tight policy stance.

"We believe these tighter policy measures will help ease inflationary pressures in the coming months."Economics

For now, however, the provisional BBS estimates suggest Bangladesh's domestic savings base is under increasing pressure, stoking concerns about the economy's ability to sustain investment-led growth without greater reliance on external financing.

Micro, small and medium enterprises (MSMEs) account for nearly 99 percent of Bangladesh’s 1.17 crore industrial establishments and employ more than three crore people, underlining their crucial role in the country’s economy.

The sector contributes around 30 percent to the economy and provides nearly 85 percent of industrial employment, according to the SME Foundation’s analysis of the Bangladesh Bureau of Statistics’ Economic Census 2024. The analysis was released on the occasion of International MSME Day.

The SME Foundation said the cottage, micro, small and medium enterprise sector remains a key driver of employment and socio-economic development, particularly in a country with a large population and limited resources.

Since its establishment under the industries ministry in 2006, the foundation has supported about 22 lakh small and medium entrepreneurs through various programmes, with women accounting for 60 percent of the beneficiaries.

FY27 budget prioritises MSME development with SME Foundation service platforms, cluster mapping updates, YESS programme, and broad support including mentorship, training, credit access, exports, branding, and market expansion for entrepreneurs
Speaking at a programme marking International MSME Day at the Bangladesh Investment Development Authority auditorium in Agargaon yesterday, Industries, Commerce, and Textiles and Jute Minister Khandakar Abdul Muktadir said Bangladesh still lags behind many regional countries in terms of MSMEs’ contribution to GDP.

“In countries like Vietnam, Cambodia, and even India and Pakistan, MSMEs contribute much more to GDP than they do in Bangladesh. We want to raise their contribution,” he added.

Muktadir said the rate of new entrepreneur creation had declined sharply over the past 12 to 15 years, contributing to rising income inequality.

“Those who already owned industries and factories became bigger, while fewer new entrepreneurs were able to emerge. One of the main reasons was the shortage of gas,” he added. He also said economic opportunities had become concentrated in the hands of a small group.

“This has kept economic activity concentrated among a few people. It is one of the main causes of rising inequality, and unfortunately, we followed that path. As a result, income inequality is much higher today than it was 15 to 20 years ago,” he added.

The minister stressed that strengthening the MSME sector is essential for keeping the economy dynamic and inclusive.

To promote entrepreneurship, the government is preparing a comprehensive plan to support new entrepreneurs through development and mentorship programmes, he added.

The government is also launching mentorship programmes and has started initiatives to establish new industrial parks through the Bangladesh Small and Cottage Industries Corporation in Pabna, Sylhet and Saidpur in Nilphamari.

It also plans feasibility studies for additional industrial parks where existing ones are fully occupied. Addressing the gas crisis, Muktadir said the government would prioritise industries with lower energy consumption while continuing efforts to ease gas shortages affecting factories.

He added that the national budget for FY27 gives special importance to MSME development and creating new entrepreneurs.

The budget includes plans to establish service platforms through the SME Foundation, update SME cluster mapping, and implement the Youth Entrepreneurship & Startups for Students (YESS) programme.

It also includes targeted support for new entrepreneurs through mentorship, technical training, database development, demand-based credit, export support, branding and design assistance, and improved access to local and international markets.

WOMEN REMAIN UNDERREPRESENTED

Nasreen Fatema Awal, president of the Women Entrepreneurs Association of Bangladesh, highlighted the wide gender gap in entrepreneurship.

She said Bangladesh has around one crore male entrepreneurs, compared with only about 7 lakh women entrepreneurs.

“This gap is not just a statistic; it reflects the untapped potential of our economy,” she added.

Nasreen also said that increasing the number of women entrepreneurs would create more jobs, raise household incomes, improve children’s education and healthcare, and make economic growth more inclusive.

Anwar Hossain Chowdhury, managing director of SME Foundation, said more than 250,000 entrepreneurs have received direct assistance from the organisation since its inception.

Since 2009, the foundation has disbursed around Tk 1,300 crore in loans to nearly 15,000 entrepreneurs through its credit wholesaling programme. At least 25 percent of the recipients are women.

He said the foundation continues to promote entrepreneurship, strengthen business capacity, encourage technology adoption, expand market access, and advocate policy reforms to make Bangladesh’s MSME sector more competitive.

There has been a serious concern about economic growth because of the liquidity crisis, huge volumes of bad and doubtful loans, inadequate revenue collection, pressure on foreign debt repayments, declining remittances from non-resident Bangladeshis and uncertainty over export growth. Some of these challenges are beyond our control, while others, including revenue collection, debt recovery and liquidity management, can certainly be addressed through appropriate policy measures.

Bad and doubtful loans reported so far need to be categorised in a dispassionate and objective manner. A large portion of these outstanding loans resulted from fraudulent lending, with funds siphoned out of the financial sector. These are criminal offences and should be dealt with through legal action. Some loans have become bad because of adverse economic conditions, including slower imports caused by the foreign currency crisis, the wars in the Middle East and Ukraine, inadequate power supply to industrial units, rising fuel prices and production costs, weaker exports and other related factors. There is also another category comprising wilful and habitual defaulters. Even in these difficult circumstances, many borrowers continue to repay their loans regularly, demonstrating their commitment and honest intention.

Loans that have become bad because of economic factors beyond borrowers’ control warrant rehabilitation schemes in both the short and long term. Such support should follow careful review on a case-by-case basis, taking industry-specific issues into account. Working capital financing is another critical requirement for boosting production and, where applicable, increasing exports.

Unfortunately, since independence, Bangladesh has seen the persistent presence of habitual and wilful defaulters, with or without political patronage. This has seriously undermined the repayment culture, encouraged corruption and ultimately weakened economic growth. This issue should be addressed firmly, with no further incentives or concessions for wilful defaulters. Strict measures could include restrictions on business expansion, overseas travel by family members, children’s overseas education, infrastructure development and donations to institutions used to fulfil political ambitions. It is unfortunate that many wilful defaulters have never been brought to account, while a large number have escaped responsibility one way or another. This should not be allowed to continue.

Where appropriate, legal action should be initiated without further delay. Inter-company loans are another important area requiring close review. It is necessary to determine whether such funds have been extended to subsidiaries and associated entities and whether those entities have the capacity to repay them on time. It is well established that borrowers often overstate the value of their personal assets when securing loans. Subsequently, those assets may be diverted or disposed of, with or without the knowledge of banks or financial institutions. As a result, loans become effectively unsecured, exposing banks to greater risks in recovering overdue advances.

Increasing revenue collection is equally important. For many years, Bangladesh has failed to raise revenue to the expected level, leaving its tax-to-GDP ratio below that of neighbouring countries and comparable economies. Weak measures by the National Board of Revenue (NBR), inadequate digitalisation and corruption remain major obstacles. Required tax payments cannot be expected solely on a voluntary basis. Greater emphasis should be placed on credible financial statements, effective tax audits as practised in many countries, third-party verification of key financial information, adoption of a faceless assessment system and stronger action against corruption. Good governance is equally important, as poor governance encourages corruption, which ultimately undermines economic growth.

Bangladesh must overcome these challenges. Otherwise, economic growth will be seriously affected at a time when the world is already facing severe pressures from wars and continuing economic uncertainty.

One of Bangladesh's leading industrial conglomerates, DBL Group, is preparing to list two of its sister concerns on the country's capital market as part of a broader strategy to strengthen corporate governance and gradually bring more of its businesses under public ownership.

The two companies are Parkway Packaging and Printing Limited and Thanbee Print World Limited. Both have already signed agreements with a local merchant bank to manage their Initial Public Offering (IPO) process.

According to the group's roadmap, if the IPOs of these two companies are completed successfully, another four to five companies will be listed on the stock exchange over the next four years.

Speaking to The Business Standard, DBL Group Vice Chairman M A Rahim said the group is currently preparing to bring both companies to the capital market. He noted that a similar attempt was made around one and a half years ago during the tenure of the interim government, but the process stalled after the regulator raised several queries.

"We responded to all of them. However, as the process became prolonged, we realised it was unlikely to move forward at that time. So, we decided to put the initiative on hold," he said.

He said the group revived the IPO plan after the new government assumed office, encouraged by its positive stance on the capital market and the economy, as well as its call for large, well-managed companies to join the stock market.

"We expect to complete the necessary documentation by November. Our target is to complete the IPO of at least one company by December, while the other is expected to come to the market in February or March 2027," Rahim said.

More companies to follow

Rahim said the successful listing of the two companies would pave the way for a series of future IPOs from the group.

"The pharmaceutical company will not be brought to the market now because it is still a relatively new business and needs a few more years to strengthen its financial base. We also want to wait a little longer before listing our ceramics business. Before those, we plan to bring some of our textile companies to the market. We aim to list one textile company by the end of 2027, followed by others in phases. Over the next four years, we hope to list at least four to five companies," he said.

'Our primary goal is not fundraising'

Rahim said raising capital is not the principal objective behind the IPOs. Instead, the group is focusing on building a stronger corporate governance framework for the future.

"At present, our four brothers jointly manage the business. As the family grows, not everyone will necessarily be involved in management. We want these companies to be run by professional management. Family members who wish to participate in the business can do so, while those who do not can remain shareholders and benefit from the companies' growth and dividend income," he said.

He added that the group wants to establish a sustainable corporate structure that will ensure good governance over the long term.

"Once listed, the companies will have independent directors, regular regulatory oversight, annual financial reviews and a much stronger corporate governance framework," Rahim said.

He also confirmed that both companies will seek listing on the main board, not the SME platform.

Planned use of IPO proceeds

According to Rahim, Parkway Packaging and Printing plans to raise around Tk70 crore through its IPO. The proceeds will be invested in expanding its carton manufacturing facility.

For Thanbee Print World, however, the fundraising amount has not yet been finalised.

"A decision will be made next week. Instead of raising a large amount, we are also considering listing the company by offering only 5% to 10% of its shares to the public because our primary objective is to strengthen corporate governance," he said.

Two companies at a glance

Parkway Packaging and Printing Limited began commercial operations in 2008. The company has a paid-up capital of Tk45 crore and an annual turnover of around Tk140 crore. It manufactures cartons and packaging products primarily for Bangladesh's readymade garment industry and has a production capacity of approximately 35,000 cartons per day.

Thanbee Print World Limited, also established in 2008, has a paid-up capital of Tk45 crore and an annual turnover of around Tk200 crore. The company provides garment printing services with a daily printing capacity of approximately 250,000 pieces.

About DBL Group

Founded in 1991, DBL Group has grown into one of Bangladesh's largest diversified conglomerates. Its businesses span apparel, textiles, textile printing, washing, garment accessories, packaging, ceramic tiles, pharmaceuticals, dredging, retail and digital transformation services.

The group already has one listed company, Matin Spinning Mills PLC, on the Dhaka Stock Exchange.

If implemented as planned, DBL Group's listing strategy is expected to increase the presence of large industrial groups in Bangladesh's capital market, expand the pool of quality listed companies and promote stronger corporate governance and transparency, while creating new investment opportunities for investors.

Food vendors across Asia who rely on plastics for everything from bags to cups and containers are grappling with their rising costs, the result of the energy crisis sparked by the Middle East war.

While the United States and Iran have reached a deal to halt the conflict, it will take time for markets to recover and supply flows to return to normal, with persistent concerns over traffic through the economically vital Strait of Hormuz.
At Taipei’s Songjiang market, chicken vendor Li Yu-ping, 52, said in early June that the price of plastic bags had jumped nearly 60 percent, while the cost of plastic trays had risen by a third.“We use them everywhere,” she said of the bags. “Our food containers are also plastic, all disposable.”

Wary of hiking prices, “all of this has become a cost for the vendors”, she said.A key raw material for many of these plastic goods is ethylene, which is derived from naphtha, an oil by-product. Around 60 percent of the naphtha imported to Asia comes from the Gulf.

Faced with tight supply and soaring prices due to the monthslong closure of the Strait of Hormuz, petrochemical companies mainly in South Korea and Japan have scaled back production capacity, sending the cost of basic goods such as plastic bags surging.In Bangkok, Nikorn Sai-inthara, a 60-year-old selling vegetables from a street cart, estimated his operating costs had risen by 30 percent.“I rely on plastic bags for my work because I sell vegetables on the go to busy people and office workers,” said Nikorn, who wraps individual portions in plastic and secures them with a rubber band.“Ever since the fighting started in the Middle East, my profits have fallen, but I don’t dare raise prices for my customers,” he told AFP. Several vendors across the region told AFP they do not have a practical alternative to the plastic products they use on a daily basis.“We have no choice. If you don’t give customers plastic bags, they complain,” said Chang Chiu-hsiang, a 78-year-old grocer in Taipei.

“I think you can’t really avoid using them,” added Li, the chicken vendor, noting however that some customers have started to use reusable bags.

Somsak Jaidee, 62, who sells rice porridge in bags secured with rubber bands at a Bangkok market, said that while “everything is more expensive... I have to endure it.”

“I can’t think of anything else that offers the same convenience for my customers as plastic bags.”

A cautious reopening of the Strait of Hormuz since the US-Iran deal was signed last week has yet to fully impact naphtha prices, which have dipped only slightly.

And manufacturers continue to process naphtha purchased when prices were higher.

In early June, Taiwanese manufacturer Formosa Petrochemical reported cutting the utilisation rate of its ethylene steam cracker to 35 percent, down from 53 percent in March at the very start of the war.

“At this point, the situation is not entirely due to lack of feedstock. The bigger issue now is that the feedstock has become extremely expensive, and some of our customers simply can’t bear the higher prices,” Formosa’s president, Lin Keh-yen, told AFP.

In South Korea, supply tensions remained acute in early June.

“Normally, if we order 10,000 plastic bags, they arrive within about a week. Now suppliers are telling us that we may have to wait more than a month” with prices 30-percent higher, said a shop employee in Seoul.

A nearby dry cleaner said the price of plastic garment covers had more than doubled, while a cafe owner noted a 50-percent increase in the cost of plastic cups.

South Korea’s plastics industry association said the Middle East war had forced manufacturers to hike prices, although “alternative” supply routes have helped stabilise the situation.

Fajar Budiyono, secretary-general of the Association of Olefin, Aromatic, Plastic and Chemical Industries in Indonesia, said a shift to suppliers in places like China and Africa has helped keep prices at bay.

In the Philippines, meanwhile, manufacturers said they had absorbed some of the additional costs.

“Our profits got squeezed. We could not simply raise prices as we would be swamped by imports,” said Steve Tavera, a member of the Philippine Plastics Industry Association.

As a result, price hikes have so far been “conservative”, he said.

Weak public institutions are holding back Bangladesh’s economic growth and costing the country billions in lost tax revenue, the World Bank said yesterday, urging reforms to tax administration, procurement, auditing and project implementation.

“These are facts, but they are also symptoms of deeper structural issues. At the core of those issues are weak institutions,” said Jean Pesme, World Bank country director for Bangladesh, at the launch of the Strengthening Institutions for Transparency and Accountability (SITA) project in Dhaka.

Citing the WB’s Country-Level Institutional Assessment and Review based on 2023 data, Jean said Bangladesh ranks in the bottom quartile among upper-middle-income countries in eight of 13 institutional clusters. The areas include political institutions, social institutions, integrity, justice, human resource management, public finance, labour and social protection, and service delivery.

The costs are heavy. Jean pointed out that Bangladesh’s tax-to-GDP ratio stood at only 6.9 percent in fiscal year 2024-25, which is less than half of the roughly 15 percent considered necessary to finance the country’s development ambitions.

Around 70 percent of government revenue comes from indirect taxes, reflecting a narrow and inequitable tax base, he added.

According to the WB, public investment projects face average cost overruns of around 30 percent and implementation delays of about three years, while Bangladesh ranks 116th among 137 countries in infrastructure quality.

“Weaknesses in procurement and public investment management undermine infrastructure outcomes and public service delivery,” Jean said.

He described Bangladesh as being at an “inflection point”, with economic growth slowing over the past three years, fiscal pressures mounting, job creation weakening and external shocks exposing long-standing structural vulnerabilities.

Poverty reduction has also slowed, with 8.9 percent of the population projected to live below the $3-a-day poverty line in 2025.

“The next game for Bangladesh will depend less on policies alone and much more on how effectively institutions can implement them and close the execution gap,” he said.

He welcomed the government’s decision to separate tax policymaking from tax administration, calling it an important step toward stronger accountability and taxpayer confidence.

According to the WB official, the FY27 budget’s revenue and service delivery targets were ambitious but contingent on institutional capacity to deliver.

“It’s about outcomes and results,” he said, adding that the government’s emphasis on digitalising tax administration and improving compliance is consistent with the reform agenda supported by the WB.

The SITA project, financed by a $250 million WB credit, will seek to modernise five institutions: the National Board of Revenue (NBR), the Bangladesh Bureau of Statistics (BBS), the Bangladesh Public Procurement Authority (BPPA), the Office of the Comptroller and Auditor General, and the Planning Division.

Successful implementation of the project is expected to result in higher revenue collection, more efficient public spending, greater procurement transparency and stronger public auditing.

The WB urged authorities to accelerate the rollout of digital tax systems at the NBR, improve data accessibility and timeliness at the BBS, strengthen project selection and monitoring in the Planning Division and the IMED, expand the electronic Government Procurement (e-GP) system and fast-track audit reforms.

“The next 18 months are critical. Only early results will ensure credibility, public trust and reform momentum,” Jean said.

State Minister for Planning Jonayed Abdur Rahim Saki, who inaugurated the project, said the government is committed to strengthening public institutions through technology to improve transparency and accountability.

He said digitising core government agencies would improve revenue mobilisation, public financial management, auditing, procurement and development planning while helping curb corruption, misuse of public funds and money laundering.

Industrial production grew by only 2.86 percent in the outgoing fiscal year -- the slowest pace in recent memory. Yet the budget projects that growth will somehow jump to 7 percent next year and continue rising thereafter. Such an acceleration is not impossible, but it demands a transformation far deeper than anything currently underway.

This gap between performance and aspiration raises an uncomfortable question: why do the same constraints -- weak logistics, unreliable energy, low foreign investment, anti-export policy bias, and chronic skill shortages -- persist after decades of being diagnosed and rediagnosed? The answer cannot be ignorance. Policymakers have long understood these problems, and the solutions are hardly mysterious.

The persistence of these constraints points to something more structural. Industrial stagnation cannot be understood solely as the result of technical bottlenecks. It also reflects the institutional incentives that shape industrial policy, competition, and investment decisions. Understanding those incentives requires looking beyond the familiar explanations that dominate policy debates.

THE CONVENTIONAL EXPLANATION

The prevailing explanation traces Bangladesh’s industrial underperformance to weak state capacity, policy inconsistency, and short political time horizons rather than to the incentives shaping policy choices. Bureaucratic fragmentation, cumbersome regulations, inadequate infrastructure, fiscal constraints, and limited administrative capability make it difficult to implement coherent industrial strategies. Governments, whether democratic or authoritarian, also tend to prioritise visible short-term projects over long-term investments in education, energy, logistics, and institutional reform.

These explanations are neither trivial nor incorrect. Weak institutions, limited technical capacity, and political incentives all matter. But they are insufficient to explain why many of the same constraints have persisted for decades despite being widely recognised. Policymakers have long understood the importance of reliable infrastructure, export diversification, better logistics, and a more attractive investment climate. Technical knowledge is readily available, international experience is abundant, and development partners have invested heavily in building administrative capacity.

The more important question, therefore, is not why good policies are difficult to implement, but why the obstacles themselves prove so resilient. That requires looking beyond administrative shortcomings to the incentives embedded in Bangladesh’s political economy. Many of these constraints persist not simply because the state lacks capacity, but because they are embedded in an institutional equilibrium in which economic power, policy influence, and market privileges reinforce one another.

AN ECONOMY ORGANISED AROUND PROTECTED RENTS

One consequence of this institutional equilibrium is an economy increasingly organised around protected rents. Bangladesh’s large business groups played a critical role in the country’s economic transformation, investing when capital was scarce, creating jobs, and helping build a domestic entrepreneurial class. The problem is not the existence of powerful firms. Every successful industrialiser had them -- from South Korea’s chaebol to China’s state-owned and private conglomerates.

The challenge is that Bangladesh has not developed institutions capable of disciplining economic power in the service of industrial transformation.

Over time, much of the formal economy has become organised around protected incumbent firms. Large business groups have expanded across manufacturing, finance, logistics, telecommunications, media, and services, while economic power and policy influence have become increasingly intertwined.

In this environment, protection, subsidised credit, regulatory discretion, and market access can become entitlements rather than instruments for building competitiveness. Firms often face stronger incentives to preserve existing advantages than to pursue innovation, export expansion, or technological upgrading.

Viewed through this lens, many familiar bottlenecks become easier to explain. Regulatory complexity raises barriers to entry. Finance flows toward established relationships rather than productive newcomers. Persistent shortcomings in logistics, trade facilitation, and export competitiveness become easier to tolerate when firms can remain profitable without competing aggressively in global markets. Underlying these patterns is an institutional environment that rewards rents more consistently than productivity.

THE NARRATIVE THAT SUSTAINS THE SYSTEM

Economic structures endure not only because they generate profits for powerful groups. They also endure because they generate ideas that justify them.

In Bangladesh, industrial policy has long been shaped by a powerful narrative: Bangladesh is different. It must follow its own development path by nurturing domestic entrepreneurial capabilities and guiding industrial transformation through active state intervention. Over time, however, this developmental narrative has increasingly come to justify preserving established firms and exercising administrative discretion over market competition.

These arguments resonate because they contain important truths. No country has industrialised without building domestic entrepreneurial capabilities, and national development cannot be outsourced to foreign investors. The problem begins when nurturing domestic capability becomes synonymous with shielding incumbent firms from competition.

The result is that industrial policy becomes more concerned with preserving existing capabilities than creating new ones. The relevant question is no longer what firms contribute to structural transformation, but whether they reinforce that order.

The problem deepens when the success of incumbent firms becomes equated with the success of the economy itself. Industrial transformation is a process of continuous renewal in which firms enter, compete, grow, and, when they cease to be productive, exit. Yet policy increasingly focuses on preserving established firms rather than renewing the industrial ecosystem.

This bias is reflected in how policy responds to success and failure. Large firms in financial distress are treated as systemic concerns because of their size and employment, while the financing, market access, and technological constraints facing thousands of small and medium enterprises receive far less attention, even though their collective contribution is indispensable to employment, innovation, and industrial diversification.

WHAT EAST ASIA ACTUALLY DID DIFFERENTLY

The weakness of Bangladesh’s approach becomes clearer when contrasted with the East Asian experience.

East Asian success was not built on free markets alone. Nor was it built on suppressing large firms or rejecting foreign capital. Its defining feature was not simply disciplined rents but continuous industrial renewal. Governments used policy support not to preserve existing firms but to create conditions in which new firms could emerge, successful firms could grow, and resources could gradually shift away from less productive activities.

Governments provided protection, subsidised credit, tax incentives, and other forms of policy support. But these privileges were conditional rather than permanent. They were tied to export success, technological upgrading, productivity growth, and integration into global markets. Firms that failed to deliver lost state support.

This took different institutional forms across countries. South Korea disciplined the chaebol through export targets and directed credit while allowing weaker firms to exit. Taiwan fostered dense networks of small and medium enterprises that continuously generated new suppliers and exporters. China combined foreign investment, local experimentation, and competition among firms and regions to accelerate technological learning and industrial upgrading.

The common thread was not a particular industrial policy but a particular relationship between the state and business. Governments remained closely connected to firms while retaining sufficient autonomy to discipline them when national development objectives required it. This has been described as “embedded autonomy” -- a state embedded in business networks yet sufficiently autonomous to discipline them.

Bangladesh has achieved embeddedness. What it has struggled to develop is autonomy. Without that autonomy, support becomes difficult to withdraw, even when performance falls short.

That is the critical distinction. The issue is not whether governments create rents—every successful industrial policy does. The issue is whether those rents are conditional on performance or become permanent privileges. East Asia used state support not only to build globally competitive firms but also to continually renew its industrial base. Bangladesh has too often used it to preserve existing market positions.

GROWTH REQUIRES DISCIPLINE

If Bangladesh genuinely wants industrial growth to accelerate, it needs more than another package of incentives. Industrial policy must shift from discretionary privileges to transparent, performance-based support that rewards firms for exporting, innovating, upgrading technology, and raising productivity. That requires predictable rules, open competition, and a state capable of disciplining powerful economic actors in pursuit of broader developmental goals.

The government’s industrial growth projections implicitly assume that the existing system will generate East Asian-style dynamism. Yet East Asia’s success rested on institutions that linked privilege to performance, competition, and continuous industrial renewal. Bangladesh’s challenge is to build institutions that do the same. Without that discipline, industrial policy will remain focused on preserving today’s capabilities rather than creating tomorrow’s. Only then can the country build globally competitive industries.

The writer is the former lead economist of the World Bank’s Dhaka office.

The Dhaka Stock Exchange (DSE) has found the factory of Active Fine Chemicals closed during an inspection, raising the number of non-operational listed manufacturing companies to 33.Geographic Reference

The inspection, conducted on Thursday, is part of the bourse's ongoing drive to verify the operational status of listed companies and provide investors with a clearer picture of their actual business status.

According to DSE data, 32 listed manufacturing companies went out of operation between 2016 and Sunday, while another company has remained shut since 2002.

The list of non-functional companies becomes even longer when troubled financial institutions are taken into account. Five Islamic banks are currently undergoing merger, while five non-bank financial institutions (NBFIs) have been selected for liquidation.

Market analysts say the growing number of inactive listed companies exposes deep-rooted structural weaknesses in the country's capital market and highlights long-standing failures in regulatory oversight.

Many of these companies raised funds from the public through the stock market years ago but later became victims of sponsor disputes, financial irregularities, loan defaults, prolonged financial distress, or legal battles. Some failed to modernise operations or lost competitiveness amid changing market conditions.

Several manufacturing companies struggled with rising energy costs and persistent shortages of gas, making operations financially unviable.

Hamid Fabrics, for example, suspended factory operations in June last year, citing inadequate gas pressure. The company informed investors that production had already been disrupted for nearly two years before the worsening gas crisis forced a complete shutdown.

Appollo Ispat Complex has remained closed since October 2020. The manufacturer of Rani Marka Dheutin, which went public despite strong objections from the then finance minister AMA Muhith, fell into trouble within three years of listing after allegations of embezzlement involving its former directors.

Meghna Pet Industries has remained non-operational since 2002, making it the longest-closed company among listed firms. Company officials could not be reached for comment, as its page on the DSE website provides neither a contact number nor the name of the company secretary.

Market participants say the absence of timely regulatory intervention has allowed many troubled companies to remain listed years after production ceased.

The physical inspection is part of the exchange's broader initiative to verify the operational status of listed companies, said Md Sajedul Islam, shareholder director of the DSE.

In recent months, the exchange has intensified inspections as companies have not disclosed their operational status to investors.

Stock prices surged while factories remained shut

With factories remaining shut, machinery lying idle, and workers gone for long, several non-operational companies have posted sharp price increases on the bourses. Analysts suspect speculative trading and price manipulation behind the rallies.

Shyampur Sugar Mills, which has remained closed since December 2020, saw its share price jump about 42 per cent over the past month. The stock gained another 8.73 per cent on Sunday to close at Tk 225.50.

Khulna Printing & Packaging, whose factory has not been producing anything for more than two years, rose 8.61 per cent on Sunday to Tk 16.40, its highest level in a month.

In some cases, companies appear to exist only on paper. Familytex (BD), for instance, no longer has any physical manufacturing assets. A recent investigation by a special team from the Chittagong Stock Exchange (CSE) found that the company's factory and other assets had already been sold to a private entity.Geographic Reference

There are always some investors who are attracted to highly speculative stocks, said Saiful Islam, president of the DSE Brokers Association of Bangladesh (DBA). A segment of traders deliberately takes high risks, betting on sharp price swings rather than company fundamentals.

"They believe that once a stock starts rising, the relatively low free float of these companies makes it easier to drive prices further in their favour," Mr Islam added.

Analysts warn that continued trading of stocks of non-operational companies erodes investor confidence and damages the credibility of the capital market. They urge the regulator to take prompt action against the firms, saying cleaning up the trading board is essential to protect investors and foster the long-term development of the equity market.

Responding to concerns over the growing number of non-operational firms, Md Abul Kalam, executive director and spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), said the stock exchanges are the frontline regulators and have the authority to take action against such companies.

"The stock exchanges can suspend trading or delist companies in accordance with the listing regulations," he added.

Bangladesh is pursuing a dual-track strategy to retain duty-free access to the European Union after graduating from the least developed country (LDC) category, negotiating a free trade agreement (FTA) with the bloc while also seeking to qualify for its GSP Plus trade preference scheme.

With the clock ticking towards the end of its LDC trade privileges, businesses say that failing to secure an alternative arrangement could dent the country’s export competitiveness in its largest overseas market and hurt the overall economy.

The stakes are high as nearly half of Bangladesh’s merchandise exports are shipped to the EU. To the European market, they currently enjoy duty-free and quota-free access under the Everything But Arms (EBA) scheme for least developed countries.

The pressure is greater because the two biggest competitors of Bangladesh in the apparel market, India and Vietnam, already have trade agreements with the EU. Once Bangladesh loses its LDC preferences, exporters fear the market peers will gain a further competitive edge.

Bangladesh is scheduled to graduate from LDC status in November this year. The government has, however, sought a three-year postponement, and officials say the response from the relevant UN body has so far been positive.

Even if the graduation goes ahead as scheduled, the EU has agreed to continue its trade preferences for Bangladesh for another three years. That means regular tariffs will come into effect from 2029 under the current timeline.

Studies have estimated that Bangladesh could lose exports worth as much as $17.5 billion a year after graduation, as around 73 percent of the country’s exports currently benefit from LDC-related preferences.

“Eventually, we are heading towards signing an FTA with the EU, but it may take a long time because of the negotiations by both parties,” Commerce Minister Khandakar Abdul Muktadir told The Daily Star over the phone.

Negotiating an FTA, however, is rarely a quick process. India, for example, took around two decades to conclude its trade agreement with the EU.
Referring to the lengthy process, the commerce minister said, “But at the same time, we should not keep the EU market as a vacuum as it is the largest export destination for Bangladesh.”

That is why Bangladesh is pursuing both options at the same time, while giving priority to concluding an FTA as early as possible, Muktadir said.

FTA or GSP Plus?

Bangladesh has been negotiating with major trading partners to secure duty-free market access after LDC graduation, either through free trade agreements or preferential trading arrangements such as GSP Plus.

With the EU, discussions are at an early stage. Both sides have been exchanging letters to prepare the ground for formal negotiations, whether for an Economic Partnership Agreement (EPA), a conventional FTA or a Comprehensive Economic Partnership Agreement (CEPA).

Recently, the European Commission replied to a commerce ministry letter sent last October, saying it was carrying out an internal assessment before deciding whether to launch formal negotiations with Bangladesh.

At the same time, Dhaka is continuing its efforts to qualify for GSP Plus, which offers tariff preferences to developing countries that meet a series of international standards on labour rights, human rights, environmental protection and good governance.

Speaking on condition of anonymity, a senior commerce ministry official said Bangladesh has already fulfilled most of the requirements under the 32 international conventions linked to GSP Plus eligibility.

The official said recent labour reforms have strengthened Bangladesh’s position.

Parliament amended the labour law last year in line with recommendations from the International Labour Organisation (ILO). Bangladesh has also ratified three ILO conventions covering occupational safety, workplace health and protection from violence and harassment.

“We are continuing negotiations with the EU for both GSP Plus status and FTA signing as we know the importance of the EU markets,” the official said.

The ministry is also closely watching the outcome of Bangladesh’s request to defer its LDC graduation. The proposal is expected to go before the UN General Assembly in September after a recommendation from the UN Economic and Social Council (UN ECOSOC).

Officials believe that if Bangladesh’s graduation is postponed, the EU grace period could also be extended.

‘FTA OFFERS MORE DURABLE SOLUTION’

Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development (RAPID), said Bangladesh’s progress on labour reforms would support both GSP Plus and FTA negotiations.

However, he said the government should focus more on securing an FTA because it offers a more durable solution for retaining preferential access to the European market.

Razzaque also questioned how much Bangladesh would ultimately gain from GSP Plus.

Under the EU GSP rules for 2024-34, clothing exports from a GSP Plus beneficiary country would lose preferential treatment if they exceed 6 percent import thresholds.

Bangladesh already accounts for nearly 20 percent of the relevant clothing imports into the EU, well above the threshold.

The EU GSP rules also mention that clothing imports from a GSP Plus beneficiary should not account for more than 37 percent of all GSP-covered clothing imports into the EU. Bangladesh’s current share is close to 50 percent, raising questions over how much of its apparel exports would actually qualify for zero-duty treatment even if it secures GSP Plus.

Bangladesh has been a member of the World Trade Organization (WTO) since 1995 and currently enjoys duty-free, quota-free access to the EU market under the Everything But Arms (EBA) arrangement, which covers all products except arms and ammunition.

THE TRADE PICTURE

The EU began enhanced engagement with Bangladesh under the EBA arrangement in 2017 to monitor compliance with international conventions on labour rights and human rights.

In 2025, Bangladesh was the EU’s 35th largest trading partner, accounting for 0.5 percent of the bloc’s total goods trade. For Bangladesh, however, the EU was its largest trading partner, representing 21.5 percent of the country’s total export.

Trade in goods between Bangladesh and the EU reached €23.3 billion in 2025, with the EU running a trade deficit of €19.1 billion.

Textiles dominated Bangladesh’s exports, accounting for almost 94 percent of EU imports from the country. EU exports to Bangladesh were led by machinery and appliances, which made up 36 percent of shipments, followed by chemical products at 24 percent.

Trade in services stood at €1.5 billion in 2024, while total trade in goods and services reached €23.8 billion.

Bangladesh is the largest beneficiary of the EU Everything But Arms scheme. In 2024, exports worth €19 billion entered the bloc under the arrangement, with a utilisation rate of 96 percent.

EU’s foreign direct investment stock in Bangladesh stood at €2.5 billion in 2024, while Bangladesh’s investment stock in the EU totalled €86 million, according to the European Commission.

Faisal Samad, a director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said exporters are concerned about retaining duty-free access to their largest market after LDC graduation.

“We are also working with the government by giving recommendations for retaining the zero-duty market access to the EU in the post-LDC period,” Faisal Samad told The Daily Star over the phone.

“But at the same time, we should keep open all of the avenues of negotiation with the EU so that we do not miss any opportunities,” he said.