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A year of firefighting for businesses
JAGARAN CHAKMA
The year began with a national election, saw a mass uprising midway and subsequently progressed through a deteriorated law and order situation. These all had adverse implications for businesses.
Similar to previous occasions, the heated political atmosphere surrounding the national elections put business expansion plans on hold for months, both before and after the polls.
Then came the nationwide student-led protests in July, culminating in a fierce anti-government campaign, violence, army deployment, curfew and government ouster in early August.
The political changeover left a huge vacuum in law and order, exposing manufacturing lines to arson, vandalism and ransacking.
Apart from these challenges, the turbulent business climate throughout the year struggled with inconsistent gas and power supplies, red-hot inflation, a US dollar crisis in raw material imports and weakening of the local currency Taka.
Lately, labour unrest and high-interest rates on bank loans further complicated the business environment.
In 2024, there were also external shocks on the global supply chain, such as the prolonged Russia-Ukraine war, conflict in the Middle East and the Red Sea crisis. On the home front, multiple floods submerged vast swathes of the southern and north-eastern regions.
“If compared, the year 2024 was no less difficult than the coronavirus pandemic,” said Ahsan Khan Chowdhury, chairman and chief executive officer of Pran-RFL Group.
Echoing similar sentiments, Zaved Akhtar, managing director of Unilever Bangladesh, said that 2024 has been a very difficult year for business communities.
The key cause for that was soaring prices of food and non-food essentials, according to Akhtar, who is also president of the Foreign Investors’ Chamber of Commerce and Industry (FICCI).
STUBBORNLY HIGH INFLATION
Not only among the business communities, but also among the general public, stubbornly high inflation made it almost impossible to turn a corner without bumping into woes due to price pressures.
The inflation rate hovered around the double-digit mark all year round in 2024. It increased to 11.38 percent in November, registering its highest rise in four months.
Business communities translated the price pressures into eroded purchasing power of people and a severe blow to demand.
For instance, megapacks of fast-moving consumer goods (FMCG) took up less space on grocery shelves as many shoppers turned to mini-packs of food and toiletries instead.
This means consumers were losing ground in their protracted war against inflation.
Zaved Akhtar, managing director of Unilever Bangladesh, said their monthly FMCG sales declined 5 percent in recent months.
For the spiralling prices, Ashif Ibrahim, former president of the Dhaka Chamber of Commerce and Industry (DCCI), blamed rising food prices and disruptions to the global commodity supply chain.
To tame the inflationary curve, the Bangladesh Bank continued its contractionary monetary policy, which, to some extent, was discouraging for fresh investment and business expansion.
THE FALLING TAKA
Throughout 2024, the local currency Taka continued to lose its value against the US dollar.
“The Taka depreciation increased the cost of imports and affected business margins,” Ibrahim said.
He added that import-related credit activities were impacted by the nonperforming loan crisis and the general liquidity of the banking sector, which resulted in a drop in letters of credit (LCs) for the import of capital machinery and essential raw materials for industry.
Ibrahim said the private sector investment faced several economic challenges in 2024, with the low import of capital machinery reflecting slowed investment throughout the year.
According to official data, LC settlements for capital machinery imports declined 41 percent while LC openings for the same dropped 21 percent from July to October.
“The decrease in capital machinery imports clearly indicates that fresh investment will not arrive in the coming days,” said Anwar-ul Alam Chowdhury Parvez, president of the Bangladesh Chamber of Industries.
LC OPENING HASSLE
Businessmen faced problems in opening LCs due to a shortage of US dollars even though the forex crunch had slightly improved compared to last year.