LightCastle Partners, in strategic partnership with The Daily Star, launched the fifth edition of its flagship publication, The LightCastle Business Confidence Index (BCI) 2022-23, at a hotel in Dhaka on October 17, 2023. This comprehensive report offers an in-depth analysis of the business sentiment within Bangladesh’s economy, serving as a tool for businesses, investors, and policymakers to chart the way forward.
The LightCastle BCI report meticulously evaluates the perspectives of 167 industry leaders representing 25+ sectors, including multinational corporations, local conglomerates, startups, and SMEs, providing a comprehensive snapshot of Bangladesh’s dynamic business landscape.
In this edition, the report delves into the private sector’s journey amidst economic headwinds driven by geopolitical challenges, with a specific focus on the impact of the Russia-Ukraine war. Furthermore, it presents the expectations of thought leaders for the economy, considering industry performance and growth six months into the future.
As part of the launching event, a roundtable discussion with industry leaders was hosted, offering a meticulous exploration and constructive analysis of the report’s key findings and their implications for businesses, investors, and policymakers.
Additionally, there was an in-depth examination of the current business environment in Bangladesh, considering regulatory changes, external sensitivities, and emerging trends, providing a meso-economic perspective on the state of the economy.
Furthermore, the event focused on sharing strategies and recommendations for enhancing business confidence and promoting sustainable economic growth in the country. M Masrur Reaz, Chairman and CEO of Policy Exchange Bangladesh, moderated the discussion.
M Masrur Reaz said, “What an index can do is help give a structured snapshot and quantify a situation, making it more comprehensible for industry leaders and policymakers. It also helps businesses, foreign investors, in making their decision, who look at documents like Doing Business Index, which was discontinued.”
The report finds that despite facing structural shifts, Bangladesh’s private sector has shown a positive outlook in cumulative business sentiment – represented by an overall score of +6.69. Interestingly the local SMEs have fared better (+14.91) than local conglomerates and MNCs (+6.31). The difference in scores is mainly driven by external factors as the performance of the larger organizations tends to fluctuate more significantly with the changes in the global market.
While the 2023 BCI remains positive, it is relatively lower than the previous year’s (+28.69), indicating a subtle deceleration in overall business sentiment. Slower economic growth, rising costs, and reduced consumer demand have contributed to a lower but positive confidence index this fiscal year.
Aameir Alihussain, Managing Director of BSRM said, “Despite the present decline in economic growth, it’s essential to recognize that Bangladesh remains an expanding market. The current situation might be difficult, but I believe we will recover. We must be positive about riding the curve. Whoever does will come out successful through the other end; it is just a matter of time.”
According to the BCI survey (done from March to June this year), the businesses have ranked top five problem areas as: rising cost of raw materials, lack of beneficial policy implementation, difficulty in accessing finance, weak demand, and inefficient human resources.
Nearly 70% of businesses surveyed reported being impacted by the rising costs of raw materials and weak demand, which are primarily attributed to the ongoing Russia-Ukraine conflict. Financial challenges surfaced as a result of financial irregularities, high level of NPL, cash shortages, reduced savings, and currency devaluation. Inefficient human resources and lack of beneficial policies have been consistent issues in previous BCI surveys and are highly demanded to be resolved for better business efficiency.
Industry leaders highlighted higher projections across sales, consumer demand, selling price, and employment; profitability, investments, and exports are expected to remain on the lower side. The rising expenses and difficulties in managing operational cash flow have led companies to abandon their hopes of higher profitability in the next 6 months. They are also forfeiting further investments to maintain necessary cash reserves to withstand any potential volatility.
Asif Ibrahim, Vice Chairman of Newage Group of Industries said, “Raw material unavailability and rising prices is a short-term thing, expected to get back to normalcy in time. More importance should be given to formulating and implementing efficient policies, and improving the talent gaps, especially in the middle management.”
Over the past six years, LightCastle has been conducting the annual business confidence index study to gauge the confidence level among business leaders, encompassing a multitude of sectors.