Bangladesh must urgently implement deep regulatory and fiscal reforms to restore macroeconomic stability and address a crippling 40% youth unemployment rate, leading economists and development experts warned on Monday.
At a joint policy discussion organized by the Policy Research Institute of Bangladesh (PRI) and the World Bank, speakers highlighted that while the country's historic growth model successfully slashed poverty over three decades, it is now stalling.
To unlock private investment and generate quality employment, Bangladesh must aggressively dismantle regulatory barriers and end protective trade policies that stifle diversification.
Presenting the latest Bangladesh Development Update, Dhruv Sharma, senior economist at the World Bank, emphasized that fixing the business environment is the only sustainable way to absorb a rapidly expanding workforce.
Reducing regulatory uncertainty, offering targeted deregulation, strengthening competition, and easing constraints to firm growth will help unlock private investment and jobs, Sharma stated.
The urgency of the situation was underscored by PRI chairman Zaidi Sattar, who pointed out that youth unemployment has soared to nearly 40%.
While export-led growth and trade liberalization successfully reduced Bangladesh's poverty rate from 60% in 1990 to 18.7% in 2020, that engine is facing structural limitations.
Sattar revealed a stark structural duality in the economy: "frontier firms" generate roughly 70% of exports and 75% of revenue, yet they account for a mere 15% of total employment. This raises critical questions about whether the dominant export sector is failing to generate proportional employment compared to domestic industries.
Despite record-breaking remittance inflows driven by a narrowing exchange rate gap, Sattar questioned the necessity of the government’s additional 2.5% cash incentive.
He argued that the Taka’s recent 30% to 40% depreciation already provides a massive natural incentive for formal channels.
The readymade garment (RMG) sector enjoys significantly lower corporate tax rates than other industries.
Simultaneously, high protective tariffs keep domestic prices artificially above international levels, inadvertently discouraging businesses from diversifying beyond garments.
Representing the private sector, TIM Nurul Kabir, executive director of the Foreign Investors’ Chamber of Commerce and Industry (Ficci), blamed a recent decline in Foreign Direct Investment (FDI) squarely on a volatile regulatory environment.
Investors require long-term policy stability, but frequent policy changes undermine business confidence, Kabir said.
He criticized sudden regulatory shifts—such as unexpected supplementary duties imposed by the National Board of Revenue (NBR)—warning that they actively discourage business expansion, killing both potential jobs and future tax revenues.
He called on the government to deliver predictability in the upcoming national budget.
Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), urged a fundamental pivot away from a growth model reliant on cheap labor and protectionism.
Noting that the vast majority of existing jobs remain informal, low-paid, and unstable, she called for "sunset clauses" on government protections for emerging industries to ensure they do not become permanent crutches.
She also flagged ongoing weaknesses in the banking sector as a severe bottleneck choking off affordable credit for the private sector.
Adding a final note of urgency, PRI principal economist Ashikur Rahman stated that sweeping fiscal and financial reforms are no longer optional.
It has become a fundamental necessity for preserving robust macroeconomic fundamentals, Rahman said, noting that building a policy cushion is vital if Bangladesh is to withstand inevitable future external shocks.
