Private sector shrinks as investment stalls

That the economy is contracting is no secret. With private sector adopting a wait-and-see policy on how things turn out and the overall investment stagnating, it is inevitable that skilled employment also contracts. More skilled people, i.e. people with university degrees in both general and specialised subjects are finding themselves squeezed out of high-paid jobs because the businesses can no longer afford to keep them on the payroll.

The country is suffering from an 'image problem' in its biggest export sector, i.e. readymade garments (RMG). Repeated flair-ups in the industrial belts over workers' wages and the ensuing violence have resulted in many weeks of work stoppages drawing unfavourable international media attention. Foreign buyers are beginning to wonder if the country is stable enough to place orders. Granted that Bangladesh is one of the top three global manufacturers of apparels, this does not allow any chance of missed shipments because the foreign wholesalers' stores cannot lie empty.

The law and order situation demands immediate attention. Again, this is easier said than done particularly in the context of the tumultuous change in government two months ago. Law enforcement agencies are in a state of disarray and are taking time to remodel themselves. None of these excuses, however, are going to be good enough reasons to restore foreign buyers' confidence. Similarly, domestic and foreign direct investment is also on hold because no business entity is going to risk putting money into an economy unless the perception on law and order turns positive.

According to the Bangladesh Bureau of Statistics (BBS) Labour Force Survey 2022, the size of the workforce increased from 61 million in 2016-17 to 71 million in 2022. It is not in Bangladesh alone that the highest paid jobs are being pushed aside in a bid to curtail spiralling costs in an atmosphere of gloomy business environment. Unless investment takes place and avenues for employment are opened to absorb the rising number of the educated unemployed, economy will not get the required momentum.

In the midst of all this uncertainty, job security in the private sector is taking a nose dive. Indeed, data from the central bank states that cash transactions have surged by 8.0 per cent in 2023, despite the wide prevalence of digital-transaction options, including mobile financial services (MFS). This is happening, because a lot of paid employees are now unemployed and are engaged in the informal sector where incomes are cash-based. No longer are they part of the workforce, the members of which get their salaries paid into the banking system.

The stagnation in the formal job market has been happening since Covid-19 when there were massive job cuts. Back then, hundreds of thousands lost their paid jobs and a lot of these people ended up opening businesses online. This of course came at a cost, particularly loss of income, but then what else was there to do? The transition from high-salaried, high-skilled jobs to entrepreneurship or low-paid jobs had begun and given the latest disruption in the political landscape of the country, the trend has quickened. But unlike the global pandemic, today's economic landscape is suffering for reasons that can be fixed faster. Back then society faced a life-threatening disease that could only be tackled by isolation from one another. Today, the economy is contracting because basic law and order is missing from the equation. The latter situation can be fixed and it must be done sooner than later. Everything else can wait.

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