Published: 12:00 AM, 05 May 2026
Growth Exists, Employment Does Not
Amir Mohammed Khosru
The current economy of the country is passing through a deep and complex paradox. On one hand, we are achieving visible GDP growth at the national level; on the other hand, we are repeatedly failing to create necessary and quality employment as a fruit of that growth. The World Bank’s recent report, ‘Bangladesh Development Update,’ has clearly highlighted this fragile picture of the country's business environment and employment. Based on data spanning from 2016 to 2024, this report points out why the current business structure is failing to be employment-oriented and why it is struggling to meet the growing demands of newcomers in the labor market.
According to the report's statistics, approximately 2 million new people join the labor market in Bangladesh every year. In contrast, an average of only 900,000 jobs are created annually. This means nearly 1.1 million young people enter the labor market each year without finding any permanent or quality work opportunities. This massive gap is not only creating economic inequality but is also pushing the social stability of the country toward a grave threat. Despite an average GDP growth of 6% over the last decade, the primary reason identified for the failure to generate adequate employment is the hostile business environment, which stands as a massive wall against new investments and initiatives.
One of the main obstacles in the business environment is the high 'regulatory burden.' The amount of bureaucratic complexity and time wasted by entrepreneurs to start or operate a new business is incredible in the era of a modern economy. World Bank data shows that it takes an average of 28 days to obtain an operating license in Bangladesh and about 49 days to get construction-related permits—times that are significantly lower in competing countries like China or Vietnam. The situation is similar for imports; it takes an average of 49 days to obtain an import license in Bangladesh. This procrastination not only wastes time but also multiplies the initial costs and uncertainty of the business, discouraging new entrepreneurs right at the start.
A major problem of our economy has been identified as the ‘productivity paradox.’ The report states that despite high GDP growth, innovation or broad-based dynamism is not observed at the company level. Particularly in the manufacturing and service sectors, income per worker is much lower than the South Asian average, and this productivity has been virtually stagnant since 2016. The rate of forming new companies has also decreased alarmingly. Currently, only 4% of firms in the formal sector were established in the last five years, which is several times lower than in China or Vietnam. Furthermore, Foreign Direct Investment (FDI) remains below 1% of GDP, which is extremely low by global standards. Most investments are now flowing into low-risk utility sectors rather than manufacturing, narrowing the scope for building technology-dependent modern industries.
A stark ‘dual structure’ has emerged in the country’s private sector. On one side are a handful of high-productivity large firms that control 75% of total formal sector revenue. Surprisingly, despite holding this massive share of income, they generate only 15% of the country’s total employment. Conversely, the majority of employment is created by small and medium enterprises (SMEs) and informal businesses, which are constant victims of policy discrimination and a hostile business environment. This disparity is particularly evident in the Readymade Garments (RMG) sector; while large firms enjoy most of the benefits, small and medium entrepreneurs struggle to survive. Consequently, because small entrepreneurs lack the opportunity to scale up, the employment crisis remains unresolved.
The extent to which bureaucratic complexity poisons the business environment is evident in the statistics regarding time spent on inspections by government officials. A significant portion of top managers' time is consumed by regulatory compliance and managing official oversight. The report refers to this as a ‘Time Tax.’ This burden is not uniform across the country; for instance, officials in Chattogram waste 40% of their time on bureaucratic tasks, while in Barishal, it is nearly 60%. Due to these adversities, about 93% of small enterprises in the country prefer to remain informal. They believe the fear of harassment by officials and the burden of extra taxes is greater than the registration process itself. As a result, they never gain the capacity to grow and create employment.
Deficits in infrastructure and financing also act as major barriers to investment. Due to power outages, production is disrupted an average of 28 times per month in Bangladesh, causing firms to lose approximately 9% of their annual sales. This forces institutions to rely on generators, which multiplies production costs. On the other hand, while large export-oriented firms receive loans at very low interest rates, ordinary entrepreneurs have to pay high interest rates of up to 13%. Currently, only 9% of SMEs have access to banking facilities, and this lack of financing reduces their productivity by up to 4.5%.
To overcome this crisis, the World Bank has proposed a three-tier ‘Smart De-regulation’ model. Its primary goal is to reduce business uncertainty and ensure transparency through digital systems. As part of short-term reforms, it suggests simplifying the licensing process and ensuring fully digital services. Additionally, incentives such as tax exemptions are needed to bring informal enterprises into the mainstream. Under medium-term reforms, the recommendation includes establishing digital systems and specialized courts for resolving commercial disputes. In long-term planning, it is essential to implement a ‘National Tariff Policy’ by reducing tariff and non-tariff barriers to trade. Furthermore, a ‘Supplier Development Program’ could be launched for small and medium enterprises so they can connect with larger firms and grow collectively.
Finally, instead of merely chasing numerical growth, it is necessary to create a humane and supportive business environment where small entrepreneurs can conduct business with ease and new jobs are created naturally. If bold policy reforms are implemented—reducing high regulatory costs and eliminating bureaucratic complexities—Bangladesh will be able to transform its vast manpower into true assets. There is no alternative to making the business environment employment-oriented for the sustainable development of the country's economy. Only if the government adopts these reforms with determination can a prosperous, stable, and equitable economic structure be built.
Amir Mohammed Khosru is a
banker and a columnist. Views
expressed in the article are
the writer’s personal opinions.
