Firms in Bangladesh are optimistic about their overall business prospect but they also worry that their cost of production will increase in the coming months which may hinder their growth, according to the Business Confidence Index (BCI) unveiled yesterday.

This highlighted the need for immediate action to address the cost burden emanating from a spike in the prices of electricity, water, gas, and raw materials, according to the survey.

Measured on a scale of 0 to 100, the overall index stands at 74.4, indicating a positive outlook for business conditions over the next six months.

On the scale, 50 is the midpoint while less than 50 reflects contraction or less optimism and more than 50 points to expansion or optimism.

The Business Cost Index, a sub-category of the BCI, is expected to fall to 22.4 over the months to June 2023, down from 35.8 earlier, said the Business Initiative Leading Development (BUILD) at the InterContinental Dhaka.

And concerns are very high about the spike in the cost of business among manufacturers. The cost index stands at 12.7.

Textile and RMG makers are highly pessimistic about the cost of business with the scale reading 4.3.

"This is giving a worrying signal to businesses. The business entities' willingness to expand may be hampered if the cost burden is not tackled on time," said Ferdaus Ara Begum, chief executive officer of the BUILD, while presenting the major findings of the survey.

The BUILD is a private sector dialogue platform set up in 2011 by the Dhaka Chamber of Commerce and Industry in partnership with the Metropolitan Chamber of Commerce and Industry and the Chittagong Chamber of Commerce and Industry.

It carried out the survey among 567 micro, small, medium and large businesses between September and November, supported by the USAID-funded Feed the Future Bangladesh Trade Activity.

Of the firms surveyed, 284 are from the manufacturing sector and the rest are from the service sector.

The information related to the fifth edition of the survey was collected on seven issues to prepare the index: employment, the volume of order or demand, business activity, operating capacity, selling price and investment, overall business cost, and investment.

Among the seven components, only the overall business cost index was in negative territory, giving a pessimistic perception, Ferdaus Ara said.

The cost confidence is low among the business entities, especially in the manufacturing sector, she said, adding that around 72 per cent of the respondents cited there might be an increase in the business cost over the six months from the survey period of September-November.

"Immediate actions should be taken to tackle the cost burden of businesses."

She said 95 per cent of businesses termed the utility costs and the cost of materials as the main cost of doing business in the manufacturing sector.

Businesses are, however, confident that the volume of orders in the manufacturing sector, the demand for services in the service sector, sales prices, and business activity will accelerate in the next six months.

So, businesses are willing to create jobs and invest over the same period, said the BUILD.

The survey finds that the level of optimism is moderate in the service sector over the next six months. But the sector is currently operating below their capacity.

It finds that the manufacturing sector has, somehow, reached a stable position through several developments.

However, the volatile service sector is yet to recover even though it has many opportunities that can be explored. Business entities in the service sector, especially micro, small and medium enterprises, need to be modern and adopt cutting-edge technologies to provide competitive services.

The BUILD said companies established between 2018 and 2022 are less optimistic than those set up before.

"This indicates these companies need more support. Thus, priority should be given to newly established companies while designing policy support."

At the launch of the survey report, Industries Minister Nurul Majid Mahmud Humayun described the survey report as well-timed, saying its findings should be taken into serious consideration.

He said the war in Ukraine and its related events have had a significant impact on Bangladesh.

BUILD Chairperson Nihad Kabir said: "We will continue to publish this survey to address the concerns of businesses."

"What is happening in Bangladesh is that we move one step forward only to go back by two steps later," said Abul Kasem Khan, a trustee board member of the platform.

Citing the now-scrapped Ease of Doing Business Ranking of the World Bank, he said: "We have moved forward but other countries have moved faster."