THE parliamentary election in Bangladesh on February 12, 2026, marked a dramatic political shift. This transition has ended the long period of political uncertainty since the ousting of the previous government in 2024. It has been met with cautious optimism among the business community for restoring stability. However, the new government faces substantial governance challenges, particularly in the trade and business sector, rooted in structural economic weaknesses, investor uncertainty and evolving global trade dynamics.
At the heart of the economy, Bangladesh’s tradable sectors have been under sustained pressure. The garment and textile industry, which accounts for around 80 per cent of export earnings and a significant share of employment, has been especially hard hit by political instability and tariffs imposed by major trading partners. Although recent negotiations lowered tariffs on ready-made garment exports to the United States from 37 per cent to 19 per cent, critical market uncertainty persists, as orders remain inconsistent and global competition intensifies.
The challenge for the new government will be not only to sustain and expand market access but also to diversify export channels and reduce overreliance on a single industry. This task requires coherent policy, trade diplomacy and trust-building with international buyers.
One major governance issue is restoring investor confidence and attracting both domestic and foreign investment. For several years, political turbulence and policy unpredictability have discouraged long-term commitments. Private investment fell sharply, export growth stalled and industrial expansion slowed as entrepreneurs waited for the political transition.
The Dhaka Chamber of Commerce and Industry has urged the new government to implement priority reforms to revitalise economic activity and remove bureaucratic obstacles that hinder business operations. Without prompt, credible action, investor hesitation may persist, undermining growth prospects and deepening unemployment across sectors beyond garments, including leather, jute, pharmaceuticals and technology.
Closely tied to investment is the banking and financial sector crisis, which poses a systemic governance challenge with direct implications for business. Non-performing loans remain alarmingly high, eroding capital available for enterprise expansion and fuelling lenders’ risk aversion.
Deteriorating asset quality and a lack of effective banking reforms have weakened credit flows, particularly to small and medium-sized enterprises, which play a central role in employment and industrial diversification. Strengthening regulatory oversight and implementing meaningful financial sector reforms will be essential to revitalise credit markets and support business growth.
Another pressing challenge for the government is managing inflation while preserving trade competitiveness. High inflation has eroded purchasing power and raised input costs across industries. Although recent measures have tempered price increases, food inflation remains a concern and wage growth has lagged. For producers, volatile domestic prices affect production costs and export pricing, making it harder to compete globally. The government must therefore pursue fiscal and monetary policies that stabilise prices without stifling growth or curbing productive investment.
The law-and-order situation repeatedly emerges as a proximate constraint on trade and business. Entrepreneurs and investors alike cite extortion, mob violence, harassment and the unclear application of the rule of law as deterrents to investment and daily business activity. A functional legal environment that protects property rights, enforces contracts transparently and curbs predatory practices is indispensable to a thriving private sector. Achieving this will require strengthening institutions and depoliticising regulatory enforcement, which is inherently political and difficult amid broader governance transitions.
Fiscal constraints and revenue shortfalls also limit the new government’s ability to stimulate the economy. Tax-to-GDP ratios in Bangladesh lag those of regional peers, constraining public investment in infrastructure and services critical to business growth, including energy, logistics and digital connectivity. Without broadening the tax base and improving revenue collection, the government may struggle to fund reforms and support sectors that require strategic investment.
An additional governance dilemma stems from global economic shifts and Bangladesh’s evolving status on the world stage. The impending loss of benefits from the least developed country status in late 2026 threatens the erosion of preferential trade terms that previously supported export competitiveness. Facing heightened competition from countries such as Vietnam, Sri Lanka and India, Bangladesh’s policymakers must strategically position key sectors to maintain market share in established markets and to explore new trade partnerships.
Last but not least, the new government must manage public expectations. While business leaders and civil society express optimism about stability and reform, they also recognise that structural transformation cannot happen overnight. Communicating realistic timelines and ensuring policy continuity, particularly in trade negotiations, investor incentives and regulatory frameworks, will be vital to sustaining confidence among businesses and the broader population.
Bangladesh’s newly elected government inherits a complex landscape in which the trade and business sectors face entrenched governance challenges. Restoring investor confidence, revitalising exports, reforming the financial sector, stabilising prices and strengthening the rule of law are urgent priorities that demand a clear strategy and political will. The new administration’s success in navigating these challenges will not only shape Bangladesh’s economic trajectory but also influence its standing in a highly competitive global market.
Dr Nasim Ahmed holds a PhD in public policy from Ulster University in the UK and currently works as associate professor of public policy at the Bangladesh Institute of Governance and Management (affiliated with the University of Dhaka).
