Bangladesh is currently experiencing a deep political and economic crisis following widespread student protests that began on July 1. These protests have prompted Prime Minister Sheikh Hasina to leave the country by helicopter to New Delhi during the night. Economic losses due to the protests are estimated to total billions of dollars.
Despite plans by Nobel Laureate Muhammad Yunus to lead a temporary government in Dhaka, local businesses are struggling to cope with unprecedented circumstances and uncertainty about the future. “Very few expected the situation to develop this way,” says Vina Nadjibulla, Vice President of Research and Strategy at the Asia Pacific Foundation of Canada. She refers to the number of people who have been killed and injured this week, as well as Hasina’s departure. “Bangladesh has experienced many coups, but this is something new – this power of the people, the sheer strength from the protesters. We are now in uncharted territory.”
The political unrest has significant economic consequences, Nadjibulla warns. Even before the recent events, Zaved Akhtar, President of the Foreign Investors Chamber of Commerce and Industry (FICCI), noted that the Bangladeshi economy had suffered a loss of $10 billion due to the protests, curfews, and communication breakdowns.
Although some garment factories – a central employer in the country – have reopened after four days of closure, there are concerns about trade relations. At least one Indian clothing manufacturer in Bangladesh has announced plans to move production back to India for the rest of the year. “For those who viewed Bangladesh as an attractive part of diversifying from China, this political instability raises questions and makes it more urgent to restore law and order,” explains Nadjibulla.
Michael Kugelman, Director of the South Asia Institute at the Wilson Center, points out that the temporary government must quickly restore law and order while also addressing the economic troubles that sparked the protests. Approximately 67 percent of Bangladesh’s 170 million inhabitants are between the ages of 15 and 64, with more than a quarter aged 15 to 29, according to the International Labour Organization. Despite notable progress, the country still faces significant social challenges, including high unemployment among youth.
“If those in charge want to address the economic issues, they must swiftly restore law and order. The recent weeks have been a nightmare and will scare off investors. It is crucial to ensure that current investors feel secure,” adds Kugelman.
Bangladesh plays an important economic role, not only as a clothing manufacturer for many Western countries but also as an energy supplier and recipient of significant infrastructure investments from countries like China and Japan. In 2023, Bangladesh imported goods worth $73 billion, primarily raw materials such as refined petroleum, cotton, textiles, and fertilizers.
Kugelman expresses hope that the new government will understand the relationship between restoring peace and stabilizing the economy. “Uncertainty is something that can make commercial partners and investors even more apprehensive. No one wants more unrest,” he concludes. India, which has historically maintained a close relationship with Bangladesh, could be particularly affected by the current instability, especially as Prime Minister Narendra Modi has been a close ally of Hasina.