LightCastle Partners’ annual flagship publication titled ‘The LightCastle Business Confidence Index 2019-20’ gauges the business sentiments of private sector leaders across several sectors, that have a notable contribution to the country’s economy. The industries to feature in this study were purposefully determined to include sectors that had the highest level of contribution to the country’s GDP.

1. LightCastle Business
Confidence Index 2017-
18
Presented By:
Zahedul Amin
Director, Finance and Strategy
LightCastle Partners
LightCastle Business
Confidence Index 2019-20
LightCastle Business
Confidence Index 2019-20

2. Our Partners
1

3. Bangladesh in a Nutshell
2

4. BCI 2019-20 Overview
3
• Business Confidence Index 2019-20 was formulated based on the opinions of 59 CXO members
across key private sectors with highest contribution to the GDP
• Using Harmonized Expectation Indicator (HEI), the 2019-20 BCI score was -19.27 (Range -100 to
+100). The overall score was +43 in 2017-18 and +39 in 2016-17
• Key problem areas on a macro level were the diminishing export receipts and reduced foreign
remittances. On a meso level, depleted demand, curtailed capacity and inadequate infrastructure
were highlighted as the major bottlenecks.
• The Top 3 industries to hold the most promise was found to be the Pharmaceuticals sector,
Agriculture and Agro-processing sector, and the IT and ITES sectors, owing to the structural and
competitive strengths of these industries and alignment with anticipated changes in consumer
lifestyle.
• As a way forward, the economy can rely on low public debt to GDP ratio and foreign exchange
reserve while reviving the economic wheel. On an industry level it is important to diversify export
revenue streams in order to reduce the high dependency on RMG sector. For sustainable
employment opportunities, it is necessary to develop the capacity of the laid off workforce and
redirect them towards new employment opportunities in high prospect sectors.

5. The Economy in the Midst of a Turbulence
• Structural fault lines have impeded growth pre-pandemic
• The pandemic has exacerbated the already slowing economy in 2020
• Demand and Supply side shocks have jolted the economic progress
• The ‘new normal’ will stem the growth momentum in 2021 and beyond
4

6. WHERE Are We?
Job Creation/Protection Key to Economic Revival
• Protection of MSMEs key to retaining jobs across the economy
• Credit Guarantee schemes to ensure effective deployment of stimulus
packages
• Investment and systems level changes in healthcare key to reviving
confidence
• Growth in consumer spending key for a turnaround
5

7. WHERE Are We?
The Twin-Engines in Disarray
• Apparel export will revive but the pandemic has led to mounting losses
• Remittances to decline due to tectonic shift in the international oil market
6
28,094
28,150
30,615
34,133
27,949
2015-16
2016-17
2017-18
2018-19
2019-20
Export of RMG (In Million US$)
Source: BGMEA & EPB

8. WHERE Are We?
Looking Beyond the Pandemic
• FDI inflow key to diversifying the economy
• Health of the banking sector will dictate the momentum for recovery
• Double down on the secondary sector and contribute to job creation
• Skill-development for outgoing migrant worker
7

9. In the Midst of a
Turbulence
Outline
METHODOLOGY AND
CONFIDENCE LEVEL
ECONOMIC AND
SECTORWISE
INSIGHTS
CHALLENGES AND
WAY FORWARD
8

10. Methodology
60 CXO Members
Harmonized
Expectation
Indicator (HEI)
9
Divided into Different
Sectors

11. Sector Coverage
1
0

12. Sector Coverage
11

13. The Confidence Index Has Nosedived
12
Source: Business Confidence Survey conducted by LightCastle 2019-20

14. Fresh Investments and New Jobs Expected to Dwindle
13

15. The Apparel Sector is Recovering Gradually
14
• Order cancellations and postponements have
severely battered the sector
• Supply chains disruptions have been
mitigated to some end and some orders
are returning to Bangladesh
RMG Export Receipts Comparison between FY19 and FY
20

16. Percentage Change in Commodity Prices From Jan-April
2020
• Supply chain disruptions
have led to a decline in
prices at the farm-gate level
during the ‘general holiday’
• Decline in rural incomes
have led to lower demand
for agro-inputs and produce
• International commodity
prices have declined due to
global recessionary phase
Agro-processing Hit Hard by Supply Chain
Disruptions
15

17. Pharmaceutical Sector at the Pole Position
16
• Supply chain
disruptions had
impacted raw material
sourcing from China
and India
• Sales had declined
but has the potential
to reap medium term
benefits due to the
pandemic
Source: EPB
82,109,595
89,174,529
103,458,264
129,947,285
135,785,917
2015-16
2016-17
2017-18
2018-19
2019-20
Export of Pharmaceuticals (In Million US$)

18. Leather & Footwear Suffer in the Domestic and International Markets
17
• Domestic demand has suffered due to lock-down and cautious discretionary
spending
• International market expected to rebound but recovery will be gradual.
714,012,530
777,839,960
809,691,010
879,407,485
755,882,156
2015-16
2016-17
2017-18
2018-19
2019-20
Export of Apparel (In Million US$)
Source: EPB

19. • Demand for essentials
have increased at the
expense of non-essential
products
• Sales expected to
rebound but growth
trajectory is expected to
be flatter
• Players exploring digital
as an alternate channel
for growth
FMCG Sector on a Roller Coaster Ride
18
24, 41%
19, 33%
3, 5%
2, 4%
10, 17%
PROSPECTS OF SALES IN THE
NEXT SIX MONTHS
Higher
Lower
Much Higher
Not Applicable
Same / No change
Source: Business Confidence Survey conducted by LightCastle 2019-20

20. Financial Sector at the Heart of the Recovery Plans
19
Non-Performing Loan (NPL) Ratio
• The banking sector suffers from high NPLs predominantly due to poor
corporate governance
• The sector will play a critical role for delivering the stimulus package of the
government

21. Power Sector Facing Overcapacity
20
• Demand has declined due to pandemic
• Proper energy distribution and development of SEZs critical for meeting surplus
demand
• Possible non-renewal of PPAs of existing quick rentals and other CCGT based
power plants
• Demand for Electricity 8,500-
9,000 MW
• Supply of Electricity 23,548
MW
• Pre-Covid low usage rate
resulted in Tk 90 billion
(US$1.1bn) capacity payments
to idle power plants in FY 18-
19

22. ICT has a Glimmer of Hope
21
• ICT sector has been growing at a steady pace backed by consistent policies
• Deal flow expected to rise due to business automation across the globe
• Lack of skilled human resources key bottleneck to steady growth

23. Declining Demand and Lack of Funding Impair Growth
22
64% Restricted Access to Funding
27% Inadequate Infrastructure
39% Diminishing Demand
37% Policy Inconsistency
33% Pessimistic Perception

24. Promising Sectors for the New Decade
23
Source: Business Confidence Survey conducted by LightCastle 2019-20

25. Historical Comparison of the Promising Sectors
24
Promising Sectors
SI BCI 2019-20 BCI 2017-18 BCI 2016-17
1 Pharmaceuticals ICT & ITES Power & Energy
2 Agro-Processing Agro-Processing ICT & ITES
3 ICT & ITES Pharmaceuticals RMG
4 Logistics Power & Energy Pharmaceuticals
5 Digital Financial Services Leather Goods (Footwear) Leather Goods (Footwear)
Moved Up Moved Down Neutral New Entrant
Source: Business Confidence Survey conducted by LightCastle 2016-17, 2018-19 and 2019-20

26. • Low Debt to GDP ratio and Forex Reserve to provide cushion
• Consider deferment of LDC graduation
• Move up the value chain in RMG export
• Diversification of the export basket to focus on labor intensive sector
• Effective deployment of stimulus funding, particularly geared towards
MSMEs
• Worker retraining schemes to laid-off workers
Recommendation and Way Forward
25

27. Contributors
26

28. LightCastle Business
Confidence Index 2017-
18
Presented By:
Zahedul Amin
Director, Finance and Strategy
LightCastle Partners
LightCastle Business
Confidence Index 2019-20
Thank you!