It also said increased manufacturing activities during the first half of the current fiscal year have helped the economy offset losses caused by last year's massive flooding, a top trade body said yesterday.

"The recovery process and economic expansionary trend are expected to continue during the rest of the current fiscal year," the MCCI said in its review of the economy during July-December, 2004.

However, the country's oldest chamber cautioned that only a 10 percent implementation of the annual development progamme in first six months of the current fiscal year will be a matter of threat to national competitiveness.

Despite the setback caused by flooding and unfavourable weather conditions, economic activities steadily picked up during July-December.

Except the agriculture sector, growth in demand for credit, disbursement of term loans, increased production of the manufacturing sector, increased imports of capital machinery, higher collection of VAT and increased credit flow to the manufacturing indicate that economic activities have been expanding, the MCCI said.

According to an interview-based study of the chamber, 23 out of 30 entrepreneurs observed that business environment has improved during the last five months as the government's law and order measures have been able to contain toll collection.

Respondent entrepreneurs in small and cottage industries said they now felt a sense of relief as the law and order measures are working. However, large industries, particularly the export-oriented ones, complained that the government has failed to take advantage of the macro-level stability due to apparent inaction for improvement of infrastructure services such as port, electricity and gas, the MCCI said.

According to the study, garment exporters expressed their confidence that withdrawal of quota will have little impact of their business. They expect a sizeable growth in earning.

The MCCI said in manufacturing sector disbursement of term loans marked a rise of 60 percent and working capital 40 percent. Textile, pharmaceuticals, cement and asbestos, iron and steel, sugar, plastic industries were the major investment sector in 2004.

In the manufacturing sector, knitwear and garment industries will continue to give the lead and pharmaceuticals, cement and fertiliser sectors will record better performance in 2005, the MCCI predicted.

During July-November, 2004, the country received $89 million in foreign direct investment and Tk 71,760 million in domestic investment.

The Quantum Index of Production marked a 7.91 percent increase during July-October last year on a year-on-year basis. The output growth in manufacturing sector reflects the impact of increased external demand resulting in higher export growth.