Business confidence in Dhaka and Chittagong eroded slightly because of political uncertainty and rising transport cost, corruption and bank interest, resulting in a slide in investment, according to a survey.
The score in the Business Confidence Index was 9.35 in July-December of 2014, falling from 9.74 in January-June the same year, according to the third Bangladesh Business Confidence Survey. The level is compared to the base score of 10 in July-Dec 2013.
The fall in the business confidence was due to a decline in confidence related to input and infrastructure, business environment, access to finance, legal environment and business regulation, the survey found.
However, businesses expect the score to reach 9.37 in January-June this year.
The survey results were disclosed at a press conference at the auditorium of Dhaka Chamber of Commerce and Industry in the capital yesterday.
Business Initiative Leading Development (BUILD), a public-private dialogue platform launched by the chamber, and the Associates for Development Services Ltd, a Dhaka-based consultancy firm, conducted the survey.
The survey covered 400 businesses in the manufacturing and services sectors in Dhaka and Chittagong and was conducted between February 6 and March 6 this year. Of the businesses, 61 percent are small firms, 12 percent medium and 27 percent large -- from 11 sectors, including food, garments, leather, chemicals and pharmaceuticals, electronics, wholesale and retail, hotel and restaurants, transport and communications, and real estate.
Saiful Hoque, research and evaluation coordinator of Associates for Development Services, who presented the survey findings, said the recent political uncertainty affected the business confidence although the survey covered the second half of last year.
In the previous survey, 47 percent of the respondents had said they would invest during July-December of 2014, but 27 percent invested at the end, according to Hoque. “This tells that they invested less because their confidence eroded.”
The survey report said businesses are mostly concerned about the political situation, electricity prices, transportation cost, transportation situation, corruption, interest rates, petroleum prices and profit tax rates.
“Continued efforts on business climate reforms are critical to boost confidence and sustain the growth momentum,” it said.
The report said businesses are keen to invest as they foresee an increase in demand, business opportunities and profit in the market.
It said actual investments made were less than the planned investments in July-December of 2014 due mainly to political uncertainty.
Businesses mostly have positive perception of labour relations, employment scenario, trade facilitation, telecommunication, electricity supply, internet connections and water supply.
Though businesses are slightly optimistic about the overall business and economic environment, they will remain cautious about their investment decisions during the period between January and June this year, the report said.
Humayun Rashid, acting president of DCCI, called for an enabling environment to increase investment.
“In the last three months, there has hardly been any investment in the country. On the other hand, the cost of doing business has gone up.”
Asif Ibrahim, chairman of BUILD, Amitava Chakraborty, director general of the WTO cell at the commerce ministry, Abul Quasem, deputy governor of Bangladesh Bank, Shoaib Chowdhury, vice president of DCCI, and Ferdaus Ara Begum, chief executive officer of BUILD, also spoke.
Since 2013, BUILD has been conducting the survey every six months.