Businesses weighed down by graft, inefficient bureaucracy

Corruption, inefficient bureaucracy and limited access to finance are among the dominant problematic factors affecting businesses in Bangladesh, according to a new survey of the Centre for Policy Dialogue (CPD).

Of the respondents, 68 per cent complained about high levels of corruption, 67 per cent about inefficient bureaucracy and 56 per cent about the limited access to funds as the major problematic factors in 2021.

In the previous years, corruption would top the list of the barriers standing in the way of businesses by maintaining a huge gap with the second and third factors.

"But factors such as inefficient bureaucracy and limited access to financing have made a stride and narrowed the gap," said Khondaker Golam Moazzem, research director of the CPD.

He spoke while presenting the "Bangladesh Business Environment; Findings from Entrepreneurs Perception Survey" at the CPD's office in Dhaka yesterday.

The think-tank took the executive opinions of 73 high officials of private companies located in Dhaka, Chattogram, Narayanganj, Gazipur and Faridpur from April to July last year.

Inadequate infrastructure, policy instability, weak health system, high tax rate and complex tax regulations were among the top ten problematic factors.

Businessmen's perception about infrastructure has improved as it was the fourth important factor (45 per cent) in the survey. It used to be the top or second most problematic factor previously.

This is largely because significant public and private investments in roads, bridges, ports, electricity, gas, rail, and water supply have contributed to the improvement in the infrastructure sector to some extent in recent years.

"Fast-track projects for large-scale infrastructure development could contribute to improving the business environment further," said Moazzem.

Forty-five per cent of the businessmen perceived businesses would require more than three years to recover from the impacts of the coronavirus pandemic.

Very few respondents (7.25 per cent) thought that it would be possible to make a turnaround from the losses in less than a year, according to the survey.

The respondents called for additional initiatives to support recovery: financial incentives (17 per cent), tax reduction (16 per cent), control of corruption (9 per cent), easy access to credit (8 per cent), improving healthcare and mass vaccination were among the recommended measures.

As part of the recovery mechanism, businesses have adopted various strategies with 28 per cent of them having taken cost-cutting measures, which included layoffs.

Some 22 per cent are working with new buyers, 19 per cent are investing to expand, 16 per cent are exploring new markets, and 15 per cent are manufacturing new products.

The entrepreneurs have identified major areas for growth for businesses in the next decade.

Some 67 per cent of executives who were surveyed indicated that Bangladesh's major market in the next 10 years would be digital financial services. Ultimately, Bangladesh's digital system will significantly improve.

Some 53 per cent indicated that skills capital would be another important area of focus, while half of the respondents indicated data management could be a major market for businesses.

Other potential growth areas would be plastics recycling, re-skilling, care, and unemployment insurance.

The businessmen's perception towards institutions has not improved during the post-Covid period (2021) compared to the pre-Covid year of 2019. A majority of institution-related indicators are yet to reach the pre-crisis level, the survey found.

For example, the government is less responsive to changes and is unable to ensure a stable policy environment.

"Tax structure needs major revision focusing on the equity of different categories of people," said the CPD.

As part of the recovery initiative, businessmen requested a reduction in tax rates that the government may consider in the upcoming national budget.

The CPD said the National Board of Revenue and Bangladesh Trade and Tariff Commission should jointly review the fiscal expenditure incurred for providing fiscal incentives and subsidies to different categories of enterprises and activities.

Businessmen are concerned about the quality of services of law enforcement agencies with 57.5 per cent perceiving that the police service is yet to be relied upon to enforce law and order efficiently.

About 63.9 per cent of businessmen opined that there is a dearth of transparency in the services provided by law enforcing agencies.

The government should handle the sanction with utmost importance as businesses are concerned, said Moazzem referring to the US sanctions on Rapid Action Battalion and some of its current and former officials. 

If the sanction affects the transactions in businesses, it will be a major factor for the future business environment, he said.

The think-tank said Bangladesh needs to be cautious about digital inequality by ensuring easy access and low-cost facilities for all categories of people, including marginalised, women, youth, and small-and-medium entrepreneurs.

"Necessary fiscal and budgetary support should be made available to expand digital services across the board."

The government needs to follow market-based approaches in the case of administered utility and energy markets, the economist said.

"Institutions such as the Bangladesh Competition Commission need to be proactive and have the capacity to identify the problems of dominant market players to ensure competitive behaviour."

Business reporting of human and labour rights, environmental compliance and corporate practices needs to be promoted, he added.

Fahmida Khatun, executive director of the CPD, also spoke.