60pc businesses find market imperfection a key obstacle

As many as 59.57 percent of the businesses in a recent government survey complained of market imperfection as the prime obstacle for them to thrive.

Market imperfection can arise for various reasons, but mostly from the low price or demand for goods and services, as per the report “Study on Employment, Productivity and Sectoral Investment in Bangladesh” by the General Economics Division.

The report, which was unveiled in May this year, summarises the findings of a survey on 824 industrial establishments between July 2017 and December 2018 for informed policymaking.

Due to low price or demand, producers eventually change their perspective in terms of upcoming production schedule, which influences the supply side of the market. Conversely, high prices of raw materials further intensify the distortion as they eat into the profit margin.

Some 31.64 percent of the survey respondents complained of interrupted supply of electricity, gas and water and poor infrastructure, as they hamper the projected production schedule, which in turn lowers profitability.

Access to capital can be termed as another barrier (29.17 percent) for sectors to flourish as they cannot expand beyond a certain level.

Other obstacles such as weak institution and corruption, unskilled labour and lack of technology also have a negative impact on the market environment.

In terms of reforms, 45.99 percent of the survey respondents called for an inclusive financial system. The highest expectation is for low interest rates or easy terms and conditions for loans.

Next on the list of reforms would be strong institutions and justice (44.14 percent). The businesses called for incentive or subsidy, reduced tax rate or licence fee, and business-friendly administration and law enforcement agencies.

In order to function more efficiently, the survey respondents sought marketing assistance for manufactured goods and services, help with enhancing supply of local, quality raw materials and aid for eliminating raw material crisis.

The study also called for greater focus on small- and medium-sized enterprises, which have contributed significantly to economic growth and employment generation in East and Southeast Asian countries.

It also suggested giving SMEs access to the hundreds of economic zones that the government has planned, which can solve many of the problems they currently face, as well as creation of one-stop SME service where speedy solutions for the SME-related problems can be provided.