Corruption and inefficient bureaucracy top roadblocks

Corruption, inefficient bureaucracy and limited access to finance were the three most problematic factors for doing business in Bangladesh last year, and it would take at least three years to recover from the economic fallout triggered by Covid-19 crisis.

This was revealed in a report titled “Bangladesh Business Environment 2021: Findings from Entrepreneurs’ Perception Survey,” published by the Centre for Policy Dialogue (CPD) at an event in the capital on Wednesday.

The think tank conducted the survey on 73 senior officials from private companies during April-July period last year. These companies have large-medium-small-micro sized factories in four sectors – Agriculture, Manufacturing, Non-manufacturing, and Services.

Presenting a keynote at the unveiling programme, CPD Research Director Khondaker Golam Moazzem said, “Businesses are still tackling structural challenges, while new challenges also emerged to raise further questions about Bangladesh’s competitiveness.

“The top three challenges – corruption, weak and inefficient bureaucracy and limited access to credit – have significantly raised the cost of doing business in Bangladesh, particularly for the micro, small and cottage industries”

The respondents also spoke of emerging concerns centring issues such as tax, health and availability of skilled workforce, which is affecting all categories of businesses – particularly the large scale and Foreign Direct Investment (FDI) led ventures.

This study was conducted in Dhaka, Chattogram, Narayanganj, Gazipur and Faridpur districts, and covered ten issues. The topics are – Infrastructure, Institutions, Safety and Security, Financial System, Trade and Investment, Competition, Business Operations, Governance and Innovation, Building Human Capital, Working and Employment, and Managing the Economic Recovery and Risks.

Corruption tops the list

About 68 per cent respondents complained about the high level of corruption as the major problematic factor for doing business in Bangladesh.

Meanwhile, 67 per cent respondents complained about inefficient bureaucracy as the second most problematic factor, and 55 per cent mentioned limited access to financing as the third factor.

A CPD report published in 2020, for the first time, identified inefficiency in government administration as the topmost problematic factor, but in 2021, corruption once again topped the chart of problems for doing business.

It should be noted that Bangladesh ranked 13th globally in the Transparency International’s Corruption Perceptions Index (CPI) 2021.

According to the report, 100 per cent of micro and around 83 per cent of small enterprises considered corruption as the most problematic factor, while 69 per cent of medium and 53 per cent of large enterprises considered the same.

New problematic factors emerge

Health and digital inequality have become new challenges since the Covid-19 pandemic’s outbreak. Among other problematic factors for doing business in Bangladesh, health was mentioned as a major issue by 35 per cent of the respondents.

Besides, issues such as tax rates, complexity in tax management, tax regulations, and inadequately skilled workforce pose a new set of challenges for a growing business sector, according to the survey.

Around 33 per cent respondents consider digital inequality a major risk for the technology sector, while 26.13 per cent mentioned failure of cyber security measures, and 22 per cent spoke of the failure of technology governance.

Moazzem continued, “Bangladesh needs to be cautious about digital inequality by ensuring easy access and low-cost facilities for all categories of people, including the marginalised, women, youth and SMEs.

“Necessary fiscal and budgetary support is a must for expanding digital services across the board.”

Skill development, data management and artificial intelligence (AI) are the future opportunities for businesses in Bangladesh, and investment is needed to develop better linkages with growth districts in major urban city points.

The CPD research director added, “Though Bangladesh’s infrastructure facility has improved, it is not conducive enough for providing digital service facilities. More investment is required for boosting digital systems on education, health, elder care and transport.

A few factors improved

The business community’s perception about infrastructure has improved. It ranked fourth in the list of top problematic factors in the survey, which had earlier ranked top or second positions in earlier iterations of the same CDP survey.

Around 45 per cent of the respondents termed it as a problematic factor, which was 57 per cent in 2020.

The majority of infrastructure-related indicators are perceived to have positive changes not only compared to 2020, but also to 2019.  Improvements were seen in the quality of road infrastructure, but the water supply witnessed moderate improvement.

Perception regarding institutional capacity improved during the post-Covid period, compared to the pre-Covid level. Perception about high taxes also improved as 35 per cent had found it problematic in 2021, compared to 42.5 per cent in 2020.

This positive perception about infrastructure is the outcome of substantive public investment in infrastructure development over the last decade, said CPD, adding that the significant public and private investments in road, bridge, port, electricity, gas, rail, water supply have contributed improvement in infrastructure to some extent.

3 years for economic recovery

Majority of the surveyed businessmen said it would take over three years to recover from the Covid-19 economic fallout.

The largest segment of respondents – 45 per cent – mentioned that it would take more than three years to recover from the pandemic fallout. While only 7.25 per cent respondents said it will be possible to recover from the losses in less than a year.

Of the respondents, 17 per cent called for financial incentives, 16 per cent for a reduction in taxes, 9 per cent for curbing corruption, 8 per cent for easy access to credit, and for boosting healthcare facilities and mass vaccination to support business recovery.

“While the businesses in many accounts have shown signs of recovery, it is in most cases a disproportionate recovery that largely fails to ensure decent employment and wages, access for the marginalised, and ensure social and environmental development,” said the CPD.

The organisation also stressed on inclusive recovery as the report findings show an uneven recovery trend. An inclusive recovery plan needs to be implemented focusing on reduction of tax rates, better access to credit facilities, and reduction of corruption.

Restructuring of the fiscal incentives focusing on micro, small, self-employed and emerging businesses are highly essential – the upcoming national budget should highlight these issues, CPD suggested.

On top of that, Bangladesh needs to address various risks – including economical, geopolitical,   environmental, social and technological – in the next two years, which would have a disproportionate impact on different categories of businesses.

New business opportunities

Surveyed business people have identified fintech, skill based training, data management, plastic recycling, reskilling, health care, unemployment insurance, artificial intelligence (AI), new antibiotics, electronic vehicles as prospective markets in the next ten years.

About 67 percent of respondents indicated that Bangladesh’s major market in the next ten years would be digital financial services – given the rise in businesses by a number of MFS and DFS companies, said CPD.

Moreover, 53 percent stated that skills capital would be other important areas of focus, while 50.5 percent indicated data management could be a major market for businesses.