December 8, 2021, 5:55 am


SAMI

Published:
2020-03-11 16:24:18 BdST

Lack of access to finance, corruption top barriers for private firms: IFC


FT ONLINE 

Access to finance and the prevalence of corruption are two major barriers the private sector faces in Bangladesh, according to a survey report by the International Finance Corporation.

The private sector arm of the World Bank Group, on Monday, published the report titled "Bangladesh's Journey to Middle Income Status: The Role of the Private Sector."

MCCI and International Finance Corporation (IFC) jointly organised the function for publishing research report on "Bangladesh Journey to Middle-Income Status: The Role of the Private Sector" at the Metropolitan Chamber of Commerce and Industry (MCCI) auditorium in the city.

Three researchers of IFC- Ali Japor, Masrur Reaz and Faria Tasin- prepared the report.

MCCI President Nihad Kabir presided over the function while Chairman of the Bangladesh Investment Development Authority (BIDA) Md Sirajul Islam, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Rubana Huq, MCCI former president Syed Nasim Monjur and Executive Director of the Policy Research Institute (PRI) Dr Ahsan H Monsur, among others, were present on the occasion.

It surveyed 103 of the country's private firms from February to April 2019 in order to assess firms' resilience and deeper challenges.

The report says 24 percent of the firms identified access to finance as a major bottleneck while 18 percent cited corruption as the greatest difficulty; meanwhile, 11 percent mentioned political instability and nine percent pointed to informal competition as the top challenges.

Although the firms surveyed in the report were diverse, in size and nature, overall investor sentiment is positive.

The study identifies that about seven of 10 firms are interested in the rapid expansion of their businesses while three of 10 believe in slow expansion and consolidation.

The responses of firms to the survey also varied by their nature and size. The report reveals that smaller firms are more likely to rely on their savings.

They, as opposed to larger firms, also identify financing as the major constraint. Additionally, smaller firms are more adversely impacted by taxation.

Meanwhile, manufacturing and larger firms, compared to service firms, are more affected by land and energy access, finds the survey.

However, both types of firms are concerned by issues of corruption and logistics.

Smaller firms tend to not engage in product diversification and are more cautious in terms of business expansion.

The study also reveals that the impact of technology and automation on the firms is not massive. Only one-third of them are impacted by automation whereas one-third are not. The rest are partially-impacted.

The study also published findings on top future barriers to growth.

It wrote that private sector firms rank: access to finance, customs administration and trade logistics, corruption, law, order and security, plus informal and formal competition – as the top five obstacles to their expansion and investment.

The study mentions the historical context of Bangladesh's economic success that has been fuelled by a combination of: ready-made garments, rural farm and non-farm industries, remittances, and microfinance.

The report, however, highlights the role of the country's private sector which has helped power and sustain growth – possibly leading the country to attain middle-income status.

The report also states that the country's private sector investment, as a share of Gross Domestic Product (GDP), increased from close to 10 percent in 1985 to more than 23 percent in 2018.

Bangladesh has already graduated to being a lower-middle income country from being a low-income one – this was recognised by the World Bank in 2015.

As the country moves to obtain middle-income status, it will have to increase its private investment to between 29 percent and 32 percent of GDP, the report highlights.

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