'Corruption, inflation among top 5 problematic factors for business'

While corruption remains the topmost problematic factor for the business environment in the country, Inefficient government bureaucracy, foreign currency instability and inflation were among the top five critical factors for business in Bangladesh, says a study.

The study jointly conducted by the Centre for Policy Dialogue (CPD) and the World Economic Forum (WEF) was released on Wednesday.

CPD Research Director Khondaker Golam Moazzem revealed the results of the study titled "Bangladesh Business Environment Study 2023: Findings from the Executive Opinion Survey."

He said that corruption remains the top problematic factor for businesses in Bangladesh in 2023, as it has been in previous years.

He said 67.61% of businessmen believed that corruption was the largest barrier to conducting business in 2023. The percentage was 64.6% in 2022.

After corruption, inefficient government bureaucracy (54.9%) and foreign currency instability (46.5%) topped the list of most problematic factors, he added.

"The severity of these three problematic factors has increased compared to the previous years, he said, explaining that Foreign currency instability has risen from being among the ‘bottom three’ to the ‘top five’ in the last two years," he added.

Similarly, Inflation (39.4%) has been ranked as the fifth most important factor for the last two years, whereas it was in the bottom three in the previous years.

According to the researcher, who divided the problematic factors in seven categories, said that the senior officials of the business institutes identified inflation (26%), economic downturn for instance recession, stagnation (12%), Geoeconomic confrontation like sanctions, tariffs, investment screening (50%), state fragility and failure of public services (35%)inequality like in wealth, income (15%), energy supply shortage (46%), unemployment (20%), chronic diseases and health conditions (39%), Cybercrime and cyber insecurity (55%), adverse outcomes of artificial intelligence technologies (24%), failure of climate-change adaptation (17.3%) and some more as the problematic factors for near future.

The study was conducted from May to June last year where 71 senior officials of different private companies from Dhaka, Gazipur and Savar were the respondents.

Obstacles not the same for all types of business institutes

The findings of the research found business policy and services implemented in the country are somewhat discriminatory to the business institutes depending on its sizes.

Dr Moazzem said that “The level of severity of problems is different for different categories of enterprises. All (100%) of the large companies have considered corruption as the most problematic factor along with 61.9% of small and micro enterprises and 66.67% of medium enterprises.”

According to the research, large enterprises found instability of foreign currency, inflation, limited access to financing, inadequate infrastructure, inefficient government bureaucracy and complexity of tax regulations are the problematic factors for them while for the medium enterprises instability of foreign currency, inefficient government bureaucracy, inflation, inadequate infrastructure, and limited access to financing as bigger problematic factors.

Again, for small and micro enterprises issues related to inefficient government bureaucracy, limited access to financing, complexity of tax regulations, instability of foreign currency and inflation are the key problematic factors.

So, CPD suggested a business size-specific measure for respective policies, plans, laws and rules in order to get an effective outcome.

But there are some good indications too
Among all odds, the senior officials noted some gradual and continuous development in inadequate infrastructure which was usually considered one of the top three problematic factors and has slightly improved (4th in ranking).

They also loud the public investment in developing and expanding national and regional highways, and constructing new infrastructure such as elevated expressways, metro-rails, tunnels, airports, and port facilities partly contribute to smoothening business activities
Similarly, the severity of the problem eased in case of policy instability, limited access to financing, complexity of tax regulations, high tax rates and poor public health, the study found.

CPD however, observed that despite significant investment in infrastructure development, the quality of the services is yet to make significant progress. Given the huge foreign debt associated with investment in infrastructure projects, the government is burdened with repaying the debt with low income from that infrastructure due to less/no use by the private sector, Dr Moazzem said.

Delay in completion of some of the infrastructure projects with additional expenditure has further burdened the government, he added.
Bangladesh least on average among competitive countries in South Asia, Asia
Bangladesh’s scores are comparatively lower than the comparable countries in Asia, even in the South Asia region, the study found.

Bangladesh in comparison with its four other countries in Asia – India, Indonesia, Thailand, and Vietnam – scored the lowest in the case of Innovativeness, Inclusiveness, and Resilience. In the case of Sustainability, Bangladesh is ahead of Indonesia and Thailand only, the study found.
Among the five economies, Thailand scored the highest in innovativeness and second highest in inclusiveness.

For inclusiveness, Vietnam scored the highest among the countries while India demonstrated the best performance in terms of sustainability among the comparable countries.

In South Asia, Bangladesh remains the least scoring country on average among other South Asian countries – India, Sri Lanka, Nepal and Pakistan, Bangladesh, among the South Asian countries, positioned third in the case of innovativeness, and resilience. For both these pillars, Bangladesh is outscored by India and Sri Lanka.

In terms of Sustainability, Bangladesh ranked the lowest in South Asia. For Inclusiveness, Bangladesh is ahead of only Pakistan.

CPD suggests to deploy Ombudsman/Ombudsperson

CPD suggested setting up an independent office of Ombudsman/Ombudsperson with proper legal, institutional, and operational responsibilities and facilities, and an integrated fiscal system, to reduce corruption as it is a big headache for businesses in the country. The Research director also suggested immediately announcing an outcome-oriented, time-specific, proper delegation of responsibilities and monitorable 100-days, one year, three year and five-year plan of action based on the political commitments.

He also urged to make it public as well through making it available on their websites.
CPD also suggested introducing an integrated financial and transaction system combining all kinds of financial and banking operations between banks, NBFIs, stock exchanges, foreign exchange dealers, and land and other asset related offices.

Besides, they have suggested immediate measures to strengthen public offices which have a role in market competition like Competition Commission, Securities and Exchange Commission, Financial Reporting Commission, Financial Integrity and Customer Services Department, Financial Intelligence Unit etc.