C T Online Desk: Private think tank Centre for Policy Dialogue has identified corruption to be the topmost problem in doing business in Bangladesh during 2022.
A study on the country’s business environment carried out by the CPD shows that Bangladesh’s business environment deteriorated during the financial year 2021-22 compared to 2020-21.
Corruption remained the most problematic factor in doing business for the majority of enterprises though the severity of its impact had been gradually shared by other structural and newly emerged problematic factors, the study says.
According to the study titled ‘Bangladesh Business Environment Study 2022: Findings from the Executive Opinion Survey’, 64.6 per cent of the respondents complained about high level of corruption as the major problematic factor while 44.6 per cent identified inadequate infrastructure as the second-most problematic factor.
Both inefficient government bureaucracy and limited access to finance emerged as the third-most serious hurdle, the report says.
The CPD on Sunday revealed the study findings at a press briefing held at its office in the capital.
The study report, presented by CPD research director Khondaker Golam Moazzem, shows that weak institutions were the most challenging components in carrying out business in the country while the public entities dealing with taxes, licences and export-import and public utilities and the judicial system performed poorly during 2022.
According to the report, bribery was largely found to be common in accessing services from public utilities, securing public contracts and licenses, making tax payments and obtaining favourable judicial decisions.
The CPD conducted the executive opinion survey over the April–July period of 2022 in partnership with the World Economic Forum.
A total of 74 companies took part in the survey.
The study identified a new set of factors, including inflation, foreign currency instability and policy instability, which have emerged as important elements in doing business in the country.
According to the report, the majority of institution-related indicators showed further negative performance during the 2022 survey.
‘This is reflected in the lack of ability to ensure a stable policy environment, illegal diversion of public funds, burdensome compliance with the public administration and inefficient legal and judicial system in settling disputes,’ the report said.
Businessmen, the report says, perceived that safety and security significantly deteriorated in 2022 compared to a year ago and it was reflected in their perception on organised crime such as mafia-oriented racketeering, crimes and violence.
Among a selected group of competing countries, Bangladesh’s performance was seen poorer than others in terms of protection for the environment and nature and reliability of police services, it says.
Businessmen were worried about the safety and security-related issues concerning organised crime, climate-related business risks, poor quality services of law enforcement agencies and social and political unrest, says the report.
These issues need special attention, particularly in the year just before the next national election, the CPD recommends.
The report, however, says that Bangladesh’s performance was relatively better in the year in terms of costs that result from widespread social and political unrest.
The study found that the performances of the financial sector somewhat worsened after the pandemic as most of the indicators showed lower scores than in 2021.
According to study respondents, negative perception was observed in the cases of soundness of banks, accessing start-up capital and financial and auditing reporting standards.
Nearly 46 per cent of the businesspeople surveyed indicated that SMEs faced difficulties in obtaining funds from the financial sector and the progress was rather slow compared with other financial market indicators.
The capital market struggled in building confidence among the investors due to poor-quality IPOs, weak regulatory enforcement role of the Securities and Exchange Commission, anomalies in financial reporting and suspicious trading in the secondary market, the report mentions.
The CPD advises that the financial sector needs major overhauling, which can be initiated as part of complying with the IMF loan conditionality, including the amendment of the Bank Company Act, lifting the cap on lending rate to ensure a better access for SMEs, ensuring transparency in outstanding loans, an effective oversight role on the part of the central bank, SEC and Insurance Development and Regulatory Authority.
Trade and investment-related issues did not improve either during 2022 after the pandemic and the FDI inflow remained at a low level, the report notes.
The study also found that the overall competitive environment remained below the minimum average level as corporate businesses were dominated by a few groups of companies.
The Competition Commission needs to be proactive in monitoring the activities of the ‘dominant market players’ in different sectors who are likely to make an adverse impact on the market, the report recommends.
More than 44 per cent of the study respondents opined that money laundering through various channels was largely pervasive and the government measures against money laundering was highly inefficient.
The report also recommends that the government needs to ensure customised policy support for different categories of enterprises, targeting diverse challenges as small and micro enterprises faced the pressure of inflation, foreign currency instability and inefficient government bureaucracy.
CPD executive director Fahmida Khatun pointed out that the world economy had been facing an unstable situation with the high prices of energy and food caused by the Russia-Ukraine war.
At the same time, she said, the prices of gas and electricity increased in Bangladesh in line with the international market, which is having a negative impact on business competitiveness.
The increased cost of doing business caused by corruption and the high prices of energy increased the prices of both products and services and ultimately people had to bear the cost, Fahmida said.
