Access to finance and widespread corruption are two major barriers facing the private sector in the country, says a survey report of the International Finance Corporation (IFC) unveiled on Wednesday.
The IFC findings were made public at a program at M Anis Ud Dowla Conference Hall, Police Plaza Concord in the capital.
The IFC and the Metropolitan Chamber of Commerce and Industry (MCCI) jointly organized the event.
IFC Senior Economists Ali Zafar and M Masrur Reaz and its consultant Faaria Tasin presented the report titled ‘Bangladesh’s Journey To Middle-Income Status: The Role Of The Private Sector.’
The report was based on a survey conducted on 103 local private firms from February to April 2019.
The report says 24% of the surveyed firms identified access to finance as a major bottleneck while 18% cited corruption as the major impediment to business.
According to the survey report, 11% mentioned political instability and 9% pointed to informal competition as the top challenges in doing business in the country.
About 40% of the surveyed firms said the business environment was getting better, another 40% believed things remained the same and the rest 20% felt things were getting worse.
Access to finance could be improved through better governance of the banking sector including the resolution of nonperforming loans in the banking sector, said the survey, adding that merging stronger and weaker banks was a major challenge in the banking sector.
Focusing on lending, the report underlined importance on streamlining the corporate bond and lessening commercial borrowing approval process, and setting up a credit information sharing mechanism to promote bank lending to small and median enterprises (SMEs).
While doing business reforms, the report said improving regulatory governance and ensuring one stop service for investors would require effective initiatives for reducing corruption and improving ease of doing business index.
The report also stated the country's private sector investment, as a share of Gross Domestic Product (GDP), increased from close to 10% in 1985 to more than 23% in 2018.
The report said corporate governance could be improved through strengthening regulatory authorities and increasing disclosure and auditing requirement for existing corporations.
Echoing with a number of findings of the report, Prime Minister’s Advisor for Private Industry and Investment Salman F Rahman said the government capped banks’ lending rate to make financing available although the practice was against the global practice.
“The capping on lending rate will be on an experimental basis and after seeing the impact, the government will make the final decision,” he added.
Commenting on the private entrepreneurs’ complaints about the customs department’s negative attitudes in releasing imported goods and allowing bonded warehouses facility, Salman said the private sector should evaluate their conducts as there were allegations that imported goods under bond facility were sold in black market.
MCCI President Nihad Kabir, who presided over the meeting, said the report gave an idea of how and what helped the private sector and what challenges the economy would need to overcome in the future.
“Almost three-fourths of the total investment in the economy come from the privet sector and the sector contribute around 87% of civilian employment,” she added.
The function was also addressed, among others, by Bangladesh Investment Development Authority (BIDA) Executive Chairman Sirazul Islam, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Rubana Huq, Policy Research Institute of Bangladesh Executive Director Ahsan H Mansur and Apex Group Director Syed Nasim Manzur.
Nasim Manzur said there remained a big deficit of trust between the public and private sectors which should be removed for the sake of the country’s development.
He said the private sector did not want to see the government’s policy change every year.
Ahsan H Mansur criticized the government’s move for capping the bank’s lending rate saying that this would not be sustainable unless there was financial reform in the country.