The Centre for Policy Dialogue (CPD) on Wednesday said that businesses in Bangladesh were plagued by corruption and fear of an impending energy crisis.
In a recent survey conducted by the think tank, 67.61% of businesses believed that corruption was the largest barrier to conducting business in 2023. The percentage was 64.6% in 2022.
Limited effective measures to curb corruption as well as a lack of transparency and accountability in case of licensing, logistics and different service-providing activities of public agencies cause a weakening of the business environment, the report added.
CPD Research Director Khondaker Golam Moazzem presented the results of the survey in the study, "Bangladesh Business Environment Study 2023: Findings from the Executive Opinion Survey", on Wednesday.
The CPD conducted the survey in partnership with the World Economic Forum (WEF.)
Responding to a question, Moazzem said that specifically, the biggest complaints businesses have about corruption are about tax, NBR, import-export, various registrations, licensing, renewal, etc.
“The institutional framework that can eliminate corruption in these areas is currently absent. The government should be proactive in creating these structures,” he also said.
Moazzem also said the government has promised to eradicate corruption and so it needs to implement target oriented policies on institutions to tackle corruption.
Among corruption, bribes are largely common in connection with imports and exports, tax payments, and public contracts and licenses. Lack of independence of the judicial system, low ethical standards of politicians, and difficulty for private businesses to challenge govt actions or regulations through the legal system are also largely common, the survey revealed.
The concerned public organizations where major institutional reform is required include customs, NBR, BJSC, City corporations, judiciary etc.
The survey also found that the business environment is not better than in other competitor countries in Asia.
To conduct the study, the CPD spoke with 71 senior officials of Bangladeshi businesses of Gazipur, Savar, and Dhaka, of which 29.58% were small and micro businesses, 35.21% were medium, and 35.21% were large.
Moreover, an inefficient government bureaucracy (54.9% of respondents) and foreign currency instability (46.5%) have been cited as the two other most problematic factors.
Inflation (39.4%) has been ranked as the fifth most important factor for the last two years.
Policy instability is ranked the eighth most important factor (24.6%). It was earlier ranked the fifth most problematic factor -- a reflection of having slowed down in deviation from policy commitment.
The survey also revealed that 58% of businesses complained about a lack of monitoring and supervision in the banking sector.
Regarding the dollar crisis, the survey stated that 50% of businesses said that the crisis affected their international payment, 60.32% said it affected their imports of raw materials, and 55% said it affected their investments.
Where Bangladesh has improved
On a positive note, businesses' perception regarding inadequate infrastructure, which was usually considered one of the top three problematic factors, slightly improved last year.
Bangladesh has demonstrated considerable progress in roads and transportation, air transport, digital platforms and financial services, the survey report read.
Top risks in the coming years
Moazzem also said that 66.20% of businesses were anxious about supply of energy in the next two years.
The businesses described the availability of energy as a serious concern, especially at a time when the lack of petrol supply was hurting industries and lowering output.
Businesses also shared their views regarding the implications of IMF conditionalities, such as a withdrawal of energy subsidies and interest caps, higher revenue mobilization and tax collection system, which will largely impact businesses in a negative way.
Nearly 51% identified inflation as the second biggest hurdle to doing business in Bangladesh in the coming years, according to the independent think tank.
Moreover, 35% businesses think an economic downturn like recession and stagnation will be challenges for them.
Cybercrime and cybersecurity, misinformation and disinformation, labour and talent shortage will also be some challenges.
Moreover, geoeconomic confrontation like sanctions, tariffs, investment screening,state fragility and failure of public services, terrorism and global interstate armed conflict will also be demonstrated as top geopolitical risks for businesses in Bangladesh.
What needs to be done
The economy is at high risk of energy supply shortage, high inflation, slow economic growth, unemployment and huge public debt.
Golam Moazzem recommended that to restore macroeconomic stability, a nuanced monetary policy with the support of a fiscal policy aimed at controlling inflation and increasing the dollar supply has become urgent.
The government should now focus on attracting FDIs, increasing export competitiveness, and channeling remittance inflow through formal channels by adopting a market-based exchange rate policy.
Recommendations for the new government
The CPD research director recommended that the new government disclose strategies, based on its election manifesto, to battle corruption by aligning with different ministries and departments.
He also recommended a ten-point action plan to improve the business and economic landscape. The plan suggests periods of a hundred days, one year, three years and five years for all public offices.
He also recommended setting up an independent office of Ombudsman/Ombudsperson along with an office in all public offices with proper legal, institutional and operational responsibilities and facilities.
Responding to a question regarding the recommendation, he said that if there is goodwill, the Anti-Corruption Commission and Ombudsman can work in parallel together.
Financial sector requires significant makeover
He also said that the government should introduce an integrated financial and transaction system, a revised public procurement system, and short-term commissions for banking, stock market and financial sector reform.
Additionally, he recommended strengthening public offices which have a role in market competition, notably the Competition Commission, Securities and Exchange Commission, Financial Reporting Commission, Financial Integrity and Customer Services Department, Financial Intelligence Unit and others.