Imagine you have set up a flourishing business by the dint of your entrepreneurial talents and many years of hard work. You have operated in a challenging investment climate but have managed to navigate the difficult terrain through creativity and resilience.
You have thought of new products and new markets, and with the zeal of an entrepreneur, have implemented your ideas.
Your business has grown, in size and in diversity.
Now you are thinking of how you can take your business to greater heights.
A friendly phone call
One day you receive a call which almost turns your world upside down. The call is from a powerful businessman, whose power derives not just from the size of his business holdings but also from his closeness to politicians.
He congratulates you on your business success and expresses a desire to help you become even bigger.
You sit up, interested in the proposition.
But there is a catch.
The powerful businessman wants a share of your company, and offers a price.
The price is unattractive, and, in any case, you are not willing to share ownership with anyone.
You politely refuse the deal.
The person on the other side of the phone respectfully says he understands but asks you to get back to him if you change your mind.
Several months pass by and you have forgotten about this episode. Then, one day, you have a surprise visitor in your office. It is that businessman.
This time he has a mutual friend, a politician, with him. After exchanging pleasantries, he comes to the point.
He reiterates his offer to buy a share of your business, this time offering a better price.
Once again, you politely decline.
The businessman says nothing but looks at the politician.
The latter gets the cue and starts explaining why this is too good a deal to refuse and how such a partnership will help you expand your business in different directions. You are unmoved.
The businessman says he understands, but this time with a little irritation palpable in his voice.
The politician shrugs.
Both leave your office, clearly disappointed.
You get back to your work, wondering if the person would bother you again.
But he doesn't. Months pass by and he does not mention this offer anymore, not even when you bump into him in social gatherings.
In any case, you don't have time to think about this.
Not only are you preoccupied with the usual hassles of running a business, now you have an extra headache to deal with.
For several weeks, the customs authorities have been holding up the shipment of some imported raw material critical to your production.
There is a dispute over valuation and, after you have shown all the necessary documents to prove that your suggested valuation is accurate, the customs officials start raising some questions about the safety of the chemicals you are importing.
You have been importing these chemicals for a long time and such questions have never been raised in the past. You are perplexed but somehow manage to solve the problem.
No sooner have you done so you start receiving letters from your banks. They have all been asked by government regulators to provide details about you, your accounts, and your businesses.
You have never been a defaulter and your business is straightforward. So, you wonder -- why all these questions?
But you dutifully respond and go back to your business chores. Then comes a visit from the income tax inspectors. They have received an anonymous complaint that you are understating your profits and that you also have businesses that have not been disclosed.
All these are baseless accusations.
You get irritated but know better than to mess around with tax inspectors. So, once again, you patiently respond to their queries. They go away, but this time you are left with a lingering worry.
You have had your share of unpleasant dealings with regulatory officials but this series of harassments within the span of a few months is a bit unusual. You start smelling something wrong. Your wife says you worry too much.
A few months pass by. You get a phone call from a dear old friend. He wants to come and have coffee with you. You have not seen him for a while and are thus delighted to hear from him. You invite him to your favourite club. He says he prefers to see you at home.
A few days later, you are with your old friend, sipping coffee and reminiscing about your days in university together. It is a great adda, but at one point, the friend's demeanour changes.
He becomes somber and asks you about the harassments you have been facing at the hands of regulators and inspectors. You wonder how he knows all this -- after all you have not spoken to him for months -- but then word spreads quickly in this town, so you are not altogether surprised.
You explain what has been happening. He commiserates with you. The conversation then moves to other topics. Then, at one point, he asks about the offer from the businessman.
You are not entirely surprised because you had mentioned this to your friend. You tell him that it is not going anywhere since you are not interested. The businessman has also lost his interest by now, you tell your friend.
“Are you sure?” asks the friend.
Reality check
Then he says something that gets your head spinning. The businessman hasn't lost interest at all. In fact, he is getting ready to play hard ball. All the regulatory harassments that you have been facing are not isolated incidents. In fact, more is coming.
All these are meant to bring you to your knees, to create an existential threat to your business, to the point that you will be forced to accept the powerful businessman's offer to buy a share in your business, except that this time, he will demand a majority share in your business and that too at terms far less attractive than his initial offer.
You realize then that you are about to become a target of what is called predatory business. This is when someone wants to get a share of your market not through fair competition, but through predatory practices.
In this particular example, someone wants to grab a part or whole of a business built up painstakingly by someone else by abusing the regulatory apparatus of government.
Such abuse is made possible by the predator's friends in government who are likely to receive some kickback in return for their favours.
Cronyism takes many forms. In one form, politically connected businesses are given privileged access to resources directly allocated by the state, such as public procurement contracts, public land, or subsidized credits. Such privileged access to resources may also extend to areas influenced by the state such as the private banking sector.
Another form of cronyism is when politically-connected businesses are able to influence the regulatory framework in a way that creates barriers to entry for potential competitors.
This may happen not only through de jure provisions in written laws or regulations, but also in their de facto application, such as complex procedural requirements that make entry costs prohibitively high for many firms.
These are bad enough. But the most insidious form of cronyism is predatory business, the prevalence of which can be a serious deterrent to investment, particularly investments that make a business grow and/or become more productive.
When predators are roaming around, businesses prefer to keep a low profile. It is wise then not to become large or very profitable.
On the rise
There is some anecdotal evidence suggesting that such predatory business practices are not uncommon in Bangladesh. Conversations with business people suggest that these may be on the rise.
People who have acquired money through corrupt means and are now looking for arenas to invest that money may not have the patience to start a business from scratch and make it grow through a long, painstaking effort.
For them, the easy way is to prey on established businesses using whatever tool they have, including buying out regulatory officers.
People who acquire businesses through predatory means usually lack the incentive or the capacity to make the businesses grow. In fact, even sustaining the business may prove challenging in some cases.
All this means that if predatory business practices become widespread in Bangladesh, it will be a serious blow to the rich entrepreneurial tradition that has been built in the country since independence.
We can't let that happen. Predatory business is something we should watch out for!
Syed Akhtar Mahmood is an economist, previously with an international development agency.