Corruption still biggest barrier to ease of doing business: CPD

Corruption still biggest barrier to ease of doing business: CPD

Businesses and entrepreneurs continue to see corruption as the most significant impediment to their operations, although new issues such as inflation, foreign currency volatility, government instability, and crime and theft have also been cited as factors.

According to a survey titled “Bangladesh Business Environment 2022: Findings from the Executive Opinion Survey” by the Centre for Policy Dialogue (CPD), 70% entrepreneurs and businessmen think that the dominance of big groups is constantly increasing and because of their monopoly, competitiveness is being disrupted.

As a result, small and medium-sized firms either consolidate or close their operations.

So study suggests, an inclusive supply chain in major sectors needs to be developed with the assured presence of SMEs in each segment of the supply chain.

The study is part of the World Economic Forum's (WEF) annual survey titled “Executive Opinion Survey”, which was carried out on 11,800 respondents from 121 economies from April to July of 2022 by the CPD who conducted the survey for Bangladesh.

In short, it's saying that Bangladesh's business environment largely stagnated or deteriorated in 2022 than in 2021.

Corruption, inadequate infrastructure, limited access to financing and inefficient government bureaucracy are the top three barriers to the business environment in Bangladesh.

In his keynote presentation on the survey's findings on January 29, CPD Research Director Khondaker Golam Moazzem stated that another issue that has come to the fore in the case of inclusive business is the dominance of big groups in the market is constantly increasing. As a result, small and medium-sized firms are unable to access the supply chain and the country's market's business competitiveness is being compromised.

According to the survey, entrepreneurs still believe that corporate firms are dominated by a few groups of companies, as they have in the past (69.4% in 2022 and 65.8% in 2021), although this is increasing.

In this regard, Moazzem explained that now the big businessmen are importing and taking care of storage, distribution and retail markets are also under them.

When asked to know the reason and solution, how to get the SME sector into this supply chain, he said that big groups can subsidize many problems themselves, but small and medium businessmen cannot. Enabling and integrating SMEs into the main supply chain is a matter of policy framework.

Different countries have policy frameworks on how they can be integrated into the supply chain.

In this case, the government can decide on some issues as the investment ceiling can be fixed which was once the case in the textile business in India.

Another could be to specify a certain amount of raw material procurement from small and medium enterprises in the case of product manufacturing.

Data analysis of the report shows that corruption remained the most problematic factor with 64.6% of respondents complaining about its high level.

The second biggest issue was inadequate infrastructure, cited by 44.6% of respondents and issues of limited access to financing and inefficient government bureaucracy tied for third at 43.1%.

Moazzam added saying that the majority of the respondents faced corruption in paying taxes, receiving licences and securing the connections for utilities like gas, electricity and water as well as during the export-import trades.

However, new factors have also reared their heads which include inflation (38.5%), foreign currency instability (38.5%) and policy instability (35.4%).

The study also found that entrepreneurs perceived the three biggest economic risks for Bangladesh in the coming years as rapid, sustained inflation (25%), a debt crisis (22%), and severe commodity price shocks and volatility (22%).

The three biggest social risks they noted were a cost-of-living crisis (51%), an employment and livelihood crisis (19%), and infectious diseases (8%).

The CPD suggested the need for comprehensive policy support to meet short, medium, and long-term challenges amid the uncertain post-Covid business environment.

The study said, on a more positive note, businessmen had fewer complaints about a high tax rate and the gradual reduction in top-tier tax rates may have contributed.

However, the complexity of tax regulations is perceived as more troublesome than the rate of the tax.

Despite sporadic improvements, institutional inefficiencies have also made things harder for businesses, according to CPD.

It pushed for major reforms to public institutions for better transparency, accountability and efficiency, and recommended that the major political parties should commit to such reforms in the upcoming election.

Regarding the financial sector, CPD recommends that the finance sector must undergo a major overhaul, including amendments to the Banking Company Act, lifting the cap on the lending rate, transparency in outstanding loans and effective oversight by regulators.

It also suggested stronger regulatory oversight, proper corporate governance practices, and instilling of corporate ethics.

Human capital development should become a mainstream activity of the government and it should evaluate its “digital Bangladesh” initiatives thoroughly to identify its strengths, weaknesses and issues, it said.

CPD Executive Director Fahmida Khatun was also present at the event.

In her speech, she said: “The current situation is unstable as we have the pressure of inflation on one side, then there is the crisis caused by the Ukraine-Russia war, also there are geopolitical factors for which even big economies are going through recessions. Many international organizations like the World Bank and the IMF have forecast that it will linger till 2024. The whole world is struggling and people in Bangladesh are also struggling with food prices and fuel inflation. Individuals, as well as businesses, are facing pressure due to this.”