Corruption was the most problematic factor for doing business for 67.6% of businessmen last year, according to a Centre for Policy Dialogue (CPD) study. 

It said inefficient government bureaucracy was the second-most problematic factor while foreign currency instability was the third one. Besides, the severity of the top three factors increased in 2023 compared to previous years.

“All large companies, along with 61.9% of small and micro enterprises and 66.67% of medium ones, identified corruption as the most problematic factor,” CPD Research Director Khondaker Golam Moazzem said while unveiling the study findings at a media briefing at the think tank’s Dhanmondi office in the capital on Wednesday.

In partnership with the World Economic Forum, the study titled “Bangladesh Business Environment Study 2023: Findings from the Executive Opinion Survey” was conducted among 71 senior officials of various private companies in Dhaka, Gazipur, and Savar from May to July last year.

Moazzem said 54.9% of businessmen identified inefficient government bureaucracy as the second-most problematic factor while 46.5% mentioned foreign currency instability as the third one.

The other factors were inadequate infrastructure, inflation, limited access to financing, complexity of tax regulations, policy instability, inadequacy in educated labour force, insufficient capacity to innovate, poor work ethic in the labour force, high tax rates, climate change, government instability, crime and theft, restrictive labour regulations, and poor public health.

Moazzem said the government had borrowed heavily in recent years to fund megaprojects for infrastructure development, which created pressure on forex reserves. “As a result, companies are facing problems in opening letters of credit and making import payments.”

He said the economy was at a big risk of facing energy supply shortages, high inflation, slow growth, unemployment, and huge public debt. He further said the government should disclose how it would address the challenges.

Critical thinking and problem-solving skills have the highest demand in the current job market, said the researcher, adding, “There is a shortage of these skills in the labour market.”

The study said the challenges for doing business in Bangladesh have been evolving, with 2023 marking significant changes in the top problematic factors. The changes in the factors happened both horizontally and vertically due to dynamic shifts in the domestic and international business environments.

On a positive note, businessmen’s perception of inadequate infrastructure, which earlier was usually considered among the top three problematic factors, slightly improved in 2023. Public investment in developing and expanding national and regional highways as well as constructing new infrastructure, such as elevated expressway and metro rail, partly contributed to smoothening business activities.

Similarly, the severity of policy instability, limited access to financing, complexity of tax regulations, high tax rates, and poor public health eased. Some changes in the ranks of limited access to financing and complexity of tax regulations were driven by the sudden rise in emerging risks, including high inflation.

Top risks for next 2 years

The study respondents identified the top five economic risks for the next two years as energy supply shortage (66.2%), inflation (50.7%), economic downturn (35.21%), inequality (29.58%), and unemployment (28.17%).

Besides, the economic prospect of the immediate future is highly uncertain while weak public investment in the health sector will be a growing concern, the study noted. 

Suggestions

The CPD gave several suggestions for the new government. It said the government needs to strengthen institutional mechanisms to combat corruption.

To address bribery and ensure smooth transactions, it is crucial to develop and promote easily accessible digital payment systems. The government, based on its election manifesto, should disclose the strategies that ministries and departments will use to address corruption in public procurements, registrations, licensing, permissions, and official orders.

Besides, the government should focus on increasing export competitiveness as well as attracting foreign direct investments and remittances through formal channels by adopting a market-based exchange rate policy.

The ongoing dollar crisis has negatively affected many business indicators, including international transactions, resulting in a significant concern for external trade and investment. To restore the macroeconomic stability disrupted in the last few years, a nuanced monetary policy with the support of the fiscal policy aimed at controlling inflation and increasing the dollar supply is urgent.