Major setbacks to growth linger.
A majority of the challenges confronting the business community in Bangladesh remained unchanged or further deteriorated in 2015 compared to a year ago, stifling the country's growth opportunities, according to the World Economic Forum (WEF).
Of the 16 major challenges, nine problematic factors remained the same in 2015, three deteriorated and four improved from a year ago, said the Global Competitiveness Report for 2015-16.
However, the impact of the unchanged challenges is now less than before, said KG Moazzem, additional research director at the Centre for Policy Dialogue (CPD), while presenting the report at Dhaka's Brac Inn yesterday. The top six challenges that did not change positions are inadequate infrastructure, corruption, inefficient government bureaucracy, political instability, limited access to finance and policy instability.
Moazzem said some factors -- inadequately educated workforce, crime and theft, inflation, and poor public health -- have become less problematic in 2015.
The other challenges are high tax rates, complex tax regulations, and poor work ethics in the labour force, foreign currency regulations, insufficient capacity to innovate and restrictive labour regulations. The report is the flagship publication of the WEF, where CPD is the partnering organisation in carrying out the Bangladesh study.
On the basis of the questionnaire developed by WEF, an executive opinion survey was conducted in Bangladesh between February and May this year, while the reference period was 2014.
The sample size was 56, with most companies being locally-owned and mostly based in Dhaka. The CPD sent the questionnaire to about 300 companies.
Three in four respondents said general infrastructure, road and rail network are under-developed, while electricity supply is insufficient and suffers frequent interruption.
Forty percent of respondents said the cost of financial services extensively impede business activity, while half of them said banks have been suffering from a lack of efficiency. They said financial auditing and reporting standards remain weak.
“The financial sector needs further reforms in order to become more competitive and efficient,” Moazzem said.
In case of foreign trade and investment, export suffers due to a weakness in internal and external connectivity, lack of diversity in products and markets and poor networking of entrepreneurs, according to the CPD analysis.
About 70 percent of respondents said customs procedures are very inefficient.
There are improvements in some areas; for example, only 36 percent of respondents think customers are rarely well-treated by the companies.
However, 70 percent said companies do not spend on research and development.
Bangladesh has competitive advantages based on low-costs, but not quality. Besides, there is narrow presence in the global value chain, according to the report.
On the security issue, the report said overall perception on law and order is not satisfactory, and crime and violence is an issue of concern.
The reliability of police services in law and order enforcement has slightly improved, but it is still below average, according to Moazzem.
The report painted a frustrating picture when it comes to governance.
About 96 percent said the ethical standards of politicians are very low; it was 94 percent in the previous survey. About 86 percent said government officials show favouritism to well-connected firms and individuals when deciding upon policies and contracts.
Rarely, the government ensures a stable policy environment for doing business, according to 66 percent of respondents.
The freedom of press is “somewhat limited”, said the report.
Companies have their own failures as well: they have limited capacity to innovate and merely turn ideas into commercially successful new products. Their production capacity is not too sophisticated either.
Corporate ethics of the companies are also weak, according to 73 percent of respondents.
On the education sector, half the respondents said the education system is not developed enough to meet the needs of a competitive economy.
Some 55 percent respondents said it is difficult for companies to find employees with the required skills, but 64 percent said investment by companies on training and employment has further deteriorated.
The WEF report was launched simultaneously in 140 countries.
The CPD also conducted a rapid assessment survey among the same sample. In the survey, 73 percent said the country's tax system is slightly complex and three in four said insider trading in the stockmarket is “somewhat pervasive”.
Over 60 percent said money-laundering through the banking system is pervasive.
“Entrepreneurs are apprehensive about the domestic business environment as well as the overall investment situation in 2015,” said Moazzem.
According to the survey, the major reasons for capital flight from Bangladesh are political unrest, insecurity, corruption, tax avoidance and poor scope for investment.
It said export and import suffer due to border and behind the border bottlenecks.
Entrepreneurs have identified a number of major risks for their business for the next decade: energy price shocks, failure in national governance and failure of critically needed infrastructure.
CPD officials Towfiqul Islam Khan, research fellow, Anisatul Fatema Yousuf, director for dialogue and communication, Kishore Kumer Basak, senior research associate, Ariful Islam, research associate, were also present.
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