The business environment in Bangladesh is facing a range of critical challenges that have impeded its progress over the years. Among the most pressing issues are corruption, inefficiency in government bureaucracy, policy instability, inadequate infrastructure, and limited access to financing. Inflation and foreign currency instability have further exacerbated the difficulties faced by businesses.
Despite some improvements in specific sectors, the broader regulatory framework remains overly complex and burdensome, discouraging innovation and competitiveness. These pressing concerns were discussed at the dialogue titled Business Environment Reform in Bangladesh: Agenda for the Interim Government, held on Sunday, 17 November 2024. The event, organised by the Centre for Policy Dialogue (CPD), sought to identify actionable reforms for the Interim Government to address these longstanding issues.
Dr Fahmida Khatun, Executive Director of CPD, chaired the session and highlighted the inefficiencies in governance and regulatory frameworks as a persistent issue. She remarked, ‘The overlapping regulations and bureaucratic delays increase the compliance costs for businesses, creating an environment that is particularly challenging for small and medium enterprises and new entrants to the market’. The dialogue emphasised the need for reforms to simplify and streamline these processes to create a more conducive business environment.
In his keynote presentation, Dr Khondaker Golam Moazzem, Research Director of CPD, called for the creation of an integrated digital platform to streamline business registration and licensing processes.
He stated, ‘This unified system should act as a one-stop shop, enabling businesses to submit applications, track progress, and make payments digitally, eliminating the need for physical interactions with multiple regulatory bodies’. He further noted that this platform could integrate sector-specific windows to address the unique needs of various industries, while also ensuring transparency and reducing administrative burdens.
Dr Moazzem also emphasised the importance of beginning the implementation of this system with sectors experiencing the highest regulatory burdens, such as manufacturing and export-oriented industries. He highlighted the necessity of adopting a phased approach, ensuring that the transition to a unified regulatory framework is both manageable and effective. Additionally, he stressed the significance of incorporating technological solutions to modernise compliance procedures, enhance transparency, and improve efficiency.
The dialogue also pointed to inefficiencies in the taxation system as a major area requiring reform. Dr Moazzem stated that current tax processes are predominantly manual, administratively intensive, and susceptible to harassment.
‘Modernising VAT and tax systems through digitalisation is essential to improve compliance and reduce corruption’, he explained. He suggested that adopting automated systems and digitising core business processes would significantly reduce the administrative burden and increase efficiency.
The presentation concluded with a consensus that the Interim Government must prioritise the simplification of regulatory procedures and the modernisation of governance frameworks to foster a more competitive and participatory business environment. The proposed reforms aim to create a transparent, efficient, and innovation-friendly ecosystem that will enable Bangladesh to address its current challenges and build a stronger economic foundation for the future.
Professor Lutfey Siddiqi, Special Envoy on International Affairs to the Chief Adviser, Interim Government of Bangladesh, emphasised the need for the government to intensify efforts to enhance the ease of doing business. He highlighted a concerning issue, noting that a small group of large businesses resists simplifying business processes, as they have benefited from exploiting existing shortcuts.
At the macroeconomic level, Professor Siddiqi pointed out that Bangladesh is contending with two critical and growing deficits: an external deficit, where imports exceed exports, and an internal fiscal deficit. While these challenges are significant, he remarked that they remain manageable provided borrowed funds are wisely invested to enhance the nation’s growth potential.
To achieve meaningful progress, Professor Siddiqi underlined the importance of carefully sequencing reforms to deliver early successes that build momentum rather than undermining it. He also observed that the absence of conflicts of interest within the government offers a unique opportunity for genuine and purposeful action.
‘We lack industry consultation terribly. Whether it is in the form of the National Economic Forum or a private sector advisory board for BIDA, we need a structure where we have genuine, constant dialogue. As a government, we must listen to the private sector regularly and give consistent feedback’. These were the words of Mr Chowdhury Ashik Mahmud Bin Harun, Executive Chairman (Senior Secretary) of the Bangladesh Investment Development Authority (BIDA), as he emphasised the critical need for reform in government-private sector collaboration.
Mr Abdul Awal Mintoo, Former President of FBCCI remarked, ‘Reform is a continuous process. On whom are we relying for reforms?’. He stressed the importance of establishing mechanisms to ensure reforms are ongoing and not reliant solely on the interim or next government.
‘Expecting any single Government to accomplish all necessary reforms is unrealistic’, he added, emphasising the need for future generations to drive reform using new technologies. He highlighted the pervasive influence of criminalised politics, which has fostered self-interest groups across sectors like power, banking, and energy. ‘If we want proper reforms, the first step is to reform the Government itself’, he emphasised.
Mr Zaved Akhtar, President, FICCI underscored ‘Government efficiency and infrastructure are critical determinants of competitiveness. For foreign investment, the three Cs—credibility, consistency, and capability—are essential’.
He elaborated that trusting a country is a key factor; foreign investors need confidence that their investments will create value. However, in Bangladesh, arbitration is not given adequate importance, which is a significant concern. The ability to trust a country heavily relies on having a robust and reliable arbitration mechanism in place.
‘Corruption has been the mother of all problems in recent years’, remarked Mr Fazlee Shamim Ehsan, Executive President of BKMEA. He highlighted that businesses struggle with the informal economy’s reluctance to issue PSRs, risking disallowed expenses and higher costs.
Entrepreneurs often pay bribes of 25 to 30 lakh taka annually, face 30 per cent fines for doing so, and are forced to pay further bribes to resolve these penalties, perpetuating a damaging cycle.
Mr Ashraf Ahmed, President, DCCI, stated, ‘Corruption has several layers, but it is the ground-level service delivery corruption that hurts businesses the most. While higher-level policies affect businesses, the lower-level issues impact the general population’.
He pointed out that file processing can be stalled for a mere 500 taka for seven days—often not even considered bribery but rather “speed money.” He emphasised that automation is the only solution to address these persistent issues effectively.
‘Larger companies and multinational corporations already have the infrastructure and resources to manage compliance and licensing requirements. However, for a 24-year-old graduate with a brilliant business idea, the extensive need for licenses, paperwork, and registrations becomes a significant obstacle’ highlighted Mr A K M Fahim Mashroor, Chief Executive Officer, Bdjobs.com Limited.
He elaborated that this process often consumes most of their time, leaving little room to focus on building their business. In contrast, Singapore exempts businesses from submitting annual audit reports to regulators unless they exceed a certain revenue threshold. He asked ‘If Singapore can implement such entrepreneur-friendly policies, why not Bangladesh?’
Ms Amrita Islam, Deputy Managing Director, Picard Bangladesh Ltd remarked that currently, the limitations of Chittagong port hinder faster connectivity to destinations like the USA, Australia, and Japan. While shipping lead times from countries like Vietnam, Cambodia, and China range from 25 to 30 days, Bangladesh requires 40 to 55 days.
She added that this delay stems from the port’s inability to accommodate mother vessels and inefficiencies in port operations. Additionally, many export businesses rely on imported raw materials, and these inefficiencies further disrupt manufacturing lead times.
The dialogue brought together government officials, private sector representatives, academics, international development partners, and journalists to discuss and deliberate on critical reforms in the business sector.
