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Infrastructure deficit, corruption are top barriers to business

Survey finds adversities; Bangladesh moves up one place to 109th in Global Competitiveness Index

Star Business Report
Inadequate infrastructure, corruption and inefficient bureaucracy continue to haunt entrepreneurs in Bangladesh, as the three factors top the list of bottlenecks hampering business, according to a survey by the World Economic Forum.
Twenty-one percent of businesses, surveyed in Bangladesh as part of the Global Competitiveness Report 2014-2015, identified inadequate supply of infrastructure as the top barrier to doing business. The report was released globally on Wednesday, and yesterday in Bangladesh.
Corruption was the second worst barrier, dropping from the first position last year, with 20.7 percent of businesses pointing at it. It was followed by inefficient government bureaucracy at 15.3 percent.
"The top factors are considered to be the most important problematic factors for doing businesses for over a long period,” said Khondaker Golam Moazzem, additional research director of Centre for Policy Dialogue (CPD), while presenting the survey report at Brae Centre Innin Dhaka.
He said there is a lack of adequate effort to reduce the extent of adversities
caused by these factors, which have topped the list since 2006.
The economist, however, said entrepreneurs foresee better economic prospects in 2014. "This would have positive
implications in overall businesses."
In Bangladesh, CPD carried out the Executive Opinion Summary survey based on the questionnaire developed by WEF; 76 businesses took part in the survey conducted between February and April.
The survey covers entrepreneurs and businessmen involved in manufacturing and services, and medium and large enterprises; 93 percent of these companies are located in Dhaka, with head offices in Bangladesh.
Government instability or coups, access to financing, policy instability, an inadequately educated workforce and crime and theft were identified by the survey among the top problems facing the business community.
Tax regulations, inflation, foreign currency regulations, tax rates, poor work ethics in the national labour force and insufficient capacity to innovate, poor public health and restrictive labour regulations also pose as problems for the businesses.
In the last six years, perceptions on general infrastructure experienced little change; it was stuck in the 'worst' category due to limited road transport, although supply of electricity improved significantly, said CPD.
"Infrastructure conducive for efficient operation of the business supply chain is largely absent in the country,'1 said the think-tank analysis, adding that infrastructure development should be more 'focused' towards 'development of supply chain’.
About 40 percent of respondents perceived that the business-government relationship is not in proper order and more importantly, perception about it has deteriorated from 'good' to 'bad'.
"The government should take note of the view that business-government relation is not cooperative and this has seen some regress," said CPD in the analysis.
"Rebuilding the relationship with businesses should be a major task confronting the government, “ said Moazzem.
To improve the country's position in competitiveness ranking, CPD called for urgent reforms in areas such as public services, public sector, financial sector, corporate governance sector and environment and social issues.
The CPD analysis said a significant deterioration in the perception was observed in key indicators related to government and public institutions particularly in the last two years.
"The government should seriously think about growing dissatisfaction regarding the performance of public institutions as service-providers."
Over 90 percent respondents said the government's efforts to combat corruption and bribery are ineffective.
Most respondents believe that diversion of public funds to companies, individuals or groups due to corruption is very common, while bribes in connection with imports and exports, in getting connection of public utilities, tax payments and awarding of public contracts and licences are common as well.
"Strong political will of the ruling party is necessary in order to withstand corruption, "said the CPD analysis.
The analysis said the financial sector is yet to regain its earlier position because of a lack of much-needed progress. It called for an effective regulatory and monitoring role of the securities regulator and access to credit at an affordable rate of interest.
In the Global Competitiveness Index, Bangladesh scored 3.72 out of 7 to move up oneplaceto 109th from last year's 110th.
CPD said slow progress in global competitiveness could hardly generate momentum to develop an enabling business environment in the country.
The rankings, conducted among 144 economies this year, are based on 12 categories - institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation.
On the basis of scores, positive changes were observed in seven pillars - infrastruc-
ture, macroeconomic stability, higher education, goods market efficiency, financial market sophistication, market size, and innovation.
Deceleration took place in five pillars -institutions, health and primary education, labour market efficiency, technological readiness and business sophistication.
Bangladesh scored 3.84 in basic requirements to rank 113th, the same as last year, which constrained making progress in overall ranking.
In case of institutions, the country ranked 131st as it scored 2.96. The ranking was the same as in last year.
In case of infrastructure, it was ranked 127th, the same as in last year.
Bangladesh has improved in the case of macroeconomic management as it moved up seven places to 72nd. Last year, the country ranked 79th.
The country also fared better in health and primary education, as it gained 2 places to 102nd position from last year's 104th.
In case of efficiency enhancers, the country moved up five places to 103rd.
It was placed at 125th position in higher education and training from last year's 127th, 84th in goods market efficiency from 89th last year, and 124th in labour market efficiency.
It made a major leap in financial market development as it ranked 88th this year, which was 102nd last year. The country moved one place up to 126th in technological readiness and to 44th in market size.
"Bangladesh could not take advantage of progress made in some indicators related to efficiency enhancers and innovation," said the CPD analysis.
The country slipped five places to 118th in business sophistication and slipped two places to 129th in innovation. Bangladesh ranked 118th out of 144 countries in 2012-13 and 108th out of 142 economies in 2011-12.
CPD said Bangladesh’s rank could be upgraded and be at par with economies having a similar income category if it could be ranked higher in terms of institution and infrastructure.
Industries Minister Amir Hossain Amu said the government is working to ensure a business-friendly environment.
Since 2001, CPD has been working as a partner institute from Bangladesh in preparing the most referred global report assessing global business environment prepared by WEF, said Mustafizur Rahman, executive director of the think-tank.
Syed Nasim Manzur, an entrepreneur, said the government has to build the key infrastructure immediately to improve the business environment.
"How long will it take to complete the four-lane work of the Dhaka-Chittagong Highway? Our cost of doing business has gone up due to the prolonged negligence in completing the project," he said.
Syed Manzur Elahi, a trustee board member of CPD, chaired the discussion.