Sluggish private investment: Why doing business in Bangladesh isn’t really easy

Yesterday's front page of The Business Standard sported two optimistic headlines. 

In one, the country's premier, in an apparent bid to encourage potential investors, stated that the businessmen who come to invest here would avail the market of South and Southeast Asia as Bangladesh will create a bridge between the East and the West. She said this while inaugurating the weeklong 'Bangladesh Trade and Investment Summit 2021.'

Another top headline revealed an ambitious new roadmap drafted by the ICT Division which will facilitate the production of digital devices in the country to increase export earnings in the information and technology sector by $4 billion in the next four years.

Despite continued optimism and a huge public investment in infrastructure, private investment and employment creation in the country have remained sluggish for some years now. At the same time, a large amount of capital is being laundered. 

It is worth looking into the ground reality.

Just two years back, when the World Bank's ease of doing business index was still a thing, Bangladesh stood 168th in the index, which says a lot about the business environment here. 

But irrespective of the rankings, and beyond the regulatory hurdles, how easy or hard is it to do business in Bangladesh? 

It is both easy and hard, according to business people. You can easily buy fitness certificates for your rickety buses, you can manage certification for adulterated food products. But if you are reluctant to spend your hard earned money to bribe officials, you will know what red tape means.

"It would take two minutes for us to do that work in the corporate world. For a government office, as we see it, it should not take longer than 20 minutes. Yet, I had to go again and again for two weeks to get the work done, while all my papers were perfectly okay," a handicrafts exporter described to this writer his experience with a certain government office. 

The exporter, unwilling to reveal his identity for obvious reasons, assumed that the officials involved wanted to squeeze some money out of his pocket, hence the delay.

The need to pay bribes, which a former minister called speed money, affects businesses in ways that are beyond financial. A private company employee gave an appalling anecdote. 

While working with a British-owned firm in Bangladesh, the employee needed to get an import realisation certificate for importing certain items for the firm. As the concerned official asked for "speed money," and he had no way to pay it due to strict office regulations, getting the certificate was delayed beyond his managing director's (who is a British citizen) patience. 

As the employee was asked to explain the delay, he mentioned that it was due to bribery. The MD was angered just because of mentioning it in the email and thus keeping evidence of possible illegal transactions. That poor guy narrowly saved his job.

Business insiders say, preliminary expenses of setting up industries are very high in Bangladesh because of bribery. Also, taking possession of land and starting construction also often involve the need to "satisfy" local political leaders. Paying a hefty amount of money for political and national events is also commonplace.

Extortion pervades many other sectors.

According to a report, ‍a bus travelling from Dhaka to Rangpur has to pay extortion at each of the seven districts on its way, and the total money amounts up to Tk4,500. There are a total of 932 organisations of transport owners and workers which extort at least Tk2,000 crores every year from commercial bus services.

Where does this money go? During the pandemic-induced shutdowns, transport workers passed miserable days. Whose welfare did these welfare funds ensure? The answer will surely "tarnish the image" of many highly placed persons.

This created fury among the workers during the shutdown. Yet, this extortion in the transport sector seems unstoppable. According to a TBS report, three days before the first transport shutdown was lifted, four top associations of transportation owners and workers in the country had issued statements seeking cooperation from the government to stop extortion at terminals and highways. But just within a short period, the extortion resumed.

Another TBS report titled "Why big companies shy away from road transportation business" published last year revealed that extortion, control of route permit issuance by shady groups, unruly roads, low profit margin etc. discourages big businesses from investing in the transport sector.

Ashraful Haque. Illustration: TBS

Last year, Bangladesh Road Transport Workers Federation decided to collect "service charge." It was seen by many as an attempt to institutionalise extortion. Such attempts to institutionalise extortion had actually been made earlier. The government turned down the associations' proposal to fix a rate for such extortion, thus earning recognition from the government. 

Such attempts to formalise extortion are common outside the transport sector too. In my small town, there was a spot where mugging took place on a regular basis. 

Someday, a group of local men opened an office in the neighbourhood, hung a sign with "community police" written on it, and started collecting a fixed amount of money from every vehicle plying on the route. The lion's share of the collected money went to a "leader" with a questionable past, and the rest was distributed among that band of people. The hijacking stopped. 

Ironically, an even larger amount of public money was pocketed by those men, and for them it became a permanent and legal source of income.

Shops and markets - both legal and illegal - also have to pay regular extortion money to certain influential quarters. People never raise a voice against it, knowing they have to pay it, only the receivers of the money will change after elections (even that stopped a while ago).

The fear of small businessmen is understandable. They are almost voiceless against mighty organised extortionists who even the law does not touch.

But surprisingly, the big industrialists hardly speak about these pervasive bribing and extortion problems; at least in public. In the past few months, I had to talk to a number of investors from the country's leading export earning industries. None of them was willing to give their names as they talked about the problems they face. 

One may genuinely wonder why. Business associations are pretty influential. Even before the nationwide shutdown could be announced, the premier of the government had to declare a hefty amount of incentive for the export industries.

The associations are not just financially strong; their political strength is evident too. The number of industrialists bagging public offices is soaring every year. Then why do they not use their influence to fix these criminal barriers to smooth business? 

This mystery is yet to be resolved, but some say, nobody wants to bell the cat, and that the "economy of extortion" is rooted so deep and reaches so high that they consider it impossible to eradicate. 

A business consultant working in the apparel industry openly talked to The Business Standard on these matters in an earlier report, but he still refrained from naming the companies he worked with to avoid the risk of any possible repercussions to his employers. The fear involved is manifest.

From small vegetable traders to large exporters, businesses are like sitting ducks to predators, compelled to pay extortion or bribes to people who enjoy impunity against legal ramifications mostly due to their political orientation, or connection with law enforcers.

This illegally collected money across the sectors mentioned above adds up to the business expenses, and consequently, reduces competitiveness in the global market, or makes local buyers' lives harder.

The current sluggish private investment, and the surge in money laundering signal one thing: Doing business in Bangladesh is not very easy, and the government must extend its ongoing efforts to attract investments way beyond regulations and capacities.