Dhaka lags behind in business climate index, Ctg tops

Business environment in divisions other than Dhaka has been turning up to be more supportive to investors, thanks to infrastructural development in those regions and the government's decentralisation bid, according to a survey.

Chattogram has so far remained at the top position on the business-outside-Dhaka list, followed by Khulna, Sylhet, Rangpur and Barishal, reveals the Bangladesh Business Climate Index (BBX) that has been prepared after conducting the survey.

The Metropolitan Chamber of Commerce and Industry (MCCI) and the Policy Exchange of Bangladesh, a research firm, jointly conducted the study for one year on businesspeople and the findings were revealed virtually on Thursday.

The index shows Chattogram is ahead in four out of the 10 indicators. Other divisions such as Khulna, Sylhet, Barishal, Rangpur and Mymensingh are also ahead in terms of their performances in different measures.

But Dhaka could not come to the top in any of the 10 criteria.

Businessmen, who took part in the survey, opined that running a business in Dhaka has become more difficult day by day because of land scarcity for setting up factories.

On the contrary, land issues plus other business complexities are less severe in district headquarters, they said.

Moreover, businesses outside the capital comply with the government's decentralisation effort and qualify for some tax holidays.

The survey covered 10 issues related to business as the results show that Bangladesh is developing in terms of business climate, but there are still some areas for improvement.

The BBX covered businesses of all the eight divisions including Dhaka and Chattogram.

Highlighting the contents of the report, M Masrur Reaz, chairman at the Policy Exchange of Bangladesh, said the index has been prepared with data input from 451 firms based on the performance indicators: starting a business, access to land, availability of regulatory information, access to information, labour regulation, dispute resolution, cross-border trade facilitation, paying taxes, technology adaptation and access to finance.

A World Bank blog article says Bangladesh's path to upper-middle-income status will hinge particularly on leveraging Dhaka, its economic and political centre that accounts for one-third of the country's total population, one-fifth of national GDP and one-third of all jobs.

But in reality, Dhaka is losing its position as the most-sought-after investment location as other regions scored much better than in all steps—from access to land to starting a business to paying taxes.

"The over-centralisation of policy and regulatory services related to decision-making power in Dhaka has resulted in discretionary and predatory behaviour on the part of some regulations," said the report.

It cited an example of tax payment by businesses that shows Dhaka businessmen suffer more in paying taxes than people in other areas.

The findings point to both an urgent need and emerging opportunity to diversify growth centres beyond Dhaka, the report said.

The findings strongly point to taking advantage of Chattogram's business environment to make it a true commercial capital and economic hub.

The potential gets further impetus from recent economic infrastructure plans in and around Chattogram, including Bangabandhu Sheikh Mujib Industrial City, Karnaphuli River Tunnel, proposed Bay Container Terminal and energy hub in Matarbari, said the report.

The MCCI said various initiatives have been taken by the government to shift industries outside Dhaka in the last couple of years. As part of this, the government is offering tax holidays on setting up industries in faraway districts.

"On top of this, the much-anticipated Padma Bridge project is nearing completion to facilitate communication with the southern parts of the country – leading to new industries and businesses in the region," said the MCCI report.

Business leaders at the programme said Dhaka's poor performance in business climate compared with other areas is "very significant". However, they acknowledged that the country's business climate has been improving. 

Citing several issues such as port shipment, getting customs clearance and costly logistics, the trade leaders called for settling the problems immediately.

Syed Nasim Manzur, managing director of Apex Group, said it is necessary to review why many businesses do not want to leave Dhaka despite its poor performance in business climate.

"Outside Dhaka, there are tax holidays. But other facilities, such as schools and hospitals, are not as standard as in the capital. If you want to shift industries outside Dhaka, you have to increase not only tax benefits, but develop the whole ecosystem too," he noted.

Naoki Ito, Japanese ambassador to Bangladesh, hoped the improvement in business climate would attract more foreign investment in Bangladesh.

He said Japanese investments would consider Bangladesh as the first choice in "China Plus One" business strategy if the improvement persists. 

Highlighting some of the challenges foreign investors face, he, however, said the country's infrastructure is one of the major obstacles. 

"Hopefully, this will change in the next five years," said the ambassador, calling for addressing issues in customs clearance, facilitating trade-related financing and allowing foreign investors the same benefits as local investors enjoy.

He said although the government provides a 4% cash incentive for garment exports, foreign investors do not get the benefit. This needs to be considered.

While addressing the programme as the chief guest, Salman F Rahman, private industry and investment adviser to the prime minister, welcomed the home grown initiative to assess the business climate.

He said such an index will help develop the country's business climate. 

"We had always had questions about methodology for the World Bank's Ease of Doing Business Index.  They would only prepare the index based on information obtained from businesses based in Dhaka and Chattagram metropolitan areas." 

The BBX has prepared the index based on data collected from small, medium and large businesses in all divisions of the country.

A credible index will be acceptable to all at home and abroad, Salman said.

The World Bank would publish the Ease of Doing Business Index every year and Bangladesh had always been at the bottom. In the 2020 ranking, the country ranked 168th out of 190 countries.

The World Bank has recently announced that it would discontinue the practice of issuing the Ease of Doing Business report after a probe found "data juggling" to improve rankings of some countries.

In such a situation, the Bangladesh Business Climate Index has been published in the style of the World Bank under the name of BBX.

MCCI President Nihad Kabir presided over the programme.  Apart from business leaders, Bangladeshi ambassadors and commercial counsellors also spoke on the occasion.