Confession of a bureaucrat and business reality

What an additional secretary of the commerce ministry, Sharifa Khan, said the other day about doing business being difficult in Bangladesh is just a reflection of the present situation.

She blames a highly cumbersome tax system for lagging behind in the Ease of Doing Business ranking.

In her view, the complexities of corporate tax, advance tax, VAT and customs duty discourage foreign investors to do business in Bangladesh. When they hear about the experiences of others in making many trips to different government bodies/offices for various business-related issues it impacts them negatively, she continues.

The record, however, speaks louder than her remarks.

When Bangladesh was thoroughly assessed for the first time in 2006 by the World Bank for the index, the country ranked 92nd on the paying tax indicator.

Thirteen years down the line, Bangladesh stands at the 151st position. It is because things have gone in the opposite direction. Over the years, the number of taxes increased to 33 per year, according to the doing business report released last year.

We have also performed worse on other indicators.

For example, we ranked 52nd on the starting a business indicator in 2006. Now we stand at 131st.

Thirteen years ago Bangladesh ranked 53rd on dealing with construction permits. We slipped to 135th on this indicator last year.

We have witnessed a free fall on other indicators – be it registering property, getting credit, minority investors, trading across borders, and enforcing contracts.

The accumulative result is that our overall ranking slipped to 168th on the 2020 index from 65th in 2006.

The fall continued over the years until 2017 when the country ranked 177th in the doing business report for 2018. Thus, Bangladesh's ranking slipped 112 places. The fall stopped in the index for 2019 as Bangladesh improved just one place.

This means our past was glorious, but our present looks bleak. It only tells the story of a bureaucratic horror – a story of unhindered red tape that has made doing business difficult over the years.

Records show we focus on imposing more regulations instead of increasing focus on facilitation.

Despite low wages and salaries of workers, we still do not get big boost in foreign investment.

In 2018, Bangladesh saw the highest 68 percent growth in FDI inflow in the world, receiving $3.6 billion. We saw the spurt, thanks to the huge inflow of funds through three acquisitions – Chinese strategic investments in the Dhaka Stock Exchange and bKash, and the acquisition of the United Dhaka Tobacco by Japan Tobacco Industries.

The investments were in existing businesses and did not see the creation of any new jobs or establishment of new plants but added value to the existing businesses.

Why will foreign investors choose Bangladesh to do business in such a difficult business environment?

Our local businesses are also victims of red tapism. They have been complaining for long about inefficiency at ports regarding taxation at customs, infrastructure, international shipping, goods tracking system, goods clearance time, and other facilities at different levels. They get few remedies.

They are being forced to do business in this complicated situation as they do not have any alternatives. They deserve praise for keeping the wheels of growth running amid the difficult business environment.

Mass people are also not free from the brutality of red tape. What is bad for businesses is also bad for the people.

Against all odds, there is hope as the government woke up to the reality and took measures to ease the condition of doing business.

The Bangladesh Investment Development Authority sets an ambitious target to move the status on Doing Business index into double digits by 2021.

For this massive reforms in regulations are required.

The culture of secretary in the bureaucracy must be changed. For any failure of any officials to act efficiently must be held accountable.

One thing we must keep in mind that we are still competitive because of our relatively cheap labour force. But this is now facing a challenge for technological innovation. If we want to survive the completion, we must improve the business environment.

We have to face a few more challenges in the coming days. The global economy, which was reeling from the shock of the USA-China trade war for more than a year, now faces another crisis – impact of the latest outbreak of the coronavirus. There is no way for us to stay safe from the impact. Self-defence can work as the best defence if we can improve our business environment by defeating red tape.

Fulfilment of our big dreams like becoming an upper middle income country by 2030 depends largely on the private sector businesses which are considered as the driving force of an economy.

So, there is no alternative to improving the country's business atmosphere.