Bangladesh
5 years ago

‘Rising costs’ of doing business cause concern

Businesses call for tax law reform, ensuring good governance

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Business leaders and economists have expressed concern over the rising cost of doing business, reintroduction of higher interest rate and lack of skilled workforce to foster sustainable economic growth.

They said the shift of manufacturing factories from China is permanent and the window will remain open for 15 to 20 years.

If Bangladesh can reform its tax regulation and management and ensure good governance, they said, the opportunity can be tapped.

They called for coming out of the sector-agnostic policies with intent to diversify export basket along with create a situation congenial to doing business to become more competitive.

The business leaders made the observations at a civic dialogue on 'Middle Income with Quality and Dignity: An Agenda for Bangladesh' in Dhaka on Saturday.

Power and Participation Research Centre (PPRC) and International Chamber of Commerce (ICC) Bangladesh jointly organised the programme in LGED auditorium.

There were three themes of the dialogue-'Jobs, Inequality and Economic Governance', 'Institutions, Implementation and Nurturing Youth' and 'Accountable Governance and Empowering the Grassroots'.

ICCB Vice-president Rokia Afzal Rahman made the opening remarks on the dialogue. ICCB President Mahbubur Rahman was also present on the occasion.

PPRC executive chairman Hossain Zillur Rahman said the dialogue focused on four issues.

First, there is a statistic of growth but a crunch of quality and decent employment. Second, there is huge investment

in infrastructure but the speed of movement has slowed down and hassle has increased.

Third, there are many attractive policies but little progress in doing business. Fourth, education has expanded a lot but quality still remains a question.

Meanwhile, Mirza AB Azizul Islam, former adviser to a caretaker government, said inequality increases at the initial stage when economic growth rises.

But the rate of increase of inequality is not unique across countries and can be moderated, he stated.

Mr Islam said Bangladesh has reached near the danger zone of inequality. It is necessary to moderate inequality. For that, good governance is necessary.

Bangladesh has scored lowest in the regulatory quality, a sub-indicator of good governance in a World Bank study.

The noted economist said the country's youth should improve technological skills to become competitive as a structural change will take place in near future.

But tertiary and secondary education enrolment rate remains at 13 to 14 per cent. Quality is also decreasing gradually, he deplored the fact.

Mr Islam suggested greater coordination between universities and private sector.

Former Bangladesh Bank governor Saleh Uddin Ahmed said the slogan of reaching a development highway is simply a sham, with no effective institutions and compliance of rules and regulations.

"We're not seeing any balanced development and there is only economic growth. There are rules but no implementation combined with accountability and transparency," he said.

A perverse incentive is being introduced here which must be stopped, said Mr Saleh, adding that the speed of growth must be geared up along with balanced and just development.

Prof MA Taslim, who teaches economics at Dhaka University, questioned various data and statistics of economic growth and provided by the Bangladesh Bureau of Statistics (BBS).

Although there is rapid growth over the last few years, he said, the relative ranking of Bangladesh has not changed dramatically.

Citing an example, Prof Taslim said per-capita income of Vietnam was one-third of Bangladesh a few years ago, but it is 60 to 70 per cent higher at $2343.1 now.

The government highlights a 50 per cent rise of nominal wage whereas real income has fallen roughly 4.0 per cent and household income also dropped over the last six years, he added.

Food and protein intake also fell while export GDP ratio dropped after 2011-12, the economist uttered.

"Unemployment rate has remained stagnant at 4.2 per cent for years while unemployment rate is the highest at secondary and tertiary level," he said.

"We're not producing market-oriented labour force."

Economist Selim Raihan said unequal access to economic opportunities would be a great challenge for Bangladesh.

The country has been able to create some efficient pockets like RMG [readymade garment] and others amid institutional weaknesses, he observed.

Various deals are taking place between the government and private sector depending on lobbying and political power, he added.

Syed Nasim Manzur, former president of Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), said Bangladesh is the fifth-largest market for BMW cars.

The cost of which is $0.24 million in Asia. It indicates the trend of consumption here, he remarked.

But Mr Manzur expressed concern over the absence of quality education as employers do not get right and competent people in their factories and other areas.

"When we talk about decent job opportunities, we have to think whether our youths are interested in the jobs we are providing," he said.

"The youth of today are interested to become java programmer and work in a research organisation, not willing to work in a factory," he said.

Mr Manzur said entrepreneurs are going for automation to sustain. They are buying one machine instead of employing 80 people. This issue must be considered.

"The trend of cost of doing business is really painful for us… Then infrastructure cost here cannot be borne by the businesses," he stated.

It would not only damage the export market, but affect the domestic market too, the business leader said.

Citing examples of discrimination in export due to sector-agnostic policies, he said all the exporters do not get VAT exception impeding export diversification.

In Vietnam, Mr Manzur said, joint-venture investors can lease 100 acres land for $1 per acre for 30 years.

But in Bangladesh anyone willing to lease 10 bighas of land needs to go to 100 people, he mentioned.

"In Vietnam, 85 per cent out of the total $14 billion export of leather products come from FDI [foreign direct investment]. This is our failure as we couldn't attract FDI," he said.

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