Economy awaits decisive reform push

Private investment in Bangladesh continues to show little sign of recovery. Businesses are postponing major investment decisions until the government demonstrates a credible commitment to reform, as evidenced by sluggish credit growth and decreased imports of capital machinery. As the Centre for Policy Dialogue recently observed, investors remain in a wait and see mode despite the easing of political uncertainty. This caution has significant implications for the economy because the private sector accounts for several times more investment than the government and remains the principal driver of job creation and industrial expansion. The upcoming national budget carries considerable importance against such backdrop, representing the most immediate opportunity for the government to demonstrate that it is serious about removing unnecessary regulatory barriers including high cost of doing business.  

The government's proposed one-stop approval system is, in this context, a genuinely promising intervention. Bangladesh has long suffered from a bureaucratic culture that imposes costs before a business even begins operations. Entrepreneurs often spend months moving through multiple offices, repeated documentation requirements and discretionary approvals. Such inefficiencies discourage both domestic and foreign investors while creating scope for corruption. The proposed digital platform would address this most persistent complaint by allowing entrepreneurs to obtain all necessary documents and approvals within a defined timeframe. The effort, however, should not stop at facilitating large investors. Every entrepreneur regardless of size should be able to access all essential government services through a seamless digital interface using a single login. If fully implemented, a genuinely integrated digital approval system could become one of the most important reforms undertaken in recent years by reducing uncertainty and lowering transaction costs. However, this reform must be backed by institutional accountability so that digitalisation does not simply transfer existing bureaucratic delays onto a new platform.

The proposed expansion of bonded warehouse facilities, announced by the finance minister, merits both acknowledgement and scrutiny. Extending duty-free import privileges for export-oriented production beyond the readymade garment sector appears to support the long-stated objective of export diversification. But the proposal overlooks serious weaknesses that already afflict the existing system. There are already widespread cases of exporters misusing bonded privileges to flood the local market with imported goods, directly undercutting domestic traders that lack similar privileges. This problem calls for stronger oversight, yet the government has instead proposed relaxing audit requirements by extending inspection intervals to between three and five years, which is a remarkably reckless move. Without regular and stringent oversight, exploitation of the system by unscrupulous businesses would only multiply. This would undermine both revenue collection and fair competition. The reform conversation also has a conspicuous gap as export sectors that do not rely on imported raw materials remain largely absent from it. The leather-and-hide industry is a case in point. During Eid-ul-Azha, countless small traders were left with unsold rawhides, many of which were discarded into rivers, exposing vulnerabilities of a domestic value chain that should have been a valuable source of export earnings. Reform should definitely create opportunities across the entire export economy rather than favouring only sectors that fit a particular policy model.

The finance minister's acknowledgement that taxation harbours the highest concentration of corruption within government is a candid admission. Such corruption not only enriches dishonest officials but also deprives the state of revenue because bribes are often exchanged in return for reducing or avoiding tax liabilities. Digitalisation of the tax system can help disrupt this cycle by reducing human discretion in routine transactions and creating traceable records.