Bangladesh is now facing a few major challenges in steering its economy to a higher growth trajectory. Such challenges, as identified by economists, policymakers and officials, include slow implementation of development projects, low investment and sluggish growth of revenue.
A high interest rate, analysts say, is an obstacle to increasing private investment. Shortage of land and a lack of electricity and gas connections are main constraints for investment growth.
Analysts also regret that the allocation for annual development programme (ADP) increases every year but the ministries and divisions concerned are unable to spend the budget, let alone quality implementation of projects spending public money. The fallout of deadly coronavirus pandemic has further slowed down implementation of the ADP.
Slowdown in exports and weak remittance growth are the new challenges for the economy, according to an International Monetary Fund (IMF) expert. He insists that Bangladesh should implement the Value Added Tax (VAT) law and boost investment to attain sustainable growth.
The economy has undergone a transformation over the past two decades, spearheaded by a rapid expansion of the garment industry, which has acted as a catalyst for women empowerment. This has also contributed to raising per capita income, with Bangladesh now reaching lower middle-income country status.
The country stands out in development indicators such as poverty, life expectancy, infant mortality and access to water and sanitation. Authorities have also made certain progress in financial inclusion. However, boosting private investment to sustain high growth still remains a critical task. Increasing public investment is also important, alongside higher revenue earning and attracting more foreign investment, for higher competitiveness and productivity growth.
And for supporting the transition towards upper middle income country status and higher global integration, the country's economic institutions and governing practice should to be upgraded.
Still, there are many problematic factors for doing business. Some of these factors such as inadequate infrastructure, corruption, inefficient bureaucracy, limited access to financing and policy instability, remained the same as the previous year.
Some major risks relating to doing business in Bangladesh in the next decade have also been identified by entrepreneurs at national and global levels. The risks include situation arising out of the pandemic, governance failure, climate change adaptation, functioning of institutions and urban planning.
Successive governments did claim of making substantial progress in reforming business environment, but, it is said, many such reform measures could not be implemented due to typical bureaucratic inertia.
Reforms are badly needed for creating congenial business climate to ensure higher economic growth, create more employment opportunities and reduce poverty level. In reality, some areas of business are over-regulated while others are less regulated. Only reforms can strike a balance between the two factors.
In many of the Global Competitive Rankings (GCI), the country's performance has deteriorated in some major and sub-indices of businesses including institutions, financial market sophistication, goods market efficiency and technological readiness. Overall performance in efficiency enhancers, and innovation and sophistication for competitiveness also declined.
However, an UN body has defined competitiveness as a set of institutions, policies and factors that determine the level of productivity of a country which, in turn, sets the level of prosperity that can be earned by an economy. As for Bangladesh, identifying potential markets and buyers, difficulty in meeting quality and quantity requirements of buyers and high cost in domestic transportation remain as major problems in exports.
Local businesses' perception of government's implementation plan for utilising information and communication technology to improve overall competitiveness has significantly improved but availability of the latest technology is otherwise unsatisfactory.
The existing state of corruption also encouraged the country's financial delinquency. However, other reasons such as black money, tax dodging and poor scope for investment were also responsible for worsening condition of the economy. Financial auditing and reporting standards remain weak.
The financial sector needs further reforms in order to become more competitive and efficient. In case of foreign trade and investment, export suffers due to weakness in internal and external connectivity, pandemic, lack of diversity in products and markets and poor networking of entrepreneurs. However, the impact of the unchanged challenges is now less than before.
Reforms in Bangladesh should, in general, aim at facilitating easy access to loans for smaller enterprises, improvement in customs clearance process, making tax payment easier, simplifying labour regulations and land issues. Besides, the businesses have to be adequately prepared to confront major challenges like capital scarcity, inflation and labour problems.
However, the situation needs to improve - substantially - for creating a major stimulus among the investors. For the last few years, domestic investment has remarkably slowed down.
Despite official measures to reduce cost of doing business, domestic investors are not putting in their money in new investments, particularly in the manufacturing sector. Shortage of power and gas did otherwise emerge as major obstacle to new investments.
Why should investors go for setting up new units when the existing industries are finding it hard to continue with their day-to-day operations because of the shortage of power and gas? A good number of industrial units throughout the country have to face operational hazards due to energy crunch.
The power supply situation should, in fact, be improved more. Many industrial units are still keeping their operations unhindered through captive power generators during power outage in the name of load management, thus adding to their cost. However, the government has recently started giving electricity connections to a number of new industrial plants at a limited scale.
In fact, the country's bid to win more overseas investment calls for reducing the cost of doing business. The economy should aim at becoming more and more competitive, especially in promoting its external trade. Bangladesh has many things to do for making its economy more competitive. A vital requirement is to significantly improve and expand its infrastructure and transportation and solve related problems.
An identical transportation system throughout the country is expected to help boost economic output. But such improvement calls for otherwise building better highways, better maintenance of infrastructure and other supportive action including elimination of graft.
All modes of transportation need to be developed as soon as possible to keep pace with the country's business and economic development. An integrated strategic plan can develop the country's communication system on an urgent basis. With such facilities in place, Bangladesh can certainly emerge as a strong regional business hub by reducing cost of doing business substantially.