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Private sector development requires regulatory reforms

Md. Joynal Abdin | Published: January 13, 2020 20:44:00 | Updated: January 21, 2020 20:47:16


The country's achievements so far are the outcomes of efforts and hard works by private sector players and of policy supports from the public sector, i.e. the government. Bangladesh is on a transformational growth path attaining per capita gross domestic product of US$1909 and targets of Millennium Development Goals. Similar joint efforts are required to reach the targets of Sustainable Development Goals (SDG) by 2030 and Vision-2041.

However, existing level of private-public partnership may not be enough to achieve the next targets. Because the importance of private sector development is not yet highlighted by bureaucrats at different levels of policymaking. A large number of bureaucrats do not have proper knowledge about the role of the private sector in Bangladesh's economic development. So, contribution of the private sector is not duly recognised. As a result, private sector institutions are completely missing from the warrant of precedence of the government.

According to a United Nations Development Programme (UNDP) study, Bangladesh's private sector accounts for 78 per cent of economic development. Moreover, it has generated 87 per cent of the civilian employment. Private citizens bring US$18.32 billion remittances (as of 2018) annually. Around 90 per cent of banking, insurance and non-bank financial institutions are operated by the private sector, which leads the process of export earning amounting to US$40.53 billion.

Of the country's investment at 31.56 per cent of the GDP (gross domestic product), the private sector's share is 23.40 percentage points, that is 74.15 per cent of the overall investment. Bangladeshi private companies are meeting more than 95 per cent of local demand and exporting goods to more than 100 countries.

There were 75,000 land phone users in Bangladesh before the entry of the private sector into the telecommunications sector. At present, more than 80 million mobile phone users are being served by private operators. The private sector is partnering with public initiatives of large infrastructure development projects.

There is no reason either for undermining the role of government in economic development, as it (the government) is the facilitator of the private sector development. It is in fact the government which can help flourish any particular sector through policy formulation and necessary other supports. For example, supports in the forms of back-to-back letters of credit (L/Cs), bonded warehouse, cash incentive etc placed the readymade garment (RMG) sector at the top of export earnings. Other potential sectors such as leather and leather goods, jute, pharmaceuticals, and agro-processing are trying to move ahead but could not make expected level of progress due largely to absence of government policy support unlike the ones provided to the garment sector.

In the current context, the role of government in the private sector development could be, but should not be limited to, the followings:

INFRASTRUCTURE DEVELOPMENT: Carrying out business operations like exports, imports, distribution and transportation is expensive in absence of proper/adequate/better infrastructures. Building infrastructures is the responsibility of the government. But governments of least developed countries (LDCs) are unable to develop required infrastructures due to resource constraints. Thus, Private-Public Partnership (PPP) model could be helpful for developing infrastructure within the shortest possible time. Foreign investments could be pulled to implement large infrastructure development projects based on build, operate and transfer (BOT) model. Whatever are the sources of funds, the government is the key player in infrastructure development.

SKILLS DEVELOPMENT/CAPACITY BUILDING: Skilling up the nation with concurrently demanded skill sets is another major task of the government. Whereas skilled workforce is the asset of a country, unskilled manpower is a liability. Private sector development without properly skilled human resources is the nightmare. Business sectors can grow faster if adequate number of skilled manpower is available. Technology adoption, productivity improvement, standardisation etc are possible if adequate manpower is there with proper skill sets.

ACCESS TO FINANCE: Private or public sources of funds are regulated by the government as official policies are the guiding principles for all institutions. It is the government which has to take the lead in making access to finance easy for entrepreneurs - and at low cost and in due time. Adequate amount of fund is also important for private sector development.

BUSINESS DEVELOPMENT SERVICES: Private sector development requires some public services and in absence of such services, the private sector growth is hampered. It is the government which has to provide appropriate electricity, gas and water supply, ensure law and order, guarantee security of investment and investors, facilitate proper partnership agreement with major import and export destinations, and formulate suitable taxation policy.

REGULATORY REFORMS: Countries that have colonial experience have inherited legal systems that are focused on controlling the private sector and have vested excessive authority upon the civil servants. Such laws have not promoted the cause of the private sector in any way. For example, Bangladesh has 215 registration/licenses/NoCs [non objection certificates]/clearance etc. laws/policies that mostly are no longer relevant but affect the private sector activities. Therefore, regulatory reform is essential to shift the focus of the laws from controlling/dominating motive to promoting/facilitating role. A large number of these licenses/registrations/NoCs/clearances could be removed easily any day.

COMPETITIVENESS: The government can also contribute largely to making the private sector competitive through proper policy supports. It can identify the country's competitors in terms of exports and imports and analyse existing business policies. Adopting best practices of the competing countries with slight modifications could be one of the easiest ways of increasing competitiveness of the native private sector. In today's context, signing free trade and investment agreements with countries of potential export destinations and economic partnership could increase competitiveness.

GOOD GOVERNANCE: Good governance is the mother of all other government supports for private sector development. Because it can ensure transparency and accountability of bureaucracy as well as the private sector.

So, private sector development is not any one-sided affair; rather there are some roles of the private sector itself as well. Private players should make themselves competitive by their own quality and efforts. Such roles could be defined as the ones of investor, employer, Innovator, mentor, guide and/or informer. The private sector can play its role through timely policy advocacy with the relevant government body/ies with facts and figures and arguments proper. For effective policy advocacy, the private sector institutions, however, need to develop negotiation skills as required.

The private sector's partnership with the government is essential for national progress. So the concept of the private sector development should be incorporated into training modules of bureaucracy at all levels. The private sector bodies too should be qualified enough to do effective policy advocacy to bring expected changes in the legal system under the government's regulatory reforms programme.

Md. Joynal Abdin is Secretary at Dhaka Chamber of Commerce & Industry (DCCI).

mdjoynal@gmail.com

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