Reducing cost of doing business

| Updated: October 23, 2017 06:16:53

Reducing cost of doing business

The country's prime chamber -- Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka -- has called for reducing cost of doing business. In a meeting with Commerce Minister Tofail Ahmed in the city last week, the chamber leaders placed a set of demands to the government for removing the obstacles and providing facilities in doing business smoothly.
The minister reportedly assured the chamber delegation of taking necessary actions in this respect. Earlier, the Prime Minister had asked all concerned to take steps to bring down the country below 100 in the doing business index soon through cutting costs. 
Indeed, Bangladesh remains at a critical position in the World Bank's cost of doing business index. Investments from both the domestic and foreign sources have been stagnant despite notable success on various economic and social fronts. High cost of financing, lack of confidence and bureaucratic hassles etc., are apparently responsible for such stagnancy, which need to be identified and addressed immediately.
The country is having problems with optimum use of land, developing special economic zones (SEZs), ensuring adequate power and energy, export diversification. Poor state of infrastructure, weak governance and lack of policy continuity, port-related problems, lack of policy coordination, political instability and law and order situation are, among others, responsible for business cost going up.
The country's apparel sector enjoys huge benefits from the government for being the top export earning sector. Other potential sectors need also to be promoted through various incentives.
The scarcity of power and energy is another notable obstacle to do business smoothly. Nobody knows when the existing gas problem will be solved. The government is assuring business people of providing liquefied natural gas (LNG). But there is no guarantee when it will be available. 
Local businesses face immense problems in finding out their imported goods at airport cargo village, where goods are kept in a haphazard manner. Only digitisation of the system through maintaining the register of imported goods can solve the problem.
Counterfeit products are, indeed, causing substantial financial losses to the manufacturers and importers of goods of big brands. As a result, local industrial units are failing to grow, and their owners are feeling discouraged to make fresh investments in the country. 
On its part, the government claims that it has been doing a lot to facilitate the businesses in the country. But obviously there are infrastructure problems and gas and power supply shortage which are hindering businesses and investments. However, the government has set a target to establish 100 economic zones (EZs) throughout the country soon. 
What is worrying is that the acute scarcity of industrial lands is also an obstacle to attracting investment. The government may extend cash incentives facility for some more sectors to promote their export, especially for IT sector.
Meantime, the government needs to withdraw all tax and value added tax (VAT) from the information and communication technology (ICT) sector. Such move will help lessen cost of doing business and expenses of end-users. Tax hurdles should be removed to bring more investment to the ICT sector.
The cost of doing business, particularly in the least-developed countries like Bangladesh, is higher as importers and exporters have to pay extra money to avoid bureaucratic hassles at customs point. Higher cost of transportation also increases the cost of doing business in such countries. 
In a recent survey of an international thinktank, Bangladesh ranked among the least attractive logistics markets among emerging economies -- lagging behind even war-torn Arab countries and Sub-Saharan Ethiopia.   
Corruption and poor infrastructure are the factors that most inhibit growth, while a range of efficiency-sapping bureaucratic impediments are also having a significant effect, said the report. 
It also revealed that, Bangladesh is not perceived as the 'major logistics markets of the future' either by the world's leading logistics companies. On the ranking of which countries have the most potential to grow as logistics markets in the next five years, Bangladesh was ranked 18th among 20 countries surveyed.
The country's performance is also dismal when it comes to market connectedness which assesses a country's domestic and international transport infrastructure and how well they connect. As par this matrix, Bangladesh has come out 47th out of 50 emerging economies that were ranked.  
Trade facilitation has, in the meantime, emerged as the key issue for the world trading system in recent years, especially with World Trade Organisation (WTO) members. One of the major commitments of the TFA is the introduction of paperless business worldwide, which is expected to slash the cost of doing business by 10-15 per cent. TFA will enter into force with the ratification by at least two-thirds of WTO members, and as of now ratification by two more countries are required to make the TFA operational. 
Although a large part of the trade facilitation agenda involves policy changes - especially coordination and information sharing, both within and among governments - modernising the customs systems and adapting new technologies can also involve significant technical capacity and financial resource demands.
The TFA also represents an important milestone by creating an international framework for reducing trade costs. Early estimates by the Organisation for Economic Cooperation and Development (OECD) suggested that implementation of the TFA would reduce trade costs by 10 per cent. More recent OECD estimates increase this to 14.5 per cent. 
In order to become a middle income country by 2021, it is thus essential that Bangladesh has to ensure full facilitation for promotion of trade and investment. Foreign investors, in fact, take into account what the World Economic Forum (WEF), the International Finance Corporation's (IFC) Ease of Doing Business and the Logistics Performance Index say about Bangladesh.
In the latest World Bank's (WB's) ease of doing business ranking, Bangladesh's position dropped two rungs to 174 out of a total of 189 countries covered under it, due to its stalled regulatory reforms. The overall private investment rate has also declined as a ratio to the country's gross domestic product (GDP).
Bangladesh's ranking is very low when it comes to getting electricity connection, property registration, contract enforcement and dispute settlement. Alternative systems to resolve dispute and recover default bank loans are not functioning properly.
However, in order to attract private and foreign investors, more things do need to be accomplished. There should be reduction of taxes and duty structure on services, easing visa and work permit with extension of visa tenure for the overseas investors.  
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