Since its first publication by the World Bank in 2003, the Ease of Doing Business Report has become a global template for improving the regulatory structure to facilitate a better business environment. Almost all of the listed 190 countries have been trying to improve their regulatory structures to get an upgrade in the Ease of Doing Business index. Bangladesh has been no exception to this, and in recent years it has intensified its efforts to improve its ranking in the Ease of Doing Business Index through making some improvements in business regulations. BIDA has been the focal point for this purpose.
In order to make an assessment on the progress on the Ease of Doing Business ranking in 2021, Bangladesh Enterprise Institute (BEI) and International Business Forum of Bangladesh (IBFB) jointly hosted a webinar on the theme of 'Ease of Doing Business: Status of 2021 on May 17, 2021. The Executive Chairman of Bangladesh Investment Development Authority (BIDA) Mr. Sirajul Islam attended the session as the Chief Guest and Mr. Jibon Krishna Saha Roy, Director of BIDA made the keynote presentation. Dr. M. A Majid, former Chairman of NBR, Gen Harun-ar-Rashid, Former Army Chief, TMSS Executive Director Ms. Hosne Ara Begum and Dr. MS Siddiqui of IBFB were the designated discussants on the presentation. Attended by around 100 participants from the government, both serving and retired, diplomats, private sector business leaders, NGOs and the media, the entire discussion was extremely animated. Although the subject had a specific focus on the progress on the elements outlined in the Ease of Doing Business Report, the discussion quickly moved on to a larger business environment highlighting many inter related issues. While the sensitive issues like corruption, opaque nature of decision making process, use of discretion by the key government officials, archaic nature and the lack of clarity in regulatory framework dominated the discussion as impeding the smooth and easy business process in Bangladesh. The Executive Chairman, BIDA was rather objective in acknowledging the constraints and the prevailing handicaps within which BIDA had to work. He also shared the scepticism that the target of reaching the serial 99 in the Ease of Doing Business Report in this year may not be possible to achieve.
In this context, he said that it was much easier to convince the policy making circles about the particular line of policy action to improve the business environment with particular focus on the private sector, however the daunting task remains at the implementation level. In order to harmonise this gap, he sought support from the government ministries and agencies as well as the members of the business community, who could be the potential beneficiaries in the improvement of the business environment and process. Given the complexity of the business landscape, it was also opined that it could be helpful to examine all related issues, which could provide a context, connection and identify challenges burdening the business ecosystem in Bangladesh. Talking only about the technical elements would address the problem from a very narrow perspective.
DRIVERS: Although the World Bank has already abandoned this Index, the issue of creating a congenial business environment for ensuring a balanced and equitable economic growth remains an important factor for countries like Bangladesh for several reasons. First, as for Bangladesh, the private sector has grown as a major driver of economic growth since late 1970s, notwithstanding the fact that much improvement still needs to be done. Nonetheless, fact remains that the private sector in Bangladesh has already demonstrated its immense potency and strength in transforming the economic landscape of the country. In the interest of maintaining this momentum, it is important that the private sector should grow and operate in a healthy and competitive environment, away from often cited 'crony capitalism' framework. Indeed, any association of private sector to such a sponsored environment only weakens its potency and creates uneven business playing field destroying its creativity, mobility and innovation.
Second, as we are on the threshold of graduating from the LDC level, the role of private sector has acquired extra salience. Not only that the private sector will lead the charge in the post-graduation phase, it has to be the head of the spear of our domestic productivity and competitiveness to help us navigate in a highly competitive, open and technology-driven regional and global environment. Third, in this process, innovation in the business and product process can also be expected to emerge from the private sector. Fourth, indeed the private sector would also be the conveyer belt for inviting and utilising FDI for the growth in the private sector with corresponding impact on the national growth and employment. Therefore, the role of a healthy, independent and competitive private sector need not be overstated.
The government's own documents show that over the years, private sector investment has been sluggish-- around 23 per cent of the GDP and it has not moved up despite various exhortations. For the similar reason, the projected private sector investment target of 28 per cent of GDP under the 8th Five Year Plan looks ambitious, unless serious reforms are done in the prevailing business environment. For Bangladesh, next few years could be a tough walk for several reasons. As Bangladesh graduates, we may lose some of the preferential accesses to markets of developed and some developing countries, which we have been enjoying as an LDC since 1975; some economists calculate that around 10 per cent of export from Bangladesh may come under severe pressure. In addition, peer pressure will mount on many areas of our common interests with India, Myanmar, Sri Lanka, Pakistan, Nepal and Vietnam entering the competitiveness race in gusto. Indeed, our journey could be a lonely walk, as we do not yet belong to any larger trade bloc, nor are we robust in effectively pursuing free trade agreements with other partners.
TECHNICAL AND PHILOSOPHICAL ISSUES: The efforts by BIDA to lead the improvement in business regulations cannot be an isolated matter, it has to coordinate with many other organisations/agencies, which are often beyond the remit of BIDA authority. Frankly, they have a limited role in the overall scheme of things. Indeed, any effort to improve the business ecosystem has to stand on at least three legs. The first leg could be BIDA as the lead agency to gather, organise and coordinate the entire national effort to produce some tangible outcome in terms of figures, which could be reflected in the Ease of Doing Business report. The second leg will comprise the various line Ministries/Agencies of the government, which deliver the services at the ground level and come into direct contact with myriad business organisations and processes. Indeed, their role is critical for the success of any improvement in the overall business process. The third leg will be composed of the business community itself, who do the actual business and directly contribute to production, innovation and the generation of employment. Unfortunately, the relationship and the level of coordination among all three elements is still unclear and often highly competitive, creating a negative and often anti-business climate, about which many of the members of the business community regularly complain. Charges of underhand dealings, corruption, bureaucratic handicaps arise from such an anomalous business conditions in Bangladesh.
Several conceptual issues also demand serious consideration. First, a close observation will reveal that our individual and collective mindset and work ethics are still mostly process oriented, not outcome oriented. Opaqueness in the bureaucratic structure makes this process more cumbersome and slows down the speed of transactions. As a result, it becomes difficult to measure the success of any initiative or track progress with evidence. The possibility of corruption is much higher under such a circumstance. Second, whether the World Bank Ease of Doing Business Index or any fair business environment will demand that it operates under a transparent and predictable set of rules under a system of rule of law. When an individual dominates the process, problems tend to crop up. The issue of discretion exercised by many in the regulatory framework has been repeatedly mentioned as a source of problem. Clear set of rules and regulation could not only obviate such a process; it could definitely create a better and predictable business environment in Bangladesh.
Third, quick and open decision making process is a prerequisite for the creation of a dynamic business climate. This obviously demands decentralization of powers and authority to the lowest level possible. Concentration of power generally works in the reverse direction and slows down the decision making process. Learning from the past experience, the concept of open government is now being promoted, which is much more helpful in creating trust on the system, and delivering the services without much regulatory hassles. Fourth, the business friendly attitudes of all stakeholders is an important factor in the conduct of business fairly and transparently. There are regular complaints that there is a strong anti-business bias in the system, which fosters rent and commission seeking mindset. Unfortunately, such a trend has received strong tail wind during the two decades in Bangladesh. Needless to say, any tangible and sustainable progress in the business climate in Bangladesh will demand reforms at several levels.
ASSESSMENT ABOUT OUR COLLECTIVE STRENGTH AND WEAKNESS: While upward movement in our ranking on the Ease of Doing Business index is important, a fundamental shift is required in our outlook and approach about the business climate and its relationship with the larger social context. We have to have an objective assessment about our strength and weakness, and based on that train our focus and invest on the areas where we can do the best value addition throughout the entire value chain, whether national, or regional or global. We also have to understand the relative position of Bangladesh in the community of nations and build up our business reputation on the basis of such an objective assessment. Publicizing our achievement is just fine, but we must also take note of the fact that the entire South Asia, South East Asia and Africa as a continent are making similar progress. It is therefore important to make a comparative assessment against this evolving perspectives and chart a realistic course of action to move forward in terms of improving our business climate with a view to making it a harbinger of equitable and sustainable growth and prosperity.
GOVERNANCE ISSUES: There is a raging debate on the size and role of a government. Some argue that government should have major role in the management of economic affairs affecting the public life, while others say that it be as little as possible. The truth perhaps sits somewhere in between. The government's role should be at the appropriate level, it should come where it has an advantage and where the private sector would not be interested to invest. There is a tendency to equate the role of the government with patronising group interests, which generally fosters corruption and hampers the sustainability of the economic model. In many places, it has distorted the market mechanism through encouraging the underhand dealings and polluting the business climate. In this process, not only the government officials are exploited toward corruption, the business community may also feel tempted to get extra advantages by going around the cue. This issue incidentally has repeatedly surfaced in a big way in the aforesaid webinar. Any effort to improve the business ecosystem cannot afford not to include such an important issue. After all, regulatory policies are by nature moored within the governance infrastructure.
OPEN GOVERNMENT AND HIGH LEVEL OF COORDINATION: One of the interesting features of Bangladesh business community is that they can respond to government policy stimuli and make their mark quite easily. A complementary role has evolved, notwithstanding the fact that in recent years the separation between the decision making machinery and the business community has practically evaporated with attending consequences. As we usher into a highly competitive global environment and most of the concessions which provided cover to access the global market would be gone after graduation. So a new kind of approach has to be explored to remain ahead of the curve. First, the government must have an honest and credible face as well as remain on a proactive mode supported by the concept of an open government. Second, reorientation of bureaucracy for at least two things would be critical-- understanding the role of private sector in economic development and the role of bureaucracy to protect the public interests from predatory practices. Third, at the same time, the business community has also to understand the public interest role of bureaucracy beyond the profit perspective and be aware of their obligation to larger social context.
In this direction, Bangladesh Enterprise Institute (BEI) implemented a project a few years ago to train around 150 mid-level bureaucrats, who observed a few trends. First, the adversarial social mindset which predominates our collective approach also infects them. Therefore, they generally harbour a poor perception about the role of private sector, and interestingly the view is reciprocal from the other side as well. Second, they generally lacked a good understanding about the role of private sector in development and hence find it difficult to explore a common ground with the private sector.
Third, they however responded positively after the training and changed their perspective about the role of private sector in larger national development. Indeed, many of them became strong advocate for exploring synergies between the public and private sectors entrepreneurs. BEI strongly believes that more systematic and structured interactions are required between the bureaucrats and the private sector leaders to instill a sense of mutual trust and to support each other for pursuing a common national goal under a commonly agreed framework. Models of collaboration available in our extended region could provide a useable template.
In sum, it is important that we recognise the relative importance, strength and weakness of both the government and the private sector and bring a synergy between them to facilitate the process of lifting the lives of the people of Bangladesh as we continue our march beyond 2026. On its part, the government can offer the policy guidance, create legal and regulatory framework alongside physical infrastructure as well as foster generation of public goods, while the private sector may deliver on its innovation, enterprise, capital and dynamism to facilitate creation and sustaining of such a harmonious process. An improved performance in the light of the Ease of Doing Business Index would be a good benchmark to achieve for this purpose. At the same time, we must not also lose sight of the multiplier benefits, which a business friendly environment could contribute toward creating a vibrant, equitable and sustainable economy.
M Humayun Kabir is a former Ambassador and President, BEI.