Starting a business, flow of regulatory information, infrastructure, paying taxes and such other factors turned more difficult in Bangladesh during the outgoing FY24, compared to previous fiscal year, according to a report by Metropolitan Chamber of Commerce and Industry (MCCI).
Businesses in Barisal and Khulna divisions experienced relatively fewer challenges when initiating business activities, compared to those in Dhaka, Sylhet and Mymensingh, where the average cost of obtaining a trade licences is higher and the number of government agencies entrepreneurs need to visit is greater.
The report published on Sunday, titled "Bangladesh Business Climate Index (BBX-3) 2023-2024", the chamber body said Bangladeshs aggregate composite BBX score dropped to 58.75 out of 100, from 61.95 in FY23.
FY24s aggregate composite score was categorized under "Several Bottlenecks Remain for Business: Significant Efforts Required," the report said.
As part of its suggestions, the MCCI advised improving infrastructure and logistics, strengthening financial systems, enhancing legal and regulatory frameworks, bolstering institutional governance, and more.
This decline from the previous years score can be attributed to a variety of factors, including increasing pressure from tax authorities amid continued revenue shortfall, streamline expenditures, combat inflationary pressures amid rising Interest rates in the backdrop of Russia-Ukraine war, and struggle with overall global economic uncertainties.
Despite government efforts, Bangladesh experienced a drop in this as entrepreneurs continued to face obstacles such as bureaucratic red tape, prolonged business application processing times, and requirement to deal with 23 government agencies to establish and run a business.
Availability of regulatory information also dipped from 72.85 in FY23 to 68.04 in FY24.
Frequency of modifying regulations by the government has been substantially high, with nearly 40 percent respondents not being given prior notice by government agencies regarding any regulatory changes that impact their businesses.
Infrastructure kept declining, from 74.49 in FY23 to 71.08 in FY24, as well as labour regulation from 74.40 in FY23 to 70.04 in FY24. Power outages in particular have been a persistent concern for businesses throughout Bangladesh.
Businesses have also faced moderate challenges in adhering to labour regulations with a higher prevalence of difficulties in Chittagong and Sylhet, where over 70 percent respondents expressed struggles with compliance, particularly with labour filing/returns.
Dispute resolution was also on decline from 64.24 in FY23 to 62.38 in FY24. There is a lack of dedicated courts to handle disputes involving foreign companies, along with a shortage of skilled lawyers capable of handling such cases, exacerbating the situation.
Paying taxes also became complicated, as it dropped from 55.21 in FY23 to 54.74 in FY24.
The highest registration costs, likely including informal payments, were observed among the RMG and financial intermediaries sectors.
The leather and tannery industries and RMG sector have the highest incidence of making informal payments for tax compliance, reaching 61.5 percent.
Other challenges include frequent and arbitrary increases in tax and VAT rates, physical tax payment, and creation of tax audit files, requiring legal assistance and raising costs. Access to finance also declined sharply, from 35.22 in FY23 to 28.11 in FY24.
Respondents said instability in dollar exchange rate has jeopardized their companies overall business strategies and access to many types of finance, most notably trade finance.
However, three aspects saw notable improvements -- access to land, up from 53.07 in FY23 to 53.11 in FY24, trade facilitation from 58.61 in FY23 to 60.87 in FY24, and technology adoption, up from 60.60 in FY23 to 63.50 in FY24.
