Good governance, policy support must in financial sector

The three-day long conference organised by South Asian Network on Economic Modeling (SANEM), a non-government research institution, discussed the country’s economy and business at large. There is nothing new in what the economists and business persons said in the conference. They have only reminded the government policy makers of problems persisting for long.

Speaking on the last day at the conference, Apex Footwear Managing Director Syed Nasim Manzur made an appeal to the government to reduce costs of doing business instead of providing cash assistance or subsidies. This deserves serious consideration.

Speaking in the session titled ‘Challenges of diversification and structural transformation in Bangladesh’s export sector’, he said, “Recently, the cost of various services, including gas and electricity, has increased by 400 per cent and the interest rate of bank loans has increased to 13 per cent. The cost for goods transport per kilometre has reached almost the highest level in the world. If these costs of doing business are not reduced, we won’t be able to stay competitive in the coming days. That is why we do not need any incentives or subsidies; please reduce the costs of doing business.”

The government provides some incentives to traders against export-oriented products which has recently decreased. But if the cost of doing business is more than the amount of incentives, the businesspersons will not benefit at all. We have seen in the past that the government made profit by selling fuel at a higher price in the domestic market even when the price had fallen in the global market. This is both irrational and contrary to the government’s claim of itself to be a business-friendly one. An increase in fuel prices increases costs of production and transportation. Ultimately, the consumers bear everything.

Syed Nasim Manzur has rightly said that a favourable environment has to be created so that the world’s leading brands, including Walmart, Nike, and so on, which have taken an initiative to shift their production from China, come to Bangladesh. According to the ‘Doing Business Index’ in 2020, Bangladesh’s position was 168th, up by eight notches than the previous year.

Despite this progress, we are lagging far behind the competing countries such as Vietnam, the Philippines and Indonesia. Though the government has established 100 economic zones to attract local and foreign investment, the infrastructural and other service facilities are insufficient there.

Economist Selim Raihan in the keynote asked a question: despite being in an almost similar status in terms of exporting electronic products in the 1990s, why is Bangladesh lagging behind Vietnam nowadays?

The emerging economies of Asia, including Vietnam, have made structural reforms in the business sector. Though our policy makers talk of reforms, little progress has actually been made.

We must remember that the international market has become fiercely competitive. We must increase our capacity in business to survive in this situation. The government must reduce bureaucratic complexities and red tape.

Nasim Manzur expressed concerns over the high interest rate of bank loans. But the interest rate could be reduced only when the amount of defaulted loan comes down. It does not seem the government kept eyes open when a section of businesspersons were embezzling billions of taka taking loans from the banks applying their political connections.

The cost of doing business will reduce if the government’s policy-support strategies are properly implemented. In that case, the government will not have to provide any additional incentives to the businesses. But bringing back good governance and order in the financial sector are among the first priorities.