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Business Competitiveness Environment in Bangladesh (2005): Domestic Perceptions and Global Comparison

Debapriya Bhattacharya
Executive Director
Centre for Policy Dialogue (CPD), House No 40/C, Road No 11 (new), Dhanmondi R/A, Dhaka-1209 Bangladesh

Khondaker Golam Moazzem
Research Fellow
Centre for Policy Dialogue (CPD), House No 40/C, Road No 11 (new), Dhanmondi R/A, Dhaka-1209 Bangladesh

Kazi Mahmudur Rahman
Senior Research Associate
Centre for Policy Dialogue (CPD), House No 40/C, Road No 11 (new), Dhanmondi R/A, Dhaka-1209 Bangladesh

Syed Saifuddin Hossain
Senior Research Associate
Centre for Policy Dialogue (CPD), House No 40/C, Road No 11 (new), Dhanmondi R/A, Dhaka-1209 Bangladesh

Abstract/ Executive Summary:

Poor performance of the country’s overall competitiveness in the global context has continued in 2005. In view of this, pragmatic actions need to be taken in order to improve the competitiveness of the country’s business environment. One significant aspect, derived from the CPD survey, was that the threat of terrorism imposes significant cost on business and if it is not checked, it would create a real problem for the country. The Executive Opinion Survey identified a number of areas where Bangladesh needs to improve in order to become competitive globally and within the country itself. Based on the finding reported here and focusing on the present condition of business competitiveness in Bangladesh, a set of policy recommendations has been formulated. Major factors that contribute to competitiveness in the international markets are low-cost labour and natural resources. Production processes primarily use labor-intensive methods, but a significant improvement has been observed in 2005. Ownership and control is slowly but increasingly shifting from foreign companies towards local companies. In terms of corporate governance, there is a lack of accountability of management to the investors and Boards of Directors. The recruitment process has improved, instead of recruiting relatives, senior management positions are being filled up by qualified personnel. Companies are gradually becoming responsive to customers and the need for customer retention. In order to improve corporate governance, Security and Exchange Commission (SEC) needs to set new regulations for all listed companies and regularly monitor the practices followed by these companies. There is a strong negative perception as regards environmental regulations of the country. Environmental regulations are lax, confusing and enforced erratically, although there are some signs of improvement. Corporate codes and social responsibility are rare or nonexistent. Businessmen considered that complying with environmental standards significantly reduced competitiveness in the country. Companies were increasingly considering cleaner production, material flow management, waste reduction, recycling and life cycle management as important factors. These would have a positive impact on business competitiveness in the global market. There is no denying that the implementation of reform measures and/or amendments to existing policies depends, to a great extent, on the government’s positive attitude towards the improvement of the business environment in the country. If the government seriously considers the current situation of business competitiveness in the country and adopts appropriate measures, the state of business competitiveness is sure to see some significant positive changes in the medium to long run.

Keywords: Growth, Business, Competitiveness, Performance, Globally

Location:

Start Date:

End Date:

Program Area: Comparative study

Non-commodity: Business, Environmental change

Objectives:

To situate Bangladesh in terms of growth and business competitiveness performance in the context of other countries, globally, for the year 2005 as compared to 2004.

Methodology:

This paper examines Bangladesh’s business environment from two perspectives. Firstly, a comparative analysis of Bangladesh’s business competitiveness environment is undertaken in the context of the overall global scenario; and secondly, the paper documents and analyses perceptions about the business competitiveness environment in Bangladesh. The analysis of the state of competitiveness environment in Bangladesh is drawn on the information from the perception-based surveys of business executives carried out by the Centre for Policy Dialogue (CPD). CPD has been carrying out this survey for the last five years to elicit first-hand information from business firms covering a wide spectrum of activities as regards their perception on doing business in Bangladesh. The paper focuses on a comparative analysis of the perceptions between 2004 and 2005 based on the perception of top executives as regards a number of key determinants and correlates of the business environment in Bangladesh. The CPD Executive Opinion Survey dealt with issues related to macroeconomic stability, quality of services provided by public institutions, corruption, infrastructure, technology, and environment. The respondents also expressed their assessment about the growth prospect for Bangladesh in 2006. A Rapid Perception Survey was also carried out to elicit some additional information as regards a number of indicators. The Rapid Perception Survey and the Executive Opinion Survey focused extensively on perceptions as regards such key business competitiveness indicators as interest rate, inflation, investment, employment, production and export situation, and the state of non-resident Bangladeshis (NRBs) investment trend in Bangladesh and Bangladeshi investment abroad. The survey was designed to cover relatively large companies, i.e. those having total assets of no less than Tk.10 crore. Under this criteria a total of 93 companies were surveyed in 2005, while the number of companies surveyed in 2004 was 100. Adequate measures were taken to ensure a very high level of response. As far as the surveys in 2004 and 2005 are concerned, the geographical distribution of companies showed a very high concentration in Dhaka (about 90% of the companies), which reflects the general pattern of the spatial distribution of companies, with very high concentration in the capital city and nearby areas. While nearly 50% of respondents represented the manufacturing sector, 12-15% were from financial institutions, and 8-9% were from ICT; real estate and construction companies constituted 15% of the respondents in 2004 and 7% in 2005 and the rest 8%-13% were from other sectors. The structure of ownership of businesses which were surveyed evinced the pronounced presence of domestic entrepreneurs; about 75% of companies were owned by domestic entrepreneurs, and about 10% were owned by foreign owners; the rest were jointly owned by local and foreign companies. The study focuses on the perception about the business competitiveness situation in Bangladesh and situates Bangladesh with respect to other countries globally. In order to appreciate Bangladesh’s global position, the present study followed the World Economic Forum’s methodology which ranks more than 100 countries of the world. World Economic Forum (WEF) (popularly known as Davos Meeting) assesses business competitiveness environment for a large number of countries worldwide through a survey of top business executives in every country, and publishes the findings every year in its “Global Competitiveness Report (GCR)”. The GCR is prepared with support from partner organizations across the world.

Source of Information: Business Competitiveness Environment in Bangladesh, CPD Occasional Paper Series 59, ISSN 1818-1570 (Print).

Article Link (Online Journal):

Funding Source:

Total Budget (Tk.) :

Achievement/Findings:

Poor performance of the country’s overall competitiveness in the global context has continued in 2005. In view of this, pragmatic actions need to be taken in order to improve the competitiveness of the country’s business environment. One significant aspect, derived from the CPD survey, was that the threat of terrorism imposes significant cost on business and if it is not checked, it would create a real problem for the country. The Executive Opinion Survey identified a number of areas where Bangladesh needs to improve in order to become competitive globally and within the country itself. Based on the finding reported here and focusing on the present condition of business competitiveness in Bangladesh, a set of policy recommendations has been formulated.

Knowledge Management: Report/Proceedings