Improving climate for doing business

FE Team | Published: December 29, 2023 17:39:04

High inflation, truncated import, foreign exchange crisis and increased bank interest rates are definitely the signs of an economy that is under stress. Add to those the facts that global lenders, the World Bank and the IMF, have revised down the country's economic growth rate for FY 24, while the US-based credit rating agency, Moody's, has downgraded Bangladesh's long-term rating. These are enough reasons for the existing businesses to be shy of fresh investments, while the would-be ones taking the wait-and-see approach. In this context, one might also recall the economy's performance in the previous fiscal year, FY23, especially in the July-May period when, year-on-year, the rate of investment proposals placed for registration with Bangladesh Investment Development Authority (BIDA) by both the local and foreign investors fell sharply by 39 per cent. Consider that the slump in investment was reportedly driven mainly by the local businesses.
Against this backdrop, the recent report of a sharp decline in the rate of new business entrants registering with the Registrar of Joint Stock Companies and Firms (RJSC) in the first half of the current fiscal year is also a notable case in point. Given the prevailing economic worries, it is feared that the declining trend of new entrepreneurs entering the scene may continue even in the second half of the ongoing fiscal. As the report goes, during the July-December period of FY24, some 4,500 new business ventures under different categories got registered with the RJSC. This phenomenon of fewer aspirants joining business seems to be a persistent one over the past few years. The record shows that in the previous fiscal year, FY23, fewer business entities registered with the RJSC than they did in FY22. For instance, in FY22, the number of companies entering business, according RJSC, was 13,485, whereas in FY23, the number fell to 10,738 in FY23.
This is a decrease by more than 20 per cent. Such a fall in the rate of registrations had also its implication for revenue earning by the RJSC. For the company registration authority reportedly earned Tk2.96 billion in FY22. But its income fell by close to 9.0 per cent in FY23 to Tk2.70 billion. Looking at the trend, it is anticipated that a similar drop in the number of company registrations in the remaining months of FY24 would also result in a marked reduction in the registration department's income. But this income loss by the company registration authority is nothing, if one considers the loss the economy has sustained due to the missed opportunity of so many potential business entities which would have otherwise joined economic activities.
Notably, the downturn in the rate of company registration followed a peak in FY 21, when the country was still in the grip of the pandemic. Obviously, with the pandemic showing signs of receding, business was looking up with the expectation that things would fast improve in the days ahead. However, from the second half of FY22, especially with the start of Ukraine war, the prospects began to fade globally. Bangladesh was no exception. While the series of developments leading to the present state of the economy and business are well-known, the point is to change the course for the better. To restore confidence of potential entrepreneurs in business, experts suggest, the economic uncertainties have to be addressed through adopting a raft of measures that include arresting inflation, stabilising balance of payments, taming currency devaluation, etc. Among other measures, priority should be given to reducing cost of doing business towards improving the overall investment climate.