New firm reg down 20pc YOY amid economic turbulence

Ismail Hossain | Published: July 05, 2023 22:28:48

The registration of new firms in the country declined by 20 per cent year-on-year to 10,738 in the just-concluded FY23, according to official figures, reflecting the prevailing economic downturn both at home and abroad.
This downward trend follows a peak of 14,826 registrations in FY21, with subsequent decreases to 13,485 next year.
Industry leaders and experts attribute the drop to economic uncertainties, high business costs and low returns on investment, prompting new enterprises to shy away from risk-taking.
According to the Registrar of Joint Stock Companies and Firms (RJSC), entrepreneurs secured registration to establish 8,021 new companies in FY23, down from 10,817 a year ago.
In the 2020-21 fiscal year, 12,125 new companies got registered under RJSC which was the highest ever in a year. Some 215 societies got registered with the RJSC in FY23, a decrease from 254 in FY22 and 317 in FY21.
However, the number of partnership firms that obtained registration rose to 2,337 in the last fiscal year from 2,268.
The number of one-person company (OPC) registrations also increased to 140 in a year from the previous year’s 124.
OPC refers to a company formed with only one person as a member, unlike traditional private companies that require at least two members. OPC registration began in FY22.
The income of RJSC also dropped during the period from Tk 2.96 billion in FY22 to Tk 2.70 billion in the just-concluded fiscal year.
In Bangladesh, there are 283,321 companies registered with the office of the RJSC until June 30. They include 3,666 public limited companies, 205,484 private limited companies, 1,071 liaison offices of foreign companies, 55,937 partnership firms, 1,177 trade organisations, 15,722 societies and 264 OPCs.
Md. Jashim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said new enterprises fear uncertainties.
He said while old businesses can’t survive in this global and domestic crisis, how could new enterprises come into the business?
M Masrur Reaz, chairman of the private sector think-tank Policy Exchange of Bangladesh, said the drop in new firm registration matches the ongoing economic situation.
The economy is facing a particular challenge during this period and naturally, new enterprises fear taking risks.
He said factors such as high depreciation of the local currency, high inflation, high cost of doing business, potentially high cost of salaries, import restrictions on raw materials and intermediate goods and capital machinery deter new enterprises from entering.
He also mentioned that the same applies to foreign direct investment and the capital market.
“If we want to see a boost in the number of new enterprises, we have to address economic uncertainties, including currency devaluation, stabilise the balance of payments to ease import restrictions and tame the cost of doing business,” he said.
Masrur Reaz said persisting challenges in the overall investment climate and tax enforcement also discourage new enterprises.
He believes that there is a requirement for creating an enabling policy and regulatory environment to attract new entrepreneurs, allow existing ones to expand their footprint and encourage informal businesses to become formal.
The office of the RJSC is mandated to provide name clearances and registration to all public companies, private companies, liaison offices or branches of foreign companies, trade organisations, societies and partnership firms.
It also handles tasks such as returns filing, issuance of certified copies, winding up and striking off firms.
Last month, the RJSC increased a total of 37 types of fees, such as application charges for firm registration, name and location changes and branch opening or closing, by two to more than five times, while 22 services remained unchanged.
The RJSC has also introduced fees for three types of services that were previously provided free of cost last month.
Businessmen said the fee hike will impact the costs of both local and foreign public and private limited companies, partnership firms, trade organisations, social organisations and individual companies registered with the RJSC.
They feared new entrepreneurs will face difficulties in starting their businesses due to the added costs. Moreover, the move will dampen the expansion mood of the formal business sector.
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