Business reforms and infrastructural supports
Thursday, 23 April 2009
Moazzem Hossain
THE findings of the survey carried out by the Bangladesh Investment Climate Fund (BICF) of the International Finance Corporation (IFC), provide some broad ideas about the state of the economy, particularly in relation to its business environment and investment climate. The survey is in the nature of a selective opinion poll, covering four groups -- general public, businesses, government officials and opinion leaders -- all of whom do constitute important segments of stakeholders.
It has brought into focus the related stakeholders' perceptions and opinions. There is no denying here of the need for broadening the appeal of business reform in Bangladesh. This reform is not a 'slogan' or a 'cliche'. To synergise the economy, reforms, based on the felt-needs particularly of economic operators, are critically important. Reforms are part of an on-going process and are certainly not an one-go event.
In this context, one of the findings of the survey relates to the large support of various stakeholders for business reforms. The stakeholders have, thus, strongly supported such reforms to facilitate a better and more congenial environment for expanded economic activities, generating employment opportunities, promoting investments and reducing poverty.
The survey was conducted before the general election held in December last. As far as its areas of focus are concerned, the domestic situation in Bangladesh, particularly with regard to key challenges faced by businesses of different sizes and in various sectors, government's role and effectiveness, improvement of public service quality, institutional reforms, economic zones etc., has largely remained unchanged in substance.
However, the global economic landscape has vastly changed over the past several months and is still changing. Policy makers in the world's leading economies are, thus, now confronted with new economic management challenges.
How such countries address such challenges and with what effect and at what speed, will have some implications in areas of public policy options for all countries, irrespective of the nature of impact of the on-going global crisis on their economies at different stages of growth and also at different levels of integration with the world economy. Having noted that, it would be worthwhile to state that today's global economic volatility does underscore the importance of competitiveness. For that, it will be all the more important to support an economic environment that can help the Bangladesh economy, like those of others similarly placed, to ensure sustained and accelerated performance going into the future.
All of us know it well that the level of productivity of an economy is essentially related to its relative competitive strengths and weaknesses. For the businesses, costs of doing business and rates of return, obtained by investments, are the moot points for consideration, in relation to productivity and competitiveness. The key focus of business reform should, therefore, be on action-oriented programmes for reducing the costs of doing business and ensuring 'reasonable' rates of return, both of which can be the fundamental drivers of growth rates of the economy in support of poverty reduction.
So far so good. No business reform agenda will be able to deliver its 'intended' results and be, thus, sustainable in a country like that of Bangladesh without a synergy of actions in many relevant areas. Such areas cover institutions, infrastructures, macro-economic stability, education, health, efficiencies of financial, goods' and labour markets etc.
We can cite here the case, as for an example, of electric power. The chairman of the Regulatory Reform Commission, Dr. Akbar Ali Khan said the other day, as reported in the media, that "power is more important today than democracy". Indeed, today power is one of the most critical constraints to growth. If steps are not taken to help improve the situation in power sector sooner than later, many existing businesses will be facing a near collapse. The findings of the IFC-BIFC survey do not shed much light on this.
But the critical question before all economic operators today in Bangladesh remains: Can new investments take place under very severe power supply problems that have been persisting for a pretty long time, even if reforms are carried forward in other areas? Bangladesh's overall economic situation is, thus, impacted by power supply crunch and also other weaknesses in the delivery and quality of infrastructures, besides those of institutions that cause burdensome and costly government regulation.
This writer would like to stress here, for the sake of not being misunderstand by any one, that transparent regulation with proper enforcement is important for proper and efficient functioning of the economy and to safeguard the broader interests of the stakeholders, as in banking, insurance and many other fields. But in Bangladesh, there is, as we all know, regulatory overstretch in good many areas but no proper regulation in many critical areas where the same is vitally important, as in, to cite instances, maintenance of standard and quality of pharmaceutical products and services of diagnostic centres. Meanwhile, the quality of the country's education system and public health care services does also remain far below the acceptable minimum standard.
This is worthwhile to note that the return to a democratic rule following the last general election has raised people's expectations anew about "change" in the quality of governance, particularly in areas of inter-face between the people and the public officials where delivery of public services is concerned. Meeting such expectations is now the main challenge facing the new government. Admittedly, there are no quick fixes to many deep-seated and long-lingering problems in areas of governance, infrastructural facilities, dysfunctional institutions etc., all of which have a strong relevance to creating an enabling environment for the businesses to grow and expand.
But early actions by the government by setting out its priorities, rightly reflecting the expectations of the people, will be necessary to help strengthen public trust of political leaders. Such actions will give the right signals to the people.
This review was presented by the writer, Editor of the FE, at a discussion meeting held in Dhaka on April 17, 2009 on the findings of IFC BIFC's survey
THE findings of the survey carried out by the Bangladesh Investment Climate Fund (BICF) of the International Finance Corporation (IFC), provide some broad ideas about the state of the economy, particularly in relation to its business environment and investment climate. The survey is in the nature of a selective opinion poll, covering four groups -- general public, businesses, government officials and opinion leaders -- all of whom do constitute important segments of stakeholders.
It has brought into focus the related stakeholders' perceptions and opinions. There is no denying here of the need for broadening the appeal of business reform in Bangladesh. This reform is not a 'slogan' or a 'cliche'. To synergise the economy, reforms, based on the felt-needs particularly of economic operators, are critically important. Reforms are part of an on-going process and are certainly not an one-go event.
In this context, one of the findings of the survey relates to the large support of various stakeholders for business reforms. The stakeholders have, thus, strongly supported such reforms to facilitate a better and more congenial environment for expanded economic activities, generating employment opportunities, promoting investments and reducing poverty.
The survey was conducted before the general election held in December last. As far as its areas of focus are concerned, the domestic situation in Bangladesh, particularly with regard to key challenges faced by businesses of different sizes and in various sectors, government's role and effectiveness, improvement of public service quality, institutional reforms, economic zones etc., has largely remained unchanged in substance.
However, the global economic landscape has vastly changed over the past several months and is still changing. Policy makers in the world's leading economies are, thus, now confronted with new economic management challenges.
How such countries address such challenges and with what effect and at what speed, will have some implications in areas of public policy options for all countries, irrespective of the nature of impact of the on-going global crisis on their economies at different stages of growth and also at different levels of integration with the world economy. Having noted that, it would be worthwhile to state that today's global economic volatility does underscore the importance of competitiveness. For that, it will be all the more important to support an economic environment that can help the Bangladesh economy, like those of others similarly placed, to ensure sustained and accelerated performance going into the future.
All of us know it well that the level of productivity of an economy is essentially related to its relative competitive strengths and weaknesses. For the businesses, costs of doing business and rates of return, obtained by investments, are the moot points for consideration, in relation to productivity and competitiveness. The key focus of business reform should, therefore, be on action-oriented programmes for reducing the costs of doing business and ensuring 'reasonable' rates of return, both of which can be the fundamental drivers of growth rates of the economy in support of poverty reduction.
So far so good. No business reform agenda will be able to deliver its 'intended' results and be, thus, sustainable in a country like that of Bangladesh without a synergy of actions in many relevant areas. Such areas cover institutions, infrastructures, macro-economic stability, education, health, efficiencies of financial, goods' and labour markets etc.
We can cite here the case, as for an example, of electric power. The chairman of the Regulatory Reform Commission, Dr. Akbar Ali Khan said the other day, as reported in the media, that "power is more important today than democracy". Indeed, today power is one of the most critical constraints to growth. If steps are not taken to help improve the situation in power sector sooner than later, many existing businesses will be facing a near collapse. The findings of the IFC-BIFC survey do not shed much light on this.
But the critical question before all economic operators today in Bangladesh remains: Can new investments take place under very severe power supply problems that have been persisting for a pretty long time, even if reforms are carried forward in other areas? Bangladesh's overall economic situation is, thus, impacted by power supply crunch and also other weaknesses in the delivery and quality of infrastructures, besides those of institutions that cause burdensome and costly government regulation.
This writer would like to stress here, for the sake of not being misunderstand by any one, that transparent regulation with proper enforcement is important for proper and efficient functioning of the economy and to safeguard the broader interests of the stakeholders, as in banking, insurance and many other fields. But in Bangladesh, there is, as we all know, regulatory overstretch in good many areas but no proper regulation in many critical areas where the same is vitally important, as in, to cite instances, maintenance of standard and quality of pharmaceutical products and services of diagnostic centres. Meanwhile, the quality of the country's education system and public health care services does also remain far below the acceptable minimum standard.
This is worthwhile to note that the return to a democratic rule following the last general election has raised people's expectations anew about "change" in the quality of governance, particularly in areas of inter-face between the people and the public officials where delivery of public services is concerned. Meeting such expectations is now the main challenge facing the new government. Admittedly, there are no quick fixes to many deep-seated and long-lingering problems in areas of governance, infrastructural facilities, dysfunctional institutions etc., all of which have a strong relevance to creating an enabling environment for the businesses to grow and expand.
But early actions by the government by setting out its priorities, rightly reflecting the expectations of the people, will be necessary to help strengthen public trust of political leaders. Such actions will give the right signals to the people.
This review was presented by the writer, Editor of the FE, at a discussion meeting held in Dhaka on April 17, 2009 on the findings of IFC BIFC's survey