The economy is on the recovery track and businesspeople are feeling more confident now than a couple of months back about a stronger rebound. However, they see persistent road bumps, which, as business leaders and economists say, have added woes to the pandemic-hit economy and held back a faster recovery.
The private sector managed to survive the pandemic shocks both in domestic and export markets, though credit growth and investment data paint an unglamourous picture.
Stimulus packages were their only support and it proved to be the shot in the arm that helped most to stay afloat and recover.
In two separate webinars in the city yesterday, businesspeople listed the hurdles they face – starting from getting a business registered to paying the taxes.
They voiced their concerns to the Commerce Minister Tipu Munshi at a meeting the day before and urged him to remove the barriers to an enabling business environment.
"Bangladesh seems to be on the recovery path. It is true that the government's initiatives came as a big support, but the private sector's resilience and adapting capacity put our economy in a better position than many others," Abul Kasem Khan, a director of AK Khan Group, said at the Sanem programme.
Referring to his own company's business, Abul Kasem said their business has recovered 70-75% from the slump nine months ago. "We hope to go back to pre-Covid levels in the next three months. We are confident," he said, adding that the successful start of vaccination will further boost business confidence.
His confidence supports Sanem's key findings that business recovery confidence grew stronger in three months, jumping from 4% to 16%.
Businesses that cater to the local market are more confident about a better recovery than those that serve the export market.
While being upbeat about the pace of recovery, Kasem Khan, who is also the former president of Dhaka Chamber of Commerce and Industry (DCCI), identified tax deduction at source as a major deterrent.
"If the tax rate is 32%, it ends up being 66% due to the system. The amount taken as source tax is final and is never adjusted later if you paid more. But they will rush to you to collect in case you pay less at source," he expressed his frustration.
This is why many people opt not to report real incomes, Kasem observed, adding that such a system of tax collection gradually throws many small companies out of business and blocks the ways for new entrants.
The tax system is a major bottleneck in Bangladesh. India, Malaysia and Thailand have competitive tax systems, he said.
It is time the government made the tax system business-friendly and reduced the rate to encourage more people to pay tax, he urged.
Similar suggestion was put forward by the DCCI in its keynote titled "Road to recovery 2021" publicised yesterday.
The chamber recommends that tax and non-tax nets should be widened to reduce burdens of the existing taxpayers. It also suggested automating tax return submission and full-fledged automation for VAT returns.
To businesspeople, obtaining a trade licence is a thing that tests their patience right before they start a venture.
It also suggested rationalising the corporate tax rate to match competing countries.
The Bangladesh Investment Development Authority (Bida) took a number of initiatives to make a number of procedures easier for businesses which also lost their way in the bureaucratic labyrinth of various government offices.
Saiful Islam, president of the Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB), described the experience of obtaining the trade licence for his company from a Union Parishad at Ashulia near Dhaka.
It is an unsavoury experience for businesses to approach the Union Parishad, municipality or other local government bodies to collect the trade licence every year, he said, demanding that renewal arrangements should be made through banks.
"It will free businesses from the interference of Union Parishad chairmen and also reduce cost of business," he told a webinar.
BGMEA Vice-President Arshad Jamal said the government's stimulus loan helped the export industry pay workers' wages. It was the resilience of the RMG sector that was its real strength to rebound.
"This happened mainly because the sector is managed by Bangladeshis who have learned to survive the difficulties. Their resilience should be quantified," he said.
But the cost of business has gone up by 5% even during the pandemic when unit prices of apparels dropped in the export market, making it difficult for the industry to remain viable, he added. Even then, he hoped that the industry would regain full confidence soon.
Sanem Executive Director Selim Raihan said business hurdles are known to all and now it is time for the government to remove those so that the economy can move faster.
Businesses seek remedies
A delegation of business leaders representing different sectors met the commerce minister on Monday, seeking his intervention in removing the hurdles to business and making the environment businesses friendly.
Easing the system to get trade licence is one of the four issues they raised to the minister.
They also suggested that the minimum amount of paid-up capital for a one-person company, as proposed in the companies' amendment bill, should be reduced from Tk50 lakh.
"The minister agreed that the amount is too high for an individual investor to start a business. He felt the amount should be lowered to Tk5 lakh," said Abul Kasem Khan, who was on the team.
They also urged the commerce minister to take up with relevant ministries and authorities the issues like reducing or rationalising various tax rates and extending bonded warehouse facilities to other export sectors like plastic and leather.
The Centre for Policy Dialogue on Monday said the overall economic recovery has so far been comparatively good on the back of domestic strength and resilience, and a second stimulus can help a faster recovery.
A day after, on Tuesday, the Dhaka Chamber, in its review of the economy, said both export and import have rebounded from the drastic fall experienced in the January-June period of FY20.
It put forward a set of recommendations to make things easier for businesses to proceed further.
Explaining its roadmap to future recovery at a webinar, the chamber stressed that value addition needs to be determined sector-wise and VAT should be imposed on the basis of value addition or profit margin, not on annual turnover.
Policy Research Institute's Executive Director Dr Ahsan H Mansur, who joined the DCCI programme, said the economy is not in a crisis now, but there are still unresolved issues. Further preparations are needed to instil full confidence in economic restoration to overcome the pandemic and move beyond, he said.
Responding to the DCCI recommendations, Dr Mashiur Rahman, economic affairs adviser to the prime minister, said the government's intervention to keep the economy functioning had been quite successful and further improvement would depend on how the private sector acts.
Businesses are concerned about any sudden fall in local demand and suggested that the government may offer tax waiver in case of purchasing locally manufactured products like televisions, fridges and mobile handsets, which will stimulate both local demand and help local companies to sustain growth.
Dr M Masrur Reaz, chairman of the Policy Exchange, felt that the private sector and the government need to work together to pull the economy out of the Covid-19 impact fully. While the export market still remains distressed, the next level of stimulus and policy support are required to stimulate the domestic demand.