In the beginning, was the deed – Ludwig Wittgenstein quotes Goethe, misquoting John the Apostle.
Yes, the deed (works or business) comes first, then the law, or the policy to regulate the business. And this has been the case for a country like Bangladesh since it began its journey. As doers (doing business), we do many deeds, not paying attention to the necessity for policies and laws. Startups are no exception to that.
The recent Russian invasion of Ukraine and the Covid-19 pandemic sparked a real resurgence of entrepreneurial spirit and startup activities. The Kauffman Index of Entrepreneurial Activity (KIEA) projects that the rate of entrepreneurship in the US is already well above the dot.com bubble.
Bangladesh is in the race too. In the last five years, startups have grown fast around e-commerce, fintech, health and education. Startups fuel economic growth by bringing new products and innovative services to generate wealth. They are like catalysts to the economy.
Business organisation law plays a crucial role in nurturing the startup ecosystem. But so far, there has been no comprehensive startup policy in Bangladesh. The policy framework is important as it expresses a well-built commitment from the government to help startups flourish and sustain.
A policy also provides the legal infrastructure for entrepreneurs and VCs(venture capital) to smoothly conduct their liaison.
Different industries have varying needs for shaping and operating businesses efficiently, and state legislatures often craft dedicated business laws and policies to meet such requirements. This is not present for local startups and the VC sector in Bangladesh. VCs and entrepreneurs are left using generic policy structures that do not necessarily fit startups' unique business models.
At the time of launch, startups classify themselves as corporations. While corporations include many kinds of businesses – both private and publicly-traded entities – they are inappropriate for structuring startups. This is quite a familiar scene across developing countries.
Managing funds for a startup business is one of the most challenging tasks. It is also the most complex phase of the business course.
There are many sources of financing at different phases of startup business. In Bangladesh, there are many government initiatives for funding small and medium enterprises, including the Innovation Fund of Access to Information Programme, the Prime Minister's Office, the ICT Division, the Bangladesh Bank Equity and Entrepreneurship Fund, and many private banks.
'Digital Bangladesh' is the government's motto and the vision of the nation. The government has taken up several projects since the current ruling party came to power in 2009. These projects have sought to create a policy framework so that investors can come forward with funds, infrastructure, and knowledge support to boost innovative ideas.
With the help of the Bangladesh Securities and Exchange Commission (BSEC), regulations have been introduced to allow loss-making promising startups to be listed on the country's stock exchanges and offer IPO, as a step to increase the flow of investment to the sector.
Nonetheless, even though we describe what we have in Bangladesh as a "startup ecosystem", we do not have a real and pragmatic system.
Lately, initiatives have been taken to enact a 'startup policy' and the concerned ministry started to work on a proposed draft of regulations last year. This will help startup businesses operate with a smooth set of laws and requirements. It will also encourage startup investments through better incentives for investors.
We learned from the proposed draft that after a specific period startups will be classified as any other standard business organisation. But before that, businesses will receive benefits under the startup category. Sources say policymakers are considering 10 years as the duration.
There are some areas in the draft policy where policies need to be specific. Foreign Direct Investment is one such area. FDI has grown four times over the past decade, and to encourage investors, the government also provides tax incentives.
Startups at present face a variety of hurdles in the ever-changing sector. They get tied up in red tape. The process between introduction and the approval involves unnecessary interruptions and duplication of procedures. The policy must ease this process.
The business-friendly Indian government is working towards creating a robust startup ecosystem in India through diverse initiatives. One such initiative is forming a dedicated ministry to support and promote new businesses within the country.
Moreover, the central government of India has introduced multiple startup schemes to provide financial assistance to emerging startups and cultivate entrepreneurship. These schemes aim to strengthen the growth of startups by providing them with the required resources and support. Bangladesh is far behind India in this regard.
Startups apply many methods to improve business and strive to meet their needs. If a policy is not specific, implementation becomes inconsistent and unpredictable. Business policies are vital and affect everything, from legal liabilities to a positive public image. Policies ensure everyone is on the same footing and enjoys the same treatment.
A comprehensive policy can also play an essential role in guiding and promoting Bangladeshi startups in the global arena. At the same time, the startup ecosystem needs to be fostered through industry-academia alliances to encourage innovation and develop talent from elementary levels.
Policies are not set in stone. They are living documents that can be amended according to the needs of the business and changing business processes. The business trend is too dynamic now for a policy to be relevant for over a year. Still, we should not sit idle.
M M Khalekuzzaman is a policy analyst and an advocate at the Supreme Court of Bangladesh.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.