The Centre for Policy Dialogue identified 17 key challenges, including corruption, inefficient bureaucracy, foreign currency instability, inflation, limited access to financing, inadequate infrastructure and policy instability, for doing business in Bangladesh.

Corruption has consistently been the most significant issue, while inadequate infrastructure has gradually become less critical, showed the report published at a dialogue titled ‘Business environment reform in Bangladesh: agenda for the interim government’ organised by the CPD at the BRAC Centre Inn in the capital Dhaka on Sunday.

The report, presented by CPD research director Khondaker Golam Moazzem, showed that inefficient bureaucracy and limited access to financing have remained persistent challenges.

In recent years, foreign currency instability and inflation have emerged as dominant factors affecting the business environment, the study found.

The other major problematic factors for doing business in Bangladesh included limited access to financing, inadequate infrastructure and policy instability.

There are also concerns about poor work ethic in the labour force, a lack of adequately educated workers, high tax rates and complexity in tax regulations.

Climate change, crime and theft, and insufficient capacity to innovate further complicate the business environment, the report mentioned.

Additionally, poor public health and restrictive labour regulations contributed to the challenges faced by businesses in the country.

The study had a total of 74 respondents across four sectors, including service, manufacturing, non-manufacturing and agriculture.

The report said that the National Board of Revenue faced a range of challenges related to management, organisation and capacity, contributing to issues such as tax fraud and avoidance.

According to the report, despite efforts to digitalise, the VAT filing system has not fully addressed these challenges and a growing number of businesses, 57.1per cent now believe bribery was common in tax-related interactions, up from 47.8 per cent in 2021.

Current value-added tax management processes are largely manual and administratively intensive, requiring modernisation to improve compliance, transparency and efficiency, it said.

The CPD report found that the tax system was widely regarded as complex and burdensome, with 59.4 per cent of businesses reporting difficulties in compliance.

According to the report, despite efforts to digitalise, the VAT filing system has not fully addressed these challenges.

To address the issues in the tax system the report recommended several measures, including enforcement of a digital payment system, financial disclosure of individuals and their relatives involved in the tax collection process, and strengthening financial reporting for both corporate houses and personal income taxpayers.

It also suggested increasing the tax net, applying tools to identify tax avoidance and evasion and introducing an integrated financial or document-related transaction/transfer system.

To improve governance and institutions, the CPD recommended enforcing transparent public procurement, amending ‘e-procurement’ guidelines for better private sector and civil society engagement, and making financial disclosure of public contract parties mandatory.

It also suggested strengthening public financial management through fair auditing and the effective operation of the public accounts committee.

The report also said that funds should be allocated only to measures that contribute meaningfully to the country’s development.

To improve the financial environment, the study recommended several reforms, include expanding financing options for small and medium enterprises with lower collateral and providing targeted support like financial aid and mentorship.

Interest rates should be reassessed, and the loan process simplified with flexible criteria.

Stronger actions against poorly managed banks, such as closures, were recommended, along with the appointment of qualified independent directors to enhance the capital market.

The CPD also recommended that the financial sector should introduce various ombudspersons, including for banking, securities, taxes, law enforcement and trade to ensure accountability and fairness.

Mentioning the business challenges outlined in the CPD study, former Federation of Bangladesh Chambers of Commerce and Industry president Abdul Awal Mintoo said that these issues were not limited to any particular administration rather over time, criminalised politics had fostered self-interested groups across various sectors, including power, banking and energy.

These groups prioritised their own benefit rather than serving the broader public interest, the business leader said.

‘To achieve meaningful reform and build a better Bangladesh, we must begin with political change. Political reform is essential, as politicians with criminal motives will only pursue reforms that benefit their own interests,’ Mintoo said.

Relying solely on any government, whether interim or otherwise, to implement all the required reforms would likely to lead to disappointment, he said.

Mintoo said that it was important to recognise that reform would be a collective responsibility, involving contributions from all sectors.

Chief adviser’s special envoy Lutfey Siddiqi said that at the macroeconomic level, Bangladesh has been facing two critical deficits — an external deficit, where imports exceed exports, and an internal fiscal deficit — which were both substantial and growing, with no immediate solution in sight.

However, this is manageable as long as the borrowed funds are invested wisely to enhance the country’s growth potential, he said

Lutfey mentioned that to make meaningful progress, reforms must be carefully sequenced to produce early successes that build momentum, rather than undermining it.

He observed that a key advantage in the current situation is the absence of conflict of interest within the government, which enables genuine and purposeful action.

However, he also said that reform efforts required collaboration with existing commissions and authorities to be truly effective.

Bangladesh Investment Development Authority executive chairman Chowdhury Ashik Mahmud Bin Harun said the inefficiency of government processes, particularly in service delivery, remained a significant issue, with many businesses reporting delays and frustrations.

‘Another critical need is industry consultation, which is currently lacking. Regular dialogue through mechanisms like a national economic forum or a private sector advisory board for BIDA is essential to ensure the government listens to the private sector and remains accountable,’ the BIDA chairman said.

Foreign Investment Chamber of Commerce and Industry president Zaved Akhtar, Bangladesh Knitwear Manufacturers and Exporters Association executive president Fazlee Shamim Ehsan, Dhaka Chamber of Commerce and Industry president Ashraf Ahmed and Picard Bangladesh Ltd deputy managing director Amrita Islam, among others, spoke at the event.

CPD executive director Fahmida Khatun moderated the dialogue.