#1CPD Media Briefing Bangladesh Business Environment 2022 Findings from the Executive Opinion Survey Study Team Dr Khondaler Golam Moazzem Research Director, CPD Ms Jebunnesa Programme Associate, CPD Ms Chowdhury Fariha Programme Associate, CPD 29 January 2023 Celebrating 1993-2023 130 CENTRE FOR POLICY DIALOGUE Generating Knowledge, Giving Voice, Challenging Injustice 1#22#3Content I. Introduction and Objectives II. Methodology III. Key Features of Bangladesh Business Environment 2022 IV. Bangladesh's Position under Different Pillars: Detailed Analysis ཡ. Conclusion 3#4I. Introduction and Objectives 4 4#5☐ I. Introduction and Objectives The business environment in Bangladesh has passed an uncertain time during the post-covid period CPD has carried out an 'Executive Opinion Survey (EOS)' during April-July 2022 under the partnership with the World Economic Forum (WEF) The objective of the survey was to appreciate the perception of entrepreneurs/businessmen on the state of business competitiveness and factors and institutions responsible for long-term growth, especially during the post-pandemic period ■ This survey covered economic, social, governance and environmental issues to trace out their relationship with business competitiveness It also covered issues related with shared prosperity, environmental sustainability and management of risk Domestic issues concerning businesses during this volatile period are also highlighted ■ The WEF has collected data of 11800+ respondents of 121 economies during 2022 However, it has postponed publishing the Global Competitiveness Report in 2022 5#6I. Introduction and Objectives Major objectives of the press briefing are- ☐ To report the state of the business environment of Bangladesh during 2021-22 in the backdrop of the easing of the COVID-19 pandemic; To compare Bangladesh's performance of competitiveness with selected Asian competing countries with a view to understand the gaps in competitiveness during the post-pandemic period; ■ To put forward suggestions for improvement in the business environment from long term sustainability point of view. 6#7II. Methodology 7#8II. Methodology ■ The Executive Opinion Survey (EOS) covers the issues related to following pillars: (a) Infrastructure, (b) Safety & security, (c) Financial system, (d) Trade & investment, (e) Competition, (f) Business operations, governance & innovation, (g) Institutions, (h) Building human capital, (i) Working & employment, and (j) Managing economic recovery & risks A Rapid Assessment Survey has been conducted along with the Executive Opinion Survey highlighting domestic issues concerning the businesses Number of respondents: 74 senior officials of different private companies ▪ Location: Dhaka, Chattogram, Narayanganj, and Gazipur Survey period: April to July 2022 Survey Respondents Sector-wise Number of Participants Agriculture 3 (4.11%) Factory Size Large Number of Factories 39 (52.7%) Manufacturing 37 (50.68%) Medium 14 (18.9%) Services 33 (45.21%) Small & Micro 17 (23%) Did not Response 1 (1.35%) Did not Response 4 (5.4%)#9Assessment II. Methodology Executive Opinion Survey (EOS) and Rapid Survey (RAS) use qualitative data (7-point Likert scale) Negative responses (Scale: -3~-1) Indifferent responses (Scale: 0) Positive responses (Scale: 1~3) Analysis has been performed by employing three different statistical techniques Frequency analysis (% of respondents) ■ Weighted index (average weighted response) Chi-square test 6#10. II. Methodology Radar diagram is used to figure out changes in the perception on different issues between 2021 and 2022 3 Best 2 Better 1 Good 0 Bad Hypothetical Radar Diagram Presentation -0.28 Worse -2 Worst -0.49 -0.88 -3 0.00 0.09 0.90 -0.05 -0,28 -0.88 -0.54 -0.39 -0.55 -2022 2021 -0.07 0.08 10#11III. Key Features of Bangladesh Business Environment 2022 11#120.0 10.0 70.0 64.6 60.0 III. Key Features of Bangladesh Business Environment 2022 Most Problematic Factors for Doing Business in 2022 50.0 44.6 43.1 43.1 38.5 38.5 40.0 35.4 30.0 26.2 24.6 20.0 16.9 16.9 16.9 16.9 15.4 15.4 Corruption Inadequate infrastructure Limited access to financing Inefficient government bureaucracy Inflation Foreign currency instability Policy instability Complexity of tax regulations High tax rates Poor work ethic in the labor force Inadequacy educated labor force Government instability Crime and theft Poor public Health Insufficient capacity to innovate Restrictive labor regulations 12 ■% of Total response 2022 10.8#13Corruption Inadequate infrastructure Limited access to financing Inefficient government bureaucracy Inflation 80.0 70.0 64.6 60.0 III. Key Features of Bangladesh Business Environment 2022 Most Problematic Factors for Doing Business in 2022 Compared to Previous Years 50.0 44.6 43.1 43.1 38.5 38.5 40.0 35.4 30.0 26.2 24.6 16.9 16.9 16.9 16.9 20.0 15. 15. 10.8 10.0 0.0 Foreign currency instability Policy instability ■% of Total response 2022 % of Total response 2021 ■% of Total response 2020 Complexity of tax regulations High tax rates Poor work ethic in the labor force Inadequacy educated labor force Government instability 13 Crime and theft Poor public Health Insufficient capacity to innovate Restrictive labor regulations#1471.4 52.9 III. Key Features of Bangladesh Business Environment 2022 Most problematic factors for doing business in 2022 (Size-wise) 47.1 35.3 Corruption Limited access to financing Inadequate infrastructure Inefficient government bureaucracy Inflation 47.1 58.8 52.9 29.4 50 50 50 17.6 17.6 50 21.4 42.9 50 28.6 17.6 21.4 59 59 33.3 21.4 23.5 23.5 11.8 5.9 29.4 11 41 38.5 14.3 14.3 14.3 28.6 14.3 11.8 28.2 30.8 28.2 25.6 28.2 7.1 12.8 12.8 15.4 10.3 15.4 17.9 10.3 Foreign currency instability Complexity of tax regulations ■Large High tax rates Inadequacy educated labor force Poor work ethic in the labor force Policy instability Medium Small & Micro Poor public Health Government instability Crime and theft Insufficient capacity to innovate Restrictive labor regulations 14#15III. Key Features of Bangladesh Business Environment 2022 ■ Some significant changes are observed in case of top problematic factors in doing business during 2022 Corruption has been topping the list in 2022 as it did in earlier years ■ 64.6% of respondents complained about high level of corruption as the major problematic factor ■ 44.6% of respondents complained about inadequate infrastructure as the second most problematic factor, whereas inefficient government bureaucracy and limited access to finance placed third together ■ - The severity of these three problematic factors has reduced compared to the previous years it indicates that the businesses have also been suffering from new arising factors (see slide 11) ■ A new set of factors have emerged as important. These include inflation (38.5%) followed by foreign currency instability (38.5%) and policy instability (35.4%) Given the uncertain business environment, businesses need comprehensive policy support targeting the short-, medium- and long-term challenges Businessmen's perception regarding high tax rate has further improved ◉ It is ranked the eighth important factor (24.6%), which was earlier ranked fourth problematic factor A gradual reduction in top-tier tax rates may contribute to improving the perception 15#16III. Key Features of Bangladesh Business Environment 2022 In contrast, complexity of tax regulation is perceived as more problematic (26.2%) than the high tax rate Perception regarding public health has been significantly improved (15.4%) compared to the previous year ▪ This happened perhaps because of the decreasing Covid affected cases among the working population The level of severity of problems is different for different categories of enterprises (see slide 13) By and large, corruption severely affects all categories of businesses. 52.9% of small and micro enterprises have considered corruption as the most problematic factor, 71.4% of medium and 59% of large ■ Medium enterprises marked limited access to finance, inadequate infrastructure, policy instability, and government instability as bigger problematic factors Small & micro enterprises are facing the pressure of inflation, instability of foreign currency, and inefficient government bureaucracy ▪ Large enterprises found more problematic issues in case of inadequate infrastructure, inefficient government bureaucracy and foreign currency instability Hence, government needs to ensure customized policy support for different categories of enterprises targeting diverse challenges 16#176% 10% III. Key Features of Bangladesh Business Environment 2022 The top three economic risks for Bangladesh for upcoming years are- Rapid & sustained inflation (25%) Debt crisis (22%) Severe commodity price shocks or volatility (22%) ■ The top three societal risks for upcoming years are- Cost-of-living crisis (51%) Employment and livelihood crisis (19%) ■ Infectious diseases (8%) ECONOMIC RISKS ■ Asset bubble burst 5% 10% 22% ■ Collapse of a systemically important industry 8% ■ Debt crises 22% 25% ■ Rapid 8% and/or sustained inflation ■ Proliferation of illicit economic activity SOCIETAL RISKS 6% 0% 8% 19% In percentage ■ Cost of living crises ■ Employment and livelihood crises ■ Erosion of social cohesion and wellbeing ■ Infectious diseases 51% ■ Widespread youth disilusionment ■ Severe mental health deterioration ■ Collapse or lack of social services and public infrastructure ■Large-scale involuntary migration 17#18III. Key Features of Bangladesh Business Environment 2022 ■ The top technological risks for Bangladesh this year are- Digital inequality (36%) ■ Failure of measures (36%) cybersecurity ■ The top environmental risks this year are- Human-made damage (29%) environmental 16% TECHNOLOGICAL RISK 12% 36% Natural disasters and extreme weather events (21%) ■ Human-made environmental damage ENVIRONMENTAL RISKS ■ Digital inequality ■ Failure of cybersecurity measures 9% 36% ■ Automation and 10% displacement of jobs Digital power 3% 8% 29% concentyration and monopolies 20% 21% In percentage ■ Natural disasters and extreme weather events ■Failure of climate- change adaptation ■ Severe commodity supply ■Failure of climate- change mitigation ■Terrestrial biodiversity loss and ecosystem collapse ■ Blue(marine/freshwat er) biodiversity loss and ecosystem collapse) 18#19N. Bangladesh's Performance under Different Pillars: Detailed Analysis 19#20IV.1 Institution -2022 -2021 Intellectual property is somewhat not protected (61.6% → 59.7%) Largly disagree that are taxes: Addressing environmental degradation (69.1%→38%) Somewhat disagree that taxes: Addressing inequality in your society (57.1%→62%) Somewhat disagree that effective regulation protects personal data held by private companies (58.9%-51.4%) -0.54 -0.68 -0.30 Somewhat disagree that the taxes: Easy to comply with (59.7%-61.1) Somewhat disagree that the government serve the interest of everyone equitably (51.4%-57.5%) -1.03 -0.94 -0.76 -1.01 -1.19 -1.27 -0.73 -1.09 Bribes are somewhat common in connection with the Imports- exports (74.6% → 71.4%) Bribes are largely common in connection with the Public utilities (61.6% → 49.3%) 0.06 Bribes are largely common in obtaining favorable judicial decisions (55.6% →47.1 %) Bribes are largely common in connection with Tax payments (58.9% 47.8%) Bribes are largely common in the awarding of public contracts and licenses (63% →54.3%) Govt. have a long-term vision in place to some extent (53.4% →31%) 20 20#21IV.1 Institutions 2022 -2021 Somewhat disagree that the govt. respond effectively to change (42.3% →44.4%) -0.18 Corporate ethics of companies are somewhat poor (61.6% → 61.7%) -0.75 -0.71 Illegal diversion of public fund is somewhat common (63% →65.3%) -0.96 -1.33 Legal and judicial systems for companies in settling disputes are somewhat inefficient (58.3%... Largly agreed that private businesses to challenge govt. actions/regulations through legal system is difficult... -0.90 Somewhat agreed that the judicial system is not independent from influences (69.9% → 62.5%) -0.41 -1.07 Somewhat agree that the property rights, including financial assets protected (40.3% →64.4%) -0.62 0.04 Somewhat disagree that the govt. ensure a stable policy environment for doing business (41.1% →49.3%) Ethical standards of politicians are largely low (68.5% →67.6%) Somewhat burdensome for companies to comply with the public administration's requirements... 21 21#22IV.1 Institutions ■ Weak institutions are the most challenging components for doing business in Bangladesh ☐ Improvement of institutions is sluggish and most importantly, their performance has deteriorated during 2022 Public entities dealing with taxes, licenses, public utilities, judicial system, export, and import have poorly performed during the year 2022 ■ Fiscal instrument do not necessarily meet the need of the people, businesses and society There is an increase in the use of bribes in connection with tax payment (- 1.19; 47.8%); and licenses (-1.27, 54.3%); public utilities (-1.01, 49.3%); and largely common in obtaining favorable judicial decisions (-1.09, 47.1 %) Tax structure needs major revision focusing on the equity of different categories of people as performance indicators related to tax are poor and deteriorating Weak performance in serving people equally (-0.73; 51.4%); could not address inequality (-0.94; 57.1%) and it was difficult to comply with tax obligations (- 0.76; 59.7%) ■ Perception regarding the use of bribes in export and import trade (-0.3; 74.6%) has lessened perhaps due to gradual rise of practices of digital payment system Businessmen over the years positively acknowledged the government's long-term vision for economic development which has continued in 2022 (0.06, 31%) ■ The perception level has improved which is due to business-focused public policies and their implementation over the years#23IV.1 Institutions Majority of institution-related indicators are showing further negative results during 2022 survey ■ For example, the government is less responsive to changes (-0.18; 44.4%); private businesses' less ability to challenge government decisions (-1.33; 74%) and poor corporate ethics (-0.67; 61.7%) ■ Some marginal improvement in perception (though below the average level) was observed during 2022 compared to that in 2021 For example, protection of property rights (0.04%, 64.4%) independence of judiciary (-0.9; 62.5%) and ethical standard of politicians (-1.07; 67.6%) ■ Businesses further struggling in a poor governance situation in number of public entities ▪ This is reflected in the lack of ability to ensure a stable policy environment (-0.41; 49.3%); illegal diversion of public funds (-0.96, 65.3); burdensome public administration's compliance (-0.62; 57.5%) and inefficient legal & judicial system to settling dispute(- 0.71; 56.2) ■ Such inefficiencies and weaknesses made a severe adverse impact for businesses particularly on SMES 23#246.0 5.0 IV.1 Institution Cross Country Comparison of Quality of Public Institutions 4.4 3.9 4.0 3.4 30 3.0 2.0 1.0 5.6 4.9 3.8 3.1 0.0 Bangladesh ■Government's responsiveness to change Ethical behavior of firms Ethical behaviour of politicians Property rights Diversion of public funds Personal data protection India China Vietnam Thailand Efficiency of legal framework in settling disputes ■Government ensuring policy stability ■Ease of compliance with government regulation Judicial independence Irregular payments in exports and imports Irregular payments in tax collection Irregular payments in judicial decisions ■Government acts in the interest of all individuals Tax system addressing inequality your society ■Venture capital availability Efficiency of legal framework in challenging regulations Intellectual property protection Irregular payments in public utilities Irregular payments in public contracts Government long-term vision ■Ease of complying to tax system ■Tax system addressing environmental degradation Bangladesh's institution related indicators in most cases are behind those of comparable countries of Asia • • Perception on 'government long term vision' is to a large extent positively acknowledged by businesses where it is found to be better in Bangladesh compared to that in Thailand Perception on irregular payments in exports and imports is the weakest part in case of Bangladesh compared to those of competing countries 24#25IV.2 Infrastructure Somewhat agree that the town and city centres are overcrowded (67.1%-71.6) Quality of Road infrastructure is somewhat poor (32.9%->44.6%) -0.28 Somewhat agree that the government does not fund and subsidize investment in green and sustainable energy and infrastructure (55.7%->68.5) -0.28 Somewhat agree that the water ->> 0.09 supply is reliable (27.4% -- 44.6%) 2022 2021 The Train services are somewhat inefficient (48.6% ->56.8) -0.55 0.08 -0.88 -0.88 -0.35 Somewhat agree that the Public transport services are inefficient (54.2% -61.7%) The Air transport services are somewhat efficient (42.9% -→ 32.4) The Seaport services are somewhat inefficient (42.3% - 49.3) ->> 25#26IV.2 Infrastructure Somewhat agree that digital platforms not at all used to provide Transportation, mobility and logistics (46%) Somewhat agree that digital platforms not at all used to provide Healthcare Services (52.7%) Somewhat agree that digital platforms are used to provide Professional services 0.11 including technical support services to a great extent (56%) 0.23 -0.49 -0.48 0.37 Somewhat agree that digital platforms are used to provide Hotel, Restaurants and Leisure Services to a great extent (52%) Somewhat agree that digital platforms are used to provide Education to a great extent (43.8%) 0.66 Somewhat agree that digital platforms are used to provide Financial Services to a great extent (63%) 26 26#27IV.2 Infrastructure Performance of majority of infrastructure-related facilities is perceived to be below the average level compared to that in 2021 Key indicators have performed weakly during 2022 and those have deteriorated ☐ For example, poor quality of road infrastructure (-0.28; 44.6%); less efficiency in train services (-0.55; 56.8%); inefficient seaport services (-0.35; 49.3%) and poor public transport services (0.88; 61.7%) Despite major public investments in key infrastructures related to road, rail and seaport, performance of those facilities is still perceived to be poor. It is important improve the efficiency of these infrastructures and related logistic facilities Some of the recent developments in infrastructure projects (e.g. Padma bridge, Metro-rail in Dhaka city and Karnaphuly tunnel in Chittagong) would contribute to improve road/rail connectivity within the country A considerable progress in water supply is mentioned by businessmen (0.09; 44.6%) Perhaps this is because of improvement in water supply infrastructure in major cities; however, quality of supplied water is still a major area of concern Bangladesh is lagging behind in developing green cities and clean energy based infrastructure Even though the Central Bank introduced green financing and draft IEPMP promotes clean energy, the perception on public funding for green energy and infrastructure has further declined (-0.88; 68.5%) The perception on overcrowding of city centers seems to be marginally improved (-0.28; 71.6%); further improvement in city-traffic would help reduce the pressure on a single city like Dhaka/Chittagong The government with the support of development partners should make substantial investment towards developing green cities, clean energy based power and energy system, better urban waste management system and reduced industrial pollution mechanism etc. 27#28IV.2 Infrastructure Bangladesh climbed up 27 notches to rank 76th in the world in the digital wellbeing thanks to the country's performance in internet affordability, security and quality, according to the Digital Quality of Life (DQL) Index 2022. (The Business Standard, 2022) ■ Positive performance observed in case of facilitating financial services (0.66; 63%); hotel, restaurant and leisure services (0.37; 63%); education services (-0.23; 43.8%) and professional services including technical support (0.11,56%) However, there is still lack of digital service activities in health care services (-0.49, 52.7%) and in providing transportation, mobility and logistics (-0.48, 46%) According to the DQL report, Bangladesh has significantly improved in four of the five indicators this year except for the electronic government pillar, where its position is unchanged A report of the Bangladesh Telecommunication and Regulatory Commission's (BTRC, 2022) confirmed that the number of mobile subscribers are 181.67 million in October 2022 However, till April 2022, 114 million people, or more than two-thirds (67.9 percent) of the population, are still without access to the internet (DATAREPORTAL) 28#29CEN WAGON 3.0 3.0 IV.2 Infrastructure Cross country Comparison on Quality of Infrastructure 5.3 5.4 4.6 4.5 4.4 Bangladesh Quality of road infrastructure Efficiency of air transport services 5.0 4.7 3.9 India China Vietnam Thailand Efficiency of train services 5.3 ■Efficiency of public transport ■Investment in green energy and infrastructure ■Efficiency of seaport services Reliability of water supply ■Quality of town and city centers ■Use of digital platforms for providing professional services including technology support Use of digital platform for providing Hotels, restaurants and leisure activities services Use of digital platform for providing Education services ■Recovery plan ■Use of digital platform for providing Financial services Use of digital platforms for providing care and healthcare services Use of digital platforms for providing transportation, mobility and logistics Among the comparable countries, Bangladesh is behind in most of the infrastructure related indicators ▪ The performance is relatively better in case of using digital platforms for providing financial services ■ The performance is poorer in case of quality of town and city centers 29#30Somewhat disagree that police IV.3 Safety and Security Somewhat agree that the costs impose on businesses for -2022 -2021 climate change (56.5%-57.5%) services be relied upon to efficiently enforce law and order (57.5% →65.65%) -0.89 Somewhat agree that the wide-scale social and political unrest impose costs on businesses (19.2%→36.11) -0.04 -0.63 -0.57 -0.36 Somewhat agree that the organized crime such as Mafia oriented racketeering impose huge costs on businesses (42.3% 43.1%) Somewhat agree that the incidence of crime and violence impose huge costs on businesses (49.3% →55.56%) 30#31IV.3 Safety and Security Businessmen's perception regarding safety and security has been significantly deteriorated in 2022 compared to that in 2021 ◉ This is reflected in case of the perception on organized crime such as mafia- oriented racketeering (-0.36; 43.1%) and crime and violence (-0.57, 55.56%) 57.5% respondents observed that climate changes are somewhat rose cost of doing business (-0.63) These are causing rise in higher demand for jobs in city areas, pressure on urban city services and rise in informal economic activities due to rise in climate displaced migrants in urban areas/city centres Businessmen are being concerned about quality of services of law enforcement agencies ■ 65.7% of businessmen perceived that police services are yet to be relied upon to enforce law and order efficiently (-0.89) In recent times the poor quality of services of the law enforcement agencies created a perception where it failed to assure basic human rights of people ■ These agencies need to invest more for improvement in the quality of services Perception on social and political unrest has further declined (-0.04; 36.1%) this year which is a major concern for business environment in the country Bangladesh has ranked 127th out of 140 nations on the World Justice Project's Rule of Law Index 2022. According to the RoL Index 2022, Bangladesh has dropped two points from last year 31#327.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 4.0 3.0 Bangladesh IV.3 Safety and Security Cross Country Comparison on Quality of Safety and Security 4.3 3.5 3.5 5.0 4.2 4.2 4.0 3.9 India China Vietnam Thailand ■Business costs of wide-scale social and political unrest ■Business costs of Organized crime Adequate protection for cultural heritage ■Business costs of climate change ■Business costs of crime and violence Adequate protection for the environment and nature ■Reliability of police services ■ Among the selected competing countries, Bangladesh's performance is poorer in case of lack of protection for the environment and nature and reliability of police services Bangladesh's performance is relatively better in case of costs due to wide scale social and political unrest 32#33SMEs have somewhat poor access to finance -0.27 (52.1% -45.9) IV.4 Financial System Somewhat agree that the soundness of banks is extremely low(19.4% →41.1%) -0.09 -1.84 -0.82 Financial auditing and reporting standards are somewhat weak (41.1% → 49.3%) -2022 2021 It is largely difficult for start-up entrepreneurs to obtain equity funding (70.8% -51.4%) 33#34IV.4 Financial System Financial sector is somewhat worsened after the pandemic - most of the indicators are showing lower score than year 2021 Overall level of performance of the financial sector has remained in the negative indicating a struggling situation as in previous years According the respondent, negative perception is observed in case of the soundness of banks (-0.09; 41.9%); accessing start-up capital (-1.34; 51.4%) and financial and auditing reporting standards (-0.32; 49.3%) 45.9% of businessmen indicated that SMEs are facing difficulty in obtaining funding from the financial sector (-0.27; 45.9%) and the progress is rather slow compared to other financial market indicators ■ ■ According to World Bank, there is a $2.8 billion investment deficit in the SME sector. Capping the interest rate is a major barrier for SMEs to avail necessary credit from the banks; government should withdraw interest rate cap on lending rates Further enhancement of credit support and innovating financial tools are needed for ensuring access to credit to SMES ■ The capital market has been struggling in building confidence among the investors Major challenges of the capital market include poor-quality IPOS (56.3%), weak regulatory enforcement role of SEC (53.1%), anomalies in financial reporting (50%) and suspicious trading in the secondary market (50%) ■ - Other issues include questionable role of institutional investors, lack of transparency in BO accounts, failure to ensure due diligence of DSE/CSE 34#3541.9 53.1 36.5 34.4 33.8 50 IV.4 Financial System 31.1 56.3 BUSINESSMEN PERCEPTION ON BANKING SECTOR AND CAPITAL MARKET 2022 In percentage 28.4 50 ☐ WEAK REGULATORY AND ENFORCEMENT ROLE OF SEC QUESTIONABLE ROLE OF INSTITUTIONAL INVESTORS SUSPICIOUS TRADING IN THE SECONDARY MARKET POOR QUALITY IPOS ANOMALIES IN FINANCIAL REPORTING LACK OF DUE DILIGENCE OF DSE/CSE LACK OF TRANSPARENCY IN BO ACCOUNTS Non-performing loans soared to a new high at Tk 1.34 trillion at the end of September, 2022. The amount is 9.36 per cent of the total outstanding loans in the banking sector (The Financial Express). ■ According to Bangladesh Bank data, 32 banks held more than Tk 1,000 crore in defaulted loans each and six of them accounted for more than Tk 5,000 crore in classified loans each Assessing the defaulted loan following international standard would reveal much higher level of outstanding loan in the banking sector Government has made commitments to improve the governance of the banking sector as part of the meeting the 'structural conditionality' of availing IMF loan (Daily Star, 2023). These conditionality include Improvement of governance in the financial sector Amendments of the Bank Company Act ■ Setting up an asset management company to dispose of soured loans 35 23 29.7 21.6 23.4#366.0 5.0 IV.4 Financial System Cross Country Comparison on Quality of Financial System 4.0 3.9 3.8 4.0 3.7 3.0 2.0 1.0 0.0 Bangladesh 5.6 5.0 4.8 4.5 India China Vietnam 5.6 4.3 Thailand Soundness of banks Financing of SMEs Strength of auditing and accounting standards ■Distortive effect of taxes and subsidies on competition Bangladesh's performance on quality of financial services is relatively good compared to that in India. However, it is still behind compared to other competing countries (e.g. China, Vietnam, Thailand) 36#37Largely agree that the foreign visitors (tourists and business travellers) are heavily concentrated in a few destinations (66.7%-52.8) IV.5 Trade and Investment Somewhat agree that non- tariff barriers do not limit domestic competition (35.3% 17.8) 0.08 -1.15 0.63 0.69 Somewhat expects supply chains to be more globalized (64.8% →62.2) 2022 -2021 FDI rules and regulations are somewhat relaxed (55.6% 56.9) -> 37#38IV.5 Trade and Investment ■ Trade and investment related issues did not improve during 2022 after the pandemic ■ Non-tariff barriers have somewhat limiting impact on the competition in the domestic market (0.08; 17.8%) Rules and regulations related to foreign direct investment (FDI) remain at the same level (0.63; 56.9%) for three consecutive year - further initiatives are required to attract more FDI with regard to tax, infrastructure, skilled manpower Despite various initiatives, FDI inflow remains at low level ($2.2 billion in FY22) Lack of proper infrastructure, limited functionality of one stop service facilities, weak financial reporting of local companies etc. are considered as drawbacks for attracting FDI in the country. 62.2% businessmen have the view that supply chains has somewhat been globalized (0.69, 62.2%); More open global supply chains on different products would lead to rise in trade and in diversified export products with diversified markets Attracting more foreign visitors could improve the business environment of the country However, 52.8% entrepreneurs noticed that foreign visitors/tourists are not so much interested to move in different places and is highly concentrated in only few destinations (-1.15; 52.8%) Such a perception is not helpful in improving network with foreign visitors in the country 38#396.0 5.0 4.0 4.8 IV.5 Trade and Investment Cross Country Comparison on Quality of Trade and Investment Indicators 3.0 3.0 2.0 1.0 0.0 Bangladesh 4.0 3.8 5.2 5.1 India China Prevalence of non-tariff barriers 5.5 Vietnam 4.4 Impact of rules on FDI 5.4 Thailand 4.4 Evolution of supply chains Geographically dispersed tourism Bangladesh and India are at the same level with regard to trade and investment related preparedness ■ Bangladesh is better in terms of supply chain management issues 39#40Somewhat agree that Individuals are not able to move their data and records easily between firms (46.6% 55.6%) IV.6 Competition Somewhat agreed corporate activities are dominated by a few business groups (65.8%% 69.4%) -0.89 -0.18 -0.35 Somewhat agree that new companies with innovative ideas not at all grow rapidly → (46.5% 56.8%) -0.41 -2022 2021 Well-developed and deep clusters are somewhat nonexistent (46.4% → 46.6%) -0.19 To some extent fiscal measures distort competition (48.6% - 43.8%) →> 40 40#41Buyers somewhat not make purchasing decisions. based on company commitment to diversity, equity and inclusion (54.9% 59.2%) Buyers somewhat not make purchasing decisions based on company commitment to decent work standards and wages (53.4-48.6%) IV.6 Competition Buyers somewhat make purchasing decisions based on product performance (57.5% - →> 67.6%) 0.81 -0.77 -0.96 -0.44 -0.43 -2022 2021 Buyers somewhat not make purchasing decisions based on product impact on the environment and nature (53.4%→ 59.2%) Buyers somewhat not make purchasing decisions based on product impact on health, mental health and well-being (50.7%→ 44.3) 41#42IV.6 Competition There is further deterioration in competitiveness of business environment in 2022 compared to the previous year (2021) Perception regarding the overall competitive environment is below the minimum average level Entrepreneurs still considered that the corporate businesses are dominated by the few groups of companies as like previous time (-0.89; 69.4% in 2022 and -0.74; 65.8% in 2021) The Competition Commission needs to be proactive to monitor the activities of the 'dominant market players' in different sectors - who are likely to make an adverse impact on the market 43.8% of respondents mentioned that fiscal measures distort competition to some extent (-0.19, 43.8%); more target oriented measures promoting diversification in investment, products and markets are needed. These measures need to be reviewed on a regular basis The situation have grown worse in case of innovative ideas. 56.8% of businessmen indicated that new companies with innovative ideas have not been growing (-0.41) It has worsened from the the pre-covid level (-0.25; in 2019) Entrepreneurs perceived that most of the fiscal measures (subsidies, tax breaks, etc.) do not at all support SME growth and the emergence of new entrants (-0.07, 47.23%) ■ Although the situation has improved, but 46.6% entrepreneurs mentioned that well- developed and deep clusters remained at poor state (-0.18; 46.6%) 42#43IV.6 Competition Buyers' decision in the market is not necessarily taken place based on their competitive behaviour ☐ Buyers' choice regarding products has improved - about 67.6% buyers fairly make their purchasing decision based on product quality aside from product price (0.81) On the other hand, 48.6% buyers somewhat do not consider company commitment to decent work standards and wages (-0.44, 48.6) but the severity is lessen compared to the previous year The perception has worsened in case of buyer's purchasing decision based on product's impact on health, environment and diversity issues ◉ ◉ 44.3% buyers somewhat do not consider product impact on health, mental health and well-being (-0.43, 44.3%); 59.2% buyers somewhat not considered product impact on the environment and nature (-0.96, 59.2%); ■ 59.2% buyers do not make purchasing decisions based on somewhat company commitment to diversity, equity and inclusion (-0.77, 59.2%) Finally, the respondents indicated that individuals can not share any information or data between the firms (-0.35; 55.6%) It has also been observed that the company's information or data is restricted for public dissemination 43#446.0 4.9 5.0 4.0 3.2 3.0 2.0 00 1.0 0.0 Bangladesh IV.6 Competition Cross Country Comparison on Quality of Competition 4.2 3.8 India 5.2 5.3 China 5.1 4.6 Vietnam 5.3 3.3 Thailandd ■Buyer sophistication on product performance ■Buyer sophistication on product impact on health, mental health and wellbeing ■Buyer sophistication on company commitment to diversity, equity and inclusion State of cluster development ■Companies embracing disruptive ideas ■Buyer sophistication on environment and nature ■Buyer sophistication on company commitment to decent work standards and wages ■Extent of market dominance ■SME effect of taxes and subsidies on competition ■Data portability between firms Growth of innovative companies Bangladesh's performance is exceptionally good and close to most of the competitive countries in case of buyer's satisfaction on product performance In none other indicator the country is near to competing countries It is relatively behind in case of extent of market dominance issues 44#45IV.7 Business Operations, Governance and Innovation Somewhat disagree that companies participate in mutually beneficial collaboration on R&D (69.4%-67.1) Somewhat relatives or friends hold senior management positions in companies (41.1% → 50%) -0.31 Somewhat disagree that businesses and universities collaborate on R&D (74% 42.5%) -0.03 People somewhat move to other parts of the country 0.07 to pursue professional opportunities (47.9% →57.5%) -0.85 2022 2021 Senior management delegate authority to subordinates is somewhat 0.01 high (35.6% 39.7%) Somewhat agree that companies nurture an internal culture of open 0.04 collaboration (46.6% → 37%) 0.04 Somewhat agree that there is a culture of taking risks to pursue entrepreneurial -0.28 Somewhat disagree that companies embrace risky or disruptive business ideas (52.1% → 45.8%) 45#46IV.7 Business Operations, Governance and Innovation Largly disagree that companies give equal opportunities to rise to positions of leadership to those who identify as LGBTI (75%-76.1%) Somewhat agree that companies give equal workforce opportunities to Women (39.7% 26.02%) 0.26 2022 Somewhat agree that companies give equal workforce opportunities to those 0.290 from a typically disadvantaged religious, ethnic or racial background... Somewhat disagree that companies give equal opportunities to rise to positions of leadership to those with disabilities (67.1%-32.9%) Somewhat agree that companies give equal opportunities to rise to positions of 0.01 leadership to low-income parents (39.7%-22.2%) -1.54 0.13 -0.99 -0.74 -1.27 2021 Somewhat agree that companies give equal workforce opportunities to born to low-income parents (39.7%-27.14%) Somewhat disagree that companies give equal workforce opportunities to those with disabilities (66.2%-61.44)% Somewhat agree that companies give equal opportunities to rise to positions of leadership to those from a typically disadvantaged religious, ethnic, or racial... 0.51 0.03 Somewhat agree that companies give equal opportunities to rise to positions of leadership Women (43.84%→17.6%) Largly disagree that companies give equal workforce opportunities to those who identify as LGBTI (70.8%→62.5%) 46#47IV.7 Business Operations, Governance and Innovation Somewhat disagree that companies account for the impact of their own local Somewhat disagree that companies account for the impact of their own local production facilities on Environment and nature (57.7% 56.17%) production facilities on Diversity, equity and inclusion -0.56 (59.4%-54%) -0.56 -0.54 Somewhat disagree that -0.39 companies account for the -0.32 impact of their own local production facilities on Decent work standards and wages (49.3%-50%) 2022 2021 Somewhat disagree that companies account for the impact of their own local production facilities on Health, mental health and well-being (60%-52.11%) Somewhat disagree that companies account for the impact of their own local production facilities on Provision of reskilling and upskilling (54.9%-50%) 17 47#48IV.7 Business Operations, Governance and Innovation ■ A considerable improvement is observed in case of performance of business operations during 2022 though government related issues are remained at low level Better performance in business operations are observed in cases where companies somewhat nurture an internal culture of open collaboration (0.04, 37%); management somewhat delegating authority to the subordinates (0.01; 39.7%) companies somewhat embracing risky or disruptive business ideas (-0.28; 45.8%); companies taking risks to pursue entrepreneurial projects (0.04, 40.3%) Corporatization in management practices is highly important. Companies should maintain a business continuity plan to avert systemic and operational risks The business culture is somewhat changed positively compared to previous year though at low level in the following indicators- Businesses and universities somewhat now collaborate on R&D (-0.03, 42.5%);, companies somewhat participate in mutually beneficial collaboration on R&D (- 0.85, 67.1%) However, perception is deteriorated in some of the cases About 50% respondents replied that relatives and friends without having necessary merit holding senior management position (-0.31; 50%) This indicates lack of professionalism in the corporate sector of Bangladesh A number of new indicators are added in the EOS 2022. However performance is poor on those indicators - Public reporting of companies on various issues are somewhat poor public reporting on environment (-0.7, 56.2%), social (-0.63, 58.3%) and governmental (-0.38, 51.4%) issues#49☐ IV.7 Business Operations, Governance and Innovation Marginal but positive changes is observed in developing inclusive workplace environment Companies somewhat giving equal workforce opportunities to woman (0.26, 26.02%), opportunities to rise to positions of leadership to those from a typically disadvantaged religious, ethnic, or racial (0.51, 30.1%); those with disabilities (-0.99, 61.4%) except those who identify as LGBTI (-1.54, 76.1%) There is a decline in perception on companies give equal opportunities to rise to positions of leadership Women (0.03, 17.6%) Bangladesh ranked 71st out of 146 countries on the Global Gender Gap Index 2022 with a score of 0.714. ◉ Women in Bangladesh saw a decline in overall gender parity in 2022 from 2021 when Bangladesh ranked 65th Curiously for people who born to low-income parents there is a decline in both aspect of giving equal workforce opportunities (39.7%→27.1%) and equal opportunities to rise to positions of leadership 49#50IV.7 Business Operations, Governance and Innovation 6.0 5.0 4.3 4.0 3.0 2.0 1.0 0.0 Cross Country Comparison on Business Operations, Governance And Innovation Issues 5.3 5.1. 4.9 4.7 4.4 4.2 Bangladesh Reliance on professional management Collaboration within a company 3.5 3.4 India China Willingness to delegate authority Internal labour mobility Vietnam Thailand ■Companies adaption to crisis University-industry collaboration in R&D Inclusion of women in workforce Inclusion of those from low-income backgrounds in the workforce ■Inclusion of those who identify as LGBTQI+ in the workforce ■Inclusion of Those born to low-income parents in the leadership Inclusion of Those who identify as LGBTI in the leadership ■Public reporting of environmental, social and governance metrics: Environmental impact Public reporting of environmental, social and governance metrics: Governance Oversight of production impact on Health, mental health and wellbeing Oversight of production impact on Decent work standards and wages Attitudes towards entrepreneurial risk Collaboration between companies Inclusion of all religious, ethnic or racial backgrounds in the workforce ■Inclusion of those with disabilities in the workforce ■Inclusion of Those from a typically disadvantaged religious, ethnic or racial background in the leadership Inclusion of Those with disabilities in the leadership Inclusion of women in leadership ■Public reporting of environmental, social and governance metrics: Social impact Oversight of production impact on The environment and nature Oversight of production impact on Provision of reskilling and upskilling Oversight of production impact on Diversity, equity and inclusion Bangladesh is behind in almost all indicators related to business operation and governance compared to other comparable countries It's performance is relatively better in cases of inclusion of disadvantaged peoples in working opportunities It's performance is poorer in case of opportunities to LGBTQ people 50#51IV.8 Building Human Capital Somewhat disagree that current education system meet the Maths and sciences skills needs of a competitive economy... Somewhat disagree that primary education system meet the needs of a competitive economy (55.6% →58.3 %) -2022 Somewhat disagree that secondary non-vocational education system meets the needs of a competitive economy... Somewhat disagree that current education system meet the Digital and technology skills needs of a competitive economy... -0.21 0.34 -0.67 -0.79 -0.21 -2021 Somewhat disagree that Vocational education system meet the needs of a competitive economy (40.3%-50%) Somewhat disagree that current education system meet the Collaboration and self- management skills needs of a... -0.94 -0.56 -0.77 Somewhat disagree that current education system meet the Innovation and creativity skills needs of a competitive economy... -0.30 Somewhat disagree that the tertiary education system meets the needs of a competitive economy (51.4%→49.3%) Somewhat disagree that the current education system meets the Global citizenship and civic responsibility skills needs of a... 51#52Companies perceive human capital expenditure to somewhat to minimize cost (60%-62.5) IV.8 Building Human Capital education system meet the needs of a competitive economy (59.7% -> 61.7%) -0.58 -0.68 -0.70 -0.52 Somewhat disagree that government invest in mid- career reskilling and upskilling opportunities (69.4%→57.2) 2022 2021 Companies somewhat do not invest in training and employee development (62.5% → 67.1) 52 42#53IV.8 Building Human Capital Business perception regarding human capital is rather limited Entrepreneurs have agreed that the current education system is still behind in complying with the needs of the competitive economy (-0.68; 61.7%). A number of factors are found to be improved when compared to the pre-pandemic period 58.3% of respondents somewhat agree that primary education still lags behind in meeting the needs of a competitive economy (-0.67) 67.1% of respondents perceived that companies are not investing enough in the training and development of the employees (-0.52) and 62.5% of respondents have the opinion that companies invest on human capital expenditure to minimize costs (-0.58) Further decline is observed in the basic level of education and human resource development Moderate improvement has been seen in tertiary education and professional skill development though it still belongs in the negative zone 49.3% of respondents perceived that tertiary education system somewhat did not meet the needs of the competitive economy (-0.30). Challenges are observed in the case of vocational education (-0.21; 50%); non- vocational education (-0.79; 66.7%) Curriculum development, improvement of teacher's skill and quality, orientation with international skill development system, standardization of national skills under NSQF, more public investment on vocational and non- vocational institutes are highly essential. 53#54■ IV.8 Building Human Capital In terms of skill development, significant improvement is required in the number of indicators ■ The system is yet to meet the digital and technological skill needs of the country (-0.21; 43.7%) It is somewhat not meeting the innovation and creativity skills (-0.74; 58.3%) or the collaboration and self-management skills needs (-0.71; 59.7%) Current education system is still not meeting the global citizenship and civic responsibility skills needs of a competitive economy (-0.77; 59.2%) The government is not investing enough in the mid-career reskilling and upskilling opportunities (-0.70, 57.2%) The current education and skill development systems are not conducive to creating human capital that can meet the needs of digital technologies, creativity skills and self-management skills, etc. Government intends to move from 'Digital' to 'Smart' Bangladesh by 2041 through building necessary infrastructure and institutions (e.g., smart government, smart citizen, smart economy and smart society) However, it is important to review of various initiatives undertaken for 'Digital Economy' development with a view to better understand their achievements and weaknesses Such review will help deciding the 'Smart' Bangladesh related activities.4#556.0 5.0 IV.8 Building Human Capital Cross Country Comparison on Quality of Human Capital 3.9 4.0 3.4 3.4 3.1 3.0 2.0 1.0 0.0 5.2 4.8 4.5 4.5 4.0 3.7 Bangladesh ■Quality of the educational system Quality of secondary education Quality of tertiary education India China Vietnam Thailand ■Quality of primary education ■Quality of vocational training Educational system to teach skills for global citizenship and civic responsibility ■Educational system to teach innovation and creativity skills Educational system to teach digital and technological skills Extent of staff training ■Companies' perception of human capital spending ■Educational system to teach collaboration and self-management skills ■Educational system to teach maths and sciences skills ■Country investment in mid-career training Bangladesh is behind in human capital development compared to other competing countries Its performance is relatively better in case of education system to teach digital and technological skills It is behind most in case of global citizenship and civic responsibility 55#56IV.9 Working and Employment 2022 -2021 Labour-employer relations are somewhat cooperative ( 34.7% →25%) The online labour platforms made somewhat improve working conditions (41.5-19.4%) 0.03 Regulations related to the hiring of foreign labor are somewhat not restrictive (41.4% → 18.1%) 0.08 0.17 Somewhat agree that companies find people in the local labour market with the skills required to 0.38 fill their vacancies (41.7% → 29.2%) Somewhat difficult for companies find people by hiring foreign labour with the skills required to fill their vacancies (36.9%→41.8) Somewhat disagree that female and male workers take equal time off to care for children and the elderly (66.2-60.6%) -0.31 -0.77 -0.21 -0.56 Somewhat disagree that companies offer flexible working arrangements such as remote and part time work (55.6-54.9%) Regulations are somewhat allow flexible hiring and firing of workers (42.9% -→ 22.2%) 0.01 0.29 Average pay is somewhat not reflect to employee productivity (52.8% → 45.8%) Somewhat agree that wages are equal between low-paid workers 0.71 and high-paid workers (58.3%-32.9%) For similar work, wages for women somewhat equal to those of men (40.3% → 23.9%) 56#57IV.9 Working and Employment of the population have sufficient access to the Childcare and pre- primary education (53.4%→24.3%) 0.09 Somewhat agree that have opportunity to improve individuals economic situation through personal efforts (39.4% →19.7) Largly disagree that all members of the population have sufficient access to the Unemployment income, training and re- employment support... -0.44 0.17 -1.42 Somewhat disagree that all members of the population have sufficient access to the Public transportation (43.1%→50.7%) Somewhat disagree that all members of the population have sufficient access to the Physical healthcare (48.6%→50.7%) -0.44 -0.99 Somewhat agree that 921 members of the population have sufficient access to the Eldercare (71.2%-64.8%) -0.12 Somewhat agree that all members of the population have sufficient access to the Education (45.8%-48.5%) -1.30 -0.30 Somewhat disagree that all members of the population have sufficient access to the Housing (65.3%-66.2%) Largly disagree that all members of the population have sufficient access to the Mental healthcare (72.2% 52.1%) 40 57#58■ ■ IV.9 Working and Employment Working and employment have experienced mixed trends during the post-covid period A number of indicators have experienced positive changes in 2022 - companies somewhat find people with skills required to fill their vacancies (0.38; 29.2%), regulation related to hiring and firing of workers (0.29, 22.2%), improved online platform (0.03, 19.4%), somewhat sufficient childcare and pre-primary education (0.09, 24.3%), a better opportunity to economic situation through personal effort (0.17, 19.7%) 25% mentioned that labour-employer relations are somewhat cooperative, and it has improved (0.17) - reflecting a better interaction, discussion and negotiation happened during the pandemic period Performance deteriorated in case of a number of indicators including- Somewhat difficulties in hiring foreign workers (-0.31, 41.8%), unequal wage structure for man and women (0.01, 23.9%), insufficient access to public transportation (-0.44, 50.7%) Majority of people do not have sufficient access to unemployment income, training and re-employment-related support (-1.42; 56.3%), eldercare (-0.99; 64.8%) and mental healthcare (-1.30; 52.1%) and sufficient access to education (-0.12, 48.5%) Bangladesh is confronting challenges of not having a universal social protection scheme ◉ Taking precedence of other countries, the Universal Pension Management Bill has passed in January, 2023 Similarly, employment insurance and unemployment insurance schemes need to be introduced in a phased approach 58#596.0 5.0 4.0 3.0 2.0 1.0 0.0 IV.9 Working and Employment Cross Country Comparison on Quality of Working and Employment Issues Bangladesh ■Ease of hiring foreign labour India ■Ease of finding skilled employees in local labour market ■Wage polarization ■Hiring and firing practices ■Equal care leave ■Cooperation in labour-employer relations Access to Eldercare Access to Housing Access to Public transportation ■Accessibility of healthcare services China Vietnam Thailand ■Fill vacancies by hiring foreign labour ■Pay and productivity Wage inequality between men and women Flexibility of working arrangements ■Impact of the online gig economy on working conditions ■Access to Childcare and pre-primary education ■Access to Primary, secondary, tertiary and lifelong education Access to Mental healthcare ■Access to Unemployment income, re-training and re-employment support ■Social mobility Bangladesh is better performed in four indicators compared to its competitive countries which include wage polarization, co-operation in labour-employer relationship and easing of finding skilled employees etc Its performance is poor in case of access to unemployment income, retraining, and re-employment supports 59#60IV.10 Managing the Economic Recovery and Risks After the pandemic crisis the recovery of the economy has become a major concern ◉ 52% of businessmen perceive that the Covid-19 vaccination program organized by the government is largely satisfactory (1.64) 32.8% of businessmen responded that the economic growth and revival strategy of the country is not so effective (-0.01; 32.8%) 55.7% of businesses opined that the government's effort to support private sector productions is somewhat inadequate (-0.43) ■ 47.1% of respondents somewhat disagree that the government support market demand through fiscal incentives (-0.47) 44.1% of businessmen perceived that money laundering through various channels is largely pervasive (-1.16) Government measures regarding money laundering is highly inefficient 42% expressed their view that a large part of economic activities are undocumented and unregistered 20% indicated that businesses are using internet for selling their foods and services (0.13) 60#61IV.10 Managing the Economic Recovery and Risks ■ According to the businessmen the Padma bridge would bring multiple benefits to the economy. These includes- Some new supply chains (64.4%) Higher level of employment generation in the North-West part (56.7%) Moderate rise of availability of skilled manpower (58.3%) Positive Aspects of the Padma Bridge 8.33 16.95 31.03 33.9 56.67 Availability of skilled Overall increment of manpower for Foreign Direct Non-firm Agro activities business Investments Access to finance for SMEs in the south- west part Employment generation in the south-west part 61.02 64.41 Investments in the Develop new supply south-west part chains ■ There is a deficit of high-quality and professional training services in the country (-0.67, 61.9%) The government's negligence towards protecting the environmental and natural assets were not appreciated either (-0.99; 66.1%) and so the cultural heritage assets are not adequately protected (-0.53; 56.9%) Bangladesh has ranked 162nd out of 180 countries in the 2020 Environmental Performance Index (EPI) (2020) ■ 64.8% businessmen expressed their views that government is conducting timely updates of legal frameworks (-0.89) 61#62IV.10 Managing the Economic Recovery and Risks - According to the businessmen major lessons for Bangladesh from the Sri Lanka debt crisis are (a) avoid undertaking unnecessary large projects (59.5%); (b) need to promote export diversification 944.6%) and (c) avoid taking bulk loans from a single lender (32.4%) and enhancing private investment (32.4%) Lessons of Sri Lanka Crisis for Bangladesh Avoid undertaking unnecessary large projects Need for export diversification Avoid taking bulk loans from a single lender Enhancing private investment Require strong revenue collection Accumulating higher foreign reserve 59.46 44.59 32.43 32.43 29.73 29.73 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 Ukraine-Russia War has a number of adverse impact on Bangladesh economy. These include These include among others- Rising cost of production (53.1%), uncertainty in import of final goods (32.8%), higher cost of imported raw materials (39.1%) and difficulty in international transactions (37.5%) International transactions, 37.5 Demand from foreign buyers, 17.2 Exports of final goods, 10.9 Adverse Impact of Ukraine-Russia War Import of raw materials, 39.1 Cost of production, 53.1 Imports of final goods, 32.8 Ocean based transportati on, 29.7 62#63IV.10 Managing the Economic Recovery and Risks There is a deficit of high-quality and professional training services in the country (-0.67, 61.9%) Businessman expressed their opinion that government should explore more gas fields (22.6%) to address the shortage of gas ◉ Other measures stop illegal gas supply (19.67%), and decline dependency on gas for electricity production (15.2%) 57.63% of businessmen indicated that inflation affected their business (-0.75%) Companies suffer a number of skill-related difficulties. These include- Poor work ethic (14.55), Lack of critical thinking (13.9%), lack of creativity (11.1%) The constraints with the potential to hinder the growth of new markets (see next slide) include - (a) lack of initiatives and financing from the public sector; (b) lack of innovative breakthrough; (c) lack of skills and talents; (d) lack of needed complementary infrastructure. 63 33#64IV.10 Managing the Economic Recovery and Risks CONSTRAINTS WITH THE POTENTIAL TO HINDER THE GROWTH OF NEW MARKETS Lack of initiative and financing innovative breakthrou from the Lack of Lack of skills and talent gh public re Lack of Lack of needed legal complemen framework tary s for the infrastructu product or asset Lack of clear Lack of fiscal space Lack of mature firms to and private market reliably sector a commercial standards produce financing products sector ly viable market 16.16 15.66 14.65 12.63 12.12 10.61 6.57 5.05 4.55 Lack of demand to sustain Lack of agreement on the value of the product or asset 2.02 64#65☐ IV.10 Managing the Economic Recovery and Risks Businessmen have identified major technologies for business for the next ten years (next slide) ■ 39.7% indicated that Bangladesh's major technologies would be power storage and generation in the next ten years ■ Given the ongoing fuel crisis and rise in the price of electricity and gas, a major technological focus for Bangladesh would be renewable energy and energy conservation-related technologies ■ 36.5% indicated that in the future, E-commerce and digital trade, education & workforce development would be the second most strategic important technologies. Covid-19 opened a new door to digitalize different sectors of Bangladesh. ■ 3D and 4D printing, agriculture, and health technologies would be other important areas of focus, given the rise in the per capita income, shortages of skilled labour force and gradual rise in the demand for different services ■ A major future policy focus is how these new technologies would be accommodated without having an adverse effect on employment 65#6639.7 Power storage and generation E-commerce and digital trade Education and workforce development 3D and 4D printing... 36.5 36.5 20.6 Agriculture Technologies Health and care technologies 19.0 17.5 Robots, non-humanoid.. 17.5 Biotechnology 15.9 15.9 15.9 Environmental management... Quantum computing Robots, humanoid 11.1 Climate change migration technology (Energy,... 11.1 Digital platforms and apps 11.1 Distributed ledger technology(e.g.blockchain) 9.5 Encryption and cyber security 9.5 New Materials... 6.3 Artificial Intelligence(e.g. machine learning,... 6.3 33 83 Water-related adaptation technologies(e.g.... 6.3 Augmented and virtual reality 4.8 Internet of things and connected devices 4.8 Big data analytics 3.2 Text,image, and voice processing 3.2 Cloud computing 1.6 Satellite services and space flight 1.6 Other(free text field) 1.6 Nanotechnology 0.0 Biodervisitry protection technologies 0.0 8888 Electric and autonomous vehicles 0.0 Cryptocurrencies 0.0 66 IV.10 Managing the Economic Recovery and Risks Strategically important technologies for Bangladesh in the next 10 years In percentage#6760.0 48.4 50.0 43.8 37.5 40.0 30.0 20.0 10.0 0.0 32.8 IV.10 Managing the Economic Recovery and Risks TECHNOLOGIES MOST LIKELY TO GENERATE NEW MARKET OPPORTUNITIES Education Agriculture, forestry, and fishing Advanced manufacturing Informationa and technology services Accomodation, food and leisure services 18.8 17.2 14.1 12.5 12.5 10.9 10.9 10.9 9.4 7.8 6.3 Employment, education and training services Medical and healthcare services Business Support and premises maintenance... Government and public sector Energy, technology and utilities Financial services and capital markets Supply Chain and Transportation Telecommunications Electronics Water and Waste Management Research, Design and Business Management Services In percentage 4.7 4.7 4.7 3.1 3.1 1.6 1.6 1.6 1.6 Oil and Gas Production of Consumer Goods Retail and Holesale of Consumer Goods Personal Care, Wellbeing, and Repair Services Care and social work services Real Estate Rental, Reservation and Leasing Services Mining and Metals ■ According to the entrepreneurs, the technological shift in some sectors would contribute to new market opportunities. These include- Agriculture, forestry & fishing, advanced manufacturing, information & technology services, accommodation, food & leisure services, and education would be most affected by the technological upgradation 67#68V. Conclusion 68#69V. Conclusion Bangladesh's business environment did not show progress during 2021-22- either it was stagnated, or it was deteriorated compared to the previous year Corruption remains the most problematic factors for doing business for majority of enterprises though the severity of its impact has been gradually shared with other structural and newly emergent problematic factors ■ The other major problematic factors include inadequate infrastructure, limited access to finance and inefficient bureaucracy ■ The emerging factors include inflation, foreign currency instability and policy instability - hence the challenges are multiplied through new factors ■ A number of emergent global economic, social, technological and environmental risks that need to be taken into account by Bangladesh at least in the medium term (see slide 16-17) ■ The government should provide importance and put necessary discounts emergent on those risks in formulating and implementing different policies, strategies, plans and operations targeting long term competitiveness, productivity enhancement, ensuring sustainability, addressing climate vulnerabilities and ensuring green growth and clean development#70☐ ◉ V. Conclusion Institutional inefficiencies and weaknesses have further worsened though some improvement has taken place sporadically ■ Such institutional weaknesses have a discriminatory adverse impact on SMEs A major reform needs to be ensured in case of public institutions dealing with private investments through better transparency, accountability, efficiency Major political parties should commit such reforms in their upcoming national election manifesto Surprisingly, businessmen still suffer from poor infrastructure despite having substantial investments over the last decade through some positive changes are discerned (e.g. water supply) A major focus should be provided on improvement in efficiency in infrastructural facilities, urban city development with less pollution and traffic, clean energy development Public investment with the support of development partners and FDI needs to focus on green city development, clean energy development, waste management, industrial pollution control etc. Businessmen are worried about the safety and security-related issues concerning organized crime, climate-related business risks, poor quality services of law enforcement agencies, social and political unrest These issues need special attention particularly in a year just before the next national election. Institutional reform is needed for ensuring better services of law enforcement agencies 70#71V. Conclusion Financial sector needs major overhauling which could be initiated as part of complying with IMF loan conditionality amendment of bank company act, - lifting the cap on lending rate to ensure better access for SMEs, transparency in outstanding loan, the effective oversight role of the central bank, security and exchange commission (SEC) and Insurance Development and Regulatory Authority (IDRA) Competitive environment in the businesses has further deteriorated due to lack of proper practices of corporate governance, weak regulatory oversight and lack of corporate ethics • • • The Competition Commission, the Consumer Rights Protection Division of the MoC, Central Bank, the NBR and the Ministry of Finance should play due role in ensuring competition in the market Companies playing the role of 'dominant market player' needs to be regularly monitored in their operations in different segments of the markets and supply chains Inclusive supply chain in major sectors needs to be developed with the assured presence of SMEs in each segment of the supply chain Business-related information needs to be disclosed in an integrated information and data system to review the operations of the market players in the supply chains 71#72V. Conclusion Human capital development is yet to become a mainstream activity of the government • In order to ensure a breakthrough public and private investment (including FDI) is needed in digital and technological development, skill development, innovation and creativity improvement A thorough review of 'digital Bangladesh' related activities is needed in order to identify the successes, weaknesses and challenges. • ● Such a gap analysis will help to better design the activities under the new initiative of the government called 'Smart Bangladesh' A number of technological breakthrough will be required in the case of energy, digital trade, 3D/4D, agriculture and health technologies FDI should get priority along with local private investment Major investment breakthroughs will be required in innovative ideas, competitive infrastructure, legal infrastructure, fiscal space and skill development and talent hunting 72#73Thank You!