Abstract
This chapter assesses the nature of government—business relationships in Bangladesh and suggests the need for and nature of reform as the country approaches middle-income status. Much of Bangladesh’s remarkable economic growth since independence has come from output growth rather than productivity improvements. The export base is undiversified, with readymade garments accounting for more than 80% of exports, and five garment products accounting for 70% of garment exports. Bangladesh produces relatively simple products. It ranks low on the Harvard Growth Lab’s Economic Complexity Index with a rank of 108 in 2018, compared to 52 for Vietnam and 42 for India. Bangladesh needs to diversify its manufacturing and export base, increase productivity, and move toward more complex products. This will require a change in the incentive structure faced by businesses, which means a government that strives to enhance competition and impose market discipline on businesses and establishes a regulatory framework that upholds societal goals while keeping compliance costs low.
Some of the material included in this chapter is derived from opinion pieces written by the author. Citations are provided in the relevant sections.
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Notes
- 1.
Mahmood and Ali (2019).
- 2.
For example, the tax authority in Bangladesh, the National Board of Revenue (NBR), has been trying get businesses to obtain new Business Identification Numbers (BIN) to successfully mandate the use of online systems for VAT and e-BIN. However, no appropriate notice was circulated on this matter, which resulted in NBR extending the validity of the old BIN three times since 2017. Businesses were not informed on this policy and out of the 800,000 registered VAT businesses only 125,000 are e-BIN registered. Those businesses that did register in the system were only informed to do so by field-level NBR officials. Another example relates to Green Certified Companies. Such companies were supposed to pay corporate taxes of only 10% as per the Finance Act 2017, but for FY 2018–19 rates have been increased to 12%, without providing prior notice to businesses.
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Mahmood, S.A. (2022). Government—Business Relationships in Bangladesh. In: Khondker, H., Muurlink, O., Bin Ali, A. (eds) The Emergence of Bangladesh. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-16-5521-0_11
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