Study demonstrates link between good economic governance and local business environment
Dhaka and San Francisco, August 1, 2010 — The Bangladesh private sector is severely limited in its ability to grow and create jobs because of government barriers and constraints, according to an extensive study released today by The Asia Foundation. In a first of its kind survey in Bangladesh, 3,800 firms in 19 districts were asked to comment on the business-friendliness of their local authorities. They were polled on measures such as entry costs, transparency, informal charges, tax administration, and land security; and their provinces were then ranked in order of business friendliness. According to the 2010 Bangladesh Economic Governance Index, or EGI, Faridpur, Dinajpur, and Kushtia are the most business-friendly districts in Bangladesh. Tangail, Chittagong, Barisal, and Rajshahi are the least business-friendly.
Created by The Asia Foundation, the EGI is a tool to measure the business-friendliness of local governments and is already in use in countries across Asia, including Cambodia, Vietnam, Indonesia, Sri Lanka, and now, Bangladesh. The 2010 Bangladesh EGI is a collaborative effort between the Foundation and the Bangladesh Investment Climate Fund (BICF), managed by IFC (a member of the World Bank Group), in partnership with the U.K. Department for International Development and the European Union.
The survey was released to leaders in government and the private sector in a symposium on August 1, 2010, in Dhaka.
The private sector in Bangladesh, particularly micro, small, and medium-sized enterprises (MSMEs), plays a critical role in generating income and employment opportunities. Conducted prior to the survey, a sample listing of more than 55,000 businesses in 19 districts confirmed that Bangladesh’s economy is dominated by micro-enterprises—more than 97 percent of the firms employ less than 10 workers, and less than 1 percent of the firms have 20 or more employees. The private sector in Bangladesh is dominated by men, with less than half of one percent of the firms owned by women.
“In Bangladesh, where The Asia Foundation has helped inform economic reform at the local district level for more than four years, business people often complain about the local economic and administrative environment,” said Syed Al-Muti, Director, Bangladesh Local Economic Governance Program at The Asia Foundation. “The 2010 Bangladesh EGI identifies good practices and highlights areas for improvement for local governments. The survey provides an economic baseline and strengthens the advocacy capacity of business leaders to engage local government officials.”
The Asia Foundation is recognized in the international community for using empirical data as a basis for economic reform and development. In Cambodia, the EGI is used as an official barometer to measure the country’s business-friendliness.
“The EGIs present a picture of what is working and what is not,” said Dr. Bruce Tolentino, Director for Economic Reform and Development Programs at The Asia Foundation. “Across Asia-Pacific, governments have embraced the EGIs as a sophisticated, empirical tool to measure local reform and government performance. As a result, healthy competition has grown between local provinces, and business leaders and entrepreneurs have relied on the EGI as a useful tool for deciding where to set up businesses.”