December 15, 2015 / 4:33 PM / 2 years ago

World Bank says bureaucracy a major weakness of Bangladesh economy

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DHAKA, Dec 15 (Reuters) - Bureaucracy is a major obstacle to economic growth in Bangladesh, burdening businesses with extra costs and leaving them less competitive than companies elsewhere, the chief economist of the World Bank said on Tuesday.

"Bureaucracy hinders the process of business in Bangladesh while neighbouring countries like Singapore and South Korea are faster and more efficient," said Kaushik Basu, who is also a senior vice president of the bank, as he concluded a four-day visit to Bangladesh.

A business leader told Reuters separately that he had calculated Bangladesh's bureaucracy cost business $1 billion a year.

An intricate legal infrastructure means opening a business can involve at least a dozen government departments, said Ershad Ahmed, a former president of American Chamber of Commerce in Bangladesh - the "central bank, national board of revenue, port authority, ministry of labour, telephone department, energy and power company, related regulating bodies and so on."

And the World Bank admitted its own bureaucracy could cause problems, particularly in sanctioning loans, said Basu and Martin Rama, the acting country director of the World Bank in Bangladesh.

"We have been trying hard to narrow it down as soon and as much as possible," Rama told reporters.

Basu also said Bangladesh needed to increase investment in infrastructure sector. Rama said in the same press briefing that out of total assistance it provided so far, 40 percent was allotted to infrastructure, especially for energy and power.

Basu called on Bangladesh to increase taxation, which is lower relative to the size of the economy than in other Asian countries, even Nepal. At present, Bangladesh's tax-GDP ratio is 9.6 percent, compared with Nepal's 12 percent. In Bulgaria, the poorest member of the European Union, it's about 28 percent.

Basu praised several Bangladesh achievements, among them its foreign exchange reserves, growth of exports, economic growth, flow of remittance, ready-made garment sector, growth of investment and estimation of poverty.

Foreign exchange reserves are now $27 billion, equivalent to seven months of imports, according to Atiur Rahman, the governor of the Bangladesh central bank.

"This comfortable reserve has strengthened the confidence of investors and lenders, particularly abroad," Rahman said.

The reserves have helped to keep the exchange rate stable for several years, Basu said. (Reporting By Serajul Quadir, editing by Larry King)

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