RMG exporters pay up to 644% higher than official fees for essential permits: CPD

Bangladeshi apparel exporters often have to pay up to 650% or six times higher than the official fees to secure essential permits and renewal of licences due to "undocumented payments", according to a new study by the Centre for Policy Dialogue (CPD).

Citing data collected from a business corporation, the study said the company paid 644% higher than the official rate for a boiler licence. For bond licences, it paid 261% higher, and as for the fire licence, the cost was 114% higher.

The additional amount was 36% higher for factory establishment licence, 16% higher for trade licence, and 12% higher for export and import registration certificates, it said.

Presenting the findings at a seminar today, Khondaker Golam Moazzem, research director at CPD, said businesses frequently encounter "unofficial and unregulated fees, leading to financial strain and unpredictability in operational expenses".

These undocumented payments are perceived as necessary to expedite the licensing process, creating ethical and compliance dilemmas, he added.

The economist said through a survey among entrepreneurs, the CPD found that "high levels of corruption impact all business sectors, with 100% of large companies, 66.67% of medium-sized enterprises, and 61.9% of small and micro enterprises reporting it as a major issue."

He also said about 58.6% of businesses reported that bribes are common in the awarding of public contracts and licences.

Besides, anecdotal information shows that costs for securing essential permits can range from Tk50,000 to Tk1,00,000 more than the official fees, Moazzem said in his keynote presentation. Renewal of these licences, however, incurs additional expenses varying from Tk500 to several thousand, he added.

The official rate, however, was not mentioned during the seminar.

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), CPD and GIZ Bangladesh, jointly organised the seminar, titled "Business Related Barriers and Possible Way Out". 

Extended processing times

The timeline for obtaining and renewing licences often exceeds the official period, leading to significant delays, said Moazzem. 

For example, a trade licence renewal, which officially takes no more than seven business days, often spans 10 to 15 days due to inefficiencies and additional fees, according to the CPD research director's presentation.

Delays disrupt business operations, hinder expansion plans, and reduce investor confidence, he noted.

Due to complications, many businesses used to hire third-party agents to navigate bureaucratic hurdles and manage which also increased the cost of business, he said.

The economist also recommended making the process transparent with digitisation, as it could be utilised to reduce such corruption and undocumented payments.  

Businesses urge release from suffering 

FBCCI President Mahbubul Alam complained that many problems have to be faced while doing business in some sectors. "In particular, we have to suffer because of the complexities of legislation, port problems." 

In this situation, to compete with neighbouring countries, it is necessary to eliminate the complexity of taxes and duties in all sectors from small, medium to large, he said, demanding the release of traders from harassment. 

Alam said Bangladesh is lagging behind in the business index due to various complexities and rising costs. He said automation is the only solution, applicable from customs to VAT departments. 

The business leader noted that institutions like the Bangladesh Investment Development Authority (Bida) are often powerless. While Bida services are accessible, delays occur elsewhere, hindering progress. 

Concerns over accountability 

Jan Janowski, deputy head of the German mission in Dhaka, said that transparency, accountability, and collection of various "name and unnamed" tariffs have become serious concerns for German businessmen in doing business in Bangladesh.

He said that although Bangladesh has a workforce of much talent, this country has not yet become attractive to German investors. 

He further said the German government has started implementing a coordinated China-India strategy because of current geopolitical tensions. Many companies are figuring out how to reduce their dependence on China. 

"In Germany, this policy is known as China Plus One. That is, Germany is looking for new centres of production and wants to move out of China. Bangladesh could be that plus one or even more. But at the moment German investors are mainly going to India, Indonesia and Vietnam," he said.

Ahsanul Islam Titu, state minister for commerce, was the chief guest on the occasion, while Lokman Hossain Mia, executive chairman of the Investment Development Authority (Bida) attended as a special guest. FBCCI President Mahbubul Alam chaired the seminar.