New company registration drops as uncertainty grips business climate 

Infographics: TBS

Wannabe entrepreneurs are facing an uphill battle as domestic political turmoil and global uncertainties have strangled Bangladesh's business landscape, with fewer companies registering and even fewer managing to take off.

Around 4,516 companies including public, private, one-person companies (OPCs) and partnership firms were newly registered in the July-December period of the current fiscal year. 

In contrast, about 8,314 new companies were registered during the same period of the last fiscal year, according to data from the Office of the Registrar of Joint Stock Companies and Firms (RJSC) — a company registration agency under the Ministry of Commerce.

In addition, the amount of investment proposals from new businesses saw a slump during the first six months, said a source at the RJSC.

When questioned about the drop in new company registrations, Commerce Minister Tipu Munshi acknowledged the potential influence of the ongoing political situation. 

He told The Business Standard that "the unrest and acts of violence committed by the opposition parties" might have instilled fear in some business circles, potentially contributing to the decline.

Bangladesh held its 12th general elections on Sunday, with the main opposition party BNP and its allies boycotting the polls.

"This figure [4,516] reflects new company registrations for the first half of the fiscal year and we anticipate significant growth in the remaining months, the minister said, expressing hope that the business climate will improve after the general elections.

A total of 10,523 companies were registered in FY23, 13,218 in FY22, 14,826 in FY21, and 11,128 in FY20, according to RJSC.

RJSC sources said that compared to the previous fiscal year, the number of new companies in the pipeline has also shrunk considerably. While around 3,000 applications were being processed by December 2022, this year saw only about 1,050 by 31 December 2023.

Talking to officials of 20 new companies revealed that despite completing registration in the last and current fiscal year, none of them had yet begun operations.

Al Mamun Mridha, secretary general of the Bangladesh China Chamber of Commerce and Industry (BCCCI) told TBS that the combined blow of the pandemic, the Russia-Ukraine war, and the country's political uncertainty have choked off the lifeblood of new businesses. 

He said that due to the ongoing dollar crisis, many companies are not able to open letters of credit (LCs) properly. Businesses are downsizing, workers are being laid off. 

Because of the volatile political situation, many people are hesitant to make fresh investments in this situation, Mamun Mridha said, adding that business leaders are waiting for foreign investment which will come if the situation improves.

Regardless of the election outcome, economists called for fostering a sound business environment through robust governance across all sectors, particularly among traders and financial institutions.

Investment proposals see a slump

The new companies have proposed investments of around Tk13,000 crore in the first six months of FY24. The amount was about Tk43,000 crore in the entire FY23. 

In addition, there were investment proposals of around Tk38,000 crore in FY22, Tk41,000 crore in FY21 and about Tk37,000 crore in FY20.

Revenue from company registration drops

According to RJSC data, Tk100 crore revenue was generated from company registration as of December of the current financial year whereas Tk198 crore was garnered in July-December of FY23. 

The RJSC received Tk270.61 crore in revenue in the entire FY23, Tk296.6 crore in FY22, Tk215 crore in FY21, and Tk182.99 crore in FY20.

Good governance a must for good business climate 

Economist Ahsan H. Mansur told TBS, "Overall, the government and agencies concerned have failed to ensure a business-friendly environment in the country. The situation might get worse [after the polls]. As a result, businessmen are not interested in making new investments. 

Not only domestic but foreign investment also dwindled due to a lack of good governance and political instability. Some entrepreneurs are making investments at their own risk. Post-election jitters are brewing and businesses are holding their breath, waiting for the dust to settle after the polls, he said.

While the global recession has undoubtedly played a role in Bangladesh's investment climate, focusing solely on external factors misses the bigger picture. Many countries are indeed navigating these challenges and thriving. What Bangladesh needs is not just resilience to external shocks, but also internal reform and the political will to drive it, the economist added.

Barrister Tanjib-ul Alam, a company law expert, argues that new business ventures have been dampened not only because of the political situation or the election but also the economic downturn, fueled by the global crisis and a significant dollar shortage. 

He points to disruptions in import and export caused by these external factors as a potential explanation for the decline.

Alam, however, expressed optimism for a post-election economic rebound.

Why not start operations despite registration

The Business Standard has talked to several officials of newly registered companies and found that they have not gone into production.

An RJSC official also told TBS that most of the companies that have received proposals this year have not started operations. 

MRK Food Production Company Ltd in Gazipur's Kalaikair is one such company that secured registration in March last year with an initial plan to invest Tk60 crore.

The company's Managing Director Naser Rahman told TBS, "The business environment is not favourable now. Our infrastructure construction work has been completed 40% and another two to three months will be needed to complete the rest. Our company initially plans to manufacture dry foods including biscuits, and breads. After that, we will produce ready-made frozen parata, singara, samucha and other items in stages."

"The machines required for the production of these foods have to be imported from abroad. However, due to the dollar crisis, we could not open the LC yet. Also, we know that there will be problems with food and raw material supply due to ongoing political unrest in the country. That is why, all activities have been stopped for now," Naser Rahman added. 

The chairman of another such company that got registration in June last year said the same thing.

Nazmul Ahsan Rony, chairman of Sabreen Oil Manufacturer Ltd in Rajshahi's Boalia, said, "The factory has been built and the necessary machines for the production and processing of oil were also installed. But we did not start operations fearing losses."

"We have been waiting for the election and we have plans to commence operations after the polls when the political situation in the country goes back to normal," he added.

What business leaders say

While expressing optimism for improved business conditions in the future, FBCCI President Mahbubul Alam pointed to the immediate difficulties faced by traders. 

He urged attention to streamlining the registration process at the RJSC and reducing bureaucratic bottlenecks to foster a more conducive environment for new business ventures.

"Businessmen always want a business-friendly environment, and for this, our organisation has taken various initiatives. But the government also needs to take initiatives and implement them properly," the FBCCI president added.

Jibon Krishna Saha Roy, director general of the Bangladesh Investment Development Authority (Bida), told TBS, "Bida's job is to create a favourable environment for business and we are working to ensure that businesses get all the access they need. However, who will invest and who will not — is not our concern."