SME Survey finds widespread bribery in Trade Licensing
- 52% of SMEs had to pay bribes
- 90% SMEs believe corruption is pervasive
- 71% or SMEs think resorting to corruption increases market competitiveness
- 61% of SMEs bypass regulations to avoid paying bribes
- Bribes most prevalent while acquiring and renewing trade license
- 78% of SMEs willing to form private sector coalition to lead anti-corruption effort.
The Center for Governance Studies (CGS), in partnership with the Center for International Business Enterprise (CIPE), has recently surveyed the current status of the SME sector of Bangladesh. The survey was conducted among 800 nationally representative SMEs, including 400 manufacturing and 400 service sector enterprises. The study took place between mid-October and mid-December 2021, and the results have been published on both CGS and CIPE web pages.
According to the study's findings, more than half (52.06%) of respondents reported having to pay a bribe to obtain essential services such as acquiring and renewing licenses, using public utilities, obtaining a Tax Identification Number (TIN), and obtaining a Value Added Tax (VAT) certificate in the year preceding COVID-19. In terms of perception, almost nine out of ten SMEs believe corruption is pervasive in the SME sector. A vast majority (62.4%) believe that corruption is well-rooted/integrated in the system, and an even higher number (71.3%) believe that resorting to corruption can increase market competitiveness. More than half of respondents believe that restrictive government regulations encourage corruption, and this opinion is especially more prevalent among smaller businesses. Because of these perceptions, the majority (61%) of surveyed SMEs have chosen to bypass regulations and operate informally.
Bribery was particularly prevalent in the services of acquiring and renewing trade licenses (36.4% and 31.8%, respectively). Two-thirds of individuals who paid bribes felt it was necessary to do so in order to acquire the services, and the second most popular reason was to save time. The license and registration authority (28.8%), the tax office (21.6%), the local government/City corporation/municipality (19.5%), the property registration office (13.5%), the Environmental Directorate (12.9%), and law enforcement agencies (10.6%) were the most frequently cited recipients of bribes. The data indicate that the offices where enterprises must interact for essential public services are the main locations of corruption.
According to the majority of respondents, the desire for money or possessions, as well as a lack of transparency at the higher government level, inspire this systemic corruption, but they also listed a slew of other contributing causes. The reasons most frequently stated by SMEs included enforcement of anti-corruption legislation (86.2%) and non-enforcement of anti-corruption regulations (79.5%). The lack of professionalism of public officials (77.4%), as well as their requests for kickbacks in contract awarding (73.9%), contribute to concerns on the demand side, while corporations seeking benefits by giving bribes or demanding special privileges (73.9%) encourage corruption on the supply side. Inadequate media coverage of corruption (72.8%) is another contributing factor, according to the respondents.
Bribery (77.9%) and the use of political influence (60.1%) are the two most commonly reported forms of corruption among SMEs. Extortion (46.3%), nepotism (43.9%), and excessive patronage (43.1%) follow the list. These types of corruption mirror the larger social and political situation, which generally affects the economic sector. Corruption in local government affects SMEs more than corruption in national government (27.6%). Bribery, relationships with influential people (68.4%), and networking with public officials are considered the simplest ways to obtain public services and survive illegally (68.4%).
Despite the prevalence of corruption, enthusiasm for submitting complaints to authorities remains low. Only 2.3% of the respondents have ever reported a complaint, yet more than 70% of those respondents reported a negative outcome to the complaint process.
Despite the government's repeated claims of a "zero-tolerance" policy, less than half of respondents (46%) felt local and national governments had taken steps to reduce corruption. Most of this group did not believe these actions had a positive impact. The corruption reporting mechanism was one of the primary concerns investigated in the government's anti-corruption process. Two elements were examined: effectiveness and ease of use. Both have yielded nearly equal numbers of divided responses. This suggests that the procedures were not appealing to SMEs. The diminishing protection of whistleblowers is another critical issue where the vast majority of respondents (72.8%) voiced dissatisfaction.
While the majority of SMEs (55.1%) were satisfied with the work of chambers of commerce and business associations in combating corruption in the public sector, more than 78% were willing to join a private sector coalition for collective action to promote business integrity and lead an anti-corruption effort.
The full survey report and several recommendations to tackle the issue can be found on the website of CGS and CIPE.
About Centre for Governance Studies-
CGS is a think tank based in Bangladesh conducting research and media studies on issues of Good Governance, Corruption, Human Rights, Democracy, and Development. The Centre was established to address the challenges for Bangladesh in coping with the rapidly changing national and global scenarios. The Centre aims at facilitating collaborative efforts among the academic community, government, private sector, civil society and development partners to improve the quality of governance, address the security needs of Bangladesh, foster the conditions for efficient and prudent utilisation of available resources towards poverty reduction, human resource development, and stabilisation of political and social order through increased democratisation, participation and sustainable economic development.
About Center for International Private Enterprise-
The Center for International Private Enterprise (CIPE) is an NGO working at the intersection of democracy, governance, and economic development. CIPE has nearly 40 years of experience designing, implementing, and evaluating projects worldwide that strengthen democratic governance, combat corruption, empower marginalized populations, and open space in closed political systems. CIPE is a core institute of the U. S. National Endowment for Democracy and a non-profit affiliate of the U.S. Chamber of Commerce and currently has more than 200 projects and grants with local partners in over 80 countries. Learn more about CIPE's work in Bangladesh and elsewhere at cipe.org.