A weak interface between the public agencies and the private sector hurts the small businesses at the district level, said a study launched yesterday.
It also revealed that most affected enterprises tend to take economic governance constraints as a given, and seek little assistance from local government officials or other actors.
These enterprises do not even initiate opportunities to engage with the public sector officials, found the study styled Economic Governance Index (EGI).
The Asia Foundation and Bangladesh Investment Climate Fund (BICF) jointly conducted the survey, first of its kind in Bangladesh.
The goal of the study was to understand and perceive how local enterprises think about the business environments, in which they start and operate their businesses.
Poor economic governance, inconsistency of regulations, entry cost, bribes, poor infrastructure and burdensome tax administration make the businesses hard at the district level, it said.
"Informal payments (bribes) discourage potential entrepreneurs, negatively affect the functioning and profitability of the existing businesses and distort incentives for both groups of entrepreneurs."
"Strong public institutions and social commitment are a must for a strong private sector-driven economy," said economist Wahiduddin Mahmud who chaired the report-launching programme at Sonargaon Hotel in Dhaka.
He said there are localised problems and policymakers will have an idea of these from the study.
Commerce Minister Faruk Khan spoke as the chief guest at the programme, also addressed by Mustafizur Rahman, executive director of Centre for Policy Dialogue.
The survey was conducted among 3,800 micro, small and medium enterprises in 19 districts between October 2009 and January 2010. The index looked at the quality of governance locally and highlighted the districts' strengths and weaknesses.
The survey ranked Faridpur, Dinajpur and Kushtia as the top performing districts in terms of business environments. Tangail, Chittagong, Barisal and Rajshahi were the lowest scorers.
Laura Watson, programme manager of BICF, said the study would serve as an important tool to assist the public and private sectors in improving local business environment.
"This diagnosis will identify areas where reforms are needed most and provide recommendations on practical steps," she said.
Mustafizur Rahman called upon the government to take actions on the outcomes of the report to facilitate district-level businesses.
He cited an example of Vietnam that introduced one-stop service centre for business registration in line with an EGI suggestion.
Faruk Khan said he would initiate steps to help disseminate information to the local businesses.
"I will personally see to the compilation of a guide to doing business at district, upazila and village levels," Khan said.
However, Wahiduddin Mahmud said these rankings do not reflect the real situation.
"More businesses, more problems."
Faridpur scored top because it has a little economic activities, whereas Tangail and Bogra scored low because they have more activities.
The survey interviewed 3,800 enterprises (220 from each district), and used data from published sources and public statistics on 10 sub-indices.
The sub-indices are entry cost, access to land and security of tenure, transparency, time cost of regulatory compliance, informal costs, participation, law and order, tax administration, dispute resolution and infrastructure.