"More than 85 percent of firms indicate that in their industry it is necessary to bribe the government officials to get things done," the survey report says pointing at a high level of corruption in interactions between the private sector and the state organs.

According to the survey titled "Firm Productivity in Bangladesh Manufacturing Industries", bribes take up 1.3 percent of sales on average in the ready-made garment industry while the other industries have to pay 0.65 percent of their sales.

The report mentioned that irrespective of their sizes, more productive firms have a larger ability to pay bribes to cut through bureaucratic hassles while less productive firms cannot do it.

The analysis used data from a survey conducted in between November 2004 and September 2005 on 575 firms in food, leather and footwear, pharmaceuticals, ready-made garment and textiles categories.

"Our positive effect of corruption on firm productivity suggests that indeed the industries and locations with more productive firms are more targeted by the government officials, thus the opportunities for bribe-seeking behaviour are larger and firms end up paying more bribes," it says.

Mir Nasir Hossain, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), however, disagrees with the World Bank on the findings of the study.

He observed that bribery does not have anything to do with the size of a company and it is not true that bribe can help increase productivity. Bribe does not in fact relate to productivity, he added.

As per the survey, the firms identified corruption, customs clearance, power outages, getting business licence and operating permits, frequent changes in government regulations and bureaucratic tangles as the major obstacles to productivity.

Besides, perceptions data show that the presence of crime in industries and locations hurts firm productivity.

Faced with recurring power outages, more than 80 percent of the firms in all industries own a generator, the report finds.

It says, "A firm belonging to an industry and location with one percent more power outages than other industry-location cells, has more than eight percent lower productivity."

"Overall, we can confidently conclude that the constraints to TFP (Total Factor Productivity) growth posed by poor electricity supply in Bangladesh are extremely severe," notes the report.

The findings also suggest that access to short-term finance like the one provided by an overdraft facility or a line of credit to address working capital and day-to-day business needs has a positive impact on productivity while the access to long-term finance has negative effect.

"These surprising findings may reflect inefficiencies of the banking sector in Bangladesh and deserve further analysis beyond the scope of this paper," the report says.

The study found that in relation to large-sized firms with more than 500 workers, firms of smaller sizes are more productive. Medium-sized firms (10-50 workers) are the most productive. On average, they are 32 percent more productive than the extremely large ones.

"Thus, in Bangladesh the larger firms are not the most productive. In fact, firms that are too large may suffer from inefficiencies in terms of coordination, management and supervision resulting from poor corporate management and a lack of qualified middle managers."

The findings suggest that foreign-owned companies in Bangladesh (10 percent of sample) have an edge over the domestically owned ones in terms of having better technology as well as better access to distribution and marketing channels and networks.

Khondkar Ibrahim Khaled, managing director of Pubali Bank Ltd, said it is not productivity, rather profitability that depends on bribe.

Citing an example, he said that evading tax substantially while spending a small amount in bribe for the custom officials often helps a company to improve its profitability.

He however agreed that companies might gain more from the short-term financial facility. Productivity from long-term loans could be severely hampered if a company borrows money from the nationalised commercial banks and the sponsors divert funds. In that case, efficiency of the bank concerned comes in question, he explained.

The FBCCI president too was of the opinion that interest rate in long-term loans should be changed. Previously, it was 11 percent but now it is 14 percent that may adversely affect the industries, he noted.