It’s time to adopt a specific policy for startups in Bangladesh

In recent times, startups have fueled economic growth in Bangladesh by generating wealth and boosting foreign investors, and it is high time that the government adopts a comprehensive policy to support this growth.

At first it was the act – Ludwig Wittgenstein quotes Goethe, misquoting the Apostle John.

Yes, the act (works or business) comes first, then the law or policy to regulate the business. And this has been the case for a country like Bangladesh since the beginning of its journey. As actors (doing business), we perform many actions without paying attention to the need for policies and laws. Startups are no exception to this.

The recent Russian invasion of Ukraine and the Covid-19 pandemic have caused a real surge in entrepreneurship and startup activity. The Kauffman Index of Entrepreneurial Activity (KIEA) projects that the rate of entrepreneurship in the United States is already well above the dot-com bubble.

Bangladesh is also in the race. Over the past five years, startups have grown rapidly in the areas of e-commerce, fintech, healthcare and education. Startups fuel economic growth by offering innovative new products and services to generate wealth. They are like catalysts of the economy.

Business organization law plays a crucial role in the development of the startup ecosystem. But until now, there has been no comprehensive startup policy in Bangladesh. The policy framework is important because it expresses a strong commitment from the government to help startups thrive and sustain themselves.

A policy also provides the legal infrastructure for entrepreneurs and venture capital (VC) companies to conduct their relationships smoothly.

Different industries have varying needs to effectively shape and manage their businesses, and state legislatures often develop dedicated business laws and policies to meet these requirements. This is not the case for local startups and the venture capital sector in Bangladesh. Venture capitalists and entrepreneurs find themselves confronted with generic policy structures that do not necessarily correspond to the unique business models of startups.

At the time of their launch, startups classify themselves as corporations. Although corporations include many types of businesses – both privately held and publicly traded entities – they are not suitable for structuring startups. It’s a fairly familiar scene in developing countries.

Managing funds for a startup business is one of the most difficult tasks. It is also the most complex phase of the business course.

There are many sources of financing at different stages of starting a business. In Bangladesh, there are many government initiatives to finance small and medium enterprises, including the Access to Information Program Innovation Fund, Prime Minister’s Office, ICT Division, Investment Fund and of entrepreneurship of Bangladesh banks and many private banks.

“Digital Bangladesh” is the government’s motto and the vision of the nation. The government has undertaken several projects since the ruling party came to power in 2009. These projects aimed to create a policy framework for investors to offer funds, infrastructure and knowledge to stimulate innovative ideas.

With the help of the Bangladesh Securities and Exchange Commission (BSEC), regulations were introduced to allow promising and loss-making startups to list on the country’s stock exchanges and offer IPOs, with the aim of increase the flow of investment to the sector.

However, even if we describe what we have in Bangladesh as a “startup ecosystem”, we do not have a real, pragmatic system.

Lately, initiatives have been taken to adopt a “start-up policy” and the relevant ministry started working on a draft regulation last year. This will help start-up businesses operate with a fluid set of laws and requirements. This will also encourage investments from startups through better incentives for investors.

The proposed project taught us that after a specific period, startups will be classified like any other standard business organization. But before that, businesses will get benefits in the startup category. Sources say that decision-makers are considering a duration of 10 years.

There are certain areas of the draft policy where policies need to be specific. Foreign direct investment is one such area. FDI has quadrupled in the last decade and to encourage investors, the government is also offering tax incentives.

Startups currently face many obstacles in an ever-changing industry. They find themselves stuck in administrative formalities. The process between introduction and approval involves unnecessary interruptions and duplication of procedures. Policy must facilitate this process.

The business-friendly Indian government is working towards creating a strong startup ecosystem in India through various initiatives. One of these initiatives is to create a ministry dedicated to supporting and promoting new businesses in the country.

Additionally, the Indian central government has introduced several startup programs to provide financial assistance to emerging startups and cultivate entrepreneurship. These schemes aim to strengthen the growth of startups by providing them with the necessary resources and support. Bangladesh is far behind India in this regard.

Startups apply many methods to improve their business and strive to meet their needs. If a policy is not specific, its implementation becomes inconsistent and unpredictable. Trade policies are vital and affect everything from legal responsibilities to positive public image. Policies ensure that everyone is on the same footing and receives the same treatment.

Comprehensive policy can also play a vital role in guiding and promoting Bangladeshi startups on the global stage. At the same time, the startup ecosystem must be fostered through industry-academia alliances to encourage innovation and develop talent from elementary levels.

Policies are not set in stone. They are living documents that can be modified according to business needs and evolving business processes. The economic trend is now too dynamic for a policy to be relevant for more than a year. However, we should not stand idly by.

Sketch: SCT

“>

Sketch: SCT