Access to finance, labour and tax regulations hinders growth: WB survey

253 firms interviewed for the survey

Survey: Access to finance, tax administration and labour regulations are some of the major constraints hindering the private sector growth, an enterprise survey conducted by World Bank reveals.

While banks financed around 26 percent of working capital, the value of collateral was found to be 178 percent more than the loan amount. However, 42 percent of the 253 firms surveyed used banks to finance working capital. Only 3.4 percent of the investments were financed by equity or stock sales.

Unlike ease of doing business, which is more relevant to limited liability companies, the enterprise survey is more specific to private sector involving small, medium and large firms. But it is also based on perception of few respondents.

The surveys covered a broad range of business environment including access to finance, competition, corruption, crime, gender, infrastructure, and performance measures.

The World Bank has collected this data from face-to-face interviews with top managers and business owners in 253 firms.

As per the survey, 14.4 percent of the firms identified inadequate educated work force as the major constraint in doing business. About 26 percent claimed that it offers formal training to the workers.

In terms of labour regulation, more Bhutanese firms (14.7 percent) identified it as a constraint to business compared with the SAARC region average (9.8 percent) and global average of 11 percent.

For 13.8 percent of the firms, transportation posed a major obstacle for business.

In terms of getting electricity, the parameter on ease of doing business index reports that it takes 61 days to obtain electricity. However, the survey reveals that it takes slightly more than 21 days to get electricity connection.

Loss due to electricity outage, the survey reveals, amounts to 1.5 percent of the total annual sales of individual firms. But the duration of the typical outage was about 1.6 hours, against the 3.1 hours for the SAARC average.

While 7.1 percent of the firms identified tax administration as a major constraint, almost 16 percent recognized tax rates as a bigger constraint.

The survey also revealed that 7.1 percent of annual sales were lost due to theft or vandalism, only 1.2 percent of the firms view crime as major threat to business in the country, against the global average of 22 percent.

Corruption also poses hindrance for 1.5 percent of the business firms compared with 16 percent globally.

Meanwhile, 87 percent of the total sales are for domestic market, 2.4 percent exported directly and 10.7 percent of the sales are exported indirectly.

Tshering Dorji

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