Concept of political-legal environment:

The political-legal environment is a combination of a lot of factors such as the current political
party in power, the degree of politicization of trade and industry, the efficiency of the current
government, government policies, current legal framework, the public attitude towards the
economy, etc. This is a non-market factor but it can still greatly impact a business. The political-
legal environment is a combination of a lot of factors such as the current political party in power,
the degree of politicization of trade and industry, the efficiency of the current government,
government policies, current legal framework, the public attitude towards the economy, etc. All
these factors will shape the political-legal environment in which the firm has to operate and
compete. There are three main elements of a political-legal environment. Let us have a look. An
election year is an extremely important factor for the economy. This is why the type of
government governing at the centre and the state has a huge impact on the businesses. The
government decides all the fiscal policies, monetary policies, and taxation modules as well.So the
type of government in power has a huge impact on the economy and the firms that operate and
compete in the economy. Like for example, the current government has the Make in Bangladesh
initiative which is good for the manufacturing sector. A sound legal system is essential to the
success of any business. So a country must have a sound and functioning legal system with laws
that equally protect both consumers and manufacturers. There are various other matters like
company law, royalties law, patent law, intellectual property rights. International laws etc. that
also have a great influence on the business of firms. For example, the new GST laws are going to
have a significant effect on the businesses. Political stability in a country  is essential for a stable
economy and stock market. Also, various political groups also hold a lot of influence on
businesses and unions. So the political environment of a country is a major factor in the success
of a firm.

Impact of politica- legal factors on different industries:

Positive Neutral Negative

1. Government Pharmaceutical Yes

policy

2. Political Tobacco Yes

stability
 3. Corruption Banking Yes

4. Foreign trade Textile Yes

policy

5. Tax policy Agriculture Yes

6. Labour law Readymade Yes

Garments

7. Trade Automobile Yes

restrictions

Reasons:

Government policy: positive- pharmaceutical industry

The pharmaceutical industry in Bangladesh is moving forward with great potential as 98% of the country’s
total demand for medicine is being met by domestic institutions. In addition to meeting the domestic
demand, the companies also export medicines to several countries of the world. In the fiscal year of
2019-20, Bangladesh’s pharmaceutical export revenue was 136 million. Besides, Bangladesh ranks 71st
out of 134 countries in the world in terms of global pharmaceutical exports. Apart from allopathic
medicines, Bangladesh also produces homeopathic, unani, and ayurvedic medicines. At present, there are
about 257 pharmaceutical companies in Bangladesh which manufacture about 80 percent of generic
drugs. 

Political stability : Neutral- tobacco industry

The demand of tobacco does not increase or decrease for political stability. So, this factor has a
neutral impact on tobacco industries.

Corruption: Negative-banking industry

Discipline in the banking sector is apparently under strain. At the same time Criminal activities in bank
have increased. In absence of good governance, many banks have indulged in irregular activities and
corruption. Sensational stories are emerging from the banking sector. As a result, customers are losing
confidence. As no firm action has been taken against those responsible, these events are multiplying.
Apart from Sonali Bank scandal, the central bank has found cases of cheque forgery, investment fraud
and irregularities in some other banks.
Foreign trade policy: positive-textile industry
Low-cost and high-quality products that are produced on time, reliably and very competitively
with a skilled work force. A unique regional location for expansion into key Asian and other
markets. Access to large markets including the EU, Japan, and Canada. Clusters of companies
providing a local supplier base with depth in skilled labor, training, and technical development
facilities. In FY 2020-21, Bangladesh’s RMG exports grew 12.55 percent to $31.46 billion (out of
$38.76 billion in total exports) as demand in major markets in Europe and North America began
to recover from the demand shock induced by the COVID-19 pandemic.  Despite the challenges
posed by the global pandemic, global competition, factory safety issues, and infrastructure
deficiencies, the long-term outlook for the RMG sector remains positive.

Tax policy: positive-agriculture industry

The tax-base of Bangladesh has been narrow and inelastic which is reflected in the low tax-GDP ratio. In
1978-79 the ratio of taxes to GDP was 7.9 percent which is much below the level attained by some other
developing countries with comparable levels of per capita income. In spite of the fact that the larger part
of tax revenue arises from indirect taxes, the tax mechanism failed generally to capture the inflationary
gains and gains originating from speculative trade and business because of the simple nature of the
economy. The share of land revenue was only 1.19 percent of total tax revenue in 1980-81 which is very
low by any standard (GOB 1980; BBS 1981).

Labour law: positive-readymade garments industry

The RMG labour laws of Bangladesh require the management of an organisation to comply with
the detailed requirement mentioned in the Act and Rule with a help of a RMG Labour lawyer in
Bangladesh. Compliance with the RMG Labour Laws in Bangladesh is required for maintaining
suitable working conditions at the work places for the workers. It also ensures the degree of
compliance for inspection by the government authorities from time to time. There is a recent
report from Human Rights Watch which stipulates that, fire and safety factory inspections
continued in the garment industry following the agreement between big brands and Bangladesh
government.

Trade restrictions: positive-automobile industry

Automobile industry is one of the growing sectors in Bangladesh. Compared to
the last decade, the growth of the automobile industry has gradually increased
due to the socio-economic development and purchasing power of the middle and
upper middle class of the country. According to BRTA data, the number of
passenger car vehicles increased at a 5.43% CAGR rate from 2011-2020.
However, compared to other Asian countries, the passenger car penetration is
still very low in Bangladesh. There are only 2.5 car owners per 1000 population.
In India, 30 people among 1000 individuals owned a car at the end of 2018. In
Myanmar, about 12 people out of 1000 own a car. Higher tax rate on automobiles,
inadequate and narrow national highways, high traffic density, high price of fuels,
higher interest rate on private vehicle financing are responsible for the lower
number of car owners in Bangladesh. Due to the covid-19 pandemic, sales of
automobiles declined to its lowest in 7 years.