Ease of Doing Business: Agenda for Structural Reform

Bappy Rahman

28th May, 2019 11:29:17 printer

Ease of Doing Business: Agenda for Structural Reform

Ease of doing business is an index published by the World Bank. It is an aggregate figure that includes different parameters which define the ease of doing business in a country. It is computed by aggregating the distance to frontier scores of different economies. The distance to frontier score uses the ‘regulatory best practices’ for doing business as the parameter and benchmark economies according to that parameter. For each of the indicators that form a part of the statistic “Ease of Doing Business”, a distance to frontier score is computed and all the scores are aggregated. The aggregated score becomes the Ease of doing business index.

Indicators for which distance to frontier is computed include construction permits, registration, getting credit, tax payment mechanism etc. Countries are ranked as per the index. According to the World Bank’s “Doing Business 2019: Training for Reform” report, Bangladesh stands 176th out of 190 countries, for ease of doing business. The country was 177th in the ranking the previous year. Among South Asian nations, Bangladesh stands the lowest, with India ranking at 77, Bhutan 81, Sri Lanka 100, Nepal 110, Pakistan 136, Maldives 139 and Afghanistan 167, with Myanmar at 171.

Bangladesh should improve its position in ‘ease of doing business’ ranking for attracting more investment. Easy process for obtaining electricity connection, bank loan and land registration will help improve the position in ‘ease of doing business’ ranking. Recently a World Bank report titled ‘Doing Business 2019: Training for Reform’ said “the marginal change in position indicates that while the country has taken some initiatives to make doing business easier, the pace of reforms needs to be increased significantly”. According to the report, Bangladesh continued to invest in the electricity grid over the past twelve months. Since 2015, Bangladesh has increased the network capacity in Chattogram and Dhaka. And as a result, the distribution utilities in both cities are now able to accommodate more connection requests, reducing the time required for businesses to obtain a new electricity connection, from more than 400 days in 2014, to less than 150 days in 2018.

However, recently the government of the United Kingdom in their guideline paper ‘Doing Business in Bangladesh: Bangladesh Trade and Export Guide’ opined that corruption is the main barrier in Bangladesh to doing business though the country has huge business opportunities. The guideline paper also said that one of the biggest challenges facing United Kingdom companies in Bangladesh is how to avoid paying ‘speed money’. It added corruption affects many aspects of daily life in Bangladesh and is often cited as a barrier to private sector development.

It is not that the government hasn’t taken any steps to remove the bottlenecks. There are various initiatives including strengthening of government institutions, improvement of service delivery, and automation of various government service delivery systems such as the online tax identification number registration. It’s a good move that the government, as part of its reforms, enacted the One-Stop Service Act 2017 to facilitate services and reduce the cost of doing business for both foreign and domestic investors. The Bangladesh Investment Development Authority (BIDA) has started its online one-stop service (OSS) on a trial basis.

In fact, the government is working for transforming the country into ‘Digital Bangladesh’ by ensuring digitisation in all public services. Digitisation is essential for improving the ranking in the ease of doing business. Ease of doing business depends on different particular issues. Many issues of the doing business index are related to OSS. So, proper use of OSS will improve Bangladesh’s ranking in the World Bank’s global doing business report. Through the OSS, the potential investors would get necessary permissions for making investment and starting a business and get all paperwork done for receiving various utility services like power, gas, water and telephone from the centre after becoming fully functional. Bangladesh’s ease of doing business situation could not be improved without effective introduction of digitisation and online-based services as there are various limitations in providing services in the existing manual process.

Despite these government efforts, Bangladesh still lacks a vibrant and conducive business environment. As indicated earlier, Bangladesh needs more reforms to improve ease of doing business. But reforms only in paper will not help improving ease of doing business condition in the country; rather Bangladesh needs effective and need based reforms to attract investments. Policy makers should focus on those policy reforms which will directly impact ease of doing business improvement. The government should form a high-powered monitoring cell to track progress on ease of doing business as well as cost of doing business. All the concerned ministries of the government should have their priority task list for improving business climate and all the ministries should work in a coordinated manner for better result.

The new Export Policy 2018-21 should focus on product diversification, new market development and export growth. Bangladesh should take initiative to integrate Bangladesh with the ASEAN as well as the Regional Comprehensive Economic Partnership (RCEP) which is formed with 16 members’ countries – existing 10 ASEAN members and China, India, Japan, South Korea, Australia and New Zealand. Fiscal and monetary policies assessment and forecast need to be coordinated so that these policies support each other in ensuring macroeconomic stability and growth.

There is no doubt that Bangladesh has made incredible strides in the last decade. But the reality is Bangladesh got disappointing ranking in the Doing Business index. To improve in the ease of doing business index, government and concerned stakeholders have to have a proper planning for infrastructure development and increase budget allocation. At present, Bangladesh spends only 3.64 per cent of GDP in infrastructure sector whereas China spends 7 per cent, Vietnam 10 per cent, India spends 5 percent, Sri Lanka spends 5 per cent and the Philippines spends 5 per cent. To monitor the progress and timely completion of mega infrastructure projects and keep coordination among stakeholders, forming a high powered authority is urgently needed. The government should frame out special planning in the next 8th Five Year Plan to adopt newer technology in industries and to face the challenges of creating more employment opportunities.

(The writer acknowledges with gratitude the different sources of information.)


The writer is a Chinese Government PhD Fellow and Assistant Professor, Department of Public Administration, Jagannath University, Dhaka