Reforms in Ease of Doing Business to Accomplish Predictable Ranking

The Ease of Doing Business (EODB) is an index created by the World Bank Group experts to measure a country's status in terms of starting and operating a business. The index is considered as a universally accepted comparative benchmark of the business environment globally. The rankings are determined by sorting the aggregate scores on 10 topics, each consisting of several indicators, giving equal weight to each topic. The regulatory environment is more conducive to the starting and operation of a local business firm to be a high ease of doing business ranking. It applies to business enterprises, providing quantitative indicators on regulation including starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency.

Moreover, the Government of Bangladesh has set an ambitious target for its immediate improvement to drive doing business reforms including amendment of Companies Act, Bankruptcy Act and Arbitration Act. Two high level committees have been formed to monitor and facilitate Ease of Doing Business reform initiatives: National Steering Committee (NSC) headed by the Honourable Finance Minister and National Committee for Monitoring & Implementation of Doing Business (NCMID) headed by the Cabinet Secretary. The Honourable Prime Minister has set a target to achieve a double-digit ranking (99) by year 2021.

Hence, Bangladesh Investment Development Authority (BIDA) has been working as a coordinating agency with various Ministries, Departments, Associations and all stakeholders to strengthen Bangladesh's position in the 10 Business Facilitation Index to double digit by 2021. BIDA has signed 25 memoranda of understanding (MoUs) with different organizations to integrate with BIDAOSS platform. As of now, the BIDA has been providing 47 services through this platform including Name clearance and registration of organizations with the Registrar of Joint Stock Companies and Firms (RJSC), e-TIN registration, VAT registration with the National Board of Revenue (NBR), security clearance for foreign companies by the Security Services Division, electricity connections, Industrial Registration with BIDA (New and amendment), IRC Recommendation, Visa recommendation for categories PI, E, E1 VOA, (new and amendment), Work permit (new, extension, cancellation and amendment), Permission for branch/liaison/representative office (establishment, extension, cancellation and amendment), Land use clearance, issuing certificate of origin and membership certificate, environmental clearance certificate and online and Payment Gateway etc. BIDA offers 16 services while other 14 government offices will provide 31 services through BIDAOSS system. BIDA has a plan to expand to 154 services covering 35 agencies under a single umbrella without paying a single visit to government offices, Land use clearance, issuing certificate of origin and membership certificate, environmental clearance certificate and online payment gateway etc.

It is encouraging to note that Bangladesh has been recognized as a Top-20 improver and secured a ranking of the 168th from 176th in the previous year by improving the following three indicators:

Getting Electricity: Obtaining electricity connection has been made easier by lowering the security deposit for a new connection by half, reduction of time to obtain electricity license to only 10 (ten) calendar days.

Getting Credit: Bangladesh improved access to credit information by expanding the coverage of Credit Information Bureau (CIB).

It is pertinent to note that the following extensive reforms by Bangladesh will be reflected in Ease of Doing Business 2021 report:

This Doing Business indicator tracks the procedures, time and cost to complete each procedure required for a business including obtaining necessary licenses and permits and all necessary inspections. In recent times, immediate reforms and consequential developments in following 8 (Eight) indicators of Ease of Doing Business were reported for reflection in the Ease of Doing Business 2021 report:

Starting a Business: The Government of Bangladesh made it easier for entrepreneurs to start a business by substantially lowering the name clearance fee and registration fee for new company registration and by abolishing fees for digital certification, abolishing Company Seal Requirement, Issued Trade License for companies registered with RJSC or BIDA OSS within 2 days from 7 days, introduced risk based random post-inspection for VAT Registration, allow and popularize businesses to open a bank account through OSS.

Dealing with Construction Permits: The process of acquiring construction permits has been expedited in Dhaka and Chittagong through reduction of ten procedures from the prevailing process of obtaining construction permits from RAJUK and CDA. Obtaining Land Use Clearance and Construction Permit must be issued in 7 working days instead of 45 days and 105 days respectively, Occupancy certificate must be issued within 5 working days from 21 days for Dhaka.

Registering Property: Property registration have been made faster through a reduction of time required for mutation of company-to-company and land transfer within 7 working days, publicize the recent amendment to Bangladesh Registration Rules 2014 reducing registration fees to 1% from 2% of the property value, introduced separate Balam Book for Company-to-Company land transfer, reduced time for providing original copy of land deed within 7 working days and reduced time for issuance of non-encumbrance certificate within 2 working days.

Getting Electricity: Obtaining electricity connection has been made easier in Dhaka by lowering the security deposit for a new connection by half, reduction of time to obtain electricity license to only 7 (seven) days and reduced time for issuance of excavation permissions for installation of underground cables within 3days instead of 21days, receive meter testing and installation, final inspection and electricity flow are reduced to 2 days.

Getting Credit: The credit information bureau of Bangladesh has improved access to credit by expanding its coverage to include five years of records and data on loans of any amount. CIB coverage increased to 7.12% from 5.2% of adult population as of January 1, 2020.

Protecting Minority Investors: The Government has taken several reform initiatives in the qualitative areas including Extent of Ownership and Control Enhanced, Extent of Corporate Transparency Increased, Extent of Disclosure Increased-Public disclosure of transaction within 30 minutes with details of consideration, conflict and description of asset, allow shareholders representing 5% of share to be able to put agenda in annual general meeting and extent of Shareholder Right improved-requiring approval of shareholder for sale of more than 50% asset.

Paying taxes: Paying taxes has been expedited through reduction in time for VAT refund process and confirmation from Private Sector of the reduction of Corporate Tax rate to 32.5% from 35%.

Trading across Borders: The Government has adopted a revised National Level Policy to reduce time and cost of both border and documentary compliances for both exports and imports. Full implementation, operationalization, and publicity of e-payment facility for all payment charges, duties related to import/ export of consignments, further improve the risk management regime through automation, adequate equipment, and coordination across relevant agencies.

Analyzing the above discussion, it is pertinent to mention here that these reforms will ensure a better business climate in Bangladesh. Furthermore, if these reforms are properly reflected in the publication of the EODB index this year, Bangladesh will achieve the desired target of double-digit ranking by 2021.

The writer is Law Officer, Bangladesh Investment Development Authority and Advocate, the Supreme Court of Bangladesh. [email protected]