Bangladesh has reportedly gone one step down in the recent World Bank's (WB's) ranking of ease of doing business. It happens mainly due to the hurdles the businesses are facing in the country at the start of their operations.
The Doing Business Report 2018, released last week, showed that Bangladesh achieved slightly more points than last year's but still its ranking slipped for decline in some indicators in addition to starting business.
The fact remains that other countries moved much faster than Bangladesh and consequently the country ranking slipped down a notch despite slight improvement in its distance to frontier (DTF) score.
The biggest fall on Starting-a-Business indicator is due to an increase in the registration cost before starting a business. There has been a significant improvement regarding dealing with construction permits, but this is not enough to offset the deterioration in starting a business.
There is a need to address the issues on which its ranking is close to the bottom like getting electricity, enforcing contracts and registering property. There is no denying that starting business here is difficult, particularly because the initial spending on getting licence and permits is very high.
The country holds 177th position among 190 economies while it ranked 176th last year going two notches up from the previous year. Among the eight South Asian countries, Bangladesh is only ahead of Afghanistan that ranked 183th. Bhutan is the best in the region at 75th position, followed by India at 100th, Nepal 105th, Sri Lanka 111th, Maldives 136th, and Pakistan at 147th.
Every year, the WB's Doing Business report sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. The report points out changes in regulations affecting 10 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
The top five countries on the list are New Zealand (score 86.55), Singapore (84.57), Denmark (84.06), Korea (83.92) and Hong Kong (83.44). The worst five performers are Somalia (19.98), Eritrea (22.87), Venezuela (30.87), South Sudan (32.86) and Yemen (33).
The movement in a country's ranking depends on the number of reforms it has implemented on various sub-indicators such as paying taxes, getting electricity and registering property, compared to the other countries. Although the government has been trying to do a lot of positive things in recent years, they are slow in execution.
Although the government has been saying for long that it would simplify the business process, the fact remains that the procedures have become more complex over the years. Local investors say they have to run from one office to another for days to get trade licences.
Even if the factories do manage to get the power connection, the quality of supply of electricity and gas tends to be poor. The supply of electricity is irregular and the pressure of gas low in many industrial units. In such a situation, the government also raised the prices of gas and power.
Currently, the amount of idle money in the banking system is huge, as the investors have limited scope for either expansion or fresh investment due to the higher cost of doing business.
In registering property, Bangladesh ranks one of the lowest. It requires eight procedures, 244 days and costs 7.0 per cent of the property value for registration. In South Asia, six of the eight economies have implemented nine reforms in the past year, compared with six reforms in four economies the previous year. The region's largest economy India eliminated the requirements for a minimum paid-in capital and a certificate to commence business operations, and in so doing, it significantly streamlined the process of starting a business. With the exception of Maldives, all economies in the South Asian region have now eliminated the minimum capital requirement, significantly reducing the costs of setting up businesses, the WB report said.
The country needs to move much faster in implementing the reform action plan developed by Bangladesh Investment Development Authority (BIDA) through better interagency coordination and more intensive monitoring of reform efforts, analysts say.
The BIDA has reportedly set a five-year plan to improve the environment of doing business and make it easier for investors. The authority was born following the merger of the Board of Investment (BoI) and the Privatisation Commission (PC). It plans to bring reforms in rules and regulations, policies and traditions which will create a global standard business and investment conducive environment.
The ministries, divisions and agencies are expected to enjoy full freedom in taking reform initiatives, programmes and activities to achieve the target. It is also reviewing the rules and regulations related to foreign direct investment in a bid to make those more competitive.
The BIDA has prepared a set of reform initiatives for national level and plan of action for ministries and other government agencies. The aim of such initiatives is to substantially improve business climate for the advent of a new generation of enterprises and investors and expansion of existing businesses domestically and attraction of foreign direct investment in areas of the country's interest.
Under the plan, the authority is set to conduct studies on 10 different sub-matrices related to ease of doing business. It will also finalise a plan of action in consultation with stakeholders including ministries, private sector, trade bodies and experts from local and international development agencies.
According to the action plan, the ministries and agencies will have to improve the fields where the country lagged behind in the ease of doing business environment including regulatory affairs, taxation, starting a business, getting credit and electricity, enforcing contracts, number of procedures in starting business, protecting minority investors and trading across borders.
The country's sole investment promotion authority has set a target of improving the global doing business ranking within 99th position or below by 2021 from the current 177th position through improving its regulatory environment and solving other complexities in doing business.
Once the problems of inadequate infrastructure, bureaucratic tangles and coordination gap among agencies concerned are properly addressed, the country's global ranking in doing business is bound to improve.
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