Regulatory unpredictability is interpreted in different ways. Some may express it as a discretionary behaviour of the regulatory bodies, while some others may call it policy inconsistencies, instabilities or difficulties in getting updated and completed information regarding business regulations and so on. Whatever that may be, it poses serious problems and increases cost of doing business. Regulatory inconsistencies discourage businesses (both local and foreign) to take decisions. It is essential to prepare an effective regulatory framework in the country.
Bangladesh is poised to graduate to a developing country status. Doing business innovatively, while improving productivity, is a crucial point at this stage. Issues of technological developments and achieving Sustainable Development Goals (SDGs) targets, while largely accommodating private sector, are important aspects that need to be considered properly in the coming days.
Business Initiative Leading Development (BUILD), a national Public-Private Dialogue (PPD) platform, in collaboration with International Finance Corporation (IFC), a member of the World Bank Group, conducted a survey on Bangladesh Regulatory Predictability. The purpose was to identify different dimensions and manifestations of regulatory unpredictability faced by the private sector. The initial survey was conducted during September-October, 2017. A follow-up survey was again conducted through Survey Monkey at the end of 2017.
The survey questionnaire mainly focuses on capturing the business perceptions and views on the various sources of regulatory unpredictability. The focus was on six issues: a) conflicting laws, rules and regulations; b) difficulties in finding information on existing rules and regulations; c) discretionary enforcement of rules and regulations by government officials; d) non-uniform interpretation of rules and requirements; e) lack of effective grievance mechanisms; and f) insecure property rights.
A pre-testing of the survey was conducted in the last week of September last year. There were six sections and 27 questions in the questionnaire. The findings of the survey, among others, show that rules and regulations are often announced without prior notice, consultation or impact assessments. Prior notice, consultation or impact assessment would improve the predictability of business regulations for private sector. Majority responders felt that the inconsistency is high in business licensing/registration, VAT (value added tax) Act, Customs Act, Companies Act etc.
In the second survey, 113 responded out of 135 recipients of questionnaires. Of them, 89 completed the full questionnaire. The respondents were mostly from the local companies, joint ventures (13) and foreign companies (9). Represented mostly by ready-made garments (RMG), leather and food sector companies, there were respondents from other sectors, including electronics, publishing, printing and recorded media, plastics & rubber, machineries & equipment, IT, consulting and advisory services. Nearly 64.04 per cent of the 89 respondents think that prior notice, consultation or impact assessment will improve the predictability of business regulations for private sector. Around 49.44 per cent of the 89 respondents think that rules and regulations being announced without prior notice, consultation or impact assessments are major obstacles to do business. Out of 87 respondents, 58.62 per cent say that they are aware of BUILD. Around 34.21 per cent of the 87 respondents have used BUILD to give comments.
People across the globe face regulatory obstacles but the nature and gamut varies. In Bangladesh, the age-old Companies Act, for example, needs updating and the Ministry of Commerce is in charge of implementing the issue.
In some countries, instant survey-generated opinions help both the public and private sectors to contribute to policy preparation. But there is no consultation policy in our country.
In a roundtable discussion, organised recently by BUILD jointly with the International Finance Corporation (IFC), representatives of several businesses referred to their own experience to show how regulatory unpredictability increases cost of doing business. One of them mentioned that it may require Tk 0.5 million-0.6 million to get a trade license from any upazila. In order to get an Acid License under the Acid Policy 2002 from the concerned DC office, there is a requirement for contributing to a Local Resource Fund that increases the cost of licenses.
Foreign investors, who usually try to follow the announced policies, face difficulties as they do not get the clear directives for these policies and procedures. Japanese investment is one such example. Even though they identified Bangladesh as one of the attractive destinations for investment, there is still not enough investment coming from them as 'wait and see' process has continued to persist for years. Another major obstacle is collecting business information. More than 50 per cent of the survey respondents felt that information sourcing on rules and regulation is difficult in Bangladesh while getting complete and updated information is often a question. These issues are one of the important constraints attracting required investment, since several years, there are sluggish behaviour in the private sector investment. In some cases, large scale investment faces more difficulties in getting regulatory support and risks the sustainability of business. A number of foreign investments are presently trying to do their policy advocacy through respective association for getting supportive role by the regulator.
Bangladesh is poised to become a middle-income country. At this stage, it needs to act carefully with regard to local investment as well as foreign direct investment (FDI). A prerequisite for this is to ensure regulatory predictability.
Ferdaus Ara Begum is Chief Executive Officer, Business Initiative Leading Development (BUILD) -- a partnership organisation of DCCI, MCCI & CCCI. [email protected]
