The Bida initiative comes at a crucial time when Bangladesh is trying to attract global business giants who are poised to move their investments from China to other countries
Nearly two years ago the Bangladesh Investment Development Authority (Bida) signed an agreement with three city corporations for issuing trade licenses within 24 hours of applying for one.
According to the Memorandum of Understanding (MoU), two Dhaka city corporations and Chattogram City Corporation would issue trade licenses online within a day upon receiving the application.
However, it is all in paper. None of the three corporations have issued a single trade license since then.
Now Bida has recommended the commerce ministry for dropping the requirement to have a trade license for company registration with the Registrar of Joint Stock Companies and Firms. Bida has asked the ministry to implement the recommendation within a year.
The Investment Development Authority has come up with 84 recommendations, including the trade license suggestion, and sent those to ministries and divisions to improve on the upcoming 'Ease of Doing Business Index' -- a World Bank ranking which defines how easy it is to start and run a business in a country. The ranking takes into consideration such factors as better, usually simpler, regulations for businesses, and stronger property rights.
The government agency under the Prime Minister's Office has also launched a series of meetings with the business regulatory bodies to implement the suggestions tailored to make businesses and investment rules, regulations and processes easier.
But business leaders say only making suggestions or sending letters to various government agencies is of very little value. They want respective ministries or divisions to be held accountable for specific failures.
The Bida initiative comes at a crucial time when Bangladesh is trying to attract global business giants who are poised to move their investments from China to other countries in the aftermath of the Covid-19 pandemic that played havoc with the global supply chain when much of the world was shutdown to stem the spread of the coronavirus.
Bangladesh scored 168 out of 190 in the 2020 Ease of Doing Business report and remains just ahead of war-torn Afghanistan in South Asia despite the improvement. Higher ranking (a low numerical value) indicates a better business environment.
At a recent commerce ministry meeting Executive Chairman of Bida Md Sirazul Islam expressed concern over the prospects of attracting Japanese investments from China to Bangladesh. He said just obtaining a trade license requires a month in Bangladesh.
Referring to foreign investors, he said service delivery for business is lengthy while there is also a lack of transparency over receiving services in Bangladesh.
In the current system, any investment ranging from a grocery store to a group of companies must have a trade license. Without it, the company would not be able to get registered, open a bank account, submit value added tax (VAT) returns or get any certificate for import and export.
Allegations of bribery are common against city corporations, municipalities and union parishads for issuing the licenses and often getting a license takes several months.
Apart from the license, a new business needs to get more than 250 certificates and clearances from the government.
In the recommendations, Bida suggested cancelling company registration and Memorandum and Article of Association fees.
Easing of VAT return submission proposed
Besides, the organisation asked the finance ministry and National Board of Revenue to introduce specific identification numbers for each company so that VAT and tax payments and VAT return submissions become easier. The investment development authority also advocated for changing VAT return submissions requirements from monthly to quarterly.
The World Bank prepares the Ease of Doing Business Index based on ten categories. Of those, Bangladesh's performances are poorer specially in protecting minority investors, paying taxes, trading across borders and enforcing contracts.
Improvements in getting power connection to a new business, however small, dealing with construction permits, registering properties and resolving insolvency helped the country to move eight steps up this year.
The 84 Bida proposals include making complete overhaul in the process of resolving insolvency.
Bida proposed allowing electronic transactions of Tk2 lakh at one go using the national payment switch in Bangladesh for new businesses and to amend the company act to protect minority shareholders.
Among others, Bida has recommended that the Rajdhani Unnayan Kartripakkha (RAJUK) and Chattogram Development Authority (CDA) introduce a risk-based construction permit system by amending the existing building codes.
In this changed method, electronic construction permit systems have been recommended for all services provided abolishing the requirement for environmental clearance for low-risk establishments including low-risk warehouses in the green category.
What else does the Bida action plan have?
Bida proposes that the Ministry of Housing and Public Works would introduce a mandatory requirement of accreditation and licensing system for professionals including architects, engineers, planners and firms. The ministry will extend the defect liability period to five years from the present two years and introduce an insurance regime for building and relevant professionals.
To ease property registration, Bida proposes to halve the municipality tax --from one percent from two percent. It proposed that the Ministry of Law would introduce digital 'Balam Book' or introduce a separate 'Balam Book' for the company to company, private to company and company to private property transfer at sub registry offices for reducing the time of land registration.
To make the loan process easier, Bida recommends the Bangladesh Bank to conduct a periodic review of the initiative including continuous increase of the credit information bureau coverage by adding credit information data from utilities, cell phone providers, retailers, and microfinance institutions through necessary legislative change.
Bida proposed to ensure the distribution of more than two years of historical credit information data to benefit borrowers with a strong credit track record and to allow private firms and individuals to access their own credit history. Bida also proposed to enact the 'Secured Transaction Bill' to allow 'Movable Collateral Registry'.
Regarding enforcing contracts, Bida said the Arbitration Act should be amended to make it mandatory to go for arbitration before going to court with any dispute and proposed to enact the draft Commercial Dispute Resolution Court Act for a dedicated special court for commercial disputes at divisional levels.
It also proposes the establishment of a dedicated bench for commercial disputes in the Supreme Court and establish a monitoring system to ensure strict adherence to time frame prescribed by the draft act and completing the entire process including enforcement of commercial dispute within 500 days.
There would be e-filing, e-service of summoning and publishing of judgments from the commercial court in their official documents and website and electronic case management tools for judges and lawyers.
'Bida alone cannot improve the situation'
Former president of Federation of Bangladesh Chambers of Commerce & Industries Shafiul Islam Mohiuddin is of the opinion that Bida alone cannot improve the business situation.
"Only making suggestions or sending letters would not yield much success until the concerned ministry or division is brought under accountability," he added.
He said, "The way some bureaucrats slow down the processes is a kind of corruption. The huge investment potentials in Bangladesh should not be jeopardised for the mismanagement of few government officials."
Shafiul Islam said the country has already readied 27 to 28 economic zones for investment among the designated 100. Bangladesh certainly has some tasks to attract foreign investments. Foreign investments would come here and generate employment if those tasks were completed.
Meantime, the prime minister's Private Sector Industry and Investment Adviser Salman F Rahman said, "When we first started working on improving Bangladesh's position in the ease of doing business index, we targeted low-hanging fruits or easily obtainable points. As a result, we were among the best-performing countries last year."
"We have been able to make many reforms in the meantime, despite the pandemic, with the help of the ministries and other agencies, which I believe will be reflected in the publication of the index this year," added Salman F Rahman.
He told The Business Standard, "Initially, whether we approached any ministries or agencies and raised issues about any rules or laws or practices, many of them used to react defensively. Now there has been a significant change in their mindset and everyone concerned is committed to reforms in order to improve business and investment climate."
"We are now targeting more advanced reforms such as amending the Bankruptcy Act and enacting a new Company Act to conform to the needs of the business community, which will facilitate ease of doing business in Bangladesh. We are confident that we will achieve a double-digit position in the next year's ranking, as per the targets set by the prime minister," he concluded.