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Ease of Doing Business: Reforms yield fruits, need for keeping it that way

  • Published at 11:15 pm September 28th, 2019
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The global lender has named Bangladesh among the 20 economies that saw progress in at least three out of ten areas of ease of doing business

Bangladesh's achievement in improving ease of doing business will pave the way for further improvement in investors' confidence and investment in the days to come if the ongoing reform initiatives continue and are implemented effectively. 

Businesspeople and economists have come up with the observation in response to the World Bank report "Top-20 improvers in Doing Business 2020" released on Friday.

The global lender has named Bangladesh among the 20 economies that saw progress in at least three out of ten areas of ease of doing business.

As per the report, Bangladesh has made it easier for entrepreneurs to start a business, obtain a power connection and access credit.

Among other initiatives, Bangladesh has lowered the name clearance fee for new company registration, abolished digital certification fees and reduced registration fee calculations based on share capital. 

In Dhaka, the electricity supplier has cut the security deposit for a new connection by half and undertaken major investments to expand its staffing and digitization of processes; licensing times by the office of electrical adviser and chief electrical inspector were also reduced.

Bangladesh’s credit information bureau has improved access to credit, by expanding its coverage to include five years of records and data on loans of any amount, the report adds. 

Why Bangladesh is on improvers’ list  

“In 2016, the Bangladesh Investment  Development Authority (BIDA) took a good number of reform initiatives to remove the barriers in doing business. It takes time to implement the reforms measures and two year have already passed,” Kazi Aminul Islam, immediate past executive chairman of BIDA, has told Dhaka Tribune. 

"It is the reflection of reforms works the BIDA did in the last two years, while the impact of the third year will be visible next year" Islam claims. 

A lot of other works are underway such as construction of infrastructures, which will contribute more, he adds. 

Development work to boost investors' confidence and investment

This improvement will attract more foreign investment as, despite global down trend in 2018, Bangladesh received $3.61 billion FDI with a 68% jump.        

Since the investor both at home and abroad will get quicker services at a discount rate, they will be inspired to invest more, Kazi Aminul Islam points out.

Private sector people as well as economists also think so.  

“Since there is wide acceptability of World Bank’s report, the latest development in doing business of Bangladesh will inspire investment from both home and abroad,” Abdus Salam Murshedy, a former BGMEA president, tells Dhaka Tribune. 

He says that of BIDA continues its reforms and remains active to implement them, there will be huge response from the investors.   

“I would like to be optimistic about the improvement if it takes place in the area of implementation of reforms,” South Asian Network on Economic Modeling (Sanem) Executive Director Selim Raihan says.

"If it is so, the investors will see the cost of doing business go down. But improvement should be comprehensive as investors face challenges in several areas," the economist notes.

He finds the reforms in right direction and suggests that one stop services should be integrated with the other services. 

Where improvements have happened 

With the reforms, time for approving a new business has been reduced to 11 days from 19 days, while the cost in this regard has also been decreased. 

The fees for naming a company, certification and others have been slashed. As a result, costs in the process of getting approval for doing business have come down to 8.6% from 21%. 

Approval for building a factory would formerly take 281 days, which now takes 76 days. Steps in the process of approval have been cut down to six from 16. This has caused a decrease in the cost of building a warehouse to 0.2% from 1.8% of the total cost. 

Hassel in getting power connection has been reduced. Formerly, it would take 148 days, which now takes 107 days. 

Land registration has been made easy. The mutation time has been cut down to 56 days, which was previously 106 days. 

The BIDA claims that for export, time spent for official documents has been reduced to 36 hours from 168 hours while, for import, it has been cut down to 72 hours from 216 hours. The costs have also been reduced. 

Previously, it would cost $408, which has come down to $200 for export.  For import, it would previously cost $900, which has been reduced to $200. 

How to make it a reality 

“It is a primary positive result of reforms. To some extent, it is a milestone. The ongoing reform activities of the government have paved ways for doing business easily,” former World Bank (Bangladesh) lead economist Zahid Hossain has told Dhaka Tribune.

The further improvement will depend on the continuation and implementation of the steps taken to improve ease of doing business ranking, he says, warning that if the progress gets stalled here, it will not bring benefits.

The impact of the improvement will be visible when a client will be able to start a business easily, so the government has to carry on the reforms and make them more effective, he states. 

“So far as I have heard, there has been some positive gains and it could better if there was progress in all the sectors,” Policy Research Institute (PRI) Executive Director Ahsan H Mansur says.

For an outstanding improvement in the ranking of ease of doing business, Bangladesh has to make tangible progress in all the sectors, he states.

Though it is quite difficult and did not happen in the past, ministries and authorities concerned have to work together to this end, suggests the economist.

He also calls for integrating one stop services (OSS), which is yet to be operational fully, with the other organizations.

In most of the cases there is no remarkable progress, he notes, adding that it is difficult to say whether it will increase investment or not. 

“There is improvement, but not up to the mark. There is a modest gain, which will boost the image of the country to some extent fueling investor's confidence,” he says.  

How much to improve for raking

As per Doing Business 2019 of WB, Bangladesh is ranked 176th out of 190 countries for ease of doing business, up from 177th last year.

Since, there is improvement in key areas due to reforms initiatives of the government, it is assumed that there will be a jump in ease of doing business ranking of 2020 to be launched by the WB next month, says Aminul Islam, adding that the ultimate gain will be shown in the next ranking. 

"I think the ranking will improve by at least 10 steps," he forecasts. 

On the other hand, Zahid Hussain finds it difficult to comment how much it will matter in ranking but there will be improvement in score as there has been improvement in three areas.