We’re all aware that Bangladesh is travelling in the right direction, things are getting better. We can see this in the economic numbers -- gaining economic growth at a cracking rate – 7% and 8% a year and the society is getting richer as a result.
However, it’s always worth, occasionally at the very least, looking at not just that direction of travel but the starting place. That means assessing where we are now and what it is necessary to do to continue to improve things. This is what the World Bank’s “Ease of Doing Business” report does and it’s a sobering read for us.
Bangladesh is down there at 176 out of 190 countries on the listing -- and yes, this is one of those lists where a lower number is better. We’d very much prefer to be number 1 on this list rather than propping up the bottom of the table.
The concepts being measured here are subtly different from the World Economic Forum’s Global Competitiveness Index where Bangladesh does better. Perhaps we shouldn’t be cheerful therefore about being at the bottom here but there is something cheering to note.
Everything necessary to improve performance is within the power of our own local government. We’re not in one of those dreary situations where things outside our borders have to change, things we cannot insist upon nor perhaps even influence. Rather, the problems here are homegrown and so thus also are the solutions.
For what is being measured here is not which businesses Bangladesh should be in, nor what world conditions for those are. Instead, just and only, how easy is it to be in business in Bangladesh at all? The background thought to be that we know that human beings are both greedy and also lazy.
We’d all like the vast wealth that comes from owning a successful business, we’d all prefer to gain that easily too. So, if we make it easier to set up a business then we’ll have more people doing so and we’ll all get richer as those businesses are founded and expand.
It’s worth noting that this isn’t really anything at all to do with capitalism as opposed to socialism or any other economic structure. Nor is it really to do with markets as opposed to a planned economic system.
However, we decide to organize matters we still want to have the minimum effort necessary to start something new. Whether it takes 150 days to get electricity to a capitalist firm or a workers’ cooperative, it’s still a 150-day delay in that new production starting, isn’t it?
A 150-day delay which not just postpones our increase in wealth from more production, but most certainly reduces the number of people willing to even try to start up new things.
Which leads to an important observation, economic growth is, by definition, people doing new things. New enterprises starting, new attempts to produce being built. So, again, delays in being able to do this slow our increase in wealth, reduce economic growth.
That’s the bad news -- Bangladesh is near the bottom of that listing of world economies in how easy it is to do these desirable things. Set up new businesses, expand old ones, in order to gain economic growth and we all become richer.
Now for the good news -- near all of what is complained about is within the power of the Bangladeshi government. We’re not dependent upon other people, or outsiders, to change their ways, this is something that can be done locally under our own steam.
For the things that are being complained about are the details of how the system works. That system which we do indeed control. Yes, some of them will require substantial capital investment -- like that being able to connect to electricity. The problem here isn’t the bureaucracy, it’s the lack of electricity to be connected to. But much of the rest really is the bureaucracy.
True, some have observed entrenched bureaucracy and just thrown up hands in horror at the impossibility of any reform ever taking place. But some of these things really are rather simple.
One measurement is how long does it take to register a company so that you can start doing something? The best global performance is Slovenia, where it takes half a day and costs nothing. In Bangladesh, it takes rather longer than that and costs more. But why? Why should it? “I’d like to start a business please” is a request which should be met with a “sign this and start,” for why not?
Yes, we’d like them to pay their taxes, they should obey the laws on safety and so on, but those are all things which can follow after the business has started. Which is how places like Slovenia have such short periods necessary for business registration.
Other matters are how long does it take to reclaim a debt? To pay taxes? To register a property? Gain a construction permit? Even, how to clear up the bankruptcy of a failed project?
These are all interactions with the bureaucracy and that’s something that really is under the control of the government. That is, these are problems that we can solve locally as long as we actually desire to do so.
It’s worth noting that we do have to have regulation, the bureaucracy has to be there to administer that. But they’ve got to be efficient about it. The greater the cost of what they do, the poorer we’ll be in that lost economic growth.
But more, the less effective regulation we’ll have too, because we always do less of more expensive things. An effective and efficient bureaucracy is the goal, one that does things quickly.
Essentially, what the World Bank is telling us here is that there’s nothing very much wrong with Bangladesh or the country’s growth opportunities that giving the state bureaucracy a good kick in the pants wouldn’t cure. So, given that we do want to be richer, we’d better start kicking, hadn’t we?
Tim Worstall is a Senior Fellow at the Adam Smith Institute in London.
