Online business licensing system needed
Tuesday, 5 April 2011
Ferdaus Ara Begum
Although several streamlining and simplification of business rules and regulations have been undertaken during the past several years, the situation has not improved much so far. Establishment of an effective screening mechanism for new regulations, comprehensive e-registry of business related rules and regulations, strengthening institutional capacities to implement and sustain pro-competitive and investor-friendly regulatory reforms are some of the suggested remedies, implementation of which are long pending issues. Earlier, a complete list 202 acts and regulations was prepared with an objective to identify specific changes, revisions and additions and to eliminate unnecessary regulations which are hampering growth of businesses. Streamlining of those regulations which will be retained and sharing of international best practices were the other objectives. Administrative reforms based on the recommendations of the FIAS administrative Barriers Study 2006 and the World Bank's Doing Business indicators identified six processes as particularly problematic. These are: (a) obtaining location clearance certificate; (b) obtaining environmental clearance certificate; (c) processing and approval of foreign private loans; (d) duty exemption and drawback system; (e) capital machinery import clearance process; and, (f) bonded warehouse licensing. Among these, some are in the process of being improved. The electronic system of business licensing can help reduce some of existing bottlenecks. Regulatory costs along with inefficient, bureaucratic and duplicative regulations may make the process difficult for SMEs. Because of this non-transparency, investors do not understand who is doing what and thus making licensing process too cumbersome, costly and time consuming. Automation of business services and an electronic licensing process as has been done in countries like Malaysia can bring good results in reducing hassles for existing businesses as well as new investors. Lack of transparency of the rules and regulations is a major problem area while some laws are even self-contradictory. Industries established in Bangladesh are mostly based on imported primary and secondary raw materials. Industries face serious problems while importing raw materials. Under Section 62A of the Income Tax Ordinance 1984, advance income tax (AIT) is payable while importing raw materials. AIT deducted at source is not the final tax, so credit can be taken while calculating the final tax. AIT is paid in the state-owned Sonali Bank. While getting credit for the tax paid at source, the certificate given from the Sonali Bank should be the final document. But it is not been treated as such. Tax officials suggest for verifying it with the Bank causing serious hassles for the importers. An electronic process could be helpful for the tax officials to get instant information from the Bank and pay the credit to the importers. The government has been changing the tax holiday facility every year, some sectors are included and some are dropped. The issue of renewal for tax holiday license should be included in the Tax Holiday License policy so that the entrepreneurs can avoid renewal difficulties. Procurement of an environmental clearance certificate is compulsory for most industries. New industrial units are finding it difficult and cumbersome to get the necessary clearance while those established before enactment of the environmental law are facing difficulty in getting the required clearance. Similar is the problem for obtaining a clearance certificate from the Fire Department, a Bond License and many other licensing. Establishment of an electronically accessible registry of all required business regulations can make the system transparent and clear to all specially for the newcomers. For a Bond License, 14 documents including memorandum of understanding, possession certificate, Vat registration, Tin registration and layout plan, are required. Entrepreneurs feel some of these requirements can easily be avoided as they have already been met for obtaining other licenses. The entrepreneurs also find it difficult to collect fire license and boiler certificate before establishing the industry. Malaysia has simplified its business licensing process. The goal of re-engineering the process was to enhance Malaysia's competitiveness. Their main principles lie in three factors: to make the process easy, efficient and relevant. Following the examples of Malaysia, Bangladesh can set a full- fledged strategy for re-engineering business licensing process. In Malaysia, currently some licenses, namely optical disc manufacturing license takes 19 days, Petroleum Development Act (PDA) approval 20 days, direct selling license 10 days, weight and measurement license 10 days, wholesale and retail trade approval 14 days, foreign hypermarket supermarketdepartment store approval 20 days, and controlled supplies act takes 14 days. They want to bring it under a one-day approval system. The main objective of their liberalization of licensing process is to review and reduce obsolete licenses and reduce time and business cost to issue licenses. In order to operate a petrol station in Malaysia, it needs approval under the Petroleum Development Act 1974 and the Control of Supplies Act 1961. After the reforms, now the PDA approval for such a business is given within one day. The Malaysian Domestic Trade Division MDTCC, which is the authority for making improvements in the business licensing system, sits with entrepreneurs in a pre-application screening process. They also impart training for the entrepreneurs on the business licensing processes. Malaysia has established a business licensing electronic support system (BLESS) that provides information and enables companies to apply for a license to start operating a business. It is a virtual one-stop service centre that assists companies to obtain business license efficiently and in an organized manner. Through this system, a company can apply online, track progress of the application and communicate with other licensing agencies. Initially, Malaysia started this virtual online registration system for some specific sectors like construction and hotels. This one-stop centre helps businesses obtain relevant business license information and submit applications online. E-payment is also allowed. On-line query and feedback and on-line tracking and monitoring are some other services. Entrepreneurs can get online notification. Approval and rejection are also done online. The first phase of BLESS is now being implemented, and it will soon include other business sectors. In the second phase, 73 licensing agencies and 400 types of licenses will be invloved. The existing licensing system in Bangladesh is hindering the growth of the private sector. Bangladesh immediately needs to rationalize its business licensing process. A single online window to start, operate and sustain a business, can give a big boost to start up new businesses. The writer is an executive of the Dhaka Chamber of Commerce and Industries and can be reached at e-mail: nothing_man2000@yahoo.com
Although several streamlining and simplification of business rules and regulations have been undertaken during the past several years, the situation has not improved much so far. Establishment of an effective screening mechanism for new regulations, comprehensive e-registry of business related rules and regulations, strengthening institutional capacities to implement and sustain pro-competitive and investor-friendly regulatory reforms are some of the suggested remedies, implementation of which are long pending issues. Earlier, a complete list 202 acts and regulations was prepared with an objective to identify specific changes, revisions and additions and to eliminate unnecessary regulations which are hampering growth of businesses. Streamlining of those regulations which will be retained and sharing of international best practices were the other objectives. Administrative reforms based on the recommendations of the FIAS administrative Barriers Study 2006 and the World Bank's Doing Business indicators identified six processes as particularly problematic. These are: (a) obtaining location clearance certificate; (b) obtaining environmental clearance certificate; (c) processing and approval of foreign private loans; (d) duty exemption and drawback system; (e) capital machinery import clearance process; and, (f) bonded warehouse licensing. Among these, some are in the process of being improved. The electronic system of business licensing can help reduce some of existing bottlenecks. Regulatory costs along with inefficient, bureaucratic and duplicative regulations may make the process difficult for SMEs. Because of this non-transparency, investors do not understand who is doing what and thus making licensing process too cumbersome, costly and time consuming. Automation of business services and an electronic licensing process as has been done in countries like Malaysia can bring good results in reducing hassles for existing businesses as well as new investors. Lack of transparency of the rules and regulations is a major problem area while some laws are even self-contradictory. Industries established in Bangladesh are mostly based on imported primary and secondary raw materials. Industries face serious problems while importing raw materials. Under Section 62A of the Income Tax Ordinance 1984, advance income tax (AIT) is payable while importing raw materials. AIT deducted at source is not the final tax, so credit can be taken while calculating the final tax. AIT is paid in the state-owned Sonali Bank. While getting credit for the tax paid at source, the certificate given from the Sonali Bank should be the final document. But it is not been treated as such. Tax officials suggest for verifying it with the Bank causing serious hassles for the importers. An electronic process could be helpful for the tax officials to get instant information from the Bank and pay the credit to the importers. The government has been changing the tax holiday facility every year, some sectors are included and some are dropped. The issue of renewal for tax holiday license should be included in the Tax Holiday License policy so that the entrepreneurs can avoid renewal difficulties. Procurement of an environmental clearance certificate is compulsory for most industries. New industrial units are finding it difficult and cumbersome to get the necessary clearance while those established before enactment of the environmental law are facing difficulty in getting the required clearance. Similar is the problem for obtaining a clearance certificate from the Fire Department, a Bond License and many other licensing. Establishment of an electronically accessible registry of all required business regulations can make the system transparent and clear to all specially for the newcomers. For a Bond License, 14 documents including memorandum of understanding, possession certificate, Vat registration, Tin registration and layout plan, are required. Entrepreneurs feel some of these requirements can easily be avoided as they have already been met for obtaining other licenses. The entrepreneurs also find it difficult to collect fire license and boiler certificate before establishing the industry. Malaysia has simplified its business licensing process. The goal of re-engineering the process was to enhance Malaysia's competitiveness. Their main principles lie in three factors: to make the process easy, efficient and relevant. Following the examples of Malaysia, Bangladesh can set a full- fledged strategy for re-engineering business licensing process. In Malaysia, currently some licenses, namely optical disc manufacturing license takes 19 days, Petroleum Development Act (PDA) approval 20 days, direct selling license 10 days, weight and measurement license 10 days, wholesale and retail trade approval 14 days, foreign hypermarket supermarketdepartment store approval 20 days, and controlled supplies act takes 14 days. They want to bring it under a one-day approval system. The main objective of their liberalization of licensing process is to review and reduce obsolete licenses and reduce time and business cost to issue licenses. In order to operate a petrol station in Malaysia, it needs approval under the Petroleum Development Act 1974 and the Control of Supplies Act 1961. After the reforms, now the PDA approval for such a business is given within one day. The Malaysian Domestic Trade Division MDTCC, which is the authority for making improvements in the business licensing system, sits with entrepreneurs in a pre-application screening process. They also impart training for the entrepreneurs on the business licensing processes. Malaysia has established a business licensing electronic support system (BLESS) that provides information and enables companies to apply for a license to start operating a business. It is a virtual one-stop service centre that assists companies to obtain business license efficiently and in an organized manner. Through this system, a company can apply online, track progress of the application and communicate with other licensing agencies. Initially, Malaysia started this virtual online registration system for some specific sectors like construction and hotels. This one-stop centre helps businesses obtain relevant business license information and submit applications online. E-payment is also allowed. On-line query and feedback and on-line tracking and monitoring are some other services. Entrepreneurs can get online notification. Approval and rejection are also done online. The first phase of BLESS is now being implemented, and it will soon include other business sectors. In the second phase, 73 licensing agencies and 400 types of licenses will be invloved. The existing licensing system in Bangladesh is hindering the growth of the private sector. Bangladesh immediately needs to rationalize its business licensing process. A single online window to start, operate and sustain a business, can give a big boost to start up new businesses. The writer is an executive of the Dhaka Chamber of Commerce and Industries and can be reached at e-mail: nothing_man2000@yahoo.com