What impedes doing business here?
Thursday, 18 September 2008
Shahiduzzaman Khan
A report released by the World Bank (WB) and the International Finance Corporation (IFC) found that restrictive trade policy, characterised by poor infrastructure, red tapism and so on, still pose a big hurdle to the progress of Bangladesh's economy. And according to this assessment, Bangladesh was placed in the 113th position, so far as its trade policy was concerned, while it fared a little better in terms of what it said 'institutional environment.' Last year, Bangladesh ranked 104th position in terms of doing business.
The report looks at reforms that aim to simplify business regulations, strengthen property rights, open access to credit, and enforce contracts - all measures that help aid the creation of enterprises that provide employment and economic growth. For this ranking, the report looks at efforts to create business-friendly environments by examining measures such as the level of investor protection, dealing with construction permits and employing workers.
Unlike, many other South Asian neighbours, Bangladesh does not have sound business environment in Asia. Of the many factors attributable to the restrictive business policy of Bangladesh, the study identified customs duty as one. But economists disagreed with the WB assessment on the ground that Bangladesh, since the 1990s, has reduced its customs duty by 350 per cent and that this duty is also one of the major sources of the country's revenue income. In sharp contrast to this, India has lowered its customs duty only by 150 per cent, whereas it has, in addition to it, the restrictions on the entry of the neighbouring country's products into its market in the form of para- and non-para tariff barriers as well as value added taxes charged on them. However, the pace of trade liberalisation in India has otherwise been faster in this decade.
Meanwhile, Bangladesh has shown a substantial improvement in as many as three indicators for the first time. The survey titled 'Doing Business-2009', however, reveals that Bangladesh improved in three indicators among 10. The government could not go aggressively with its reform programmes in the past one year. Typical bureaucratic inertia in terms of carrying out reforms is a major reason for Bangladesh's falling behind from the last year's position.
According to the study, Bangladesh is the fourth easiest country in South Asia for doing business. The Maldives ranks 69th followed by Pakistan 77, Sri Lanka 102, Nepal 121, India 122, Bhutan 124 and Afghanistan 162. Singapore tops the ranking for the consecutive three years. Doing Business ranks economies based on 10 indicators to ascertain a country's business competitiveness. These are: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across border, enforcing contracts and closing a business. The survey shows that Bangladesh cut the time to 245 days from 425 days, needed to register property by almost half through reforms. Bangladesh is the only country in South Asia that recorded two reforms between June 2007 and June 2008. Three other South Asian nations recorded only one reform each.
However, the cost to register property remains high, 10.4 per cent of the property values, among the South Asians. Bangladesh has also improved significantly in time to pay taxes to 302 hours from 400 hours in the previous report. The cost of export in Bangladesh is $970 per container, much lower than Bhutan, the Maldives, Nepal and Afghanistan, but higher than Pakistan ($611), Sri Lanka ($865) and India ($945). In terms of the standing in ease of starting a business. Bangladesh has improved two steps to 90th this year from 92nd a year ago.
However, the indicators of business conditions are not suggestive as to attract major investment operations in the country. The same need to improve -- substantially -- for creating a major stimulus among the investors. The country's position could be much better this year had its bureaucracy not slowing down implementation of the reforms recommended by the Regulatory Reforms Commission (RRC) and the Better Business Forum (BBF).
But the Bangladesh's latest position in the index does certainly show that despite some positive steps taken by this caretaker government to change things for the better, the situation, far from improving, has deteriorated to some extent. The facts about 231 days being still needed in Bangladesh on average to get construction permits, 302 hours required per year for paying taxes, 28 days for exporting and 32 days in importing and, very notably 245 days in just registering property, are no good features of the investment situation in Bangladesh.
Nearly a year after the formation of the BBF which created some enthusiasm when it was set up, progress particularly in areas of implementation for changing really the ground-level situation appears to be far less than what was anticipated or needed. The commission has so far recommended 50 reform proposals, of which most remain unimplemented. The RRC and the BBF need to be thoroughly activated.
The anomalies between the high and the low income groups of countries remain even with respect to the outcomes of the studies conducted to assess their worth on the basis of various criteria. All this notwithstanding, Bangladesh requires to do more to ease its business policy and environment so that the local as well as foreign investors may find it as a welcome place for doing business. At the same time, it has to be ensured that the implementation of reforms that have been recommended by the BBF do not get mixed up, from bureaucratic bottlenecks.
szkhan@thefinancialexpress-bd.com
A report released by the World Bank (WB) and the International Finance Corporation (IFC) found that restrictive trade policy, characterised by poor infrastructure, red tapism and so on, still pose a big hurdle to the progress of Bangladesh's economy. And according to this assessment, Bangladesh was placed in the 113th position, so far as its trade policy was concerned, while it fared a little better in terms of what it said 'institutional environment.' Last year, Bangladesh ranked 104th position in terms of doing business.
The report looks at reforms that aim to simplify business regulations, strengthen property rights, open access to credit, and enforce contracts - all measures that help aid the creation of enterprises that provide employment and economic growth. For this ranking, the report looks at efforts to create business-friendly environments by examining measures such as the level of investor protection, dealing with construction permits and employing workers.
Unlike, many other South Asian neighbours, Bangladesh does not have sound business environment in Asia. Of the many factors attributable to the restrictive business policy of Bangladesh, the study identified customs duty as one. But economists disagreed with the WB assessment on the ground that Bangladesh, since the 1990s, has reduced its customs duty by 350 per cent and that this duty is also one of the major sources of the country's revenue income. In sharp contrast to this, India has lowered its customs duty only by 150 per cent, whereas it has, in addition to it, the restrictions on the entry of the neighbouring country's products into its market in the form of para- and non-para tariff barriers as well as value added taxes charged on them. However, the pace of trade liberalisation in India has otherwise been faster in this decade.
Meanwhile, Bangladesh has shown a substantial improvement in as many as three indicators for the first time. The survey titled 'Doing Business-2009', however, reveals that Bangladesh improved in three indicators among 10. The government could not go aggressively with its reform programmes in the past one year. Typical bureaucratic inertia in terms of carrying out reforms is a major reason for Bangladesh's falling behind from the last year's position.
According to the study, Bangladesh is the fourth easiest country in South Asia for doing business. The Maldives ranks 69th followed by Pakistan 77, Sri Lanka 102, Nepal 121, India 122, Bhutan 124 and Afghanistan 162. Singapore tops the ranking for the consecutive three years. Doing Business ranks economies based on 10 indicators to ascertain a country's business competitiveness. These are: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across border, enforcing contracts and closing a business. The survey shows that Bangladesh cut the time to 245 days from 425 days, needed to register property by almost half through reforms. Bangladesh is the only country in South Asia that recorded two reforms between June 2007 and June 2008. Three other South Asian nations recorded only one reform each.
However, the cost to register property remains high, 10.4 per cent of the property values, among the South Asians. Bangladesh has also improved significantly in time to pay taxes to 302 hours from 400 hours in the previous report. The cost of export in Bangladesh is $970 per container, much lower than Bhutan, the Maldives, Nepal and Afghanistan, but higher than Pakistan ($611), Sri Lanka ($865) and India ($945). In terms of the standing in ease of starting a business. Bangladesh has improved two steps to 90th this year from 92nd a year ago.
However, the indicators of business conditions are not suggestive as to attract major investment operations in the country. The same need to improve -- substantially -- for creating a major stimulus among the investors. The country's position could be much better this year had its bureaucracy not slowing down implementation of the reforms recommended by the Regulatory Reforms Commission (RRC) and the Better Business Forum (BBF).
But the Bangladesh's latest position in the index does certainly show that despite some positive steps taken by this caretaker government to change things for the better, the situation, far from improving, has deteriorated to some extent. The facts about 231 days being still needed in Bangladesh on average to get construction permits, 302 hours required per year for paying taxes, 28 days for exporting and 32 days in importing and, very notably 245 days in just registering property, are no good features of the investment situation in Bangladesh.
Nearly a year after the formation of the BBF which created some enthusiasm when it was set up, progress particularly in areas of implementation for changing really the ground-level situation appears to be far less than what was anticipated or needed. The commission has so far recommended 50 reform proposals, of which most remain unimplemented. The RRC and the BBF need to be thoroughly activated.
The anomalies between the high and the low income groups of countries remain even with respect to the outcomes of the studies conducted to assess their worth on the basis of various criteria. All this notwithstanding, Bangladesh requires to do more to ease its business policy and environment so that the local as well as foreign investors may find it as a welcome place for doing business. At the same time, it has to be ensured that the implementation of reforms that have been recommended by the BBF do not get mixed up, from bureaucratic bottlenecks.
szkhan@thefinancialexpress-bd.com