Bangladesh Policy Notes
Back in Business to Create Jobs
The Doing Business Reform Agenda: From Vision to Action

Key Issues and Challenges

Bangladesh slipped one place to 177 in the Doing Business rankings for 2018. This is the second lowest
among South Asian economies (Afghanistan is at 183). The country’s dismal performance on the doing
business indicators is attributable to the absence of meaningful reforms in Bangladesh.1 The overall
Distance to Frontier (DTF) score of 40.99 in DB 2018 is virtually unchanged from the 40.84 in DB 2017.
The trend in DTF indicates that Bangladesh is narrowing its gap with the global regulatory frontier, but the
pace, size and quality of improvement remains slow and insufficient. The Doing Business project also
recorded two negative reforms in the past two editions of the report, one relating to business start-up2 and
the other to paying taxes3.

In late 2016 the government set a goal of attaining a double-digit rank on the DB indicators by 2021,
requiring targeted and systematic reforms. Bangladesh has taken some initiatives in the past 12 months,
including commissioning a DB Reform Memorandum outlining key reform opportunities, and preparing a
detailed reform action plan for eight indicators. The Bangladesh Investment Development Authority
(BIDA), under the Prime Minister’s Office, has also recently created an inter -ministerial task force that will
focus on concrete and measurable actions aimed at improving the business environment in the country. As
the DB rankings tend to reflect the overall business environment, improving the ranking is likely to give
potential private investors a more positive image of Bangladesh’s business environment as well as foster
private sector growth through SME development at the local level.

Complex and cumbersome Government to Business (G2B) service delivery impedes business startup
and growth. The service delivery process of government agencies, which involves multiple reviews and
approvals, is neither systematic nor clear, resulting in difficulties and delays for investors. The absence of
a well-structured Standard Operating Procedure (SOP) for service delivery at the agency level often leads
to a lack of transparency, increasing the jurisdictional power of government officials and consequently
allowing a preferential delivery of services to select businesses. In addition, the lack of coordination among
government agencies causes delays in business operations. An investor must navigate over 36
uncoordinated agencies to obtain the licenses and permits needed to start a business. Lack of coordination
among inspectorates often leads to multiple inspections on the same regulatory compliance issues, adding
time and cost for both the government and the investors.

The archaic legal framework cannot accommodate existing and new businesses. Obsolete laws and
regulations governing the private sector, such as the Companies Act, do not support modern practices. An
overlap of jurisdictions among government agencies caused by the introduction of new laws without a
thorough analysis of their impact poses an additional burden on the private sector.

The recent initiatives for improving DB will likely address many of the aforementioned challenges
but the absence of task forces impedes systematic and comprehensive reforms. The absence of topic-
specific task forces impedes proper implementation of disaggregated DB Reform Action Plans. Improving

1
  It is worth noting that the methodology for post-filling processes under the Paying Taxes indicator was further refined in
accordance to best practices. Hence, this rank is not comparable to the one published in the Doing Business 2017 report.
2
  According to Doing Business 2018, Bangladesh made starting a business more expensive by increasing the cost of business
registration at the Registrar of Joint Stock Companies and Firms.
3
  According to Doing Business 2017, Bangladesh made paying taxes more complicated for companies by increasing the time it
takes to prepare VAT and corporate income tax returns
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the performance of a country in a specific regulatory area requires action by multiple government agencies
and strong inter-agency coordination. Successful countries have developed topic-specific task forces
comprising designated officials from relevant agencies responsible for implementing recommendations.
The absence of topic-specific task forces delays the implementation of DB reform recommendations in
Bangladesh. These task-forces should work in close coordination with or include private stakeholders to
ensure that the private sector’s concerns are addressed.

Furthermore, the absence of a holistic monitoring and evaluation mechanism hinders adequate
tracking of the implementation progress. Several government agencies have taken individual initiatives
to support the DB reform agenda. However, those efforts are dispersed and some are not aligned with the
DB reform recommendations. There is no mechanism in place to understand the planned activities of the
respective agencies related to DB reform initiatives. In addition, there is no system in place to monitor the
progress in implementing the disaggregated DB reform action plan. It is also important to have a designated
reform champion with political leverage to ensure that the reforms are implemented. Empowering BIDA –
within the Prime Minister’s Office – as the clear reform champion and strengthening its capacities will be
key for successfully delivering on the country’s reform agenda.

Lack of capacity among government agencies also impedes the implementation of reforms.
Government agencies often lack the necessary resources, including technical know-how, human resources
and infrastructure, to make progress on the necessary reforms.

Policy Recommendations

To address these issues, in the short term, the government needs to:
   • Develop inclusive topic-specific task forces comprising representatives from respective line
       agencies to implement Disaggregated DB Reform Action Plans. The task forces should remain
       accountable for delivery of reform actions to a central high-powered coordination committee or to
       the Prime Minister’s Office.

To address these issues, in the medium to long term, the government needs to:
   • Simplify G2B service delivery as indicated in the DB disaggregated action plans and develop
       Standard Operating Procedures (SOP) outlining responsibilities/authority of the officials, time and
       documents required to ensure a transparent, time-defined and effective delivery of services.
   • Strengthen Public Private Dialogue (PPD) mechanisms through BIDA, task-forces and relevant
       agencies to collect inputs and feedback from the private stakeholders. Develop a monitoring and
       evaluation mechanism to govern the implementation of the recommendations, and establish clear
       reporting lines and escalation mechanisms to the highest levels of government.
   • Set up an institutional mechanism for regular follow up by the Prime Minister’s Office (PMO) for
       ensuring better inter-agency coordination.
   • Review and update the existing legal framework such as companies act and the arbitration
       framework to bring in more transparency and efficiency in the regulatory service delivery.




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