From ease of doing business to business ready: Bangladesh’s perspective and possible reforms 

The World Bank's Ease of Doing Business Initiative was a globally influential programme that assessed the regulatory environment for businesses in 190 economies annually. This initiative aimed to provide benchmarks and insights to help governments improve their regulatory frameworks and foster entrepreneurship and economic growth. Although the programme was discontinued in 2021 due to concerns about data integrity and manipulation, it had pushed many emerging economies to implement various economic reforms to attract Foreign Direct Investment (FDI).

The 10 key indicators considered in the rankings are starting a business, dealing with construction permits, getting electricity, registering property, access to credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.

These indicators collectively provided a ranking for each economy, with higher rankings indicating a more business-friendly environment. In the World Bank's last publication of the Ease of Doing Business Index 2020, Bangladesh was ranked 168th out of 190 countries. Bangladesh faced significant challenges compared to other South Asian countries. For instance, India was ranked 63rd, Bhutan 89th, Nepal 94th, and Pakistan ranked 108th in the same report.

In 2023, the World Bank introduced the Business Ready (B-READY) initiative as a replacement for the discontinued Ease of Doing Business Index. On 4 October 2024, the World Bank published the Business Ready (B-READY) 2024 report with an updated benchmarking framework designed to assess the business environment across 50 economies. The report evaluates economies across three core pillars: Regulatory Framework (Bangladesh scored 56.99), Public Services (Bangladesh scored 41.64), and Operational Efficiency (Bangladesh scored 70.49), with 10 specific topics like business entry, labour, taxation, and dispute resolution.

On the Topic-Specific Scores, Bangladesh received 74 in Business Entry, 66.91 in Business Location, 64 in Labour, 62 in Utility Services, 61 in Financial Services, 56 in Taxation, 54 in International Trade, 43 in Market Competition, 42 in Dispute Resolution, and 41 in Business Insolvency. These results are far from ideal, highlighting areas where the country needs to make improvements.

In the Business Ready (B-READY) 2024 report, Bangladesh faces several key shortcomings that hinder its business environment, which reflect long-standing challenges in regulatory and operational areas:

Regulatory Framework: Bangladesh struggles with the enforcement of business laws, property rights, and regulatory consistency. While the country has made progress in some legal reforms, complex and outdated legal systems still pose obstacles for businesses. The business registration process is inefficient, and the dispute resolution framework is slow, leading to extended delays in legal processes, particularly for foreign investors.

Public Services: There are significant gaps in public service delivery, especially related to infrastructure and utilities, which are crucial for business operations. The quality and availability of utility services such as electricity, water, and internet are often unreliable and inconsistent. These inefficiencies are exacerbated by bureaucratic delays in acquiring necessary permits and licences, making it difficult for businesses to start and operate smoothly.

Operational Efficiency: While Bangladesh shows some improvement in operational efficiency, there are still major bottlenecks in areas like taxation and market competition. The taxation process is cumbersome and not fully digitalised, leading to increased costs and time delays. Additionally, regulatory compliance is often slow, and businesses face inefficiencies in the labour market and tax administration. The report also points out that Bangladesh's ability to resolve business disputes and deal with business insolvency processes remains below average, affecting investor confidence.

Persistent Challenges in the Business Landscape

The major shortcomings in the business landscape are centred around legal issues, which have consistently shown no significant development.

Despite challenges, Bangladesh's path to becoming business-ready hinges on tackling long-standing regulatory and operational hurdles

Shoeb Masud, Former vice president, BASIS

Weak Contract Enforcement: The legal process for dispute resolution can be slow and unpredictable, with cases often taking years to resolve due to backlogs in the judiciary system. This delays business operations, creates uncertainties for investors, and increases the risk of doing business.

Property Rights and Land Acquisition: The process of acquiring land for business purposes is often marred by bureaucratic inefficiencies and land disputes. Additionally, land ownership and title registration can be unclear, leading to conflicts over land ownership. Investors face significant challenges when trying to acquire land for industrial or commercial use.

Complex Tax and Regulatory Framework: While the government has made strides in simplifying tax filing and regulatory processes, Bangladesh's tax laws are still considered complex and burdensome. The legal framework surrounding taxes, such as VAT (Value Added Tax), customs duties, and corporate taxes, is often seen as confusing, with frequent changes and a lack of clarity in the interpretation of laws. Moreover, the implementation of existing tax laws is lacking, which causes an undue burden on certain parties indiscriminately.

Labour Laws and Employment Regulations: Labour laws in Bangladesh tend to be worker-friendly, which, while beneficial for employees, can be seen as overly stringent and inflexible for businesses. Strict labour regulations make it difficult for businesses to lay off or dismiss employees, and the system for resolving labour disputes can be slow and inefficient. The rigidity of labour laws can increase operational costs for businesses, especially those in the manufacturing and service sectors, where labour needs fluctuate. Additionally, employers are often concerned about the long-term financial obligations towards employees due to complex severance and pension requirements. A balance is needed to ensure equity in justice for both employees and employers.

Inadequate Bankruptcy and Insolvency Laws: The legal process for dealing with insolvent businesses can be long and inefficient, leading to delays in resolving business failures. This discourages new businesses from entering the market and limits the ability of failing businesses to quickly exit the market and restructure.

Possible Reforms

To address the delays in contract enforcement, Bangladesh should invest in training and resourcing its judiciary. By increasing the number of courts dedicated to commercial disputes and streamlining case management, the country can significantly reduce business uncertainties. Additionally, improving alternative dispute resolution (ADR) mechanisms, such as arbitration, would provide businesses with faster, cost-effective options for resolving conflicts.

Given that the land registration process for business organisations in Bangladesh involves numerous stakeholders, it is unnecessarily complex. Rather than going through the process of obtaining permission from the Deputy Commissioner's (DC) office to moving to the registration and mutation stages, it would be better to streamline this process. A standard operating procedure (SOP) should be introduced to minimise the timeline and make land acquisition more efficient.

While the government is working to launch the National Single Window (NSW) as soon as possible, optimising tax refunds and rationalising tariffs and customs duties would significantly enhance the overall business environment.

The Bankruptcy Act should be revised to enable faster resolution of cases. Establishing specialised commercial courts in major business hubs like Dhaka and Chattogram would help expedite resolutions. Additionally, appointing professional bankruptcy arbitrators to oversee these cases would be key to improving the effectiveness of resolving these matters.

Beyond the numerous government-owned organisations focused on skill development, a central taskforce should be established to strategically plan the required technical skills and distribute training programmes across the relevant implementing agencies. A rigorous evaluation system should also be enforced to assess the effectiveness of the training sessions provided by these agencies.

Although many business services are now available online, certain services, such as those provided by certificate, licensing, and permit issuing agencies (CLPIAs), still rely on manual processes. To improve service efficiency, these manual application-handling practices must be phased out, and any manual interactions, such as fee payments or certificate delivery, should be converted to electronic formats. Furthermore, creating a public dashboard that tracks the Service Level Agreement (SLA) compliance of CLPIA services would help build investor confidence by providing transparency.

Different Investment Promotion Agencies (IPA) and CLPIAs are offering services; however, there is no central database of investors. A central database with an information bureau should be established where all CLPIA officials can record and update any offences by investors, similar to the Credit Information Bureau (CIB) of Bangladesh Bank. This would make for quicker and more accurate decision-making for officials in cases of approvals.

Despite its efforts to improve the ease of doing business, Bangladesh is still constrained by the legal barriers that persist, which remain a point of contention when attracting and retaining local and foreign investors. Nevertheless, the country is continuously reforming itself, and through the resolution of these challenges, it is possible for Bangladesh to meet its economic potential and become a competitive global player.