• Thursday, Aug 11, 2022
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Despite reforms, companies still face bottlenecks in all stages of registration

  • Published at 09:07 pm August 8th, 2021

Although various stages of company registration have been automated to some extent, manual intervention is still practised in the pre-registration and registration stages

Despite the recent reforms undertaken by the Registrar of Joint Stock Companies and Firms (RJSC), Bangladesh has time and cost-related bottlenecks across all stages of company registration and post-registration.

Although various stages of company registration such as obtaining a trade license, name clearance, incorporation certificate, TIN, VAT registration, have been automated to some extent, manual intervention is still practised in the pre-registration and registration stages, according to a survey study by Business Initiative Leading Development (BUILD) and USAID conducted during March-April of 2021.

According to the study titled “Measuring the Administrative Burden of the Company Registration Process in Bangladesh”, new and inexperienced applicants spent more hours in obtaining information on RJSC registration, thus taking 8 days to complete it, which is supposed to be finished within 3 days. 

“Additionally, bottlenecks like manual intervention in preparing documents, consulting with third parties, paying bank fees, etc were also found. The study found that RJSC registration requires 89% of third party engagement and thus cost enhances up to 49.22%,” BUILD CEO Ferdaus Ara Begum said while delivering the keynote presentation on the findings during a webinar. 

The webinar was organized by BUILD in collaboration with USAID-funded Feed the Future Bangladesh Improving Trade & Business Enabling Environment Activity.

Speaking as the chief guest, Commerce Minister Tipu Munshi said: “We can improve further,” while acknowledging the various forms of reform entailing digitization undertaken by the RJSC.

“Some countries in the region, like Singapore and Malaysia, have shown remarkable success in simplifying the company registration process, reducing the time to register a company to less than one hour. While New Zealand does it in ten minutes,” said the minister.

Also Read - Why ease of doing business remains difficult in Bangladesh

Starting a business in Bangladesh has become less expensive because of a reduction in name clearance and registration fees, as well as the abolishment of the fee for certifying digital certificates in FY2019-20, according to BUILD Chairperson Abul Kasem Khan. 

RJSC had also incubated reforms in areas of starting a business, dealing with construction permits, getting electricity, registering property and getting credit, resulting in the improvement of the country’s position to 168th from 176th in World Bank’s Doing Business 2020. 

However, the country is still behind the South Asian average in terms of the procedure, time, and cost related to starting a business, said the chairperson.

According to the study, in the case of obtaining a trade license, 67% third party engagement is required, incurring an additional 32.33% cost. Moreover, the post-registration process is more difficult than pre-registration as more offline interaction is required. 

In the opening session, DCCI President Rizwan Rahman said that the cost of the company registration process in RJSC ranges from Tk6,000-10,000 is bearable for the medium and large industries. However, it is a bit high for small industries. 

“Third-party support is recognised all over the world. We may provide this third party/consultancy system under institutional formation and bring them under the tax bracket,” he commented.  

Registrar, (Additional Secretary) of RJSC Sheikh Shoebul Alam appreciated the recommendations placed by BUILD in the presentation. RJSC seeks to implement a full online service. He recommended training, awareness and outreach programs to familiarize the stakeholders related to RJSC with the existing online system. 

Additional Secretary of the Ministry of Commerce Maleka Khayrunnessa mentioned that the applicants should be accustomed to the online process and there should be more training or publicity so that the registration can be done without the help of a third party and without any hassle. 

Meanwhile, Igor Gutan, team leader of Business Enabling Environment of USAID Feed the Future Bangladesh Improving Trade and Business Enabling Environment Activity said that the study is very important to know about the true cost and time incurred in registering a company in Bangladesh. 

“If Bangladesh wants to get into the first fifty countries in Doing Business, the country needs to improve its position in terms of time, cost, and the number of procedures in company registration,” he said. Doing Business is a yearly report published by the World Bank in a series of annual studies measuring the regulations that enhance business activity and those that constrain it.

Advocate at Supreme Court of Bangladesh and Head of Chambers of Ahmed & Associates Rajin Ahmed mentioned that both soft copies and hard copies are still required in RJSC registration. 

Less than a thousand foreign companies were registered in RJSC. The payment system should be online, using mobile financial services like bKash and Nagad. 

Asifa Aziz, the owner of Yoshi International, emphasized that 100% automation in every stage will be very business-friendly for the companies.

Secretary of the Ministry of Commerce Tapan Kanti Ghosh mentioned that, while a remarkable number of reforms have been made, more needs to be done. 

“The officials must work hard to reduce the number of days for the procedure, while the cost is bearable. To avail of the benefit of automation, every applicant should be accustomed to the online process. The RJSC should ensure that no third party can pose any obstacle in the smooth process,” he said.  

As special guest, Rebecca Moanikeala Robinson, acting deputy office director of Feed the Future Office of Economic Growth, USAID Bangladesh mentioned that the ease of doing business ranking can be improved by better and effective reform proposed by BUILD for reducing cost and time in RJSC registration. 

BUILD CEO said that the comments of the guests will be taken into account and addressed. The points derived from the discussion session will be incorporated in the final report. 

As the guest of honor, Marc Shiman (acting) chief of party of USAID Feed the Future Bangladesh Improving Trade and Business Enabling Environment Activity, suggested that the RJSC should follow best practices and adopt a practical approach to set its future actions to upgrade ranking in Ease of Doing Business Index. 

“The Ministry of Commerce is playing a very important role in driving reform. An initiative from a high-powered political level is required to ensure incremental changes to have a better business environment in Bangladesh,” he said.