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Doing business should be easier

  • Published at 11:03 pm November 28th, 2018
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What is holding us back?

Since 2003, the “Doing Business Report” has been one of the flagship publications of the World Bank Group, which measures the regulations that enhance business activity and those that constrain it, particularly targeted at the private sector. The report covers 190 economies and allows the making of comparisons between countries/regions. 

The latest showed that New Zealand came out on top among the economies, and Bangladesh ranked 176 out of 190 economies, one place ahead of last year’s ranking, and the lowest among South Asian countries.  

Methodologically, the “Doing Business” score consists of 11 different factors. Each of the factors has several dimensions when estimating scores for a country. For example, starting a business includes a number of procedures, time taken to start a business, cost, and minimum capital. Similarly, for other factors, they also have various sub-dimensions -- the minimum number of sub-dimensions is three, and the highest is eight. 

Referring to the 2019 report, it is desirable to decode the constraints that push Bangladesh below war-torn Afghanistan and other South Asian countries. To understand the paradox and suggest plausible policy reforms, a few of the sub-dimensions were chosen to compare with India and Afghanistan, which were ranked 77 and 167 respectively. 

Afghanistan has made significant reforms in five factors -- starting a business, getting credit, protecting minority investors, paying taxes, and resolving insolvency. India has also made remarkable reform in six factors -- starting a business, dealing with construction permits, getting electricity, getting credit, paying taxes, and trading across borders. 

Looking at these two countries also revealed that reform has not taken place uniformly. And some economies may focus on particular factors. Unfortunately, the report showed that Bangladesh has not undertaken any reform in any of the factors and/or its sub-factors. 

While the government may have drafted some reform plans, it has not been enough to effectively improve the overall situation. 

According to the report, starting a business in Bangladesh requires nine procedures and 19.5 days to complete, and aggregately costs 21.2% of income per capita. In India, the requirement is 10 procedures within 16.5 days with a cost of 14.4% of income per capita. This revealed that although the number of procedures is greater in India, on average it takes less time and less money to start a business -- each of the procedures in Bangladesh is lengthier and costlier than India. 

A comparison with Afghanistan: It takes 4.5 procedures and 8.5 days to start a business costing only 6.4% of income per capita. Meaning, starting a business in war-torn Afghanistan is the cheaper compared to India and Bangladesh. 

For the second factor, which deals with construction permits, it takes 17.9 procedures and 94.8 days to complete in India, while Afghanistan has only 13 procedures that need 199 days to complete. In contrast, construction permits require 15.8 procedures and 273.5 days in Bangladesh, almost three-times that of India.  

Another distinguishable difference is also observed in enforcing contracts. While it takes almost a similar number of days both for India (1,445) and Bangladesh (1,442), the cost is more than double in Bangladesh (66.8% of claim value) than India (31.0% of claim value). 

Similarly, the quality of judicial processes index also ranked India higher (10.5 out of 18) than Bangladesh (7.5 out of 18).

Without any doubt, it is important to improve in all factors to have a better Doing Business rank and its overall impact in the economy. Specific policy reforms targeting each of the factors are necessary. As a reference, Bangladesh could look and gain insights from some countries that have excelled in such factors. 

While keeping an eye on the recent developments in Bangladesh, it will be interesting to see how well the government responds to the crisis showcased in the report, and performs next year.

Aslam Mia is a Senior Lecturer at the School of Management, University of Science Malaysia.

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