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Page 1: BCIR index - IFC Brochure - Final 201113(v-F)
Page 2: BCIR index - IFC Brochure - Final 201113(v-F)
Page 3: BCIR index - IFC Brochure - Final 201113(v-F)

Transforming the Investment Climate in Bangladesh1st Edition

Page 4: BCIR index - IFC Brochure - Final 201113(v-F)

About IFCIFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. Working with private enterprises in more than 100 countries, we use our capital, expertise, and influence to help eliminate extreme poverty and promote shared prosperity. In FY13, our investments climbed to an all-time high of nearly $25 billion, leveraging the power of the private sector to create jobs and tackle the world’s most pressing development challenges. For more information, visit www.ifc.org.

About Bangladesh Investment Climate FundBangladesh Investment Climate Fund provides advisory services aimed at improving business operating environment in Bangladesh. BICF is managed by IFC, in partnership with the UK Government and the European Union. Its objectives are consistent with the Bangladesh government’s strategic vision for private sector development within its poverty reduction strategy. Government agencies and BICF—in close collaboration with the key stakeholders in Bangladesh—jointly design and implement programs to institute business friendly policies, laws and regulations, and strengthen the institutions that implement them.

IFC Publication DisclaimerUnder no circumstances shall IFC have any liability to you or your clients or any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of IFC or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information contained in this publication, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if IFC is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information.

This report is compiled by:Rotbah Nitia Result Measurement Consultant – Advisory Services in South Asia [email protected] Shams Result Measurement Consultant – Advisory Services in South Asia [email protected]

The content of this report has been developed from the contributions of the entire Bangladesh Investment Climate Fund team. “Transforming the Investment Climate in Bangladesh” has been conceptualized by:M. Masrur Reaz, IFC Program Manager – Investment Climate - BangladeshSyed Estem Dadul Islam, Result Measurement Specialist – Investment Climate Sub Saharan Africa, formerly the Monitoring and Evaluation Officer for Investment Climate South Asia

Layout & Production: studioCMP Ltd.

Page 5: BCIR index - IFC Brochure - Final 201113(v-F)

Reducing the burden for private sector to enable a better operating environment requires reforming regulations and procedures, coupled with policy or legal amendments. Bangladesh Investment Climate Fund, managed by IFC, in partnership with the UK Government and the European Union, has been working steadily over the last seven years in Bangladesh to address key investment and operating constraints. Bangladesh is a developing country where growth has been and will be private-sector led. . If Bangladesh is to achieve the targeted per annum growth necessary to meet the key Millennium Development Goals of halving the number of people in poverty by 2015, significant improvements to its business environment are needed.

BICF focuses its work on two main program areas: regulatory simplification (making it easier to do business) and private investment generation (making private investment happen). The regulatory simplification program area targets work towards simplified business tax administration and simplified business regulation, including alternate dispute resolution. The private investment generation work is mainly geared towards economic zones, but is now actively moving towards high growth sectors such as agribusiness. Over the course of the last seven years, BICF has contributed to improving investment climate through simplification of 18 regulatory processes for businesses, 12 legal amendments that include the development of the first ever Competition Act in Bangladesh and supporting the establishment of four institutions, all of which act as reform catalysts. BICF employs IFC’s approach towards advisory services that includes (but is not limited

to) technical support towards drafting of laws, regulation, policies and advancement in the area of information and communication technology through automation of government to business services, capacity building and institutional strengthening.

The Bangladesh Investment Climate Results Index is a pioneering initiative by the BICF team to create an index of the various investment climate related development results achieved by BICF. All reported results have been validated by the IFC Results Measurement team and this first edition of the Index features achievements of BICF over a seven year period. For each achievement, a brief description of the work is provided followed by outcomes and impacts delivered, beneficiaries, feedback from beneficiaries and way forward plans, where applicable.

We hope that this index will prove to be a very useful tool to communicate our achievements. This will also be a valuable resource for our donors, relevant bodies of the Government of Bangladesh, private sector, researchers, scholars and bilateral and multilateral institutions and donor groups in documenting some of the progress Bangladesh has made in private sector development and creating an investment friendly environment. Policy makers and think tanks focusing on economics, political science and international development will also find it beneficial.

Going forward, we hope to deliver the subsequent editions of the Transforming Investment Climate in Bangladesh Index at the end of each fiscal year.

Kyle KelhoferIFC Country ManagerBangladesh, Bhutan and Nepal

Paramita DasguptaIFC Regional Business Line Manager,

Investment Climate – South Asia

M. Masrur ReazIFC Program Manager

Investment Climate - Bangladesh

Foreword

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Contents Page No.

Summary of Investment Climate Results in Bangladesh

A. Business Regulation Simplification 6

B. Legal/Policy Amendments and New Laws 9

C. Reform Catalysts 11

Section A: Business Regulation Simplification

Automation of Export Permit Issuance at Dhaka Export Processing Zone 14

Automation of Import Permit Issuance at Dhaka Export Processing Zone 15

Automation of Sub-contract Permit Issuance at Dhaka Export Processing Zone 16

Automation of Investor Registration Processes at Board of Investment 17

Automation of Company Registration with Registrar of Joint Stock Companies & Firms 18

Cash Subsidy Claim Process Simplification 20

Duty Drawback Process Simplification 21

Bonded Warehouse Licensing Process Simplification 22

Automation of Import Clearance Process at Dhaka Customs House 23

Property Registration Process Simplification 24

Digital Signature 25

Trade License Issuance Process Simplification in Sylhet 26

Trade License Issuance Process Simplification in Cox’s Bazar 27

Trade License Issuance Process Simplification in Hobiganj 28

Trade License Issuance Process Simplification in Gopalganj 29

Trade License Renewal Process Simplification in Cox’s Bazar 30

Trade License Renewal Process Simplification in Hobiganj 31

Trade License Renewal Process Simplification in Gopalganj 32

Automation on Tax Identification Number Registration 33

Section B: Legal/Policy Amendments and New Laws

Establishment of Small Medium Enterprise Service Centers 36

Establishment of SME Monitoring & Evaluation System for Informed Decision Making 37

Turnover Tax Reform 38

Amendment of Abolishment of ‘Account Current’ in VAT Act 1991 39

Amendment of Input Credit on VAT Paid at Import Level in VAT Act 1991 40

IT (CA) Rules Enactment under ICT Act 2006 41

Transfer Pricing Module Amendment under Income Tax Ordinance 1984 42

Legalization of Private Courier Services under Postal Act 1898 43

Enactment of Alternate Dispute Resolution Rules under VAT Act 1991 44

Enactment of Alternate Dispute Resolution Rules in Income Tax Ordinance 1984 45

Enactment of Alternate Dispute Resolution Rules in Customs Act 1969 46

Enactment of Bangladesh Economic Zones Act 2010 47

Section C: Reform Catalysts

Business Initiative Leading Development 50

Private Sector Development Policy Coordination Committee 52

Business Regulatory Quality Assessment Unit 54

Bangladesh International Arbitration Center 55

Table of Contents

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Intervention

Automation of Export Permits Issuance at Dhaka Export Processing Zone

Automation of Import Permit Issuance at Dhaka Export Processing Zone

Automation of Sub-contract Permit Issuance at Dhaka Export Processing Zone

Automation of Investor Registration at Board of Investment

Automation of Company Registration with Registrar of Joint Stock Companies & Firms

Before

The average time to issue export permit used to take 11.96 hours and cost $5.

The average time to issue export permit used to take 10.74 hours and cost $6.

The sub-contract permit issuance took less than a day to prepare from the enterprise end and took 4.56 days by the Dhaka Export Processing Zone Authority to issue the permit. Also, alongside other direct costs, there was a Bangladeshi Taka 300 in unofficial cost ($3.6) per transaction.

Registration of industrial projects (local, joint venture and foreign) on average used to take 42 days in 2010. This meant that on average capital on $2.06 million remained idle during that period as projects were unable to start implementation.

Company registration with the Registrar of Joint Stock Companies and Firms used to take 73 days in 2009 and was a very burdensome process that deterred many businesses registering. The name clearance process itself took 7 days.

After

Average time to issue an export permit has reduced by 33 percent and the cost has increased by 20 percent. Overall 91 percent of firms are using the automated system

Average time to issue an export permit has reduced by 19.5 percent. However cost has decreased by 20 percent. Overall 91 percent of firms are using the automated system

The time taken by enterprise to prepare the documents required for sub-contract permit has increased by 32.5 percent since baseline. However, time taken by the agency has decreased by 25 percent. The unofficial fees have been completely eliminated.

The average time taken for registering industrial projects (local, joint-venture and foreign) has reduce by 71.5percent while cost has reduced by 81.8 percent.

The two lawyer verification was eliminated in 2009 reducing overall cost by $100 that was reflected in Doing Business 2009. In 2010, Doing Business reflected that automation of name clearance reduced to one day and overall time reduction of 45 percent from the automation of the registration processes. In 2011, starting a business was made easier by eliminating the requirement to buy adhesive stamps and further enhancement of the online registration system reduced time further by 91 percent also acknowledged by Doing Business in 2011.

Summary of Investment Climate Results in Bangladesh

A. Business Regulation Simplification

6 Transforming the InvestmentClimate in Bangladesh

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Intervention

Cash Subsidy Claim Process Simplification

Duty Drawback Process Simplification

Bonded Warehouse Licensing Process Simplification

Automation of Import Clearance Process at Dhaka Customs House

Property Registration Process Simplification

Digital Signature

Before

Before firms' claims were disbursed only after the full audit by Bangladesh Bank and were subject to fund availability in the Bangladesh Bank. Processing times were uncertain, sometimes exceeding one year, on average 4 months.

Duty drawback a facility extended to eligible exporters used to take 26 days. The total cost, in terms of money, for processing a claim includes 55 percent paid to service providers, 44 percent towards unofficial fees and only 1 percent as official fees. After deducting all the costs, the client was only able to retain 82 percent.

Previously to obtain a Bonded Warehouse License, it took 108 days, 28 documents and cost nearly Bangladeshi Taka 400,000 ($5,394) in 2006.

The time taken to obtain import clearance at Dhaka Customs House took 6 days in the manual system.

Property registration in Dhaka took 425 days and costs associated to tax were 18 percent in urban areas and 14 percent in rural areas.

Although there was a IT(CA) Rules in place, Bangladesh Computer Council lacked institutional capacity to operationalize digital signatures

After

Firms are able to obtain 70 percent of a claim on the same day without Bangladesh bank audit with only a preliminary verification by commercial bank with the remaining 30 percent processed with the next 15 days.

Average time to process duty drawback has reduced by 92 percent and there has been a 99 percent cost reduction. The total cost has reduced from $261 to $2.65

In 2010-2011, after the recommendations of the Regulatory Reform Commission was implemented, average time to obtain license reduced by 68 percent. In 2012-2013, after further new recommendations from BUILD (a public private dialogue platform) were implemented, the overall time reduced further by 53.5 percent with 20 percent reduction in overall cost and 28.5 percent reduction in visits.

The automation has eliminated 30 steps which reduced the time taken by half. Now possible in 2-3days.

The time taken to register property was cut almost by half within Dhaka city and was acknowledge by Doing Business in 2009. Costs such as stamp duties, fees and taxes associated with property registration were reduced to 8 percent in urban areas to 6 percent in rural areas.

The first ever Controller of Certifying Authorities established in Bangladesh Computer Council leading to 3 local firms certified and are ready for commercial operations.

Summary of Investment Climate Results in Bangladesh

7Transforming the InvestmentClimate in Bangladesh

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Intervention

Trade License Issuance Process Simplification in Sylhet

Trade License Issuance Process Simplification in Cox’s Bazar

Trade License Issuance Process Simplification in Hobiganj

Trade License Issuance Process Simplification in Gopalganj

Trade License Renewal Process Simplification in Cox’s Bazar

Trade License Renewal Process Simplification in Hobiganj

Trade License Renewal Process Simplification in Gopalganj

Before

The time taken to issue trade license took 4.3 days in 2009.

The time taken to issue trade license took 3.5 days and 4 visits.

The time taken to issue trade license took 2 days and 4 visits.

The time taken to issue trade license took 3.5 days and 4 visits.

The time taken to issue trade license took 2 days and 4 visits.

The time taken to issue trade license took 2 days and 4 visits.

The time taken to issue trade license took 2 days and 4 visits.

After

The time taken to issue trade license has reduced to 2.5 days in 2010.

The time taken to issue trade license has reduced to half a day with the elimination of 8 steps.

The time taken to issue trade license has reduced to half a day with the elimination of 12 steps.

The time taken to issue trade license has reduced to half a day with the elimination of 11 steps.

The time taken to renew trade license has reduced to half a day with the elimination of 2 steps.

The time taken to renew trade license has reduced to half a day with the elimination of 2 steps.

The time taken to renew trade license has reduced to half a day with the elimination of 14 steps.

Summary of Investment Climate Results in Bangladesh

8 Transforming the InvestmentClimate in Bangladesh

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Intervention

Establishment of Small Medium Enterprise Service Centers

Establishment of Small Medium Enterprise Monitoring & Evaluation System for Informed Decision Making

Turnover Tax Reform under 1991 VAT Act

Amendment of Abolishment of Account Current in 1991 VAT Act

Amendment of Input Credit on VAT Paid at Import Level in 1991 VAT Act

IT (CA) Rules Enactment under ICT Act 2006

Transfer Pricing Module Amendment under Income Tax Ordinance 1984

Legalization of Private Courier Services under Postal Act 1898

Before

Lack of SME service centers, particularly in rural areas of banking and non-banking financial institutions to facilitate SME lending.

Lack of systematic system for monitoring lending to SMEs by financial institutions.

Instead of paying 15 percent VAT, micro, small and medium enterprises with an annual turnover of less than Bangladesh Taka 2 million ($24,432) had to pay a turnover tax at 4 percent.

Under 1991 VAT Act, “account current” held advance VAT payment before the clearance on any goods. Firms also had to maintain this account for custom duties/custom clearance.

All businesses are eligible to obtain input credit However; this was not allowed at level of import. Businesses had VAT deducted at source.

Although there was an ICT Act in place, there was a lack of proper secondary legislature where the credibility of electronic or digital signature can be assured.

The transfer pricing legislation which covers mispricing, roles and powers of transfer pricing officer, process of record keeping, penalties and so forth was absent in Bangladesh.

The 'Post Office Act 1898' authorized the government to monopolize postal service delivery to clients. The act had limited private sector investment in this sector.

After

210 Small, Medium Enterprise Service Centers were launched by 20 banks in 48 districts in Bangladesh based on recommendation by Bangladesh Better Business Forum.

Bangladesh Bank established the first ever benchmark for SME lending and SME monitoring system developed for Bangladesh Bank enabling a progressive increase in the target for SME lending from $3.4 billion in 2009 to $8.8 billion in 2011.

Reduction in turnover tax rate from 4 percent to 3 percent that affects over 30,000 registered SMEs.

The excise type Account Current system was abolished by the National Board of Revenue in FY10.

All businesses are eligible to obtain input credit at import level from FY11 onwards.

In FY10, Bangladesh Computer Council implemented the recommendation to the IT (CA) Rules to develop an international standard public key infrastructure in Bangladesh. These rules were enacted under the IT (CA) Rules 2010.

National Board of Revenue has set up a Transfer pricing Cell to handle the Transfer Pricing related issues.

BICF core group recommendation to legalize private courier services enacted by the government has allowed private courier services to run business legally in Bangladesh.

Summary of Investment Climate Results in Bangladesh

B. Legal/Policy Amendments and New Laws

9Transforming the InvestmentClimate in Bangladesh

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Intervention

Enactment of Alternate Dispute Resolution Rules under VAT Act 1991

Enactment of Alternate Dispute Resolution Rules under Income Tax Ordinance 1984

Enactment of Alternate Dispute Resolution Rules under Customs Act 1969

Enactment of Bangladesh Economic Zones Act 2010

Before

BICF proposed addition for VAT ADR in VAT Act 1991 that was reflected by National Board of Revenue under Finance Bill FY11. The addition of ADR provision allows VAT related tax disputes to be settled through out of court mechanism however there was no secondary legislation in place.

BICF proposed addition for Income Tax ADR in Income Tax Ordinance 1984 that was reflected by National Board of Revenue under Finance Bill FY11. The addition of ADR provision allows VAT related tax disputes to be settled through out of court mechanism however there was no secondary legislation in place.

BICF proposed addition for VAT ADR in Customs Act 1969 that was reflected by National Board of Revenue under Finance Bill FY11. The addition of ADR provision allows VAT related tax disputes to be settled through out of court mechanism however there was no secondary legislation in place.

Although special economic zones were operational in Bangladesh under the purview of the Prime Minister’s Office through the Bangladesh Export Processing Zone Association, there was a lack of legal framework in place for setting-up and operating private or PPP economic zones in Bangladesh

After

The Alternate Dispute Resolution Rules for VAT was enacted in February 2012 were under VAT Act 1991. Further NBR also operationalized a VAT ADR Center in Dhaka.

The Alternate Dispute Resolution Rules for Income Tax was enacted in February 2012 were under Income Tax Ordinance 1984. Further NBR also operationalized an Income Tax ADR Center in Dhaka.

The Alternate Dispute Resolution Rules for Customs was enacted in February 2012 were under Customs Act 1969. Further NBR also operationalized a Customs ADR Center in Chittagong.

BICF supported the Government of Bangladesh to draft and enact the Bangladesh Economic Zones Act in August 2010, allowing for a more modern, competitive economic zones regime in the country.

Summary of Investment Climate Results in Bangladesh

10 Transforming the InvestmentClimate in Bangladesh

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Intervention

Business Initiative Leading Development (BUILD)

Private Sector Development Policy Coordination Committee (PSDPCC)

Business Regulatory Quality Assessment Unit (BRQAU)

Bangladesh International Arbitration Center

Before

There was a lack of a common platform through which the private sector could coordinate and advocate for recommendations that affect laws, policies, practices, regulations and processes for promoting private sector development in Bangladesh.

A large number of regulatory bottlenecks which constrain the growth of the private sector in Bangladesh are inter-ministerial in nature, and resolving these issues require ministries and multiple government agencies to coordinate. There was no such high power body within the government to coordinate between these agencies before the existence of the PSDPCC.

The Board of Investment had no sector/policy research support or team in place to conduct professional research on investment climate issues that would help BOI in planning and implementing investor outreach and facilitation activities.

Bangladesh had no mainstreaming process for enforcement of arbitration awards, no Alternative Dispute Resolution institution to administer commercial disputes and non-conformity of arbitration laws to modern practices.

After

BUILD is a research backed Public Private Dialogue platform was launched in October 2011 jointly by three leading business chambers of Bangladesh – Dhaka Chamber of Commerce & Industry, Metropolitan Chamber of Commerce & Industry and the SME Foundation. BUILD’s four thematic working committees meet quarterly, and are co-chaired by a private sector leader and a relevant Secretary of the Government of Bangladesh.

The PSDPCC established by the Prime Minister’s Office, is headed by the Principal Secretary of Government of Bangladesh and is comprised of ten Secretaries of ministries relevant to private sector development. The Committee also has representation from the private sector as Presidents of Federation of Bangladesh Chamber of Commerce and Industry, Dhaka Chamber of Commerce & Industry, Metropolitan Chamber of Commerce & Industry and Managing Director of SME Foundation. The PSDPCC meets on a quarterly basis and reviews the recommendations raised by the private sector.

The Business Regulatory Quality Assessment Unit is a team of researchers who have been working full time with the Board of Investment since June 2012 to generate researched information that the Board of Investment needs to fulfill their mandate of attracting investment and improve the investment climate.

Bangladesh International Arbitration Center, launched on April 9, 2011, is the first international ADR institution in Bangladesh. BIAC provides neutral, efficient and reliable dispute resolution.

C. Reform Catalysts

Summary of Investment Climate Results in Bangladesh

11Transforming the InvestmentClimate in Bangladesh

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:: Section A ::Business Regulation Simplification

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Description: Bangladesh Export Processing Zone Association introduced an automated export permit issuance process at the Dhaka Export Processing Zone in June 2010. The automation resulted from the work undertaken by BICF based on administrative barrier review of processes at DEPZ in 2008. Once the export permit application gets submitted, the system automatically notifies the applicant through a return email and/or an SMS as soon as it is approved.

Results: as of FY12

Outcomes:

has increased by 20 percent.

permits.

issued by BEPZA for that year.

Impacts:

firms using the system in DEPZ and is expected to save $1.9 million in direct compliance cost in four years.

Beneficiaries:All active firms currently operating in DEPZ.

Feedback from Beneficiaries:

DEPZ.

a) Time and cost savings (89 percent) b) Confidence building measure to operate in DEPZ (57 percent) c) Efficiency gain from reduced processing time (50 percent)

Way Forward:

system.

operations and management costs in the core annual budget is underway.

issuance system to the remaining seven export processing zones.

Client Name of Project

Bangladesh Export Processing Zone Association BICF Economic Zones

Automation of Export Permit Issuance at Dhaka Export Processing Zone

14 Transforming the InvestmentClimate in Bangladesh

Page 17: BCIR index - IFC Brochure - Final 201113(v-F)

Description: BEPZA introduced an automated import permit issuance process at the Dhaka Export Processing Zone in June 2010. The automation resulted from the work undertaken by BICF based on administrative barrier review of processes at DEPZ in 2008. Once the application gets submitted, the system automatically notifies the applicant through a return email and/or an SMS as soon as it is approved.

Results: as of FY12

Outcomes:

decreased by 20 percent.

permits.

issued by BEPZA for that year.

Impacts:

firms using the system in DEPZ and is expected to save $0.9 million in direct compliance cost in four years.

Beneficiaries:All active firms currently operating in DEPZ.

Feedback from Beneficiaries:

DEPZ.

a) Time and cost savings (89 percent) b) Confidence building measure to operate in DEPZ (57 percent) c) Efficiency gain from reduced processing time (50 percent)

Way Forward:

system.

operations and management costs in the core annual budget is underway.

issuance system to the remaining seven export processing zones.

Automation of Import Permit Issuance at Dhaka Export Processing Zone

Client Name of Project

Bangladesh Export Processing Zone Association BICF Economic Zones

15Transforming the InvestmentClimate in Bangladesh

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Description: BEPZA introduced an automated sub-contract permit issuance process at the Dhaka Export Processing Zone in June 2010. The automated system processes both sub-contract offering and sub-contract taking permits. Once enterprises have obtained their permission letter from BEPZA, they can opt to apply for their sub-contract permits online. Once the application gets submitted, the system automatically notifies the applicant through a return email and/or an SMS as soon as it is approved.

Results: as of FY12

Outcomes:

to endline by 32.5 percent.

by 25 percent for sub-contract permits taking.

that year.

Impacts:

Beneficiaries:All active firms currently operating in DEPZ.

Feedback from Beneficiaries:

service of DEPZ.

automated system. The few that did provide feedback said the system was slow, the server often lagged and automation for sub-contract permit is not useful if other export processing zones are not linked.

Way Forward:

system.

operations and management costs in the core annual budget is underway.

Automation of Sub-contract Permit Issuance at Dhaka Export Processing Zone

Client Name of Project

Bangladesh Export Processing Zone Association BICF Economic Zones

16 Transforming the InvestmentClimate in Bangladesh

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Description: Board of Investment introduced an automated registration system for both local and foreign investors in Bangladesh in December 2010. The online platform enables potential investors to complete the entire registration process, including submitting an application, attaching documents, tracking status, providing interactive feedback and seeking approval, without visiting the Board of Investment office or using an intermediary.

Results: as of FY12

Outcomes:

days in 2012)

the same; reduction happened for document preparation & unofficial fees). Further, costs vary depending on size of the project.

Impacts:

compliance cost savings ($0.14 million in direct compliance cost savings and $15.9 million in indirect compliance cost savings). The significant indirect costs is the result of an average of $2.06 million (Bangladesh taka 14,099 million) of capital idled per industrial project due to average bureaucratic delay of 42 days. At baseline only 4 percent of projects were registered with 10 days as mandated in the Board of Investment Citizen Charter. Recent survey shows 18 percent of industrial projects are now being registered within 10 days. Further, since baseline, bureaucratic delay has reduced by 71 percent.

Beneficiaries:All industrial projects (local, joint-venture & foreign) that obtained registrations post-automation.

Feedback from Beneficiaries:

Investment.

system: o Capacity of Board of Investment Staff (43 percent) o Challenges with paperwork (43 percent) o Environment not friendly (14 percent)Attitude of BOI officials was a major bottleneck identified at baseline as well.

percent suggested that the initial deposit requirement for traders should be dropped and client service at front desk should be improved

Way Forward:

applicants do not have to submit hard copies of their application before their online application can be approved. Recently BICF has supported Bangladesh Computer Council in implementation of a public key infrastructure that enabled digital signatures to become operational in Bangladesh. It is expected that is will result in further reduction in time taken for registration.

receive e-Payment of fees that will reduce the number of visits leading to improved governance and processing time.

Client Name of Project

Board of Investment BICF Institutional Capacity Building

Automation of Investor Registration Processes at Board of Investment

17Transforming the InvestmentClimate in Bangladesh

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Description: Registrar of Joint Stock Companies & Firms introduced online name clearence in February 2009 and automated business registration in March 2009 with support from BICF. The automated system allowed businesses to complete the entire registration process including submitting an application, attaching documents, tracking status, providing interactive feedback and seeking approval. BICF’s further supported RJSC&F to bring about structural changes that was recognized by an IFC performance award in FY11. After the Name Clearance and Registration services had been automated, RJSC&F moved to a modern office premise. Consequently, new IT manpower was sanctioned by Ministry of Commerce for RJSC&F. BICF then helped develop a system user manual and trained relevant officials to make them familiar with the system. RJSC&F is now self-sustaining the automated system with their own budget. The FY11 Finance Bill sanctioned $270,270 (Bangladesh taka 20,000,000) each year for the next 5 years towards operation and maintenance of the automated system. BICF support towards maintaining the automated system ended on 30 June 2011.

Results:

FY09 Outcomes:

acknowledged by Doing Business in 2009.

Impacts:

FY10 Outcomes:

automation of company registration services in March 2009 reduced time from 73 days to 33 days (45 percent reduction).

Impacts:

$967,502.

FY11 Outcomes:

further enhancing the online registration system, reducing time by 91 percent (from 33 days in 2009 to 3 days), acknowledged by DB in 2011.

Impacts:

Client Name of Project

Registrar of Joint Stock Companies and Firms BICF Regulatory Reform Component

Automation of Company Registration with RJSC&F

18 Transforming the InvestmentClimate in Bangladesh

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As of FY12: A beneficiary survey* was carried out in FY12. The survey was carried out with actual registrants directly

and a separate survey was carried out simultaneously with key survey findings are as follows:

Outcomes:

time required for registration (23 days in 2009 to 17 days in 2012) and 98 percent reduction in time required to obtain name clearance (9 days in 2009 to 1.58 hours in 2012) with the automated system since baseline

Impacts:

Beneficiaries: All businesses (public, private, partnerships, societies and associations) that obtained registrations

post-automation and all future business registration applicants.

Feedback from Beneficiaries:

clearance and registration service of RJSC&F respectively.

Way Forward:

system. This, along with the feedback collected on the performance of the automated system, will also be provided to RJSC&F for overall service quality improvement, especially with regards to governance, in FY13,

digital signature provision that can guarantee authenticity of the supporting documents. It is expected that it will result in further reduction in time taken for registration, as currently hard copy verification is still required for authentication purposes.

BRAC Bank and RJSC&F have an integrated management system whereby once fees are paid at BRAC Bank; RJSC&F receives instant notification. BICF is currently working with Bangladesh Bank to operationalize National Payment Switch that will allow electronic payment from any bank, reducing number of visits required, leading to improved governance and processing time.

that will assist prospective entrepreneurs in filling out the application, which will also function as an information center.

* It should be noted that after a baseline enterprise survey in 2009, there were no further surveys conducted over the subsequent years. This beneficiary survey was conducted in December 2011. The results reported in FY10 & FY11 are based on Doing Business reports.

19Transforming the InvestmentClimate in Bangladesh

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Description: Following Core Group* recommendations, Bangladesh Bank passed a circular in September 2009, streamlining cash subsidy claim procedure and significantly reducing the time taken by firms to obtain their cash subsidies. Manufacturers of export products get cash subsidies on domestic raw materials used as inputs. Subsidy rates vary from sector to sector between 5-20 percent of the value of the local inputs. Prior to this circular, firms’ claims were only disbursed after a full audit by Bangladesh Bank and subject to fund availability. Smaller firms were suffering more from uncertainty in disbursement time before the circular and are thus benefited the most.

Results: as of FY11

Outcomes:

a preliminary verification by commercial banks. The remaining 30 percent is received within 15 days.

Impacts:

is expected to save $20.7 million in direct compliance cost in 4 years. The savings were calculated as reduction in opportunity cost of US$259 million disbursed as cash subsidy annually due to reduction in disbursement times.

Beneficiaries:

Feedback from Beneficiaries:

Client Name of Project

Bangladesh Bank BICF Institutional Capacity Building

Cash Subsidy Claim Process Simplification

* Core Group: A group of mid-level civil servants who received capacity building training from BICF in order to foster private sector development friendly reform initiatives.

20 Transforming the InvestmentClimate in Bangladesh

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Description: BICF, through its Regulatory Reform Core Group program, has helped Bangladesh Bank and the National Board of Revenue implement the simplification processes of duty drawback facilities. . Exporters can claim duty paid at customs for raw materials or goods imported for exporting within two years from the time of import. This duty drawback is managed by the Duty Exemption and Drawback Office at National Board of Revenue. Prior to this reform, there was very little information made available to clients by Duty Exemption and Drawback Office, which forced them to solicit help from informal service providers and often took up to six months to receive the claim (although official claim settlement time is 30 days).

Results: as of FY11

Outcomes:

has been a 99 percent cost reduction.

Impacts:

Feedback from Beneficiaries:

Client Name of Project

Duty Exemption & Drawback Office at BICF Institutional Capacity Building National Board of Revenue

Duty Drawback Process Simplification

21Transforming the InvestmentClimate in Bangladesh

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Description: The Customs Bond Commissionerate (an agency under the purview of National Board of Revenue) implemented the bonded warehouse licensing process simplification with support from BICF. In June 2008, the government issued a set of rules to streamline the licensing process and reduce uncertainty and discretion. The new rules stipulated a reduction in required documents, set a time limit for issuance of the license and omitted the requirement to get approval from an additional agency. Further, through the Business Initiative Leading Development - BUILD (a Public Private Dialogue platform) the bonded warehouse licensing process was further simplified in July 2012.

Results:

FY11 Outcomes:

need to submit 19 documents instead of 28.

in unofficial costs from $4,117 to $2,295, a 44 percent reduction.

Impacts:

at the agency level.

FY13 Outcomes:

with 20 percent reduction in overall cost and 28.5 percent reduction in the number of visits.

Impacts:

saving of $21,996 in the first year and is expected to lead to saving of $80,238 in four years.

Beneficiaries:

Feedback from Beneficiaries:

reform client survey showed that there is a 52 percent improvement in rating. Based on 2013 survey, 46percent beneficiary rated Customs Bond Commissionerate neutrally on bond license issuance.

of paperwork and unofficial fees were rated as ‘major’ or ‘severe’ obstacles faced by applicants based on follow-up survey carried out post the July 2012 regulatory simplification.

Way Forward:

be simplified by introducing online application system including e-Payment of fees along with online tracking of the application and progress on the date of inspection. This will ensure a more transparent and accountable process.

Commissionerate and Board of Investment to see whether applicants are registered at Board of Investment to eliminate the Board of Investment recommendation.

Bonded Warehouse Licensing Process Simplification

Client Name of Project

Customs Bond Commissionerate at BICF Institutional Capacity Building & National Board of Revenue Regulatory Modernization for the Creation of Digital Bangladesh

22 Transforming the InvestmentClimate in Bangladesh

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Description: Inland Container Deport at Dhaka Customs House (under the purview of National Board of Revenue) in collaboration with the Dhaka Chambers of Commerce and Industries, supported by BICF, implemented an automated import clearance process to reduce hassles. Previously the import general manifesto was submitted and processed manually, post-arrival, via a token system, which could take up to two days to be cleared, as the Clearing and Forwarding agent would have to wait in line at the cargo department to physically collect the import general manifesto. Also, the Clearing and Forwarding agents would have to physically wait at the customs declaration department at the customs house to submit the Bill of Entries to a customs official, which would then be used to manually calculate the imports’ duties and levies. This could take up to a whole day. Now, the Clearing and Forwarding agents can submit the Bill of Entries automatically through the Société Internationale de Télécommunications Aéronautiques system, which then automatically estimates the duties and sends a notification to the customs clearance department through the system

Results: as of FY12

Outcomes:

taken by half (from six days to two to three days: two days approximately saved from import general manifesto submission + one day approximately saved from Bills of Entry submission = three days)

Impacts:

direct compliance cost savings and $7,704,733 is indirect compliance cost savings in one year.

Beneficiaries:

Feedback from Beneficiaries:

o Number of visits (85 percent) o Unofficial fees at Inland Container Depot (83 percent) o Harassment by Inland Container Depot officials (83 percent)

Way Forward:

to identify areas of improvement.

Asycuda World, which will be addressed through targeted training and coordination support.

Automation of Import Clearance Process at Dhaka Customs House

Client Name of Project

Dhaka Customs House, BICF Regulatory Reform 2 & National Board of Revenue Regulatory Modernization for the Creation of Digital Bangladesh

23Transforming the InvestmentClimate in Bangladesh

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Description: The Registration Directorate at the Land Registration Division to simplify property registration process which gained government approval through Finance Bill FY10 with support from BICF. The simplified property registration process has been functional since September 2009. The reform took place in 2 steps: first there was a reduction in time and following that stamp duties, fees and taxes were also reduced significantly.

Results: as of FY11

Outcomes:

Registry Office (from 425 days to 245 days since 2009) within Dhaka city, acknowledged by Doing Business in 2009.

percent to 8 percent in urban areas and from 14 percent to 6percent in rural areas.

(acknowledged by Doing Business in 2011)

Impacts:

showed savings of $5.3 million (assuming $267 was saved per firm and 20,000 firms per year in Dhaka City).

Feedback from Beneficiaries:

Client Name of Project

Registration Directorate at the Ministry of Law, BICF Regulatory Reform Judicial & Parliamentary Affairs

Property Registration Process Simplification

24 Transforming the InvestmentClimate in Bangladesh

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Description:BICF supported in drafting the IT (CA) Rules including providing recommendations on international best practices on the development of a public key infrastructure. Bangladesh Computer Council amended the ICT Act in 2009 where the credibility of digital signature was assured very clearly by giving it legal recognition in Section seven of the ICT Act 2006. BICF mobilized office equipment, computers, servers, technical expertise and other necessary logistics were collected for the establishment of the Controller of Certifying Authorities office. Further, Bangladesh Computer Council recruited local consulting firm who drafted necessary rules, guidelines and documents for digital signature. BICF recommendations were accepted and enacted by Bangladesh Computer Council under the IT (CA) Rules 2010.

Results: as of FY12

Outcomes:

order to launch digital signature in Bangladesh.

completed their technology audit and are ready for commercial operations.

completed by Controller of Certifying Authorities on April 18, 2012 so that Certifying Authorities can start operations. So far three Certifying Authority firms - Mango Teleservices Limited, Dohatech New Media Limited and Data Edge Limited, have received their Certifying Authority certificates.

Identification Number registration system. Digital Signature is also currently under implementation at the Department of Printing and Publication.

Impacts:

Beneficiaries:

Feedback from Beneficiaries:

o Feedback from CA firms were: - “Digital signatures provides protection against data tampering and manipulation.” - “Ensure security and integrity of paperless work management and e-governance.” o Feedback from potential users was: - “Improved Government to Business and Business to Business Correspondence needed.”

Way Forward:

signatures, its usage and benefits.

as BOI and RJSC&F.

Client Name of Project

Bangladesh Computer Council Regulatory Modernization for the Creation of Digital Bangladesh

Digital Signature

25Transforming the InvestmentClimate in Bangladesh

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Description: BICF facilitated the District Public Private Dialogue in Sylhet to identify that the mandatory submission of

holding tax payment receipt for obtaining a trade license is an impediment to business investment. It was difficult for business owners, who leased land or premises, to collect the holding tax payment receipt from the landlord or the government. This requirement was dropped after a proposal from the District Public Private Dialogue, which was implemented by the Sylhet City Corporation in December 2009.

Results: as of FY12

Outcomes:

2.5 days in 2010, down from 4.3 days in 2009.

Impacts:

Beneficiaries:

Way Forward:

proportion of respondents rating the service to be good increased to 64percent in 2010 from 43.1percent in 2009 and the proportion of respondents judging it to be bad decreased from 33.6 percent in 2009 to 10 percent in 2010.

Client Name of Project

Sylhet City Corporation Regulatory Reform

Trade License Issuance Process Simplification in Sylhet

26 Transforming the InvestmentClimate in Bangladesh

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Description: The Ministry of Establishment, Local Government Division and BICF have designed and implemented a pilot project that mapped and simplified the Trade License Issuance processes in the Cox’s Bazar municipality. Due to the simplification of the Trade License, it is expected that higher number of firms will be willing to receive their Trade Licenses from the Municipality, which will increase the potentiality for these informal firms to become formal.

Results: as of FY13

Outcomes:

for a trade license has reduced from four to one, with the elimination of eight procedural steps.

February 2013, 1,971 trade licenses have been issued using the simplified process.

Impacts:

Beneficiaries:

Feedback from Beneficiaries:

years.

Way Forward:

support from BICF before rolling it out nationwide. Once rolled out nationwide, the system is expected to be automated as well.

Client Name of Project

Local Government Division, Ministry of Regulatory Modernization for the Creation ofEstablishment, Ministry of Public Affairs Digital Bangladesh

Trade License Issuance Process Simplification in Cox’s Bazar

27Transforming the InvestmentClimate in Bangladesh

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Description: The Ministry of Establishment, Local Government Division and BICF have designed and implemented a pilot project that mapped and simplified the Trade License Issuance processes in the Hobiganj municipality. Due to the simplification of the Trade License, it is expected that higher number of firms will be willing to receive their Trade Licenses from the Municipality, which will increase the potentiality for these informal firms to become formal.

Results: as of FY13

Outcomes:

for a trade license has reduced from four to one, with the elimination of 12 procedural steps.

348 trade licenses have been issued using the simplified process.

Impacts:

Beneficiaries:

Feedback from Beneficiaries:

Way Forward:

support from BICF before rolling it out nationwide. Once rolled out nationwide, the system is expected to be automated as well.

Client Name of Project

Local Government Division, Ministry of Regulatory Modernization for the Creation ofEstablishment, Ministry of Public Affairs Digital Bangladesh

Trade License Issuance Process Simplification in Hobiganj

28 Transforming the InvestmentClimate in Bangladesh

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Description: The Ministry of Establishment, Local Government Division and BICF have designed and implemented a pilot project that mapped and simplified the Trade License Issuance processes in the Gopalganj municipality. Due to the simplification of the Trade License, it is expected that higher number of firms will be willing to receive their Trade Licenses from the Municipality, which will increase the potentiality for these informal firms to become formal.

Results: as of FY13

Outcomes:

days and three visits to half a day and one visit with the elimination of 11 procedural steps.

2013, 408 trade licenses have been issued using the simplified process

Impacts:

Beneficiaries:

Feedback from Beneficiaries:

Way Forward:

support from BICF before rolling it out nationwide. Once rolled out nationwide, the system is expected to be automated as well.

Client Name of Project

Local Government Division, Ministry of Regulatory Modernization for the Creation ofEstablishment, Ministry of Public Affairs Digital Bangladesh

Trade License Issuance Process Simplification in Gopalganj

29Transforming the InvestmentClimate in Bangladesh

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Description: The Ministry of Establishment (MOESTAB), Local Government Division (LGD) and BICF have designed and implemented a pilot project that mapped and simplified the Trade License Renewal processes in the Cox’s Bazar municipality

Results: as of FY13

Outcomes:

a day with the elimination of two procedural steps.

February 2013, 4,245 trade licenses have been renewed using the simplified process.

Impacts:

Beneficiaries:

Feedback from Beneficiaries:

Way Forward:

support from BICF before rolling it out nationwide. Once rolled out nationwide, the system is expected to be automated as well.

Client Name of Project

Local Government Division, Ministry of Regulatory Modernization for the Creation ofEstablishment, Ministry of Public Affairs Digital Bangladesh

Trade License Renewal Process Simplification in Cox’s Bazar

30 Transforming the InvestmentClimate in Bangladesh

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Description: The Ministry of Establishment, Local Government Division and BICF have designed and implemented a pilot project that mapped and simplified the Trade License Renewal processes in the Hobiganj. municipality

Results: as of FY13

Outcomes:

day, reducing the required number of visits from four to one, with the elimination of two procedural steps.

of February 2013, 3,813 trade licenses have been renewed using the simplified process.

Impacts:

Beneficiaries:

Feedback from Beneficiaries:

Way Forward:

support from BICF before rolling it out nationwide. Once rolled out nationwide, the system is expected to be automated as well.

Client Name of Project

Local Government Division, Ministry of Regulatory Modernization for the Creation ofEstablishment, Ministry of Public Affairs Digital Bangladesh

Trade License Renewal Process Simplification in Hobiganj

31Transforming the InvestmentClimate in Bangladesh

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Description: The Ministry of Establishment, Local Government Division and BICF have designed and implemented a pilot project that mapped and simplified the Trade License Renewal processes in the Gopalganj Municipality.

Results: as of FY12

Outcomes:

steps.

day, with the elimination of 14 procedural steps.

As of February 2013, 2,985 trade licenses have been renewed using the simplified process.

Impacts:

Beneficiaries:

Feedback from Beneficiaries:

Way Forward:

support from BICF before rolling it out nationwide. Once rolled out nationwide, the system is expected to be automated as well.

Client Name of Project

Local Government Division, Ministry of Regulatory Modernization for the Creation ofEstablishment, Ministry of Public Affairs Digital Bangladesh

Trade License Renewal Process Simplification in Gopalganj

32 Transforming the InvestmentClimate in Bangladesh

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Description: National Board of Revenue together with BICF introduced an automated system for registration of Tax Identification Number called e-TIN in July, 2013. The automation resulted from work undertaken by BICF based on findings from the Bangladesh Tax Perception and Compliance Cost Survey. Prior to designing the automated system, detailed before-after process maps were also developed. Now, individual taxpayers are able to register from home or office through the automated system using their National Identification Number and for firms the company registration number provided by the RJSC&F is used. Both individuals and firms are also able to print their digitally signed TIN certificate right away. The initiative is one of the first Government-to-Business services where BICF has been successfully able to demonstrate the use of Digital Signature. The digital signature is provided by locally certified firm Mango Teleservices Limited.

Results: as of FY14

Outcomes:

individuals.

555,422 re-registrations have been completed

Impacts:

Beneficiaries:

Feedback from Beneficiaries:

Way Forward:

campaigns will be harmonizing the electronic TIN with other tax departments such as Customs and VAT. This means the electronic TIN will act as an unique number which can also be used to enforce VAT and Customs payments, returns and refunds.

ministries’ automate system such as the BOI and RJSC&F.

Client Name of Project

National Board of Revenue Tax Streamlining

Automation on Tax Identification Number Registration

33Transforming the InvestmentClimate in Bangladesh

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:: Section B ::Legal/Policy Amendments and New Laws

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Description: The Bangladesh Better Business Forum was a public-private dialogue platform that was established in 2008 with support from BICF. The Business Finance Working Group of BBBF made recommendation to Bangladesh Bank, the central bank of Bangladesh, to establish SME Service Centers of banking and non-banking financial institutions to facilitate SME loans. Bangladesh Bank issued official notification in May 2008 to establish SME service centers. These centers could be a standalone premise or a dedicated service desk at financial institution branches to facilitate SME loans. It was expected that this financing facility would help SMEs contribute more to economic growth and employment generation.

Results: as of FY11

commercial banks in 48 districts all over Bangladesh.

average SME Center borrowers employed 4 workers. With these findings, it was calculated that approximately 31,000 jobs were created by the end of 2009.

Branch to facilitate lending to agro based SMEs. It allowed banks to transform the SME Service Centers into SME-Agricultural branches in rural areas or regular SME branches in urban areas. The SME agri-branches provide normal banking services in addition to lending to SMEs (except opening L/C). Thus the Service Centers which were created with the explicit objective to provide loans to SMEs have given way to either another form of institution in terms of policy emphasis or a return to traditional branches

clients were first time borrowers. Further, both the volume of SME loan and the number of borrowers also increased significantly (e.g. from 3 borrowers in June 2009 to 36 new borrowers in September 2011). Furthermore, the average time taken to process a loan reduced from two months to three weeks.

Beneficiaries:

Client Name of Project

Bangladesh Bank BICF Public-Private Dialogue & Stakeholder Engagement

Establishment of Small Medium Enterprise Service Centers

36 Transforming the InvestmentClimate in Bangladesh

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Description: BICF supported the development of an online monitoring system for Bangladesh Bank for Small and Medium Enterprises lending by commercial banks and non-banking financial institutions. The key objective of the SME Monitoring System are to track the following: (i) SME Target Achievements; (ii) Women owned SME Access to Finance; (iii) SME share in total loan outstanding; (iv) small medium composition; (v) sector wise disbursement to SMEs. The monitoring system helps Bangladesh Bank collect required data systematically to monitor, analyze and take informed decisions to ensure access to finance for the SMEs in Bangladesh.

Results: as of FY11

the target for SME lending from $3.4 billion in 2009 to $8.8 billion in 2011.

Bank of which 99 percent was met by the third quarter of 2010.

Beneficiaries:

Client Name of Project

Bangladesh Bank BICF Public-Private Dialogue & Stakeholder Engagement

Establishment of SME M&E System for Informed Decision Making

37Transforming the InvestmentClimate in Bangladesh

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Description: BICF has been providing advisory services to National Board of Revenue since 2010. Finance Bill FY11 adopted several BICF recommendations, including reduction of turnover tax rate from four percent to three percent. Turnover tax is paid by micro, small and medium enterprises in Bangladesh, and is an alternative to VAT: Instead of paying 15 percent VAT, micro, small and medium enterprises with an annual turnover of less than Bangladesh taka 2 million (approximately $ 24,432) pay a percentage from their turnover. Until FY 10 this was 4 percent, and now it is 3 percent. This represents significant savings for micro, small and medium enterprises. This change is expected to encourage compliance as well.

Results: as of FY12

Outcomes:

Impacts:

direct compliance cost savings of $555,021 in four years.

Beneficiaries:

Way Forward:

reduced rate of turnover tax along with other relevant tax related legal reforms pertaining to SMEs.

Client Name of Project

National Board of Revenue Tax Streamlining

Turnover Tax Reform

38 Transforming the InvestmentClimate in Bangladesh

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Description: BICF recommendation to abolish this “excise” type account current was amended by National Board of Revenue in FY10 – businesses were no longer required to maintain account current. Under 1991 VAT Act, “account current” held advance VAT payment before the clearance on any goods. Firms also had to maintain this account for custom duties/custom clearance.

Results: as of FY11

Outcomes:

account current with averaged $1,230 per account.

Impacts:

will yield direct compliance cost savings of $14, 795,112 in four years. Savings were calculated as opportunity cost of capital idled/deposited at current accounts.

Beneficiaries:

Way Forward:

from ready-made garments firms. Awareness raising is required amongst key beneficiaries

Client Name of Project

National Board of Revenue Tax Streamlining

Amendment of Abolishment of ‘Account Current’ in VAT Act 1991

39Transforming the InvestmentClimate in Bangladesh

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Description: The BICF recommendation to the National Board of Revenue which came into effect in FY10 allowed input credit (tax credit) for all firms that imported raw materials. All businesses are eligible to obtain input credit (VAT credit on raw materials). However, this was not allowed at level of import. Businesses were not able obtain this credit and had VAT deducted at source.

Results: as of FY12

Outcomes:

of $6,002.80 each at level of import in FY 10.

Impacts:

in one year and will yield direct compliance cost savings of $ 31,795,725 in four years.

Beneficiaries:

Way Forward:

Client Name of Project

National Board of Revenue Tax Streamlining

Amendment of Input Credit on VAT Paid at Import Level in VAT Act 1991

40 Transforming the InvestmentClimate in Bangladesh

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Description: The Office of the Controller of Certifying Authority at Bangladesh Computer Council under Ministry of Science and Information & Communication Technology has made digital signature commercially available with support from BICF. BICF targets are to reduce time and cost; and improve transparency and governance by introducing online service delivery. Digital signature is essential for online service delivery.

Results: as of FY12

Outcomes:

completed their technology audit and are ready for commercial operations.

received their certifying authority certificates.

Impacts:

Beneficiaries:

Way Forward:

signature, its usage and benefits.

Client Name of Project

Bangladesh Computer Council Regulatory Modernization for the Creation of Digital Bangladesh

IT (CA) Rules Enactment under ICT Act 2006

41Transforming the InvestmentClimate in Bangladesh

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Description: National Board Revenue, with support from BICF, has recently adopted the Transfer Pricing Legislation in the Income tax law of the country. The transfer pricing legislation covers the definition of the arm’s length pricing to determine mispricing, roles and powers of the transfer pricing officer, process of record keeping, penalties and so forth in case of any irregularities found.

Results: as of FY12

Outcomes:

Impacts:

Beneficiaries:

Way Forward:

Client Name of Project

National Board of Revenue Tax Streamlining

Transfer Pricing Module Amendment under Income Tax Ordinance 1984

42 Transforming the InvestmentClimate in Bangladesh

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Description: The 'Post Office Act 1898' authorized the government to monopolize postal service delivery to clients. The act had limited private sector investment in this sector. BICF core group members conducted a light regulatory impact assessment on the Postal Act and recommended amending it to allow private courier services to operate. To advocate the amendment, the core group members wrote five op-eds in national dailies on their findings and lobbied to concerned government officials.

Results: as of FY10

Outcomes:

allowed private courier services to run business legally in Bangladesh. This resulted in protection of nearly 100,000 jobs under the national labor law.

Impacts:

Further validation is required.

Beneficiaries:

Way Forward:

Client Name of Project

Bangladesh Post Office BICF Institutional Capacity Building

Legalization of Private Courier Services under Postal Act 1898

43Transforming the InvestmentClimate in Bangladesh

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Description: The Alternate Dispute Resolution Rules for VAT was enacted in February 2012 were under VAT Act 1991. BICF proposed addition for VAT ADR in VAT Act 1991 that was reflected by National Board of Revenue under Finance Bill FY11. The addition of ADR provision allows VAT related tax disputes to be settled through out of court mechanism. The ADR Rules provided the procedural framework required to resolve VAT related ADR cases. The reform will contribute to the reduction in time and cost for VAT disputes which will ultimately result in increase in revenue collection.

Results: as of FY13

Outcomes:

Impacts:

Beneficiaries:

Way Forward:

particularly with trainings of facilitators and NBR officials.

disputes.

Client Name of Project

National Board of Revenue Bangladesh Debt Resolution and Business Exit

Enactment of Alternate Dispute Resolution Rules under VAT Act 1991

44 Transforming the InvestmentClimate in Bangladesh

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Description: The Alternate Dispute Resolution Rules for Income Tax was enacted in February 2012 were under Income Tax Ordinance 1984. BICF proposed addition of Income Tax ADR was reflected by National Board of Revenue under Finance Bill FY11. The addition of ADR provision allows Income Tax related disputes to be settled through out of court mechanism. The ADR Rules provided the procedural framework required to resolve Income Tax related ADR cases. The reform will contribute to the reduction in time and cost for Income Tax disputes which will ultimately result in increase in revenue collection.

Results: as of FY13

Outcomes:

been resolved.

Impacts:

Beneficiaries:

Way Forward:

facilitators and NBR officials.

Tax disputes.

Client Name of Project

National Board of Revenue Bangladesh Debt Resolution and Business Exit

Enactment of Alternate Dispute Resolution Rules in Income Tax Ordinance 1984

45Transforming the InvestmentClimate in Bangladesh

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Description: The Alternate Dispute Resolution Rules for Customs was enacted in March 2012 were under Customs Act 1969. BICF proposed addition of Customs ADR was reflected by National Board of Revenue under Finance Bill FY11. The addition of ADR provision allows Customs related tax disputes to be settled through out of court mechanism. The ADR Rules provided the procedural framework required to resolve Customs related ADR cases. The reform will contribute to the reduction in time and cost for Customs disputes which will ultimately result in increase in revenue collection.

Results: as of FY13

Outcomes:

Customs cases have been resolved.

Impacts:

Beneficiaries:

Way Forward:

facilitators and NBR officials.

disputes.

Client Name of Project

National Board of Revenue Bangladesh Debt Resolution and Business Exit

Enactment of Alternate Dispute Resolution Rules in Customs Act 1969

46 Transforming the InvestmentClimate in Bangladesh

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Description: BICF supported the Government of Bangladesh to draft and enact the Bangladesh Economic Zones Act in August 2010, allowing for a more modern, competitive economic zones regime in the country. The law enshrines a number of important best practices including private sector participation in zone development, site selection for new zones on the basis of feasibility study and master planning, environmental and social compliance in zones, fiscal accountability, and the use of a "negative list" of industries. As a result, the law will send a clear signal to both potential zone developers as well as investors in future zones that the Government of Bangladesh is serious about developing its zones and has established the rules of operation.

Results: as of FY13

Outcomes:

the first step in making the EZ Act operational and establishing an institutional framework. BEZA’s mandate is to oversee all private and Public Private Partnership licensed zones in the country. Its organogram and scope of work were approved in June 2011. Three staff members have been posted at BEZA, which is a significant milestone in making it operational.

regulations has been drafted and training has been provided to BEZA on proper use of these application forms.

recommendations. The Government of Bangladesh selected an international firm to conduct feasibility on the selected sites. BEZA has shortlisted 3 international developers for 2 sights and an additional local zone developer.

Impacts:

Beneficiaries:

Way Forward:

principle) of the Economic Zones Operational Rules and BEZA Recruitment Regulations. The Board formed two committees to finalize the Economic Zones Operational Rules and Recruitment Regulations and gazettes on this committee formation were issued accordingly. The committees reviewed the Operational Rules and Recruitment Regulations made recommendations to the government.

Client Name of Project

Prime Ministers’ Office BICF Economic Zones Government of Bangladesh

Enactment of Bangladesh Economic Zones Act 2010

47Transforming the InvestmentClimate in Bangladesh

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:: Section C ::Reform Catalysts

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Description: Business Initiative Leading Development (BUILD) is a research backed Public Private Dialogue platform, launched in October 2011 jointly by three leading business chambers of Bangladesh - Dhaka Chamber of Commerce and Industry, the Metropolitan Chamber of Commerce and Industry and the SME Foundation. BUILD has four thematic working committees (trade & investment, financial sector development, SME development and taxation), each co-chaired by a private sector leader and a Secretary of a relevant Ministry of the Government of Bangladesh.

Results: as of FY13

National Budget for FY 2012-13, BUILD recommendations were accepted by the government, which include, extension of Tax Holiday for new businesses extended till 2015; supplementary duty raised on fan parts from 30 to 45percent to offer greater protection to the local fan part producers and VAT removed on import of LP Gas Cylinder.

signature requirements internally by moving up documentation verification to the very start of the process. Resulted in savings of 11-14 days.

potential sectors out of the 32 thrust sectors mentioned in the current Industrial Policy, the status of which is now being upgraded by the Ministry of Commerce and Ministry of Industries so that their potential for growth can be fully harnessed.

nominated banks to renew the Import Registration Certificates instead of Office of the Chief Controller of Imports & Exports (reverting to the practice prior to FY11-12), saving approximately 14 days each, for at least 75,800 firms.

Import Registration Certificate (IRC) issuance processes and the Bangladesh Standards and Testing Institution (BSTI) have simplified the Certification Mark license based on recommendations by BUILD

Bangladesh. The guide provides details on application procedure, document requirements, and sequential list of licenses, fees and renewal procedures.

need to obtain supplier's credit reports has been raised to $ 10,000 from $ 6250 for foreign issued invoices, and to $ 20,000 ($ 12,500 in the case of local inventor) issued invoices.

(not just DNB).

sharing supplier's credit reports between bank branches

Chittagong Chamber of Commerce & Industry jointly formed the BUILD Trust at a signing ceremony on November 3, 2013

Client Name of Project

Dhaka Chamber of Commerce & Industry, Regulatory Modernization for the Creation of Metropolitan Chamber of Commerce & Industry, Digital BangladeshChittagong Chamber of Commerce & Industryand SME Foundation

Business Initiative Leading Development

50 Transforming the InvestmentClimate in Bangladesh

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Beneficiaries:

Feedback from Beneficiaries:

‘Private sector aspires to see BUILD as a leading think tank for business reforms’- expressed by the representatives of major chambers and associations.

“Happy to see that reforms initiated by BUILD would attract local and foreign investments”- A.B.M Khorshed Alam, Additional secretary, Ministry of Industries.

“BUILD can further help the government by identifying issues pertinent to financial sector development’- A. K Azad, President FBCCI.

“We would appreciate more practical and research-based proposals from BUILD, to identify issues hampering the growth of private sector” –Sheikh Md. Wahid-uz-Zaman, Principal Secretary, Prime Minister Office, Government of Bangladesh.

Way Forward:

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Description: The Private Sector Development Policy Coordination Committee (PSDPCC) established in Prime Minister’s Office, is headed by the Principal Secretary of Government of Bangladesh and is comprised of ten Secretaries of ministries relevant to private sector development. The Committee also has representation from the private sector in the form of Presidents of Dhaka Chamber of Commerce & Industry, Metropolitan Chamber of Commerce & Industry, Federation of Bangladesh Chamber of Commerce & Industry and Managing Director of SME Foundation. The PSDPCC meets on a quarterly basis and reviews the recommendations raised by the private sector. PSDPCC also has the option to co-opt new members as and when required including ministerial representation and private sector bodies, to facilitate implementation of ministry, industry, and sector specific recommendations. PSDPCC has recognized BUILD as its primary platform for raising and soliciting recommendations from the private sector, backed by extensive analysis and research. Through this reform architecture, the working committees under BUILD, with support from the BUILD Secretariat, will act as the core partners of the PSDPCC and recommend a list of issues faced by the private sector with possible solutions that require approval from PSDPCC for implementation. In order to conduct its activities efficiently, the Policy Coordination Unit is being headed by Director General of Prime Minister’s Office and supported by a Director of the Prime Minister’s Office. The unit also comprises of a consulting team that is responsible for carrying out the technical activities. The consulting team is headed by the ex-Principal Secretary and has Investment Climate Specialist, M&E Specialist and Research Analysts onboard.

Results: as of FY12

internally by moving up documentation verification to the very start of the process, leading to estimated savings of 11-14days

to be included in the upcoming industrial policy and to be used as a basis for policy formulation and provision of monetary and fiscal incentive pertinent to these sectors

implemented under BICF’s supervision

by ADB to Bangladesh Bank for re-financing through commercial banks

Beneficiaries:

Client Name of Project

Prime Minister’s Office Regulatory Modernization for the Creation of Digital Bangladesh

Private Sector Development Policy Coordination Committee

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Feedback from Beneficiaries:

fourth Trade Policy Review of Bangladesh.

Way Forward:

Development Policy Coordination Committee.

Coordination Unit is provided by a professional consulting firm - Institute for Policy, Advocacy and Governance.

Sector Development Policy Coordination Committee does not include politically exposed policy makers.

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Description: The Business Regulatory Quality Assessment Unit is a team of researchers who have been working full time with the Board of Investment since June 2012 to generate researched information that the Board of Investment needs to fulfill their mandate of attracting investment and improve the investment climate. The Business Regulatory Quality Assessment Unit conducts general research through selection of priority issues, sectors and topics. The Business Regulatory Quality Assessment Unit further conducts diagnostics on business regulatory processes, regulations and laws to complement general research. The Board of Investment, for the first time, has access to a team who can fill gaps of necessary information in real time, which the Board of Investment lacks.

Results: as of FY12

healthcare), a market worth $2 billion has been identified in Bangladesh’s health care and medical equipment sectors.

Beneficiaries:

and foreign

Feedback from Beneficiaries:

Way Forward:

the Unit in coordination with the Board of Investment directors to create more sector profiles along with identification of potential investment leads. It is expected that the Board of Investment will utilize this for their investment promotion opportunities.

identify regulatory bottlenecks in specific sectors which require regulatory simplifications to help promote investments in the priority sectors.

Client Name of Project

Board of Investment Regulatory Modernization for the Creation of Digital Bangladesh

Business Regulatory Quality Assessment Unit

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Description: Bangladesh International Arbitration Center, launched on April 9, 2011, is the first international arbitration institution in the country. Three business chambers of Bangladesh - International Chamber of Commerce, Bangladesh, Dhaka Chamber of Commerce & Industry and Metropolitan Chamber of Commerce and Industry, are sponsors of BIAC. BIAC provides neutral, efficient and reliable dispute resolution services in this emerging hub of South Asia’s industrial and commercial activity.

Results: as of FY12

resolution institution in Bangladesh, it is the first institutional Arbitration Rules in Bangladesh.

two cases.

launch of mediation in 3 districts of Bangladesh.

Beneficiaries:

Feedback from Beneficiaries:

Way Forward:

when cases are brought in for arbitration or mediation.

BIAC’s sustainability plan to ensure BIAC is able to produce more arbitrators and mediators independently.

of Bangladesh - Dhaka, Gazipur and Naraynaganj. This pilot will introduce court referred mediation whereby any civil cases filed will be referred for mediation through the court appointed legal aid officer prior to any litigation. The legal aid officer will be entrusted with appointing a judge for the mediation from the roster of trained judges who is expected to undertake mediation as per the Civil Procedure Code amendment on mediation.

Client Name of Project

International Chamber of Commerce-Bangladesh, Bangladesh Debt Resolution and Business Exit Dhaka Chamber of Commerce & Industry and Metropolitan Chamber of Commerce & Industry

Bangladesh International Arbitration Center

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