91912 Doing Business 2015 Bangladesh Economy Profile 2015 Bangladesh Doing Business 2015 Bangladesh 2 © 2014 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org All rights reserved. 1 2 3 4 17 16 15 14 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2015 Bangladesh 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 6 Starting a business ..................................................................................................................... 16 Dealing with construction permits ........................................................................................... 27 Getting electricity ....................................................................................................................... 38 Registering property .................................................................................................................. 49 Getting credit .............................................................................................................................. 57 Protecting minority investors ................................................................................................... 64 Paying taxes ................................................................................................................................ 73 Trading across borders .............................................................................................................. 78 Enforcing contracts .................................................................................................................... 83 Resolving insolvency .................................................................................................................. 90 Labor market regulation ........................................................................................................... 93 Distance to frontier and ease of doing business ranking .................................................... 100 Resources on the Doing Business website ............................................................................ 103 Doing Business 2015 Bangladesh 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is 1, 2014 (except for the paying taxes indicators, which for a local entrepreneur to open and run a small to cover the period January–December 2013). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, getting trading across borders and getting electricity), the credit, protecting minority investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and labor market regulation. macroeconomic conditions or the underlying strength of In a series of annual reports Doing Business presents institutions—are not directly studied by Doing Business. quantitative indicators on business regulations and the The indicators refer to a specific type of business, protection of property rights that can be compared generally a local limited liability company operating in across 189 economies, from Afghanistan to Zimbabwe, the largest business city. Because standard assumptions over time. The data set covers 47 economies in Sub- are used in the data collection, comparisons and Saharan Africa, 32 in Latin America and the Caribbean, 25 benchmarks are valid across economies. The data not in East Asia and the Pacific, 26 in Eastern Europe and only highlight the extent of obstacles to doing business; Central Asia, 20 in the Middle East and North Africa and they also help identify the source of those obstacles, 8 in South Asia, as well as 31 OECD high-income supporting policy makers in designing regulatory reform. economies. The indicators are used to analyze economic More information is available in the full report. Doing outcomes and identify what reforms have worked, where Business 2015 presents the indicators, analyzes their and why. relationship with economic outcomes and presents This economy profile presents the Doing Business business regulatory reforms. The data, along with indicators for Bangladesh. To allow useful comparison, it information on ordering Doing Business 2015, are also provides data for other selected economies available on the Doing Business website at (comparator economies) for each indicator. The data in http://www.doingbusiness.org. this report are current as of June Doing Business 2015 Bangladesh 5 CHANGES IN DOING BUSINESS 2015 As part of a 2-year update in methodology, Doing Finally, the name of the employing workers indicator set Business 2015 incorporates 7 important changes. First, has been changed to labor market regulation, and the the ease of doing business ranking as well as all topic- scope of this indicator set has also been changed. The level rankings are now computed on the basis of indicators now focus on labor market regulation distance to frontier scores (see the chapter on the applying to the retail sector rather than the distance to frontier and ease of doing business ranking). manufacturing sector, and their coverage has been Second, for the 11 economies with a population of more expanded to include regulations on labor disputes and than 100 million, data for a second city have been added on benefits provided to workers. The labor market to the data set and the ranking calculation. These regulation indicators continue to be excluded from the economies are Bangladesh, Brazil, China, India, aggregate distance to frontier score and ranking on the Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian ease of doing business. Federation and the United States. Third, for getting Beyond these changes there are 3 other updates in credit, the methodology has been revised for both the methodology. For paying taxes, the financial statement strength of legal rights index and the depth of credit variables have been updated to be proportional to 2012 information index. The number of points has been income per capita; previously they were proportional to increased in both indices, from 10 to 12 for the strength 2005 income per capita. For enforcing contracts, the of legal rights index and from 6 to 8 for the depth of value of the claim is now set at twice the income per credit information index. In addition, only credit bureaus capita or $5,000, whichever is greater. For dealing with and registries that cover at least 5% of the adult construction permits, the cost of construction is now set population can receive a score on the depth of credit at 50 times income per capita (before, the cost was information index. assessed by the Doing Business respondents). In addition, Fourth, the name of the protecting investors indicator set this indicator set no longer includes the procedures for has been changed to protecting minority investors to obtaining a landline telephone connection. better reflect its scope—and the scope of the indicator For more details on the changes, see the “What is set has been expanded to include shareholders’ rights in changing in Doing Business?” chapter starting on page corporate governance beyond related-party transactions. 24 of the Doing Business 2015 report. For more details Fifth, the resolving insolvency indicator set has been on the data and methodology, please see the “Data expanded to include an index measuring the strength of Notes” chapter starting on page 114 of the Doing the legal framework for insolvency. Sixth, the calculation Business 2015 report. For more details on the distance to of the distance to frontier score for paying taxes has frontier metric, please see the “Distance to frontier and been changed. The total tax rate component now enters ease of doing business ranking” chapter in this profile. the score in a nonlinear fashion, in an approach different from that used for all other indicators (see the chapter on the distance to frontier and ease of doing business ranking). Doing Business 2015 Bangladesh 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: South Asia based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: Low income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. This Population: 156,594,962 year's report presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 900 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier (DTF) scores. DB2015 rank: 173 The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute DB2014 rank: 170* distance to the best performance in each Doing Business Change in rank: -3 indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the DB 2015 DTF: 46.8 worst performance and 100 the frontier. (See the chapter on the distance to frontier and ease of doing business). DB 2014 DTF: 46.4 The 10 topics included in the ranking in Doing Business 2015: starting a business, dealing with construction Change in DTF: 0.4 permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading * DB2014 ranking shown is not last year’s published across borders, enforcing contracts and resolving ranking but a comparable ranking for DB2014 that insolvency. The labor market regulation indicators captures the effects of such factors as data (formerly employing workers) are not included in this corrections and the changes in methodology. See year’s aggregate ease of doing business ranking, but the the data notes starting on page 114 of the Doing data are presented in this year’s economy profile. Business 2015 report for sources and definitions. The aggregate ranking on the ease of doing business benchmarks each economy’s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2015 Bangladesh THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2015 Bangladesh THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How Bangladesh and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 Bangladesh 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Bangladesh (Scale: Rank 189 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - Bangladesh (Scale: Score 0 center, Score 100 outer edge) Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 Bangladesh 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business tells Doing Business introduced the distance to frontier score. This only part of the story, so do changes in that ranking. Yearly measure shows how far on average an economy is from the movements in rankings can provide some indication of best performance achieved by any economy on each Doing changes in an economy’s regulatory environment for firms, Business indicator. but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed in over time—how far it has moved toward (or away from) the different areas. To aid in assessing such changes, most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has Bangladesh come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2010, except for getting credit, paying taxes, protecting minority investors and resolving insolvency which had methodology changes in 2014 and thus are only comparable to 2013. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2015 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2015 Bangladesh 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for Bangladesh United Kingdom DB2015 Best performer globally Bangladesh DB2015 Bangladesh DB2014 Chittagong DB2015 Sri Lanka DB2015 Pakistan DB2015 Dhaka DB2015 Indicator India DB2015 DB2015 Starting a Business 115 111 -- -- 158 116 104 45 New Zealand (1) (rank) Starting a Business (DTF 81.36 80.52 81.36 81.36 68.42 80.92 83.01 91.23 New Zealand (99.96) Score) Procedures (number) 9.0 9.0 9.0 9.0 11.9 10.0 9.0 6.0 New Zealand (1.0)* Time (days) 19.5 21.8 19.5 19.5 28.4 19.0 11.0 6.0 New Zealand (0.5) Cost (% of income per 16.8 18.8 16.8 16.8 12.2 9.6 20.7 0.3 Slovenia (0.0) capita) Paid-in min. capital (% 0.0 0.0 0.0 0.0 111.2 0.0 0.0 0.0 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 144 142 -- -- 184 125 60 17 China (1) (rank) Dealing with Hong Kong SAR, Construction Permits 61.90 61.50 61.64 62.84 30.89 66.07 76.50 85.06 China (95.53) (DTF Score) Doing Business 2015 Bangladesh 12 United Kingdom DB2015 Best performer globally Bangladesh DB2015 Bangladesh DB2014 Chittagong DB2015 Sri Lanka DB2015 Pakistan DB2015 Dhaka DB2015 Indicator India DB2015 DB2015 Hong Kong SAR, Procedures (number) 13.4 13.4 13.0 15.0 25.4 10.0 12.0 9.0 China (5.0) Time (days) 269.2 269.2 278.0 238.0 185.9 249.4 169.0 105.0 Singapore (26.0) Cost (% of warehouse 2.1 2.3 2.1 2.1 28.2 3.5 0.3 1.2 Qatar (0.0)* value) Getting Electricity 188 189 -- -- 137 146 100 70 Korea, Rep. (1) (rank) Getting Electricity (DTF 17.32 15.39 16.87 18.93 63.06 60.10 72.71 78.42 Korea, Rep. (99.83) Score) Procedures (number) 9.0 9.0 9.0 9.0 7.0 5.0 5.0 4.0 12 Economies (3.0)* Time (days) 428.9 428.9 404.0 517.0 105.7 178.3 104.0 126.0 Korea, Rep. (18.0)* Cost (% of income per 3,890.1 4,359.7 4,000.4 3,499.1 487.7 1,353.3 901.6 90.1 Japan (0.0) capita) Registering Property 184 183 -- -- 121 114 131 68 Georgia (1) (rank) Registering Property 31.34 31.15 32.60 26.89 60.40 61.48 58.45 72.55 Georgia (99.88) (DTF Score) Procedures (number) 8.0 8.0 8.0 8.0 7.0 6.0 9.0 6.0 4 Economies (1.0)* Time (days) 244.0 244.0 244.0 244.0 47.0 50.0 51.0 21.5 3 Economies (1.0)* Cost (% of property 7.2 7.2 6.6 9.1 7.0 7.6 5.1 4.6 4 Economies (0.0)* value) Getting Credit (rank) 131 125 -- -- 36 131 89 17 New Zealand (1) Getting Credit (DTF 30.00 30.00 30.00 30.00 65.00 30.00 45.00 75.00 New Zealand (100) Score) Strength of legal rights 6 6 6 6 6 3 3 7 3 Economies (12)* index (0-12) Doing Business 2015 Bangladesh 13 United Kingdom DB2015 Best performer globally Bangladesh DB2015 Bangladesh DB2014 Chittagong DB2015 Sri Lanka DB2015 Pakistan DB2015 Dhaka DB2015 Indicator India DB2015 DB2015 Depth of credit 0 0 0 0 7 3 6 8 23 Economies (8)* information index (0-8) Credit registry coverage 0.9 0.8 0.9 0.9 0.0 7.3 0.0 0.0 Portugal (100.0) (% of adults) Credit bureau coverage 0.0 0.0 0.0 0.0 22.4 4.5 44.5 100.0 23 Economies (100.0)* (% of adults) Protecting Minority 43 43 -- -- 7 21 51 4 New Zealand (1) Investors (rank) Protecting Minority 60.83 60.83 60.83 60.83 72.50 66.67 59.17 78.33 New Zealand (81.67) Investors (DTF Score) Extent of conflict of interest regulation 6.3 6.3 6.3 6.3 6.7 6.0 6.0 8.3 Singapore (9.3)* index (0-10) Extent of shareholder governance index (0- 5.8 5.8 5.8 5.8 7.8 7.3 5.8 7.3 France (7.8)* 10) Strength of minority investor protection 6.1 6.1 6.1 6.1 7.3 6.7 5.9 7.8 New Zealand (8.2) index (0-10) United Arab Emirates Paying Taxes (rank) 83 78 -- -- 156 172 158 16 (1)* Paying Taxes (DTF United Arab Emirates 73.98 73.98 73.98 73.98 55.53 44.46 55.00 90.52 Score) (99.44)* Payments (number per Hong Kong SAR, 21.0 21.0 21.0 21.0 33.0 47.0 47.0 8.0 year) China (3.0)* Time (hours per year) 302.0 302.0 302.0 302.0 243.0 594.0 167.0 110.0 Luxembourg (55.0) Trading Across Borders 140 140 -- -- 126 108 69 15 Singapore (1) (rank) Trading Across Borders 61.36 60.15 60.69 63.73 65.47 69.05 76.94 88.32 Singapore (96.47) Doing Business 2015 Bangladesh 14 United Kingdom DB2015 Best performer globally Bangladesh DB2015 Bangladesh DB2014 Chittagong DB2015 Sri Lanka DB2015 Pakistan DB2015 Dhaka DB2015 Indicator India DB2015 DB2015 (DTF Score) Documents to export 6 6 6 6 7 8 7 4 Ireland (2)* (number) Time to export (days) 28.3 28.6 29.0 26.0 17.1 20.7 16.0 8.0 5 Economies (6.0)* Cost to export (US$ per 1,281.0 1,203.0 1,325.0 1,125.0 1,332.0 765.0 560.0 1,005.0 Timor-Leste (410.0) container) Cost to export (deflated 1,281.0 1,282.7 1,325.0 1,125.0 1,332.0 765.0 560.0 1,005.0 US$ per container) Documents to import 9 9 9 9 10 8 7 4 Ireland (2)* (number) Time to import (days) 33.6 37.6 34.0 32.0 21.1 18.4 13.0 6.0 Singapore (4.0) Cost to import (US$ per 1,515.0 1,437.0 1,570.0 1,320.0 1,462.0 1,005.0 690.0 1,050.0 Singapore (440.0) container) Cost to import (deflated 1,515.0 1,532.2 1,570.0 1,320.0 1,462.0 1,005.0 690.0 1,050.0 US$ per container) Enforcing Contracts 188 188 -- -- 186 161 165 36 Singapore (1) (rank) Enforcing Contracts 20.82 20.82 20.82 20.82 25.81 41.53 38.96 68.08 Singapore (89.54) (DTF Score) Time (days) 1,442.0 1,442.0 1,442.0 1,442.0 1,420.0 993.1 1,318.0 437.0 Singapore (150.0) Cost (% of claim) 66.8 66.8 66.8 66.8 39.6 23.0 22.8 39.9 Iceland (9.0) Procedures (number) 41.0 41.0 41.0 41.0 46.0 46.0 40.0 29.0 Singapore (21.0)* Resolving Insolvency 147 146 -- -- 137 78 72 13 Finland (1) (rank) Resolving Insolvency 29.49 29.49 29.49 29.49 32.60 46.18 47.81 82.04 Finland (93.85) (DTF Score) Doing Business 2015 Bangladesh 15 United Kingdom DB2015 Best performer globally Bangladesh DB2015 Bangladesh DB2014 Chittagong DB2015 Sri Lanka DB2015 Pakistan DB2015 Dhaka DB2015 Indicator India DB2015 DB2015 Time (years) 4.0 4.0 4.0 4.0 4.3 2.7 1.7 1.0 Ireland (0.4) Cost (% of estate) 8.0 8.0 8.0 8.0 9.0 5.6 10.0 6.0 Norway (1.0) Outcome (0 as piecemeal sale and 1 as 0 0 0 0 0 0 0 1 going concern) Recovery rate (cents on 25.8 25.8 25.8 25.8 25.7 39.4 42.4 88.6 Japan (92.9) the dollar) Strength of insolvency 5.0 5.0 5.0 5.0 6.0 8.0 8.0 11.0 5 Economies (15.0)* framework index (0-16) Note: DB2014 rankings shown are not last year’s published rankings but comparable rankings for DB2014 that capture the effects of s uch factors as data corrections and changes to the methodology. Trading across borders deflated and non-deflated values are identical in DB2015 because it is defined as the base year for the deflator. The best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2015 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practic e or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bot tom of the ranking on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2015 Bangladesh 16 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city 1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Time required to complete each procedure generating more revenue for the government. (calendar days) What do the indicators cover? Does not include time spent gathering information Doing Business measures the ease of starting a business in an economy by recording all procedures Each procedure starts on a separate day (2 officially required or commonly done in practice by procedures cannot start on the same day). an entrepreneur to start up and formally operate an Procedures that can be fully completed industrial or commercial business—as well as the online are recorded as ½ day. time and cost required to complete these procedures. Procedure completed once final document is It also records the paid-in minimum capital that received companies must deposit before registration (or within 3 months). The ranking of economies on the No prior contact with officials ease of starting a business is determined by sorting Cost required to complete each procedure their distance to frontier scores for starting a (% of income per capita) business. These scores are the simple average of the distance to frontier scores for each of the component Official costs only, no bribes indicators. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Is a limited liability company, located in the  Has a start-up capital of 10 times income per largest business city and is 100% domestically capita. owned . 1  Has a turnover of at least 100 times income per  Has between 10 and 50 employees. capita.  Conducts general commercial or industrial  Does not qualify for any special benefits. activities.  Does not own real estate. 1 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 Bangladesh 17 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Bangladesh? largest business city of an economy, except for 11 According to data collected by Doing Business, starting a economies for which the data are a population-weighted business there requires 9.0 procedures, takes 19.5 days, average of the 2 largest business cities. See the chapter costs 16.8% of income per capita and requires paid-in on distance to frontier and ease of doing business minimum capital of 0.0% of income per capita (figure ranking at the end of this profile for more details. 2.1). Most indicator sets refer to a case scenario in the Figure 2.1 What it takes to start a business in Bangladesh - Dhaka Paid-in minimum capital (% of income per capita): 0.0 Doing Business 2015 Bangladesh 18 What it takes to start a business in Bangladesh - Chittagong Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Bangladesh 19 STARTING A BUSINESS Globally, Bangladesh stands at 115 in the ranking of 189 average ranking provide other useful information for economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in The rankings for comparator economies and the regional Bangladesh to start a business. Figure 2.2 How Bangladesh and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2015 Bangladesh 20 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in Bangladesh (table 2.1)? Table 2.1 How has Bangladesh made starting a business easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Bangladesh made starting a business easier by launching a DB2010 full-fledged online business name clearance and registration process. Bangladesh made business start-up easier by eliminating the DB2011 requirement to buy adhesive stamps and further enhancing the online registration system. Bangladesh made starting a business easier by automating the registration process and reducing the time required to obtain DB2014 a trading license and to complete the tax and value added tax registration. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Bangladesh 21 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Bangladesh is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: Private Limited Liability Company firm. These are identified by Doing Business through collaboration with relevant local professionals and Paid in minimum capital requirement: BDT 0 the study of laws, regulations and publicly available City: Dhaka , Chittagong information on business entry in that economy. Following is a detailed summary of those procedures, Start-up Capital: 10 times GNI per capita along with the associated time and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in Bangladesh - Dhaka Time to No. Procedure Cost to complete complete Verify the uniqueness of the proposed company name on the website of the Registrar of Joint Stock Companies and Firms The search for the availability of a company name was computerized in 2003. After checking that the proposed company name is available for registration, the entrepreneur then applies for name clearance through the Registrar of Joint Stock Companies and Firms (RJSC) website. The status of the application can be checked online and is usually accepted or rejected within 1 working day. If accepted, the company name is Less than one day BDT 600 (paid at a 1 reserved for 6 months. A print out of the name clearance certificate (online procedure) designated Bank) must be submitted to the RJSC, along with the other required documents for incorporation. In addition to the BRAC Bank, the name reservation fee may be paid at the following designated banks: One Bank and Mutual Bank. Agency: Registrar of Joint Stock Companies and Firms Pay stamp duty at a designated bank BDT 3,000 for the Payment of stamp duty is made to the account of the Treasury at the Articles of BRAC Bank. According to the Stamp Act 1899 as amended on June Association + BDT 30th, 2012, for an authorized share capital of up to BDT 1,000,000, the 50 for a certified 2 total stamp duty fees are BDT 4,000. These include BDT 3,000 for 1 day copy; and BDT affixing stamps on the Articles of Association, and BDT 1,000 for stamps 1,000 for the on the Memorandum of Association. In addition, a certified copy of Memorandum of each document costs BDT 50. Association + BDT 50 for a certified Agency: BRAC Bank Doing Business 2015 Bangladesh 22 Time to No. Procedure Cost to complete complete copy Register at the Registrar of Joint Stock Companies and Firms To register a company, the following documents must be submitted to the registrar: (1) Name clearance certificate (2) Memorandum and Articles of association (3) Forms I (Declaration on the registration of the company); Form VI (Notice of the registered office); Form IX (Consent to act as directors); Form X (The list of persons consenting to act as directors); and Form XII (Particulars of the Directors, Managers, and Managing Agents) (4) Proof of payment (i.e. receipt from the designated bank) for Treasury Stamps BDT 3645 Less than one day registration fees + 3 The registration fees payable at a designated bank are as follows: (online procedure) 1200 registration i. For filing 6 documents (5 filled in forms and the memorandum & filing fees articles of association, the fee is BDT 200.00 per document): BDT 1,200.00 ii. For an authorized share capital of up to BDT 20,000, the fee is BDT 360. An additional fee of BDT 180 is applicable for every BDT 10,000 or part from the first BDT 20,000 up until BDT 50,000 An additional fee of BDT 45 is applicable for every BDT 10,000 or part from the first BDT 50,000 up until BDT 1,000,000 Agency: Registrar of Joint Stock Companies and Firms Make a company seal Business founders can make a company seal at the Sealmaker for BDT 30-50. 4 1 day BDT 30-50 Agency: Sealmaker Obtain a Tax Identification Number In order to start business operations, every company must register for taxes at the appropriate taxation authority (Deputy Commission of Taxes of Company Circle, Zonal Taxation Department) under the Less than one day 5 National Board of Revenue (NBR) and obtain a tax identification no charge (online procedure) number. Obtaining TIN number can now be done online in less than one day. Agency: National Board of Revenue Doing Business 2015 Bangladesh 23 Time to No. Procedure Cost to complete complete * Open a Bank Account In order to register for VAT, the company must first open a bank 1 day account. (simultaneous with 6 no charge previous Agency: Bank procedure) Apply for VAT registration For VAT purposes, companies register with the Customs, Excise, and VAT Commission under the National Board of Revenue. The company's VAT is regulated by the Customs, VAT and Excise Department of the region in which it operates. When an enterprise submits a VAT Registration application to the VAT authority an application must accomplish or enclosed the following papers & Documents: - Fill-up an application form. 7 - Enterprise Trade License. 1 day no charge - Bank Solvency Certificate. - Owners 02 photograph. - National ID/Passport copy of owners. - IRC/ERC if enterprise dong import and Export Business. - Article & Memorandum (if enterprise is Limited Company.) - TIN Certificate. - Location MAP of Enterprise premises. Agency: National Board of Revenue Receive physical inspection of the business premises by a government agent and Obtain the VAT registration certificate As of 2010, businesses receive physical inspection by a government agent in order to verify that the company is real before obtaining their 7 days no charge 8 VAT registration certificates. Agency: National Board of Revenue Obtain a trade license Companies obtain a trade license from the City Corporation. Recently, 7 days BDT 2,700 9 the City Corporation (Dhaka) was divided into 2 zones: the North Zone and the South Zone. The proposed company will have to file its application at the nearest City Corporation. Doing Business 2015 Bangladesh 24 Time to No. Procedure Cost to complete complete The trade license filled-in application form must be accompanied by the following documents: (1) A certified copy of the memorandum and articles of association (2) A copy of the certificate of incorporation (3) Tax Identification Number certificate (5) A copy of the lease agreement of the registered office Agency: City Corporation * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Summary of time, cost and procedures for starting a business in Bangladesh - Chittagong Time to No. Procedure Cost to complete complete Verify the uniqueness of the proposed company name on the website of the Registrar of Joint Stock Companies and Firms The search for the availability of a company name was computerized in 2003. After checking that the proposed company name is available for registration, the entrepreneur then applies for name clearance through the Registrar of Joint Stock Companies and Firms (RJSC) website. The status of the application can be checked online and is usually accepted Less than one day BDT 600 (paid at a 1 or rejected within 1 working day. If accepted, the company name is (online procedure) designated Bank) reserved for 6 months. A print out of the name clearance certificate must be submitted to the RJSC, along with the other required documents for incorporation. Agency: Registrar of Joint Stock Companies and Firms Pay stamp duty at a designated bank BDT 3,000 for the Payment of stamp duty is made to the account of the Treasury at the Articles of BRAC Bank. According to the Stamp Act 1899 as amended on June Association + BDT 30th, 2012, for an authorized share capital of up to BDT 1,000,000, the 50 for a certified total stamp duty fees are BDT 4,000. These include BDT 3,000 for copy; and BDT 2 affixing stamps on the Articles of Association, and BDT 1,000 for stamps 1 day 1,000 for the on the Memorandum of Association. In addition, a certified copy of Memorandum of each document costs BDT 50. Association + BDT Agency: BRAC Bank 50 for a certified copy Register at the Registrar of Joint Stock Companies and Firms BDT 3645 Less than one day registration fees + 3 To register a company, the following documents must be submitted (online procedure) 1200 registration either online or to the registrar: (1) Name clearance certificate (2) filing fees Memorandum and Articles of association (3) Forms I (Declaration on Doing Business 2015 Bangladesh 25 Time to No. Procedure Cost to complete complete the registration of the company); Form VI (Notice of the registered office); Form IX (Consent to act as directors); Form X (The list of persons consenting to act as directors); and Form XII (Particulars of the Directors, Managers, and Managing Agents) (4) Proof of payment (i.e. receipt from the designated bank) for Treasury Stamps The registration fees payable at a designated bank are as follows: i. For filing 6 documents (5 filled in forms and the memorandum & articles of association, the fee is BDT 200.00 per document): BDT 1,200.00 ii. For an authorized share capital of up to BDT 20,000, the fee is BDT 360. An additional fee of BDT 180 is applicable for every BDT 10,000 or part from the first BDT 20,000 up until BDT 50,000 An additional fee of BDT 45 is applicable for every BDT 10,000 or part from the first BDT 50,000 up until BDT 1,000,000 Agency: Registrar of Joint Stock Companies and Firms Make a company seal Business founders can make a company seal at the Sealmaker for BDT 30-50. 4 1 day BDT 30-50 Agency: Sealmaker Obtain a Tax identification number In order to start business operations, every company must register for taxes at the appropriate taxation authority (Deputy Commission of Taxes of Company Circle, Zonal Taxation Department) under the National Board of Revenue (NBR) and obtain a tax identification Less than one day 5 no charge number. Obtaining TIN number can now be done online in less than (online procedure) one day. Agency: National Board of Revenue * Open a Bank Account 1 day In order to register for VAT, the company must first open a bank (simultaneous with account. previous no charge 6 procedure) Agency: Bank Apply for VAT registration For VAT purposes, companies register with the Customs, Excise, and 7 VAT Commission under the National Board of Revenue. The company's 1 day no charge VAT is regulated by the Customs, VAT and Excise Department of the region in which it operates. Doing Business 2015 Bangladesh 26 Time to No. Procedure Cost to complete complete When an enterprise submits a VAT Registration application to the VAT authority an application must accomplish or enclosed the following papers & Documents: o Fill-up an application form. o Enterprise Trade License. o Bank Solvency Certificate. o Owners 02 photograph. o National ID/Passport copy of owners. o IRC/ERC if enterprise dong import and Export Business. o Article & Memorandum (if enterprise is Limited Company.) o TIN Certificate. o Location MAP of Enterprise premises. Agency: National Board of Revenue Receive physical inspection of the business premises by a government agent and Obtain the VAT registration certificate As of 2010, businesses receive physical inspection by a government agent in order to verify that the company is real before obtaining their 7 days no charge 8 VAT registration certificates. Agency: National Board of Revenue Obtain a trade license Companies obtain a trade license from the City Corporation. The trade license filled-in application form must be accompanied by the following documents: (1) A certified copy of the memorandum and articles of association (2) A copy of the certificate of incorporation (3) Tax 7 days BDT 2,700 9 Identification Number certificate (4) Photograph of the Managing Director (5) A copy of the lease agreement of the registered office Agency: City Corporation * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Bangladesh 27 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records the procedures, time and cost Obtaining utility connections for water and for a business in the construction industry to obtain sewerage all the necessary approvals to build a warehouse in Registering the warehouse after its the economy’s largest business city, connect it to completion (if required for use as collateral or basic utilities and register the warehouse so that it for transfer of the warehouse) can be used as collateral or transferred to another Time required to complete each procedure entity. (calendar days) The ranking of economies on the ease of dealing with Does not include time spent gathering construction permits is determined by sorting their information distance to frontier scores for dealing with Each procedure starts on a separate day. construction permits. These scores are the simple Procedures that can be fully completed online average of the distance to frontier scores for each of are recorded as ½ day. the component indicators. Procedure considered completed once final To make the data comparable across economies, document is received Doing Business uses several assumptions about the business and the warehouse, including the utility No prior contact with officials connections. Cost required to complete each procedure (% The business: of warehouse value) Official costs only, no bribes  Is a limited liability company operating in the construction business and located in  Will have complete architectural and the largest business city. For the 11 technical plans prepared by a licensed economies with a population of more than architect or engineer. 100 million, data for a second city have  Will be connected to water and sewerage been added. Is domestically owned and (sewage system, septic tank or their operated. equivalent). The connection to each utility  Has 60 builders and other employees. network will be 150 meters (492 feet) long. The warehouse:  Will be used for general storage, such as of books or stationery (not for goods requiring  Is valued at 50 times income per capita. special conditions).  Is a new construction (there was no  Will take 30 weeks to construct (excluding all previous construction on the land). delays due to administrative and regulatory requirements). Doing Business 2015 Bangladesh 28 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build business city of an economy, except for 11 economies for a warehouse in Bangladesh? According to data collected which the data are a population-weighted average of the by Doing Business, dealing with construction permits 2 largest business cities. See the chapter on distance to there requires 13.4 procedures, takes 269.2 days and frontier and ease of doing business ranking at the end of costs 2.1% of the warehouse value (figure 3.1). Most this profile for more details. indicator sets refer to a case scenario in the largest Figure 3.1 What it takes to comply with formalities to build a warehouse in Bangladesh - Dhaka Doing Business 2015 Bangladesh 29 What it takes to comply with formalities to build a warehouse in Bangladesh - Chittagong Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Bangladesh 30 DEALING WITH CONSTRUCTION PERMITS Globally, Bangladesh stands at 144 in the ranking of 189 other useful information for assessing how easy it is for economies on the ease of dealing with construction an entrepreneur in Bangladesh to legally build a permits (figure 3.2). The rankings for comparator warehouse. economies and the regional average ranking provide Figure 3.2 How Bangladesh and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2015 Bangladesh 31 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Bangladesh are BUILDING A WAREHOUSE based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated cost of information collected from experts in construction BDT 3,660,746 construction : licensing, including architects, civil engineers, construction lawyers, construction firms, utility City : Dhaka , Chittagong service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and cost, that apply to a company and structure matching the are summarized below. standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in Bangladesh - Dhaka Time to No. Procedure Cost to complete complete Obtain cadastral survey map from Land Settlement Office 1 3 days USD 25 Agency: Land Settlement Office Obtain zoning clearance To obtain clearance, BuildCo must present proof of land ownership and the cadastral maps showing the exact site location. An anticorruption drive of the interim government of Bangladesh stemmed from massive violations of building regulations on one hand and collapse of buildings with casualties on the other hand impacted the work of some 45 days no charge 2 areas of construction regulation. Obtaining zoning clearance takes on average 2 -- 3 months if no bribes are paid, while the time limit by law is 15 days. Agency: Rajuk (Capital Development Authority) Obtain project clearance from the local authority (Ward Commissioner, Dhaka City Corporation) To obtain the local authority’s approval, BuildCo must submit an application with the proposed design plans. The approval may take 3 days no charge 3 anywhere from 3 to 7 days. Agency: Dhaka City Corporation Doing Business 2015 Bangladesh 32 Time to No. Procedure Cost to complete complete Obtain project clearance from the Environmental Directorate The Environmental Directorate of Rajuk issues three types of clearances based on the type of establishment: green (nonpolluting), orange (low polluting), and red (high polluting). For the green category, the environmental clearance is issued for a fee of USD 25.00. If unofficial payments are made, the environmental clearance can be obtained in a week. For other categories, the cost and time to obtain a clearance are higher. To obtain a project clearance, the following documents are required, depending on the environmental category: • Approval from the Ward Commissioner, Dhaka City Corporation • Project profile, feasibility report, and drawings • Land ownership documents • Cadastral survey map and location map • Trade license (copy) • Registration of the Board of Investment (copy) • EIA/ IEE/ EMP Report • Fees payable to DOE Fees by total project cost 30 days USD 80 4 USD 0–0.08 million: USD 25.00 USD 0.08 million–0.16 million: USD 50.00 USD 0.16 million–0.8 million: USD 80.00 USD 0.8 million–1.6 million: USD 160.00 USD 1.6 million–32 million: USD 400.00 USD 32 million–80 million: USD 800.00 USD 80-million and above: USD 1,600.00 Renewal fees by total project cost USD 0–0.08 million: USD 5.00 USD 0.08 million–0.16 million: USD 12.00 USD 0.16 million–0.8 million: USD 20.00 USD 0.8 million–1.6 million: USD 40.00 USD 1.6 million–32 million: USD 125.00 USD 32 million–80 million: USD 250.00 USD 80-million and above: USD 400.00 Agency: Environmental Directorate * Obtain fire safety clearance 5 15 days BDT 8,000 Agency: Fire Department * Obtain clearance from Dhaka Electricity Supply Co (DESCO) BuildCo must obtain the clearance from Dhaka Electricity Supply Co (DESCO) for the electrical plans. 15 days no charge 6 Agency: Dhaka Electricity Supply Co (DESCO) Doing Business 2015 Bangladesh 33 Time to No. Procedure Cost to complete complete * Obtain water and sanitation clearance The plumbing plans must be cleared by the relevant agencies. 7 15 days no charge Agency: Dhaka Water and Sewerage Authority (WASA) Request and receive inspection from the City Development Authority (RAJUK) Before the building permit is issued, the authorized officers must visit the site to ascertain its location according to the drawings and maps. However, with only a handful of officers and a massive number of 8 applications, it is extremely difficult to comply with the original 30-day 60 days no charge time limit established by the government. The procedure still takes 2 -- 5 months on average. Agency: City Development Authority (RAJUK) Obtain project clearance and building permit from the City Development Authority (RAJUK) The approving panel of the City Development Authority (RAJUK) meets weekly to discuss cases. In early 2007, officials in the Ministry of Works imposed a 30-day time limit on the process. Applicants must obtain all relevants clearances, water, sanitation, electricity and a fire safety 105 days BDT 30,000 9 clearance certificate before applying for the building permit. Each agency that provides approval is given a 7-day time limit, but it is generally not complied with. Agency: City Development Authority (RAJUK) Receive random inspection from the City Development Authority (RAJUK) According to the 2006 National Building Code, Section II, chapter 3, all inspections during construction are carried out by a structural engineer who must sign the certificate of supervision. However, a building officer 10 from the City Development Authority may carry out one random 1 day no charge inspection during construction to verify that the work is being done according to the approved plans Agency: City Development Authority (RAJUK) Submit notice of completion and obtain the certificate of conformity According to the 2006 National Building Code, chapter 3, section 3.3.4, 11 the completion notice must be signed by the structural engineer who 21 days no charge has supervised the entire construction phase. The notice of completion certifies that the building has been built in compliance with the existing regulations. The authorities may or may not inspect the building. It is only after receipt of this completion notice that the certificate of Doing Business 2015 Bangladesh 34 Time to No. Procedure Cost to complete complete conformity can be issued. Agency: City Development Authority (RAJUK) Receive inspection by tax inspector from Dhaka City Corporation upon completion of construction A tax inspector from the Dhaka City Corporation visits the site to assess the completed building. No appointment is necessary and there are no 12 fees paid. The tax authority then sends the annual tax bill which will 1 day no charge arrive 30 days later. Agency: Dhaka City Corporation * Request and obtain water and sewerage connection 13 10 days BDT 30,000 Agency: Dhaka Water and Sewerage Authority (WASA) * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Summary of time, cost and procedures for dealing with construction permits in Bangladesh - Chittagong Time to No. Procedure Cost to complete complete Obtain cadastral survey map and proof of ownership from Land Records Department 1 3 days USD 25 Agency: Land Records Department Obtain project approval from Ward Commissioner Due to the location of the Doing Business case study warehouse (which would be near the port), BuildCo is required to obtain the approval of the land commissioner for the project, in addition to the building 2 permit from the Development Authority. An application must therefore 4 days no charge be submitted, along with the design plan. Agency: Chittagong City Corporation Obtain land use clearance (LUC) from the Chittagong Development Authority 3 40 days no charge The land use clearance is obtained to ensure that the plot of land can be used for construction purposes. Doing Business 2015 Bangladesh 35 Time to No. Procedure Cost to complete complete Agency: Chittagong Development Authority (CDA) * Obtain fire safety license A fire safety license must be obtained from the fire authority. This can be done while the land use clearance is being processed. 15 days BDT 8,000 4 Agency: Fire Authority * Obtain clearance from Bangladesh Power Development Board BuildCo must first obtain the clearance from Bangladesh Power Development Board for the electrical plans before applying for the 5 building permit. 15 days no charge Agency: Bangladesh Power Development Board * Obtain water and sanitation clearance The plumbing plans must be cleared by the relevant agencies. 6 15 days no charge Agency: Chittagong WASA * Obtain soil test report A soil test study must be obtained prior to applying for the permit. A certified company provided by the government conducts the soil test. 3 days BDT 10,000 7 Agency: Private Company Request and receive inspection from the Chittagong Development Authority (CDA) The Chittagong Development Authority (CDA) will then have to inspect the land physically and make its own independent assessment. The waiting time is about 3-6 months for inspectors to visit the site because 8 of a backlog in requests. If the inspection is satisfactory, the inspector 60 days no charge then submits a report to the CDA for the approval of the building permit. Agency: Chittagong Development Authority (CDA) Obtain building permit from the Chittagong Development Authority (CDA) 9 105 days BDT 26,000 BuildCo submits an application for a building permit to the Authorization Committee of CDA. It can take as long as 3-6 months Doing Business 2015 Bangladesh 36 Time to No. Procedure Cost to complete complete from the moment a satisfactory report on the inspection is issued to the time it takes CDA to issue the building permit. Agency: Chittagong Development Authority (CDA) Receive random inspection during construction A building officer will randomly inspect the construction site. 10 1 day no charge Agency: Chittagong Development Authority (CDA) Submit completion certificate and receive certificate of conformity According to the National Building Code, Chapter 3, Section 3.3.4, the completion notice must be signed by the structural engineer who has supervised the entire construction phase, certifying that the building has been built in compliance with the existing regulations. The 11 authority may or may not conduct a final inspection of the building. It is 1 day no charge only after receipt of this completion notice that the certificate of conformity is issued. Agency: Chittagong Development Authority (CDA) Receive inspection by tax inspector from Chittagong City Corporation upon completion of construction A tax inspector from the Chittagong City Corporation visits the site to assess the completed building. No appointment is necessary and there 12 are no fees paid. The tax authority then sends the annual tax bill, which 1 day no charge will arrive 30 days later. Agency: Chittagong City Corporation Request water connection at WASA BuildCo must first submit an application to get a new water connection (3 day process). 1 day no charge 13 Agency: Chittagong WASA Receive inspection for water assessment works The sales division will then visit the site and assess the feasibility of the work. If feasible, they will issue a demand note containing the cost estimate for the excavation and the pipes (which is generally a 1 week 14 process). If there is road crossing involved, an extra permit from the city 1 day no charge would be required. Agency: Chittagong WASA Doing Business 2015 Bangladesh 37 Time to No. Procedure Cost to complete complete Obtain water connection 15 21 days BDT 30,000 Agency: Chittagong WASA * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Bangladesh 38 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity a customer is always to gain access by obtaining a connection (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to complete them. These Obtaining external installation works and procedures include applications and contracts with possibly purchasing material for these works electricity utilities, clearances from other agencies Concluding any necessary supply contract and and the external and final connection works. The obtaining final supply ranking of economies on the ease of getting electricity is determined by sorting their distance to Time required to complete each procedure frontier scores for getting electricity. These scores are (calendar days) the simple average of the distance to frontier scores Is at least 1 calendar day for each of the component indicators. To make the data comparable across economies, several Each procedure starts on a separate day assumptions are used. Does not include time spent gathering The warehouse: information  Is owned by a local entrepreneur, located Reflects the time spent in practice, with little in the economy’s largest business city, in follow-up and no prior contact with officials an area where other warehouses are Cost required to complete each procedure located. For the 11 economies with a (% of income per capita) population of more than 100 million, data Official costs only, no bribes for a second city have been added. Excludes value added tax  Is not in a special economic zone where the connection would be eligible for subsidization or faster service.  Is to either the low-voltage or the medium- voltage distribution network and either  Is located in an area with no physical overhead or underground, whichever is more constraints (ie. property not near a railway). common in the area where the warehouse is  Is a new construction being connected to located. Included only negligible length in the electricity for the first time. customer’s private domain.  Is 2 stories, both above ground, with a total  Requires crossing of a 10-meter road but all surface of about 1,300.6 square meters the works are carried out in a public land, so (14,000 square feet), is built on a plot of there is no crossing into other people's 929 square meters (10,000 square feet), is private property. used for storage of refrigerated goods  Involves installing one electricity meter. The The electricity connection: monthly electricity consumption will be 26880 kilowatt hour (kWh). The internal  Is 150 meters long and is a 3-phase, 4-wire electrical wiring has been completed. Y, 140-kilovolt-ampere (kVA) (subscribed capacity) connection. Doing Business 2015 Bangladesh 39 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection Most indicator sets refer to a case scenario in the largest in Bangladesh? According to data collected by Doing business city of an economy, except for 11 economies for Business, getting electricity there requires 9.0 procedures, which the data are a population-weighted average of the takes 428.9 days and costs 3890.1% of income per capita 2 largest business cities. See the chapter on distance to (figure 4.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 4.1 What it takes to obtain an electricity connection in Bangladesh - Dhaka What it takes to obtain an electricity connection in Bangladesh - Chittagong Doing Business 2015 Bangladesh 40 Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Bangladesh 41 GETTING ELECTRICITY Globally, Bangladesh stands at 188 in the ranking of 189 average ranking provide another perspective in assessing economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in Bangladesh to The rankings for comparator economies and the regional connect a warehouse to electricity. Figure 4.2 How Bangladesh and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2015 Bangladesh 42 GETTING ELECTRICITY Obtaining an electricity connection is essential to enable ensure safety in the connection process while keeping a business to conduct its most basic operations. In many connection costs reasonable, governments around the economies the connection process is complicated by the world have worked to consolidate requirements for multiple laws and regulations involved—covering service obtaining an electricity connection. What reforms in quality, general safety, technical standards, procurement getting electricity has Doing Business recorded in practices and internal wiring installations. In an effort to Bangladesh (table 4.1)? Table 4.1 How has Bangladesh made getting electricity easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Bangladesh made getting electricity more difficult by imposing a moratorium on new electricity connections from April 2010 to DB2012 March 2011 because of an electricity supply shortage. This moratorium has led to long delays for customers and has increased the time to obtain an electricity connection. Bangladesh made getting electricity more difficult by requiring DB2013 all customers to meet 7% of their electricity needs through solar energy, making it necessary to install solar panels. Source: Doing Business database. Doing Business 2015 Bangladesh 43 GETTING ELECTRICITY What are the details? The indicators reported here for Bangladesh are based OBTAINING AN ELECTRICITY CONNECTION on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— Name of utility - identified by Doing Business. Data are collected from the Chittagong: PDB Chittagong distribution utility, then completed and verified by electricity regulatory agencies and independent Name of utility - Dhaka Electric Supply professionals such as electrical engineers, electrical Dhaka : Company Ltd. (DESCO) contractors and construction companies. The electricity distribution utility surveyed is the one serving the area City: Dhaka , Chittagong (or areas) in which warehouses are located. If there is a choice of distribution utilities, the one serving the largest The procedures are those that apply to a warehouse and number of customers is selected. electricity connection matching the standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 4.2 Summary of time, cost and procedures for getting electricity in Bangladesh - Dhaka Time to No. Procedure Cost to complete complete Obtain clearance from Office of Chief Electrical Inspector for setting up of sub-station The customer needs to go to the Chief Electric Inspector’s office with design plans of warehouse, plan of substation, total load requirement. 1 The office ideally should provide this clearance on the spot, but it can 14 calendar days BDT 0 take two weeks and several repeated follow-up visits to the office. Agency: Ministry of Power Obtain permission for installation of underground cable Once permission is obtained from City Corporation office for excavation works, the customer also needs to inform local police station of road 2 works. 21 calendar days BDT 0 Agency: City Corporation * Hire electrical contracting firm which will purchase sub-station equipment and get it tested and carry out installation/earthing 3 15 calendar days BDT 1,800,000 Electrical equipment, distribution transformer, etc, needs to be purchased before hand and needs to be tested before submitting the application to the utility. Usually, all these equipments are readily Doing Business 2015 Bangladesh 44 Time to No. Procedure Cost to complete complete available in Dhaka. The electrical equipment needs to be submitted for testing to Bangladesh University of Engineering and Technology (BUET). Agency: Outside firm Apply for license from Office of Chief Electrical Inspector This is the official clearance required in order to set up the warehouse and obtain the electric connection (not just for internal wiring). Procedure 1 is at a more "informal" level and happens in practice to keep the relevant officials informed, but this officially takes place once customer have already gone through Procedures 2 and 3. Documents required • Application form 28 calendar days BDT 5,000 4 • Technical specifications of equipment and test report • Land registration deed (on which warehouse is located) • RAJUK approval/mutation certificate • Fire service permission (for underground cabling) • Architectural approval Agency: Ministry of Energy Submit application to Dhaka Electric Supply Company Ltd. (DESCO) and await estimate 1. List of documents to be provided with application • Two duly certified passport size photos • Copy of land deed paper and copy of mutation certificate where necessary. • Copy of land tax payment to the municipal/union parishad. • Copy of the agreement paper between the landowner and developer, if building is constructed by real estate developer. • Design of the building, duly approved by RAJUK/Municipal Corporation. • Clear location of the meter room, including the S/S in the plan, duly 5 approved by RAJUK/Municipal Corporation. 277 calendar days BDT 33,921.28 • Certified copy of test result on electrical equipment. • Copy of approved/duly certified single line diagram and earthing diagram of the S/S. • Copy of the layout diagram of S/S from the Office of Chief Electrical Inspector. • Copy of the license received from Office of Chief Electrical Inspector. • Detailed description of present connection status. • Copy of the last paid bills. 2. The applicant needs to bear all the cost of 11.4kV S/S and to be connected with the nearby 11kV supply of DPDC through underground cable. 3. On submission of application, DESCO will calculate the load requirement for solar panel Doing Business 2015 Bangladesh 45 Time to No. Procedure Cost to complete complete The long duration noted for this procedure is due to the delay in the customer receiving the demand notice from the utility. Agency: DESCO Electrical contracting firm conducts external connection works This is basically the setting up of substation on the warehouse premises. All equipment already purchased, electrical contractor firm and builder 6 does the site construction and installation of equipment 20 calendar days BDT 270,000 Agency: Outside firm * Private solar panel installation firm installs solar panels As per Ministry directive to all the utilities, all new connections with demand above 2KW will now require installation of solar panels. For domestic purposes, solar energy should meet at least 2 percent of the 14 calendar days BDT 570,000 7 demand, for commercial 7 percent and for industrial 10 percent. Agency: Private solar panel installation company Electrical contracting firm purchases meter The meter can be collected once the estimate has been paid, and the utility sends communication to the stores dept, and store dept issues an 8 account number, and the meter is then available for pickup. 14 calendar days BDT 250,000 Agency: Outside firm Utility tests and installs the meter, conducts final inspection and electricity starts flowing The utility conducts final internal as well as external inspection, tests the 9 meter and electricity starts flowing. 30 calendar days BDT 0 Agency: DESCO * Takes place simultaneously with another procedure. Source: Doing Business database. Summary of time, cost and procedures for getting electricity in Bangladesh - Chittagong Time to No. Procedure Cost to complete complete Doing Business 2015 Bangladesh 46 Time to No. Procedure Cost to complete complete Obtain clearance from Office of Chief Electrical Inspector for setting up of sub-station The customer needs to go to the Chief Electric Inspector’s office with design plans of warehouse, plan of substation, total load requirement. 1 The office ideally should provide this clearance on the spot, but it can 14 calendar days BDT 0 take several weeks and repeated follow-up visits to the office. Agency: Ministry of Power, Energy and Mineral Resources Obtain permission for installation of underground cable Once permission is obtained from CDA office for excavation works, the customer also needs to inform local police station of road works. 28 calendar days BDT 0 2 Agency: Chittagong Development Authority (CDA) * Hire electrical contracting firm which will purchase sub-station equipment and carry out installation/earthing Electrical equipment, distribution transformer, etc, need to be purchased before hand and needs to be tested before submitting the application to 3 the utility. Usually, all these equipments are readily available in 30 calendar days BDT 1,400,000 Chittagong. Agency: Outside firm Apply for Certificate of Connection to the Electricity License Board This is the official clearance required in order to set up the warehouse and obtain the electric connection (not just for internal wiring). Documents required • Application form • Technical specifications of equipment and test report • Land registration deed (on which warehouse is located) 28 calendar days BDT 5,000 4 • CCC approval/mutation certificate • Fire service permission (for underground cabling) • Architectural approval Agency: Ministry of Power, Energy and Mineral Resources Doing Business 2015 Bangladesh 47 Time to No. Procedure Cost to complete complete Submit application to PDB Chittagong and await estimate List of documents to be provided with application • Two duly certified passport size photos • Copy of land deed paper and copy of mutation certificate where necessary. • Copy of land tax payment to the municipal/union parishad. • Copy of the agreement paper between the landowner and developer, if building is constructed by real estate developer. • Design of the building, duly approved by CDA. • Clear location of the meter room, including the S/S in the plan, duly approved by CDA • Certified copy of test result on electrical equipment. • Copy of approved/duly certified single line diagram and earthing diagram of the S/S. • Copy of the layout diagram of S/S from the Office of Chief Electrical 365 calendar days BDT 66,842.56 5 Inspector. • Copy of the license received from Office of Chief Electrical Inspector. • Detailed description of present connection status. • Trade license • Land documents • Copy of the last paid bills. 2. The applicant needs to bear all the cost of 11.4kV S/S and to be connected with the nearby 11kV supply of DPDC through underground cable. The long duration noted for this procedure is due to the delay in the customer receiving the demand notice from the utility. Agency: PDB Chittagong Electrical contracting firm conducts external connection works This is basically the setting up of substation on the warehouse premises. All equipment already purchased, electrical contractor firm and builder 6 does the site construction and installation of equipment 30 calendar days BDT 270,000 Agency: Customer's electrical contracting firm Electrical contracting firm purchases meter The meter can be collected once the estimate has been paid, and the utility sends communication to the stores dept, and store dept issues an 7 account number, and the meter is then available for pickup. 14 calendar days BDT 250,000 Agency: Customer's electrical contracting firm Doing Business 2015 Bangladesh 48 Time to No. Procedure Cost to complete complete * Private solar panel installation firm installs solar panels As per Ministry directive to all the utilities, all new connections with demand above 2KW will now require installation of solar panels. For domestic purposes, solar energy should meet at least 2 percent of the 14 calendar days BDT 570,000 8 demand, for commercial 7 percent and for industrial 10 percent. Agency: Private solar panel installation firm Utility tests and installs the meter, conducts final inspection and electricity starts flowing After installation of all Electrical equipment, an authorized inspector from the PDB license board will inspect all installation and equipment. If the inspection is successful, a certificate of conformity will be issued, with an 35 calendar days BDT 0 9 official seal. Company will then re-submit the certificate to PDB and electricity will start flowing. Agency: PDB Chittagong * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2015 Bangladesh 49 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. The (calendar days) ranking of economies on the ease of registering Does not include time spent gathering property is determined by sorting their distance to information frontier scores for registering property. These scores are the simple average of the distance to frontier Each procedure starts on a separate day. scores for each of the component indicators. To Procedures that can be fully completed online are recorded as ½ day. make the data comparable across economies, several assumptions about the parties to the Procedure considered completed once final transaction, the property and the procedures are document is received used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure  Are limited liability companies, 100% (% of property value) domestically and privately owned and Official costs only, no bribes perform general commercial activities. No value added or capital gains taxes included  Are located in the economy’s largest business city . 2  Is located in a periurban commercial zone, and no rezoning is required.  Have 50 employees each, all of whom are nationals.  Has no mortgages attached, has been under the same ownership for the past 10 years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square  Has a value of 50 times income per capita. feet) of land and a 10-year-old, 2-story The sale price equals the value. warehouse of 929 square meters (10,000  Is registered in the land registry or cada- square feet). The warehouse is in good stre, or both, and is free of title disputes. condition and complies with all safety standards, building codes and legal  Property will be transferred in its entirety. requirements. There is no heating system. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 Bangladesh 50 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest Bangladesh? According to data collected by Doing business city of an economy, except for 11 economies for Business, registering property there requires 8.0 which the data are a population-weighted average of the procedures, takes 244.0 days and costs 7.2% of the 2 largest business cities. See the chapter on distance to property value (figure 5.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 5.1 What it takes to register property in Bangladesh - Dhaka What it takes to register property in Bangladesh - Chittagong Doing Business 2015 Bangladesh 51 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Bangladesh 52 REGISTERING PROPERTY Globally, Bangladesh stands at 184 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Bangladesh to transfer property. Figure 5.2 How Bangladesh and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2015 Bangladesh 53 REGISTERING PROPERTY Economies worldwide have been making it easier for the time required substantially—enabling buyers to use entrepreneurs to register and transfer property—such as or mortgage their property earlier. What property by computerizing land registries, introducing time limits registration reforms has Doing Business recorded in for procedures and setting low fixed fees. Many have cut Bangladesh (table 5.1)? Table 5.1 How has Bangladesh made registering property easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Bangladesh reduced the property transfer tax to 6.7% of the DB2011 property value. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Bangladesh 54 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: BDT 3,660,746 notaries and property registries. These procedures are those that apply to a transaction matching the City: Dhaka , Chittagong standard assumptions used by Doing Business in collecting the data (see the section in this chapter on The procedures, along with the associated time and what the indicators cover). cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in Bangladesh Time to No. Procedure Cost to complete complete Verify the record of rights from the Land Office (also known as Land Revenue Office) "Parties check that land tax payments are up to date. The Land Administration system in Bangladesh separates Records of Ownership and Records on Revenue as such: (a) Land Records Office for land records, surveys, publication and maintenance of records under the 30 days directorate of land records and survey (Ministry of Land). (b) Land Office (simultaneous 1 or Land Revenue Office under Ministry of Land. There are 11 BDT 3,000-6,000 with procedures 2 administrative offices in each upajela (sub district) (c) There are 64 and 3) districts in Bangladesh but 61 registration districts. 3 hill districts do not have registration centres. In Dhaka, the district land registration office has 13 subregistrar offices under the Ministry of Law." Agency: Land Office or Land Revenue Office * Conduct BS Mutation on property 30 days (simultaneous 2 BDT 15000 with procedures 1 Agency: Assistant Commissioner of Lands (Tahsil) and 3) * Obtain inspection for BS Mutation 30 days (simultaneous 3 BDT 15000 with procedures 1 Agency: Assistant Commissioner of Lands (Tahsil) and 2) Doing Business 2015 Bangladesh 55 Time to No. Procedure Cost to complete complete Obtain the non-encumbrance certificate from the relevant Sub- registry office 4 30 days BDT 2500 Agency: Sub-registry and Land Revenue Office Prepare deed of transfer and pay stamp duty "A lawyer may prepare the transfer deed, but it can be prepared by the parties themselves. If a lawyer does it, the fees will be around BDT 6,000. The deed must be prepared in stamped paper that will cost 3% of the 3% of property 5 1 day property value to get it. This represents the stamp duty." value (Stamp duty) Agency: Registry Office and Designated Bank Pay capital gains tax, registration fee, VAT and other taxes at a designated bank "Registration fee = 2% Local Government Tax = 1% The 2% registration fee is payable to the Bank in favor of the sub-registry office and the receipt is to be presented at the moment of applying for registration. Municipal tax (3%) Also, Capital Gains Tax = 2% (Not applicable in rural areas for + registration fee 6 agriculture. Applicable to land above 100 000 Takas, irrespective of when 1 day (2%) of property the transfer was made) and VAT = 1.5% (Applicable only for municipal value corporation area payable by private housing and flat developers and commercial businesses) have to be paid at this stage." Agency: Designated Bank Apply for registration at the relevant Sub-registry "The buyer applies for registration at the Municipal Deed Registry Office, presenting the receipts of payment for the registration fees obtained in Procedure 6. A certified registration document is obtained within a week 180 days Already paid in 7 for the buyer’s record. The original sale deed/certificate requires about 6 (simultaneous Procedure 6 months to be obtained." with procedure 8) Agency: Municipal Deed Registry Office * Register the change in ownership at the Land Revenue Office 60-90 days The change of ownership must be registered in the Land Revenue Office. (simultaneous BDT 5,000 8 The property is recorded under the name of the new owner, who is with procedure 7) responsible for paying the land taxes from the day it is transferred. Doing Business 2015 Bangladesh 56 Time to No. Procedure Cost to complete complete Agency: Land Revenue Office * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Bangladesh 57 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable Strength of legal rights index (0–12) 3 lenders’ rights to view a potential borrower’s financial history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially Depth of credit information index (0–8) 4 movable property, as security to generate capital— while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting Notes section of the Doing Business 2015 report). credit is determined by sorting their distance to These scenarios assume that the borrower: frontier scores for getting credit. These scores are the distance to frontier score for the strength of legal  Is a private limited liability company. rights index and the depth of credit information  Has its headquarters and only base of index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. 3 For the legal rights index, 2 new points are added in Doing Business 2015 for new data collected to assess the overall legal framework for secured transactions and the functioning of the collateral registry. 4 For the credit information index, 2 new points are added in Doing Business 2015 for new data collected on accessing borrowers’ credit information online and availability of credit scores. Doing Business 2015 Bangladesh 58 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Bangladesh stands at 131 in the ranking of 189 and bankruptcy laws in Bangladesh facilitate access to economies on the ease of getting credit (figure 6.1). The credit? The economy has a score of 0 on the depth of rankings for comparator economies and the regional credit information index and a score of 6 on the strength average ranking provide other useful information for of legal rights index (see the summary of scoring at the assessing how well regulations and institutions in end of this chapter for details). Higher scores indicate Bangladesh support lending and borrowing. more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Bangladesh and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2015 Bangladesh 59 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for Bangladesh and shows the scores for indicators into context is to see where the economy comparator economies as well as the regional average stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit Figure 6.2 highlights the score on the strength of legal information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Source: Doing Business database. Doing Business 2015 Bangladesh 60 GETTING CREDIT When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in Bangladesh (table 6.1)? Table 6.1 How has Bangladesh made getting credit easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Bangladesh improved access to credit information by DB2013 establishing an online platform for sharing such information. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Bangladesh 61 GETTING CREDIT What are the details? The getting credit indicators reported here for The data on the legal rights of borrowers and lenders are Bangladesh are based on detailed information collected gathered through a survey of financial lawyers and in that economy. The data on credit information sharing verified through analysis of laws and regulations as well are collected through a survey of a credit registry and/or as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, a credit information index, a score of 1 is assigned for each score of 1 is assigned for each of 10 aspects related to of 8 features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Dhaka Chittagong Strength of legal rights index (0–12) Index score: 6 Index score: 6 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional No No equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description Yes Yes of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes Yes collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, proceeds or replacements of the Yes Yes original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between Yes Yes parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non- incorporated entities, that is unified geographically and by asset type, with No No an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional No No equivalents can be registered? Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any No No interested third party? Doing Business 2015 Bangladesh 62 Dhaka Chittagong Strength of legal rights index (0–12) Index score: 6 Index score: 6 Are secured creditors paid first (i.e. before tax claims and employee Yes Yes claims) when a debtor defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee No No claims) when a business is liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No No protect secured creditors’ rights by providing clear grounds for relief from the stay and/or sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor Yes Yes to sell the collateral through public auction and private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 0 Are data on both firms and individuals distributed? No No 0 Are both positive and negative credit data distributed? No No 0 Are data from retailers or utility companies - in addition to data from banks and financial institutions - No No 0 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on No No 0 defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per No No 0 capita distributed? By law, do borrowers have the right to access their No No 0 data in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an No No 0 online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions No No 0 assess the creditworthiness of borrowers? Note: Prior to Doing Business 2015, the depth of credit information index covered only the first 6 features listed above. An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or Doing Business 2015 Bangladesh 63 covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 0 328,270 Number of individuals 0 589,531 Percent of total 0.0 0.9 Source: Doing Business database. Doing Business 2015 Bangladesh 64 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions ; Disclosure requirements for related-party transactions What do the indicators cover? Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold interested indicators and shareholders’ rights in corporate directors liable for prejudicial related-party transactions; governance through another. The ranking of economies Available legal remedies (damages, disgorgement of on the strength of minority investor protections is profits, fines, imprisonment, rescission of the transaction) determined by sorting their distance to frontier scores Ease of shareholder suits index (0–10) for protecting minority investors. These scores are the Access to internal corporate documents; Evidence simple average of the distance to frontier scores for the obtainable during trial and allocation of legal expenses extent of conflict of interest regulation index and the extent of shareholder governance index. To make the Extent of conflict of interest regulation index data comparable across economies, a case study uses (0–10) several assumptions about the business and the Sum of the extent of disclosure, extent of director liability transaction. and ease of shareholder indices, divided by 3 The business (Buyer): Extent of shareholder rights index (0-10.5)  Is a publicly traded corporation listed on the Shareholders’ rights and role in major corporate decisions economy’s most important stock exchange (or at least a large private company with Strength of governance structure index (0- multiple shareholders). 10.5) Governance safeguards protecting shareholders from  Has a board of directors and a chief executive undue board control and entrenchment officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Extent of corporate transparency index (0-9) specifically required by law. Corporate transparency on ownership stakes, The transaction involves the following details: compensation, audits and financial prospects  Mr. James, a director and the majority Extent of shareholder governance index shareholder of the company, proposes that (0–10) the company purchase used trucks from Sum of the extent of shareholders rights, strength of another company he owns. governance structure and extent of corporate transparency indices, divided by 3  The price is higher than the going price for used trucks, but the transaction goes forward. Strength of investor protection index (0–10)  All required approvals are obtained, and all Simple average of the extent of conflict of interest required disclosures made, though the regulation and extent of shareholder governance indices transaction is prejudicial to Buyer.  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2015 Bangladesh 65 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in Bangladesh? The economy has a score of not measure all aspects related to the protection of 6.1 on the strength of minority investor protection index, minority investors, a higher ranking does indicate that an with a higher score indicating stronger protections. economy’s regulations offer stronger minority investor protections against self-dealing in the areas measured. Globally, Bangladesh stands at 43 in the ranking of 189 economies on the strength of minority investor Figure 7.1 How Bangladesh and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2015 Bangladesh 66 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the protecting indices for Bangladesh in 2014. A summary of scoring for minority investors indicators into context is to see where the protecting minority investors indicators at the end of the economy stands in the distribution of scores across this chapter provides details on how the indices were comparator economies. Figures 7.2 through 7.7 highlight calculated. the scores on the various minority investor protection Figure 7.2 How extensive are disclosure Figure 7.3 How extensive is the liability regime for directors? requirements? Extent of director liability index (0-10) Extent of disclosure index (0-10) Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2015 Bangladesh 67 PROTECTING MINORITY INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Ease of shareholder suits index (0-10) Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2015 Bangladesh 68 PROTECTING MINORITY INVESTORS Figure 7.5 How extensive are shareholder rights? Extent of shareholder rights index (0-10.5) Note: The higher the score, the stronger the protections. Source: Doing Business database. Figure 7.6 How strong is the governance structure? Strength of governance structure index (0-10.5) Note: Higher scores indicate more stringent governance structure requirements. Source: Doing Business database. Doing Business 2015 Bangladesh 69 Figure 7.7 How extensive is corporate transparency? Extent of corporate transparency index (0-9) Note: Higher scores indicate greater transparency. Source: Doing Business database. Doing Business 2015 Bangladesh 70 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported to disclosure, director liability, shareholder suits, here for Bangladesh are based on detailed information shareholder rights, governance structure and corporate collected through a survey of corporate and securities transparency in a standard case study (for more details, lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2015 court rules of evidence and procedure. To construct the report). The summary below shows the details underlying six indicators on minority investor protection, scores are the scores for Bangladesh. assigned to each based on a range of conditions relating Table 7.2 Summary of scoring for the protecting minority investors indicators in Bangladesh Answer Score Answer (Dhaka ) Score (Dhaka ) (Chittagong) (Chittagong) Extent of disclosure index (0-10) 6.0 6.0 Board of Board of directors directors Which corporate body can provide legally sufficient approval excluding 2 excluding 2 for the Buyer-Seller transaction? (0-3) interested interested members members Full disclosure Is disclosure by the interested director to the board of Full disclosure of 2 of all material 2 directors required? (0-2) all material facts facts Disclosure on Disclosure on the the transaction Is disclosure of the transaction in published periodic filings transaction and 2 and on the 2 (annual reports) required? (0-2) on the conflict of conflict of interest interest Is immediate disclosure of the transaction to the public No disclosure No disclosure 0 0 and/or shareholders required? (0-2) obligation obligation Must an external body review the terms of the transaction No 0 No 0 before it takes place? (0-1) Extent of director liability index (0-10) 7.0 7.0 Can shareholders sue directly or derivatively for the damage Yes 1 Yes 1 caused by the Buyer-Seller transaction to the company? (0-1) Can shareholders hold the interested director liable for the Liable if Liable if negligent 1 1 damage caused by the transaction to the company? (0-2) negligent Can shareholders hold members of the approving body Liable if unfair or Liable if unfair liable for the damage cause by the transaction to the 2 2 prejudicial or prejudicial company? (0-2) Must the interested director pay damages for the harm caused to the company upon a successful claim by a Yes 1 Yes 1 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder Yes 1 Yes 1 plaintiff? (0-1) Can both fines and imprisonment be applied against the No 0 No 0 interested indrector? (0-1) Doing Business 2015 Bangladesh 71 Voidable if Voidable if Can a court void the transaction upon a successful claim by a negligently 1 negligently 1 shareholder plaintiff? (0-2) concluded concluded Ease of shareholder suits index (0-10) 6.0 6.0 Before filing suit, can shareholders owning 10% of the company’s share capital inspect the transaction documents? Yes 1 Yes 1 (0-1) Can the plaintiff obtain any documents from the defendant Any relevant Any relevant 3 3 and witnesses during trial? (0-3) document document Can the plaintiff request categories of documents from the Yes 1 Yes 1 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and No 0 No 0 witnesses during trial? (0-2) Is the level of proof required for civil suits lower than that of Yes 1 Yes 1 criminal cases? (0-1) At the Can shareholder plaintiffs recover their legal expenses from At the discretion 0 discretion of 0 the company? (0-2) of the court the court Strength of minority investor protection index (0-10) 6.1 6.1 Extent of conflict of interest regulation index (0-10) 6.3 6.3 Extent of shareholder rights index (0-10.5) 5.5 5.5 Can shareholders amend company bylaws or statutes with a No 0 No 0 simple majority? Can shareholders owning 10% of the company's share No 0 No 0 capital call for an extraordinary meeting of shareholders? Can shareholders remove members of the board of directors Yes 1.5 Yes 1.5 before the end of their term. Must a company obtain its shareholders’ approval every time No 0 No 0 it issues new shares? Are shareholders automatically granted subscription rights Yes 1.5 Yes 1.5 on new shares? Must shareholders approve the election and dismissal of the Yes 1.5 Yes 1.5 external auditor? Can shareholders freely trade shares prior to a major Yes for listed Yes for listed 1 1 corporate action or meeting of shareholders? companies companies Strength of governance structure index (0-10.5) 5.0 5.0 Is the CEO barred from also serving as chair of the board of Yes 1.5 Yes 1.5 directors? Must the board of directors include independent board No 0 No 0 members? Yes for listed Yes for listed Must a company have a separate audit committee? 1 1 companies companies Must changes to the voting rights of a series or class of shares be approved only by the holders of the affected Yes 1.5 Yes 1.5 shares? Must a potential acquirer make a tender offer to all Yes for listed Yes for listed 1 1 shareholders upon acquiring 50% of a company? companies companies Is cross-shareholding between 2 independent companies No 0 No 0 limited to 10% of outstanding shares? Is a subsidiary barred from acquiring shares issued by its No 0 No 0 parent company? Extent of corporate transparency index (0-9) 7.0 7.0 Doing Business 2015 Bangladesh 72 Must ownership stakes representing 10% be disclosed? No 0 No 0 Must information about board members’ other directorships as well as basic information on their primary employment be Yes 1.5 Yes 1.5 disclosed? Must the compensation of individual managers be disclosed? Yes 1.5 Yes 1.5 Must financial statements contain explanatory notes on significant accounting policies, trends, risks, uncertainties Yes 1.5 Yes 1.5 and other factors influencing the reporting? Must annual financial statements be audited by an external Yes 1.5 Yes 1.5 auditor? Yes for listed Yes for listed Must audit reports be disclosed to the public? 1 1 companies companies Extent of shareholder governance index (0-10) 5.8 5.8 Source: Doing Business database. Doing Business 2015 Bangladesh PAYING TAXES Taxes are essential. The level of tax rates needs to be carefully chosen—and needless complexity in tax WHAT THE PAYING TAXES INDICATORS rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2013 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, sales tax or goods and service tax) Using a case scenario, Doing Business measures the taxes and mandatory contributions that a medium- Method and frequency of filing and payment size company must pay in a given year as well as the Time required to comply with 3 major taxes administrative burden of paying taxes and (hours per year) contributions. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax payable transactions made over the year. Information is also compiled on the frequency of filing and payments as Completing tax return forms, filing with well as time taken to comply with tax laws. The proper agencies ranking of economies on the ease of paying taxes is Arranging payment or withholding determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if required the simple average of the distance to frontier scores for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to Profit or corporate income tax one of the component indicators, the total tax rate . 5 The financial statement variables have been updated Social contributions and labor taxes paid by to be proportional to 2012 income per capita; the employer previously they were proportional to 2005 income Property and property transfer taxes per capita. To make the data comparable across Dividend, capital gains and financial economies, several assumptions are used. transactions taxes  TaxpayerCo is a medium-size business that Waste collection, vehicle, road and other taxes started operations on January 1, 2012.  Taxes and mandatory contributions include  The business starts from the same financial corporate income tax, turnover tax and all position in each economy. All the taxes labor taxes and contributions paid by the and mandatory contributions paid during company. the second year of operation are recorded.  A range of standard deductions and  Taxes and mandatory contributions are exemptions are also recorded. measured at all levels of government. 5 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis. It is calculated and adjusted on a yearly basis. The threshold is not based on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 26.1%. Doing Business 2015 Bangladesh 74 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with 2 largest business cities. See the chapter on distance to taxes in Bangladesh—and how much do firms pay in frontier and ease of doing business ranking at the end of taxes? On average, firms make 21.0 tax payments a year, this profile for more details. spend 302.0 hours a year filing, preparing and paying Globally, Bangladesh stands at 83 in the ranking of 189 taxes and pay total taxes amounting to 32.5% of profit economies on the ease of paying taxes (figure 8.1). The (see the summary at the end of this chapter for details). rankings for comparator economies and the regional Most indicator sets refer to a case scenario in the largest average ranking provide other useful information for business city of an economy, except for 11 economies for assessing the tax compliance burden for businesses in which the data are a population-weighted average of the Bangladesh. Figure 8.1 How Bangladesh and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2015 Bangladesh 75 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue rise. consolidating filings, reducing the frequency of What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Bangladesh (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Bangladesh made paying taxes easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Bangladesh made paying taxes less costly for companies by DB2010 reducing the corporate income tax rate—though it also increased the capital gains tax rate. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Bangladesh 76 PAYING TAXES What are the details? The indicators reported here for Bangladesh are LOCATION OF STANDARDIZED COMPANY based on the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section City: Dhaka , Chittagong in this chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of assumptions and transactions that the company The taxes and contributions paid are listed in the completed during its 2nd year of operation. summary below, along with the associated number of Respondents are asked how much taxes and payments, time and tax rate. mandatory contributions the business must pay and how these taxes are filed and paid. Table 8.2 Summary of tax rates and administration Total tax Notes on Dhaka : Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate taxable Corporate income tax 5 140 37.5% 27.9 profit rental Municipal tax (property tax) 1 0 12% 3.9 value capital Capital gains tax 0 paid jointly 0 15% 0.8 gains interest included in Tax on interest 0 withheld 0 10% 0.3 income other taxes fixed fee Land development tax 15 taka per based on small 1 0 0 (khajna) 465 sq. ft area of amount land type of small Stamp duty on contracts 1 0 varies 0 contract amount fixed fee depending small Vehicle tax 1 0 0 on type of amount vehicle Doing Business 2015 Bangladesh 77 Total tax Notes on Dhaka : Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Variable value not Value added tax (VAT) 12 162 rate (up 0 added included to15%) Totals 21.0 302.0 32.5 Total tax Notes on Chittagong: Tax or Payments Notes on Time Statutory Tax base rate (% of total tax mandatory contribution (number) payments (hours) tax rate profit) rate taxable Corporate income tax 5 140 37.5% 27.9 profit rental Municipal tax (property tax) 1 0 12% 3.9 value capital Capital gains tax 0 paid jointly 0 15% 0.8 gains interest included in Tax on interest 0 withheld 0 10% 0.3 income other taxes fixed fee Land development tax 15 taka per based on small 1 0 0 (khajna) 465 sq. ft area of amount land type of small Stamp duty on contracts 1 0 varies 0 contract amount fixed fee depending small Vehicle tax 1 0 0 on type of amount vehicle Variable value not Value added tax (VAT) 12 162 rate (up 0 added included to15%) Totals 21.0 302.0 32.5 Source: Doing Business database. Doing Business 2015 Bangladesh 78 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from a Customs clearance documents 10% drop in their trading costs than from a similar reduction in the tariffs applied to their products in Port and terminal handling documents global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing a Inland transport and handling standard shipment of goods by sea transport, and the number of documents necessary to complete the Customs clearance and inspections transaction. The indicators cover predefined stages Port and terminal handling such as documentation requirements and procedures Does not include sea transport time at customs and other regulatory agencies as well as at the port. They also cover trade logistics, including Cost required to export and import (US$ per the time and cost of inland transport to the largest container) business city. The ranking of economies on the ease All documentation of trading across borders is determined by sorting their distance to frontier scores for trading across Inland transport and handling borders. These scores are the simple average of the Customs clearance and inspections distance to frontier scores for each of the component Port and terminal handling indicators. To make the data comparable across economies, Doing Business uses several assumptions Official costs only, no bribes about the business and the traded goods. The business:  Is located in the economy’s largest The traded product: business city. For the 11 economies with a population of more than 100 million, data  Is not hazardous nor includes military items. for a second city have been added.  Does not require refrigeration or any other  Is a private, limited liability company, special environment. domestically owned and does not operate  Do not require any special phytosanitary or with special export or import privileges. environmental safety standards other than  Conducts export and import activities, but accepted international standards. does not have any special accreditation  Is one of the economy’s leading export or such as an authorized economic operator import products. status.  Is transported in a dry-cargo, 20-foot full container load. Doing Business 2015 Bangladesh 79 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Bangladesh? population-weighted average of the 2 largest business According to data collected by Doing Business, exporting cities. See the chapter on distance to frontier and ease of a standard container of goods requires 6 documents, doing business ranking at the end of this profile for more takes 28.3 days and costs $1281.0. Importing the same details. container of goods requires 9 documents, takes 33.6 Globally, Bangladesh stands at 140 in the ranking of 189 days and costs $1515.0 (see the summary of four economies on the ease of trading across borders (figure predefined stages and documents at the end of this 9.1). The rankings for comparator economies and the chapter for details). Most indicator sets refer to a case regional average ranking provide other useful scenario in the largest business city of an economy, information for assessing how easy it is for a business in except for 11 economies for which the data are a Bangladesh to export and import goods. Figure 9.1 How Bangladesh and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2015 Bangladesh 80 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing Business tools to facilitate trade—including single windows, risk- recorded in Bangladesh (table 9.1)? based inspections and electronic data interchange Table 9.1 How has Bangladesh made trading across borders easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Bangladesh reduced the time required to clear goods by DB2010 automating customs clearance procedures at the Chittagong port. Bangladesh made trading across borders easier by introducing a fully automated, computerized customs data management DB2015 system, ASYCUDA (Automated System for Customs Data) World. This reform applies to both Chittagong and Dhaka. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Bangladesh 81 TRADING ACROSS BORDERS What are the details? The indicators reported here for Bangladesh are LOCATION OF STANDARDIZED COMPANY based on a set of specific predefined stages for trading a standard shipment of goods by ocean transport (see the section in this chapter on what the Port Name - Chittagong: Chittagong indicators cover). Information on the required documents and the time and cost to complete export Port Name - Dhaka : Chittagong and import is collected from local freight forwarders, shipping lines, customs brokers, port officials and City: Dhaka , Chittagong banks. The predefined stages, and the associated time and cost, for exporting and importing a standard shipment of goods are listed in the summary below, along with the required documents. Dhaka Chittagong Stages to export Time (days) Cost (US$) Time (days) Cost (US$) Customs clearance and inspections 6 150 6 150 Documents preparation 14 225 14 225 Inland transportation and handling 4 350 1 150 Ports and terminal handling 5 600 5 600 Totals 29 1,325 26 1,125 Dhaka Chittagong Stages to import Time (days) Cost (US$) Time (days) Cost (US$) Customs clearance and inspections 6 150 6 150 Documents preparation 18 370 18 370 Inland transportation and handling 3 400 1 150 Ports and terminal handling 7 650 7 650 Totals 34 1,570 32 1,320 Doing Business 2015 Bangladesh 82 Documents to export Bill of Lading Certificate of origin Commercial Invoice Customs export declaration Packing list Pre-shipment inspection clean report of findings Documents to import Bill of lading Cargo release order Certificate of origin Commercial invoice Customs import declaration Letter of credit Packing list Technical standard/Cleanliness certificate Terminal handling receipts Source: Doing Business database. Doing Business 2015 Bangladesh 83 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent courts encourage new business relationships because Procedures to enforce a contract through businesses know they can rely on the courts if a new the courts (number) customer fails to pay. Speedy trials are essential for Steps to file and serve the case small enterprises, which may lack the resources to Steps for trial and judgment stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment What do the indicators cover? Time required to complete procedures (calendar days) Doing Business measures the efficiency of the judicial system in resolving a commercial dispute before Time to file and serve the case local courts. Following the step-by-step evolution of Time for trial and obtaining judgment a standardized case study, it collects data relating to Time to enforce the judgment the time, cost and procedural complexity of resolving a commercial lawsuit. The ranking on the ease of Cost required to complete procedures (% of enforcing contracts is the simple average of the claim) percentile rankings on its component indicators: Average attorney fees procedures, time and cost. Court costs The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The Enforcement costs case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city. For the 11 economies with a population of more than  The seller requests a pretrial attachment to 100 million, data for a second city have secure the claim. been added.  The dispute on the quality of the goods  The buyer orders custom-made goods, requires an expert opinion. then fails to pay.  The judge decides in favor of the seller; there  The seller sues the buyer before a is no appeal. competent court.  The seller enforces the judgment through a  The value of the claim is 200% of the public sale of the buyer’s movable assets. income per capita or the equivalent in local currency of USD 5,000, whichever is greater. Doing Business 2015 Bangladesh 84 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial business cities. See the chapter on distance to frontier dispute through the courts in Bangladesh? According to and ease of doing business ranking at the end of this data collected by Doing Business, contract enforcement profile for more details. takes 1442.0 days, costs 66.8% of the value of the claim Globally, Bangladesh stands at 188 in the ranking of 189 and requires 41.0 procedures (see the summary at the economies on the ease of enforcing contracts (figure end of this chapter for details). Most indicator sets refer 10.1). The rankings for comparator economies and the to a case scenario in the largest business city of an regional average ranking provide other useful economy, except for 11 economies for which the data benchmarks for assessing the efficiency of contract are a population-weighted average of the 2 largest enforcement in Bangladesh. Figure 10.1 How Bangladesh and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2015 Bangladesh 85 ENFORCING CONTRACTS What are the details? The indicators reported here for Bangladesh are COURT NAME based on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this chapter on Claim value - what the indicators cover). These procedures, and BDT 388,862 Chittagong: the time and cost of completing them, are identified through study of the codes of civil procedure and Claim value - Dhaka : BDT 388,862 other court regulations, as well as through questionnaires completed by local litigation lawyers Court name - Chittagong Senior (and, in a quarter of the economies covered by Chittagong: Assistant Judge Court Doing Business, by judges as well). Dhaka Senior Assistant Court name - Dhaka : Judge City: Dhaka , Chittagong Table 10.2 Summary of time, cost and procedures for enforcing a contract in Bangladesh South Asia Indicator Dhaka Chittagong average Time (days) 1442 1442 1,077 Filing and service 30 30 Trial and judgment 1047 1047 Enforcement of judgment 365 365 Cost (% of claim) 66.8 66.8 30.4 Attorney cost (% of claim) 40 40 Court cost (% of claim) 8.3 8.3 Enforcement Cost (% of claim) 18.5 18.5 Procedures (number) 41 41 43 Number of procedures (without bonus points) 41 41 Total number of procedures (including bonus points) 41 41 Doing Business 2015 Bangladesh 86 No. Dhaka Procedures Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. 2 Plaintiff hires a lawyer: Plaintiff hires a lawyer. Plaintiff files a summons and complaint: Plaintiff files a summons and complaint with the court (orally or * in writing). Plaintiff pays court fees: Plaintiff pays court fees (e.g. court duties, stamp duties, or any other type of court * fees). Answer ‘yes’ even if Plaintiff recovers these costs. Registration of court case: Registration of court case by the court administration (this can include 3 assigning a reference number to the case). Assignment of court case to a judge: Assignment of court case to a judge (through a random procedure, * automated system, ruling of an administrative judge, court officer, etc). Judicial scrutiny of summons and complaint: Judge examines Plaintiff's summons and complaint for 4 formal requirements as a matter of law or standard practice. Judge admits summons and complaint: Judge admits summons and complaint (after verifying the formal * requirements). Plaintiff requests service of process on Defendant: Plaintiff requests in writing to the court for an order 5 that process be served on Defendant. 6 Court order for service: Upon Plaintiff’s request, judge orders process be served on Defendant. Delivery of summons and complaint to person authorized to perform service of process on Defendant: 7 The judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. Mailing of summons and complaint: Court or process server, including (private) bailiff, mails summons * and complaint to Defendant. Second attempt at physical delivery: If a first attempt is not ordinarily successful, a second attempt to 8 physically deliver the summons and complaint to Defendant is required by law or standard practice. (Check ‘yes’ only if a first attempt at physical delivery is not ordinarily successful) Substituted service: Substituted service is completed by publication in newspapers, by affixing a notice in 9 court or on public bulletin boards, etc. * Proof of service: Plaintiff submits proof of service to court, as required by law or standard practice. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. Decision on pre-judgment attachment: Judge decides whether to grant Plaintiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. Doing Business 2015 Bangladesh 87 No. Dhaka Procedures Pre-judgment attachment order: Defendant's property is attached prior to judgment. Attachment order 10 either involves physical attachment, or is achieved by freezing, registering, marking, or otherwise separating and restricting Defendant’s movement of specific moveable assets. Report on pre-judgment attachment: Court enforcement officer or private bailiff issues and delivers a 11 report on the attachment of Defendant’s property to the judge. Hearing on pre-judgment attachment: A hearing takes place as a matter of law or standard practice to 12 resolve the question of whether Defendant’s assets can be attached prior to judgment. This process may include the submission of separate summons and petitions. Trial and judgment: Defendant files an answer to Plaintiff’s claim: Defendant files a written pleading which includes his answer 13 or defense on the merits of the case (see assumption 4). Filing of written submissions: Plaintiff and Defendant file written pleadings and submissions with the court 14 and transmit copies of the written pleadings or submissions to one another. The pleadings may or may not include witness statements or expert (witness) statements. Adjournments: Court procedure is delayed because one or both parties request and obtain an 15 adjournment to submit written pleadings. Check as ‘yes’ if this commonly happens. Court appointment of independent expert: Judge appoints, either at the parties' request or at his own * initiative, an independent expert to decide whether the quality of the goods Plaintiff delivered to Defendant is adequate. (see assumption 5-b). Notification of court-appointment of independent expert: The court notifies both parties that the court is 16 appointing an independent expert (see assumption 5-b). Delivery of expert report by court-appointed expert: The independent expert, appointed by the court, * delivers his or her expert report to the court (see assumption 5-b). Setting of date for mediation hearing: The judge sets a date for a mediation hearing, sometimes also * called a 'pre-trial conference,' and notifies the parties of the hearing date. Mediation hearing: The judge, during this informal meeting with the parties, encourages them to settle 17 the case (acting as mediator). The case cannot be settled, the judge may draft a pre-trial conference report, after which the case may be allocated to another judge for tr Request for interlocutory order: Defendant raises preliminary issues, such as jurisdiction, statute of * limitation, etc. Checked as ‘yes’ if commonly raised by the Defendant as a matter of practice, regardless of justification. Court’s issuance of interlocutory order: Court decides the preliminary issues the Defendant raised by * issuing an interlocutory order. Check as ‘yes’ if this is commonly the case in commercial c ases. Plaintiff’s appeal of court's interlocutory order: Plaintiff appeals the court's interlocutory order, which 18 suspends the court proceedings. Check as ‘yes’ if an appeal by Plaintiff is common in this case. Request for oral hearing or trial: Plaintiff lists the case for trial on the court’s calendar or applies for the 19 date(s) for the oral hearing or trial. * Setting of date(s) for oral hearing or trial: Judge sets the date(s) for the oral hearing or trial. Doing Business 2015 Bangladesh 88 No. Dhaka Procedures * List of (expert) witnesses: The parties file a list of (expert) witnesses with the court (see assumption 5-a). Summoning of (expert) witnesses: The court summons (expert) witnesses to appear in court for the oral 20 hearing or trial (see assumption 5-a). Adjournments: Court proceedings are delayed because one or both parties request and obtain an 21 adjournment to prepare for the oral hearing or trial as a matter of common practice. Trial (prevalent in common law): The parties argue the merits of the case at (an) oral session(s) before the 22 court. Witnesses and expert witnesses are questioned and cross-examined during trial. Adjournments: Court proceedings are delayed because one or both parties request and obtain an 23 adjournment during the oral hearing or trial, resulting in an additional or later trial or hearing date. Request for closing of the evidence period: Plaintiff or Defendant requests the judge to close the evidence * period. 24 Closing of the evidence period: The court makes the formal decision to close the evidence period. Order for submission of final arguments: The judge sets a deadline for the submission of final factual and 25 legal arguments. Final arguments: The parties present their final factual and legal arguments to the court either by oral * presentation or by a written submission. 26 Judgment date: The judge sets a date for delivery of the judgment. 27 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 28 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 29 judgment. Appeal period: By law Defendant has the opportunity to appeal the judgment during a specified period. 30 Defendant decides not to appeal. Seller decides to start enforcing the judgment when the appeal period ends (see assumption 8). Order for reimbursement by Defendant of Plaintiff's court fees: The judgment orders Defendant to 31 reimburse Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff hires a lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented by * a lawyer during the enforcement of judgment phase. Plaintiff retains an enforcement agent to enforce the judgment.: Plaintiff retains the services of a court 32 enforcement officer such as a court bailiff or sheriff, or a private bailiff. Plaintiff requests an enforcement order: Plaintiff applies to the court to obtain the enforcement order * ('seal' on judgment). Attachment of enforcement order to judgment: The judge attaches the enforcement order (‘seal’) to the 33 judgment. Doing Business 2015 Bangladesh 89 No. Dhaka Procedures Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer * or a private bailiff. Plaintiff’s request for physical enforcement: As Plaintiff commonly fears that Defendant might physically * resist the taking into custody of its previously attached movable assets, Plaintiff requests the judge or the police authorities to obtain police assistance during the physical enforcement of the Judge's order for physical enforcement: Judge orders the police to assist with the physical enforcement of 34 the attachment of Defendant's movable assets. Check as “yes” only if the pretrial order of attachment for Defendant’s moveable assets does not ordinarily involve physical seizure of the as Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a 35 private bailiff requests Defendant to voluntarily comply with the judgment. Identification of Defendant's assets by court official or Defendant for purposes of enforcement: The judge, 36 a court enforcement officer, a private bailiff or the Defendant himself identifies Defendant's movable assets for the purposes of enforcing the judgment through a sale of Defendant’s assets. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 37 assets). Report on execution of attachment: A court enforcement officer or private bailiff delivers a report on the 38 attachment of Defendant's movable goods to the judge. Call for public auction: Judge calls a public auction by, for example, advertising or publication in the 39 newspapers. 40 Sale through public auction: The Defendant’s movable property is sold at public auction. 41 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. No. Chittagong Procedures Filing and service: * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2015 Bangladesh 90 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient INDICATORS MEASURE companies and reallocating the resources of inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By improving the expectations of creditors Appeals and requests for extension are and debtors about the outcome of insolvency included proceedings, well-functioning insolvency systems can facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and thereby improve growth and estate) sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome of Fees of insolvency administrators insolvency proceedings involving domestic legal Lawyers’ fees entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Assessors’ and auctioneers’ fees dollar recouped by secured creditors through Other related fees reorganization, liquidation or debt enforcement (foreclosure) proceedings. To determine the present Outcome value of the amount recovered by creditors, Doing Whether business continues operating as a Business uses the lending rates from the International going concern or business assets are sold Monetary Fund, supplemented with data from piecemeal central banks and the Economist Intelligence Unit. Recovery rate for creditors In addition, Doing Business evaluates the adequacy Measures the cents on the dollar recovered and integrity of the existing legal framework by secured creditors applicable to liquidation and reorganization proceedings through the strength of insolvency Outcome for the business (survival or not) determines the maximum value that can be framework index. The index tests whether economies recovered adopted internationally accepted good practices in four areas: commencement of proceedings, Official costs of the insolvency proceedings management of debtor’s assets, reorganization are deducted proceedings and creditor participation. Depreciation of furniture is taken into The ranking of the Resolving Insolvency indicator is account based on the recovery rate and the total score of the Present value of debt recovered strength of insolvency framework index. The Strength of insolvency framework index (0- Resolving Insolvency indicator does not measure 16) insolvency proceedings of individuals and financial institutions. The data are derived from survey Sum of the scores of four component indices: responses by local insolvency practitioners and Commencement of proceedings index (0-3) verified through a study of laws and regulations as well as public information on bankruptcy systems. Management of debtor’s assets index (0-6) Reorganization proceedings index (0-3) Creditor participation index (0-4) Doing Business 2015 Bangladesh 91 RESOLVING INSOLVENCY Where does the economy stand today? Combination of quality regulations and efficient practice According to data collected by Doing Business, characterize the top-performing economies. How Bangladesh scores 2.0 out of 3 points on the efficient are insolvency proceedings in Bangladesh? commencement of proceedings index, 2.0 out of 6 points According to data collected by Doing Business, resolving on the management of debtor’s assets index, 0.0 out of 3 insolvency takes 4.0 years on average and costs 8.0% of points on the reorganization proceedings index, and 1.0 the debtor’s estate, with the most likely outcome being out of 4 points on the creditor participation index. that the company will be sold as piecemeal sale. The Bangladesh’s total score on the strength of insolvency average recovery rate is 25.8 cents on the dollar. Most framework index is 5.0 out of 16. indicator sets refer to a case scenario in the largest Globally, Bangladesh stands at 147 in the ranking of 189 business city of an economy, except for 11 economies for economies on the ease of resolving insolvency (figure which the data are a population-weighted average of the 11.1). The rankings for comparator economies and the 2 largest business cities. See the chapter on distance to regional average ranking provide other useful frontier and ease of doing business ranking at the end of benchmarks for assessing the efficiency of insolvency this profile for more details. proceedings in Bangladesh. Figure 11.1 How Bangladesh and comparator economies rank on the ease of resolving insolvency Doing Business 2015 Bangladesh 92 Source: Doing Business database. Doing Business 2015 Bangladesh 93 Figure 11.2 Recovery Rate (0-100) - Bangladesh Source: Doing Business database. Figure 11.3 Strength of insolvency framework index (0-16) - Bangladesh Source: Doing Business database. Doing Business 2015 Bangladesh 94 LABOR MARKET REGULATION Doing Business measures flexibility in the regulation of Doing Business 2015 presents the data for the labor employment, specifically as it affects the hiring and market regulation indicators in an annex. The report redundancy of workers and the rigidity of working hours. does not present rankings of economies on these This year, for the first time, the indicators measuring indicators nor include the topic in the aggregate distance flexibility in labor market regulations focus on those to frontier score or ranking on the ease of doing affecting the food retail industry, using a standardized business. Detailed data collected on labor market case study of a cashier in a supermarket. Also new is that regulations are available on the Doing Business website Doing Business collects data on regulations applying to (http://www.doingbusiness.org). The data on labor employees hired through temporary-work agencies as market regulations are based on a detailed survey of well as on those applying to permanent employees or employment regulations that is completed by local employees hired on fixed-term contracts. The indicators lawyers and public officials. Employment laws and also cover additional areas of labor market regulation, regulations as well as secondary sources are reviewed to including social protection schemes and benefits as well ensure accuracy. To make the data comparable across as labor disputes. economies, several assumptions about the worker and the business are used. Over the period from 2007 to 2011 improvements were made to align the methodology for the labor market The worker: regulation indicators (formerly the employing workers  Is a cashier in a supermarket or a grocery store indicators) with the letter and spirit of the International  Is a full-time employee Labour Organization (ILO) conventions. Only 6 of the 188  Is not a member of the labor union, unless ILO conventions cover areas measured by Doing membership is mandatory Business: employee termination, weekend work, holiday The business: with pay, night work, protection against unemployment  Is a limited liability company (or the equivalent and medical care and sickness benefits. The Doing in the economy) with 60 employees. Business methodology is fully consistent with these 6  Operates a supermarket or grocery store in the conventions. The ILO conventions covering areas related economy’s largest business city. For 11 to the labor market regulation indicators do not include economies the data are also collected for the the ILO core labor standards—8 conventions covering second largest business city. the right to collective bargaining, the elimination of  Is subject to collective bargaining agreements if forced labor, the abolition of child labor and equitable such agreements cover more than 50% of the treatment in employment practices. food retail sector and they apply even to firms that are not party to them. Between 2009 and 2011 the World Bank Group worked  Abides by every law and regulation but does not with a consultative group—including labor lawyers, grant workers more benefits than those employer and employee representatives, and experts mandated by law, regulation or (if applicable) from the ILO, the Organisation for Economic Co- collective bargaining agreements. operation and Development (OECD), civil society and the private sector—to review the methodology for the labor market regulation indicators and explore future areas of research. A full report with the conclusions of the consultative group is available at: http://www.doingbusiness.org/methodology/employing-workers. Doing Business 2015 Bangladesh LABOR MARKET REGULATION What are the details? The data reported here for Bangladesh are based on a Employment laws and regulations as well as secondary detailed survey of labor market regulation that is sources are reviewed to ensure accuracy. completed by local lawyers and public officials. Difficulty of hiring index Difficulty of hiring covers 4 areas: (i) whether fixed-term wage to the average value added per worker. The contracts are prohibited for permanent tasks; (ii) the average value added per worker is the ratio of an maximum cumulative duration of fixed-term contracts; economy’s GNI per capita to the working-age population (iii) the minimum wage for a cashier, age 19, with 1 year as a percentage of the total population. of work experience; and (iv) the ratio of the minimum Dhaka Chittagong Difficulty of hiring index Data Data Fixed-term contracts prohibited for permanent tasks? No No Maximum length of a single fixed-term contract (months) No limit No limit Maximum length of fixed-term contracts, including renewals (months) No limit No limit Minimum wage applicable to the worker assumed in the case study 0.00 0.00 (US$/month) Ratio of minimum wage to value added per worker 0.00 0.00 Source: Doing Business database. Doing Business 2015 Bangladesh 96 LABOR MARKET REGULATION Rigidity of hours index Rigidity of hours covers 7 areas: (i) whether the premium for work on a weekly rest day (as a percentage workweek can extend to 50 hours or more (including of hourly pay); (v) whether there are restrictions on night overtime) for 2 months in a year to respond to a work; (vi) whether there are restrictions on weekly seasonal increase in workload; (ii) the maximum number holiday work; and (vii) the average paid annual leave for of days allowed in the workweek; (iii) the premium for workers with 1 year of tenure, 5 years of tenure and 10 night work (as a percentage of hourly pay); (iv) the years of tenure. Dhaka Chittagong Rigidity of hours index Data Data 50-hour workweek allowed for 2 months a year in case of a seasonal Yes Yes increase in workload? Maximum working days per week 6.0 6.0 Premium for night work (% of hourly pay) 0% 0% Premium for work on weekly rest day (% of hourly pay) 0% 0% Major restrictions on night work? No No Major restrictions on weekly holiday? No No Paid annual leave for a worker with 1 year of tenure (in working days) 17.0 17.0 Paid annual leave for a worker with 5 years of tenure (in working days) 17.0 17.0 Paid annual leave for a worker with 10 years of tenure (in working 17.0 17.0 days) Paid annual leave (average for workers with 1, 5 and 10 years of tenure, 17.0 17.0 in working days) Source: Doing Business database. Doing Business 2015 Bangladesh 97 LABOR MARKET REGULATION Difficulty of redundancy index Difficulty of redundancy index looks at 9 questions: (i) whether the employer needs approval from a third party what the length is in months of the maximum to terminate 1 redundant worker; (vi) whether the probationary period; (ii) whether redundancy is employer needs approval from a third party to terminate disallowed as a basis for terminating workers; (iii) a group of 9 redundant workers; (vii) whether the law whether the employer needs to notify a third party (such requires the employer to reassign or retrain a worker as a government agency) to terminate 1 redundant before making the worker redundant; (viii) whether worker; (iv) whether the employer needs to notify a third priority rules apply for redundancies; and (ix) whether party to terminate a group of 9 redundant workers; (v) priority rules apply for reemployment. Dhaka Chittagong Difficulty of redundancy index Data Data Maximum length of probationary period (months) 3.0 3.0 Dismissal due to redundancy allowed by law? Yes Yes Third-party notification if 1 worker is dismissed? Yes Yes Third-party approval if 1 worker is dismissed? No No Third-party notification if 9 workers are dismissed? Yes Yes Third-party approval if 9 workers are dismissed? No No Retraining or reassignment obligation before redundancy? No No Priority rules for redundancies? Yes Yes Priority rules for reemployment? Yes Yes Source: Doing Business database. Doing Business 2015 Bangladesh 98 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice requirements and severance payments applicable to a requirements, severance payments and penalties due worker with 1 year of tenure, a worker with 5 years and when terminating a redundant worker, expressed in a worker with 10 years is considered. One month is weeks of salary. The average value of notice recorded as 4 and 1/3 weeks. Dhaka Chittagong Redundancy cost indicator (in salary weeks) Data Data Notice period for redundancy dismissal for a worker with 1 year of 4.3 4.3 tenure Notice period for redundancy dismissal for a worker with 5 years of 4.3 4.3 tenure Notice period for redundancy dismissal for a worker with 10 years of 4.3 4.3 tenure Notice period for redundancy dismissal (average for workers with 1, 5 4.3 4.3 and 10 years of tenure) Severance pay for redundancy dismissal for a worker with 1 year of 5.0 5.0 tenure Severance pay for redundancy dismissal for a worker with 5 years of 25.0 25.0 tenure Severance pay for redundancy dismissal for a worker with 10 years of 50.0 50.0 tenure Severance pay for redundancy dismissal (average for workers with 1, 5 26.7 26.7 and 10 years of tenure) Source: Doing Business database. Social protection schemes and benefits & Labor disputes Doing Business collects data on the existence of unemployment protection schemes as well as data on whether employers are legally required to provide health insurance for employees with permanent contracts. Doing Business also assesses the mechanisms available to resolve labor disputes. More specifically, it collects data on what courts would be competent to hear labor disputes and whether the competent court is specialized in resolving labor disputes. Doing Business 2015 Bangladesh 99 Dhaka Chittagong Social protection schemes and benefits & Labor disputes indicator Data Data Availability of unemployment protection scheme? No No Health insurance existing for permanent employees? No No Availability of courts or court sections specializing in labor disputes? Yes Yes Source: Doing Business database. Doing Business 2015 Bangladesh 100 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING This year’s report presents results for 2 aggregate defined as the total tax rate at the 15th percentile of the measures: the distance to frontier score and the ease of overall distribution for all years included in the analysis. doing business ranking, which for the first time this year For the time to pay taxes the frontier is defined as the is based on the distance to frontier score. The ease of lowest time recorded among all economies that levy the doing business ranking compares economies with one 3 major taxes: profit tax, labor taxes and mandatory another; the distance to frontier score benchmarks contributions, and value added tax (VAT) or sales tax. In economies with respect to regulatory best practice, addition, the cost to export and cost to import for each showing the absolute distance to the best performance year are divided by the GDP deflator, to take the general on each Doing Business indicator. When compared price level into account when benchmarking these across years, the distance to frontier score shows how absolute-cost indicators across economies with different much the regulatory environment for local entrepreneurs inflation trends. The base year for the deflator is 2013 for in an economy has changed over time in absolute terms, all economies. while the ease of doing business ranking can show only In the same formulation, to mitigate the effects of how much the regulatory environment has changed extreme outliers in the distributions of the rescaled data relative to that in other economies. for most component indicators (very few economies Distance to Frontier need 700 days to complete the procedures to start a business, but many need 9 days), the worst performance The distance to frontier score captures the gap between is calculated after the removal of outliers. The definition an economy’s performance and a measure of best of outliers is based on the distribution for each practice across the entire sample of 31 indicators for 10 component indicator. To simplify the process, 2 rules Doing Business topics (the labor market regulation were defined: the 95th percentile is used for the indicators are excluded). For starting a business, for indicators with the most dispersed distributions example, Canada and New Zealand have the smallest (including time, cost, minimum capital and number of number of procedures required (1), and New Zealand the payments to pay taxes), and the 99th percentile is used shortest time to fulfill them (0.5 days). Slovenia has the for number of procedures and number of documents to lowest cost (0.0), and Australia, Colombia and 110 other trade. No outlier was removed for component indicators economies have no paid-in minimum capital bound by definition or construction, including legal requirement (table 15.1 in the Doing Business 2015 index scores (such as the depth of credit information report). index, extent of conflict of interest regulation index and strength of insolvency framework index) and the Calculation of the distance to frontier score recovery rate (figure 15.1 in the Doing Business 2015 Calculating the distance to frontier score for each report). economy involves 2 main steps. First, individual Second, for each economy the scores obtained for component indicators are normalized to a common unit individual indicators are aggregated through simple where each of the 31 component indicators y (except for averaging into one distance to frontier score, first for the total tax rate) is rescaled using the linear each topic and then across all 10 topics: starting a transformation (worst − y)/(worst − frontier). In this business, dealing with construction permits, getting formulation the frontier represents the best performance electricity, registering property, getting credit, protecting on the indicator across all economies since 2005 or the minority investors, paying taxes, trading across borders, third year after data for the indicator were collected for enforcing contracts and resolving insolvency. More the first time. For legal indicators such as those on complex aggregation methods—such as principal getting credit or protecting minority investors, the components and unobserved components —yield a frontier is set at the highest possible value. For the total ranking nearly identical to the simple average used by tax rate, consistent with the use of a threshold in Doing Business . Thus Doing Business uses the simplest 6 calculating the rankings on this indicator, the frontier is 6 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to Doing Business 2015 Bangladesh 101 method: weighting all topics equally and, within each overall tax system. Instead, it is mainly empirical in topic, giving equal weight to each of the topic nature. The nonlinear transformation along with the components . threshold reduces the bias in the indicator toward 7 economies that do not need to levy significant taxes on An economy’s distance to frontier score is indicated on a companies like the Doing Business standardized case scale from 0 to 100, where 0 represents the worst study company because they raise public revenue in performance and 100 the frontier. All distance to frontier other ways—for example, through taxes on foreign calculations are based on a maximum of 5 decimals. companies, through taxes on sectors other than However, indicator ranking calculations and the ease of manufacturing or from natural resources (all of which are doing business ranking calculations are based on 2 outside the scope of the methodology). In addition, it decimals. The difference between an economy’s distance acknowledges the need of economies to collect taxes to frontier score in any previous year and its score in from firms. 2014 illustrates the extent to which the economy has closed the gap to the regulatory frontier over time. And Calculation of scores for economies with 2 cities in any given year the score measures how far an covered economy is from the best performance at that time. For each of the 11 economies for which a second city Treatment of the total tax rate was added in this year’s report, the distance to frontier score is calculated as the population-weighted average This year, for the first time, the total tax rate component of the distance to frontier scores for the 2 cities covered of the paying taxes indicator set enters the distance to (table 12.1). This is done for the aggregate score, the frontier calculation in a different way than any other scores for each topic and the scores for all the indicator. The distance to frontier score obtained for the component indicators for each topic. total tax rate is transformed in a nonlinear fashion before it enters the distance to frontier score for paying taxes. Table 12.1 Weights used in calculating the distance to As a result of the nonlinear transformation, an increase in frontier scores for economies with 2 cities covered the total tax rate has a smaller impact on the distance to Economy City Weight (%) frontier score for the total tax rate—and therefore on the Dhaka 78 distance to frontier score for paying taxes—for Bangladesh Chittagong 22 economies with a below-average total tax rate than it São Paulo 61 would have in the calculation done in previous years (line Brazil Rio de Janeiro 39 B is smaller than line A in figure 15.2 of the Doing Shanghai 55 China Business 2015 report). And for economies with an Beijing 45 extreme total tax rate (a rate that is very high relative to Mumbai 47 India the average), an increase has a greater impact on both Delhi 53 these distance to frontier scores than before (line D is Jakarta 78 Indonesia bigger than line C in figure 15.2 of the Doing Business Surabaya 22 Tokyo 65 2015 report). Japan Osaka 35 The nonlinear transformation is not based on any Mexico City 83 Mexico economic theory of an “optimal tax rate” that minimizes Monterrey 17 distortions or maximizes efficiency in an economy’s Lagos 77 Nigeria Kano 23 Karachi 65 Pakistan that from the simple average method because both these methods Lahore 35 assign roughly equal weights to the topics, since the pairwise Moscow 70 Russian Federation correlations among indicators do not differ much. An alternative to the St. Petersburg 30 simple average method is to give different weights to the topics, New York 60 depending on which are considered of more or less importance in the United States Los Angeles 40 context of a specific economy. Source: United Nations, Department of Economic and Social 7 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned Affairs, Population Division, World Urbanization Prospects, to the strength of legal rights index and 40% to the depth of credit 2014 Revision. http://esa.un.org/unpd/wup/CD- information index. Indicators for all other topics are assigned equal ROM/Default.aspx. weights Doing Business 2015 Bangladesh 102 Economies that improved the most across 3 or more Selecting the economies that implemented regulatory Doing Business topics in 2013/14 reforms in at least 3 topics and had the biggest improvements in their distance to frontier scores is Doing Business 2015 uses a simple method to calculate intended to highlight economies with ongoing, broad- which economies improved the ease of doing business based reform programs. The improvement in the the most. First, it selects the economies that in 2013/14 distance to frontier score is used to identify the top implemented regulatory reforms making it easier to do improvers because this allows a focus on the absolute business in 3 or more of the 10 topics included in this improvement—in contrast with the relative improvement year’s aggregate distance to frontier score. Twenty-one shown by a change in rankings—that economies have economies meet this criterion: Azerbaijan; Benin; the made in their regulatory environment for business. Democratic Republic of Congo; Côte d’Ivoire; the Czech Republic; Greece; India; Ireland; Kazakhstan; Lithuania; the former Yugoslav Republic of Macedonia; Poland; Ease of Doing Business ranking Senegal; the Seychelles; Spain; Switzerland; Taiwan, China; Tajikistan; Togo; Trinidad and Tobago; and the The ease of doing business ranking ranges from 1 to 189. United Arab Emirates. Second, Doing Business sorts these The ranking of economies is determined by sorting the economies on the increase in their distance to frontier aggregate distance to frontier scores, rounded to 2 score from the previous year using comparable data. decimals. Doing Business 2015 Bangladesh 103 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 10,700 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 139 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, reform case repreneurship studies and customized economy and regional profiles Distance to frontier http://www.doingbusiness.org/reports Data benchmarking 189 economies to the frontier in regulatory practice Methodology http://www.doingbusiness.org/data/distance-to- The methodologies and research papers underlying frontier Doing Business http://www.doingbusiness.org/methodology Information on good practices Showing where the many good practices identified Research by Doing Business have been adopted Abstracts of papers on Doing Business topics and http://www.doingbusiness.org/data/good-practice related policy issues http://www.doingbusiness.org/research Doing Business iPhone App Doing Business at a Glance—presenting the full Doing Business reforms report, rankings and highlights for each topic for Short summaries of DB2015 business regulation the iPhone, iPad and iPod touch reforms, lists of reforms since DB2008 and a ranking http://www.doingbusiness.org/specialfeatures/ simulation tool iphone http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2015 Bangladesh 104