Doing Business 2016 Bangladesh 100660 Economy Profile 2016 Bangladesh Doing Business 2016 Bangladesh 2 © 2016 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 Some rights reserved 1 2 3 4 18 17 16 15 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 2016 Bangladesh 3 CONTENTS Introduction .................................................................................................................................. 4 Starting a business ..................................................................................................................... 16 Dealing with construction permits ........................................................................................... 27 Getting electricity ....................................................................................................................... 42 Registering property .................................................................................................................. 57 Getting credit .............................................................................................................................. 72 Protecting minority investors ................................................................................................... 79 Paying taxes ................................................................................................................................ 85 Trading across borders .............................................................................................................. 90 Enforcing contracts .................................................................................................................... 98 Resolving insolvency ................................................................................................................ 106 Labor market regulation ......................................................................................................... 113 Distance to frontier and ease of doing business ranking .................................................... 119 Resources on the Doing Business website ............................................................................ 122 Doing Business 2016 Bangladesh 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is (comparator economies) for each indicator. The data in for a local entrepreneur to open and run a small to this report are current as of June 1, 2015 (except for the medium-size business when complying with relevant paying taxes indicators, which cover the period January– regulations. It measures and tracks changes in December 2014). regulations affecting 11 areas in the life cycle of a The Doing Business methodology has limitations. Other business: starting a business, dealing with construction areas important to business—such as an economy’s permits, getting electricity, registering property, getting proximity to large markets, the quality of its credit, protecting minority investors, paying taxes, infrastructure services (other than those related to trading across borders, enforcing contracts, resolving trading across borders and getting electricity), the insolvency and labor market regulation. Doing Business security of property from theft and looting, the 2016 does not present rankings of economies on labor transparency of government procurement, market regulation indicators or include the topic in the macroeconomic conditions or the underlying strength of aggregate distance to frontier score or ranking on the institutions—are not directly studied by Doing Business. ease of doing business. The indicators refer to a specific type of business, In a series of annual reports Doing Business presents generally a local limited liability company operating in quantitative indicators on business regulations and the the largest business city. Because standard assumptions protection of property rights that can be compared are used in the data collection, comparisons and across 189 economies, from Afghanistan to Zimbabwe, benchmarks are valid across economies. The data not over time. The data set covers 47 economies in Sub- only highlight the extent of obstacles to doing business; Saharan Africa, 32 in Latin America and the Caribbean, 25 they also help identify the source of those obstacles, in East Asia and the Pacific, 25 in Eastern Europe and supporting policy makers in designing regulatory reform. Central Asia, 20 in the Middle East and North Africa and More information is available in the full report. Doing 8 in South Asia, as well as 32 OECD high-income Business 2016 presents the indicators, analyzes their economies. The indicators are used to analyze economic relationship with economic outcomes and presents outcomes and identify what reforms have worked, where business regulatory reforms. The data, along with and why. information on ordering Doing Business 2016, are This economy profile presents the Doing Business available on the Doing Business website at indicators for Bangladesh. To allow useful comparison, it http://www.doingbusiness.org. also provides data for other selected economies Doing Business 2016 Bangladesh 5 CHANGES IN DOING BUSINESS 2016 As part of a two-year update in methodology, Doing The case study underlying the trading across borders Business 2016 expands the focus of five indicator sets indicators has been changed to increase its relevance. (dealing with construction permits, getting electricity, For each economy the export product and partner are registering property, enforcing contracts and labor now determined on the basis of the economy’s market regulation), substantially revises the comparative advantage, the import product is auto parts, methodology for one indicator set (trading across and the import partner is selected on the basis of which borders) and implements small updates to the economy has the highest trade value in that product. The methodology for another (protecting minority investors). indicators continue to measure the time and cost to export and import. The indicators on dealing with construction permits now include an index of the quality of building regulation and Beyond these changes there is one other update in its implementation. The getting electricity indicators now methodology, for the protecting minority investors include a measure of the price of electricity consumption indicators. A few points for the extent of shareholder and an index of the reliability of electricity supply and governance index have been fine-tuned, and the index transparency of tariffs. Starting this year, the registering now also measures aspects of the regulations applicable property indicators include an index of the quality of the to limited companies rather than privately held joint land administration system in each economy in addition stock companies. to the indicators on the number of procedures and the For more details on the changes, see the “What is time and cost to transfer property. And for enforcing changing in Doing Business?” chapter starting on page contracts an index of the quality and efficiency of judicial 27 of the Doing Business 2016 report. For more details processes has been added while the indicator on the on the data and methodology, please see the “Data number of procedures to enforce a contract has been Notes” chapter starting on page 119 of the Doing dropped. Business 2016 report. For more details on the distance to The scope of the labor market regulation indicator set frontier metric, please see the “Distance to frontier and has also been expanded, to include more areas capturing ease of doing business ranking” chapter in this profile. aspects of job quality. The labor market regulation indicators continue to be excluded from the aggregate distance to frontier score and ranking on the ease of doing business. Doing Business 2016 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: Lower middle income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. Population: 158,512,570 Doing Business presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 1,080 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier scores, DB2016 rank: 174 rounded to two decimals. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where DB2015 rank: 172* 0 represents the worst performance and 100 the frontier. Change in rank: -2 (See the chapter on the distance to frontier and ease of doing business). DB 2016 DTF: 43.1 The ease of doing business ranking compares economies with one another; the distance to frontier score DB 2015 DTF: 42.71 benchmarks economies with respect to regulatory best practice, showing the absolute distance to the best Change in DTF: 0.39 performance on each Doing Business indicator. When compared across years, the distance to frontier score * DB2015 ranking shown is not last year’s published shows how much the regulatory environment for local ranking but a comparable ranking for DB2015 that entrepreneurs in an economy has changed over time in captures the effects of such factors as data revisions absolute terms, while the ease of doing business ranking and the changes in methodology. See the data notes can show only how much the regulatory environment has starting on page 119 of the Doing Business 2016 changed relative to that in other economies. report for sources and definitions. The 10 topics included in the ranking in Doing Business 2016: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The labor market regulation indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented in this year’s economy profile. Doing Business 2016 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 2016 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 2015 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 2016 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) Source: Doing Business database. Note: The rankings are benchmarked to June 2015 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. Doing Business 2016 Bangladesh 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier score. tells only part of the story, so do changes in that ranking. This measure shows how far on average an economy is Yearly movements in rankings can provide some indication from the best performance achieved by any economy on of changes in an economy’s regulatory environment for each Doing Business indicator. firms, 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 over time—how far it has moved toward (or away from) in different areas. To aid in assessing such changes, the 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. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. 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 119 of the Doing Business 2016 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2016 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 DB2016 Best performer globally Bangladesh DB2016 Bangladesh DB2015 Chittagong DB2016 Sri Lanka DB2016 Pakistan DB2016 Dhaka DB2016 Indicator India DB2016 DB2016 Starting a Business 117 111 -- -- 155 122 98 17 New Zealand (1) (rank) Starting a Business (DTF 81.72 81.36 81.72 81.72 73.59 80.94 84.98 94.57 New Zealand (99.96) Score) Procedures (number) 9.0 9.0 9.0 9.0 12.9 10.0 8.0 4.0 New Zealand (1.00)* Time (days) 19.5 19.5 19.5 19.5 29.0 19.0 10.0 4.5 New Zealand (0.50) Cost (% of income per 13.9 16.8 13.9 13.9 13.5 9.4 18.7 0.1 Slovenia (0.00) capita) Paid-in min. capital (% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 105 Economies (0.00)* of income per capita) Dealing with Construction Permits 118 118 -- -- 183 61 77 23 Singapore (1) (rank) Dealing with Construction Permits 65.27 64.78 65.06 66.03 32.47 72.62 70.39 78.92 Singapore (92.97) (DTF Score) Procedures (number) 13.4 13.4 13.0 15.0 33.6 10.0 12.0 9.0 5 Economies (7.00)* Doing Business 2016 Bangladesh 12 United Kingdom DB2016 Best performer globally Bangladesh DB2016 Bangladesh DB2015 Chittagong DB2016 Sri Lanka DB2016 Pakistan DB2016 Dhaka DB2016 Indicator India DB2016 DB2016 Time (days) 269.0 269.0 278.0 237.0 191.5 250.4 116.0 105.0 Singapore (26.00) Cost (% of warehouse 1.7 2.1 1.7 1.7 26.0 3.2 0.2 1.1 Qatar (0.00) value) Building quality control 11.0 11.0 11.0 11.0 11.0 13.7 5.5 9.0 New Zealand (15.00) index (0-15) Getting Electricity 189 189 -- -- 70 157 81 15 Korea, Rep. (1) (rank) Getting Electricity (DTF 15.31 12.99 15.03 16.28 74.56 45.47 70.82 89.12 Korea, Rep. (99.88) Score) Procedures (number) 9.0 9.0 9.0 9.0 5.0 5.0 5.0 4.0 14 Economies (3.00)* Time (days) 428.9 428.9 404.0 517.0 90.1 178.3 100.0 79.0 Korea, Rep. (18.00)* Cost (% of income per 3,140.5 3,890.1 3,229.6 2,824.8 442.3 1,225.5 829.5 26.7 Japan (0.00) capita) Reliability of supply and transparency of tariff 0.0 0.0 0.0 0.0 5.5 0.0 5.0 8.0 18 Economies (8.00)* index (0-8) Registering Property 185 184 -- -- 138 137 153 45 New Zealand (1) (rank) Registering Property 27.48 27.26 28.39 24.29 50.29 50.31 46.76 74.5 New Zealand (94.46) (DTF Score) Procedures (number) 8.0 8.0 8.0 8.0 7.0 6.0 9.0 6.0 4 Economies (1.00)* Time (days) 244.0 244.0 244.0 244.0 47.0 50.0 51.0 21.5 3 Economies (1.00)* Cost (% of property 7.0 7.1 6.5 8.9 7.5 7.5 5.1 4.6 Saudi Arabia (0.00) value) Quality of the land administration index (0- 4.5 4.5 4.5 4.5 7.0 5.0 3.5 24.0 3 Economies (28.50)* 30) Doing Business 2016 Bangladesh 13 United Kingdom DB2016 Best performer globally Bangladesh DB2016 Bangladesh DB2015 Chittagong DB2016 Sri Lanka DB2016 Pakistan DB2016 Dhaka DB2016 Indicator India DB2016 DB2016 Getting Credit (rank) 133 128 -- -- 42 133 97 19 New Zealand (1) Getting Credit (DTF 30 30 30 30 65 30 45 75 New Zealand (100) Score) Strength of legal rights 6.0 6.0 6.0 6.0 6.0 3.0 3.0 7.0 3 Economies (12.00)* index (0-12) Depth of credit 0.0 0.0 0.0 0.0 7.0 3.0 6.0 8.0 26 Economies (8.00)* information index (0-8) Credit registry coverage 0.9 0.9 0.9 0.9 0.0 6.7 0.0 0.0 Portugal (100.00) (% of adults) Credit bureau coverage 22 Economies 0.0 0.0 0.0 0.0 22.0 4.8 50.3 100.0 (% of adults) (100.00)* Protecting Minority 88 87 -- -- 8 25 49 4 Singapore (1)* Investors (rank) Protecting Minority 53.33 53.33 53.33 53.33 73.33 66.67 60 78.33 Singapore (83.33)* Investors (DTF Score) Strength of minority investor protection 5.3 5.3 5.3 5.3 7.3 6.7 6.0 7.8 3 Economies (8.30)* index (0-10) Extent of conflict of interest regulation 6.3 6.3 6.3 6.3 6.7 6.0 6.0 8.3 Singapore (9.30)* index (0-10) Extent of shareholder governance index (0- 4.3 4.3 4.3 4.3 8.0 7.3 6.0 7.3 4 Economies (8.00)* 10) United Arab Emirates Paying Taxes (rank) 86 85 -- -- 157 171 158 15 (1)* Paying Taxes (DTF United Arab Emirates 74.42 73.98 74.42 74.42 56.14 44.46 55.23 91.34 Score) (99.44)* Payments (number per 21.0 21.0 21.0 21.0 33.0 47.0 47.0 8.0 Hong Kong SAR, Doing Business 2016 Bangladesh 14 United Kingdom DB2016 Best performer globally Bangladesh DB2016 Bangladesh DB2015 Chittagong DB2016 Sri Lanka DB2016 Pakistan DB2016 Dhaka DB2016 Indicator India DB2016 DB2016 year) China (3.00)* Time (hours per year) 302.0 302.0 302.0 302.0 243.0 594.0 167.0 110.0 Luxembourg (55.00) Total tax rate (% of 31.6 32.5 31.6 31.6 60.6 32.6 55.2 32.0 Ireland (25.90) profit) Trading Across Borders 172 172 -- -- 133 169 90 38 Denmark (1)* (rank) Trading Across Borders 34.86 34.86 34.86 34.86 56.45 38.11 70.7 91.4 Denmark (100)* (DTF Score) Time to export: Border 100 100 100 100 109 79 43 24 15 Economies (0.00)* compliance (hours) Cost to export: Border 408 408 408 408 413 426 366 280 18 Economies (0.00)* compliance (USD) Time to export: Documentary 147 147 147 147 41 62 76 4 Jordan (0.00) compliance (hours) Cost to export: Documentary 225 225 225 225 102 307 58 25 20 Economies (0.00)* compliance (USD) Time to import: Border 183 183 183 183 287 141 72 8 19 Economies (0.00)* compliance (hours) Cost to import: Border 1,294 1,294 1,294 1,294 574 957 300 205 28 Economies (0.00)* compliance (USD) Time to import: Documentary 144 144 144 144 63 153 58 2 21 Economies (1.00)* compliance (hours) Cost to import: Documentary 370 370 370 370 145 786 283 0 30 Economies (0.00)* compliance (USD) Enforcing Contracts 188 188 -- -- 178 151 161 33 Singapore (1) Doing Business 2016 Bangladesh 15 United Kingdom DB2016 Best performer globally Bangladesh DB2016 Bangladesh DB2015 Chittagong DB2016 Sri Lanka DB2016 Pakistan DB2016 Dhaka DB2016 Indicator India DB2016 DB2016 (rank) Enforcing Contracts 22.21 22.21 22.21 22.21 32.41 45.35 39.31 69.36 Singapore (84.91) (DTF Score) Time (days) 1,442.0 1,442.0 1,442.0 1,442.0 1,420.0 993.2 1,318.0 437.0 Singapore (150.00) Cost (% of claim) 66.8 66.8 66.8 66.8 39.6 23.0 22.8 43.9 Iceland (9.00) Quality of judicial 7.5 7.5 7.5 7.5 7.5 6.0 7.5 15.0 3 Economies (15.50)* processes index (0-18) Resolving Insolvency 155 155 -- -- 136 94 78 13 Finland (1) (rank) Resolving Insolvency 26.36 26.36 26.36 26.36 32.59 42.96 46.4 82.04 Finland (93.81) (DTF Score) Recovery rate (cents on 25.8 25.8 25.8 25.8 25.7 39.2 45.6 88.6 Japan (92.90) the dollar) Time (years) 4.0 4.0 4.0 4.0 4.3 2.7 1.7 1.0 Ireland (0.40) Cost (% of estate) 8.0 8.0 8.0 8.0 9.0 5.6 10.0 6.0 Norway (1.00) Outcome (0 as piecemeal sale and 1 as 0 0 0 0 0 0 0 1 going concern) Strength of insolvency 4.0 4.0 4.0 4.0 6.0 7.0 7.0 11.0 4 Economies (15.00)* framework index (0-16) Source: Doing Business database. Note: DB2015 rankings shown are not last year’s published rankings but comparable rankings for DB2015 that capture the effects of such factors as data revisions and changes to the methodology. The global best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2016 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” mark if r egulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom 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). Doing Business 2016 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 records all procedures officially required, or commonly done in practice, for an Each procedure starts on a separate day (2 entrepreneur to start up and formally operate an procedures cannot start on the same day). industrial or commercial business, as well as the time Procedures that can be fully completed and cost to complete these procedures and the paid- online are recorded as ½ day. in minimum capital requirement. These procedures Procedure completed once final document is include obtaining all necessary licenses and permits received and completing any required notifications, verifications or inscriptions for the company and No prior contact with officials employees with relevant authorities. The ranking of Cost required to complete each procedure economies on the ease of starting a business is (% of income per capita) determined by sorting their distance to frontier scores for starting a business. These scores are the Official costs only, no bribes simple average of the distance to frontier scores for No professional fees unless services required each of the component indicators. by law or commonly used in practice To make the data comparable across economies, Paid-in minimum capital (% of income several assumptions about the business and the per capita) procedures are used. It is assumed that any required information is readily available and that the Deposited in a bank or with a notary before entrepreneur will pay no bribes. Assumptions about registration (or within 3 months) the business:  Is a limited liability company (or its legal  Has a start-up capital of 10 times income per equivalent), located in the largest business city capita and a turnover of at least 100 times 1 and is 100% domestically owned with five income per capita. owners, none of whom is a legal entity.  Has a company deed 10 pages long.  Has at least 10 and up to 50 employees, all of  Does not qualify for any special benefits. them domestic nationals.  Leases the commercial plant or offices and is not  Performs general commercial or industrial a proprietor of real estate. activities. 1 For 11 economies the data are also collected for the second largest business city. Doing Business 2016 Bangladesh 17 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Bangladesh? the 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 9.00 procedures, takes 19.50 average of the 2 largest business cities. See the chapter days, costs 13.90% of income per capita and requires on distance to frontier and ease of doing business paid-in minimum capital of 0.00% of income per capita ranking at the end of this profile for more details. (figure 2.1). Most indicator sets refer to a case scenario in Figure 2.1 What it takes to start a business in Bangladesh - Dhaka Paid-in minimum capital (% of income per capita): 0.00 Doing Business 2016 Bangladesh 18 What it takes to start a business in Bangladesh - Chittagong Source: Doing Business database. 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. Doing Business 2016 Bangladesh 19 STARTING A BUSINESS Globally, Bangladesh stands at 117 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 2016 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 DB2011 to DB2016 DB year Reform 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. Source: Doing Business database. 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. Doing Business 2016 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 Articles of Payment of stamp duty is made to the account of the Treasury at the 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 1 day 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 copy Doing Business 2016 Bangladesh 22 Time to No. Procedure Cost to complete complete 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 4,005 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 Seal maker 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 2016 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 no charge 6 procedure) Agency: Bank 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 2016 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. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. 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 Doing Business 2016 Bangladesh 25 Time to No. Procedure Cost to complete complete Register at the Registrar of Joint Stock Companies and Firms To register a company, the following documents must be submitted either online or 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 The registration BDT 4,005 fees payable at a designated bank are as follows: i. For filing 6 Less than one day registration fees + 3 documents (5 filled in forms and the memorandum & articles of (online procedure) 1200 registration association, the fee is BDT 200.00 per document): BDT 1,200.00 ii. For an filing fees 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 Seal maker 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 Doing Business 2016 Bangladesh 26 Time to No. Procedure Cost to complete complete 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: o Fill-up an application form. 7 o Enterprise Trade License. 1 day no charge 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 2016 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 all procedures required for a Obtaining utility connections for water and business in the construction industry to build a sewerage warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, this year Doing Business completion introduces a new measure, the building quality Time required to complete each procedure control index, evaluating the quality of building (calendar days) regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and Does not include time spent gathering professional certification requirements. information The ranking of economies on the ease of dealing with Each procedure starts on a separate day. Procedures that can be fully completed online construction permits is determined by sorting their are recorded as ½ day distance to frontier scores for dealing with construction permits. These scores are the simple Procedure considered completed once final average of the distance to frontier scores for each of document is received the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure (% several assumptions about the construction of warehouse value) company, the warehouse project and the utility Official costs only, no bribes connections are used. Building quality control index (0-15) Assumptions about the construction company Sum of the scores of six component indices: The construction company (BuildCo): Quality of building regulations (0-2)  Is a limited liability company (or its legal equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business Quality control during construction (0-3) city. For 11 economies the data are also Quality control after construction (0-3) collected for the second largest business Liability and insurance regimes (0-2) city. Professional certifications (0-4)  Is 100% domestically and privately owned.  Has five owners, none of whom is a legal entity.  Is fully licensed and insured to carry out construction projects, such as building warehouses. Doing Business 2016 Bangladesh 28 The construction company (BuildCo) (continued):  Will be a new construction (there was no previous construction on the land), with no  Has 60 builders and other employees, all of trees, natural water sources, natural reserves them nationals with the technical expertise or historical monuments of any kind on the and professional experience necessary to plot. obtain construction permits and approvals.  Will have complete architectural and  Has at least one employee who is a technical plans prepared by a licensed licensed architect or engineer and architect. If preparation of the plans requires registered with the local association of such steps as obtaining further architects or engineers. BuildCo is not documentation or getting prior approvals assumed to have any other employees who from external agencies, these are counted as are technical or licensed experts, such as procedures. geological or topographical experts.  Will include all technical equipment required  Has paid all taxes and taken out all to be fully operational. necessary insurance applicable to its general business activity (for example,  Will take 30 weeks to construct (excluding all accidental insurance for construction delays due to administrative and regulatory workers and third-person liability). requirements).  Owns the land on which the warehouse will be built and will sell the warehouse upon Assumptions about the utility connections its completion. The water and sewerage connections:  Is valued at 50 times income per capita.  Will be 150 meters (492 feet) from the Assumptions about the warehouse existing water source and sewer tap. If there The warehouse: is no water delivery infrastructure in the economy, a borehole will be dug. If there is  Will be used for general storage activities, no sewerage infrastructure, a septic tank in such as storage of books or stationery. The the smallest size available will be installed or warehouse will not be used for any goods built. requiring special conditions, such as food, chemicals or pharmaceuticals.  Will not require water for fire protection reasons; a fire extinguishing system (dry  Will have two stories, both above ground, system) will be used instead. If a wet fire with a total constructed area of protection system is required by law, it is approximately 1,300.6 square meters assumed that the water demand specified (14,000 square feet). Each floor will be 3 below also covers the water needed for fire meters (9 feet, 10 inches) high. protection.  Will have road access and be located in the  Will have an average water use of 662 liters periurban area of the economy’s largest (175 gallons) a day and an average business city (that is, on the fringes of the wastewater flow of 568 liters (150 gallons) a city but still within its official limits). For 11 day. Will have a peak water use of 1,325 liters economies the data are also collected for (350 gallons) a day and a peak wastewater the second largest business city. flow of 1,136 liters (300 gallons) a day.  Will not be located in a special economic  Will have a constant level of water demand or industrial zone. Will be located on a land and wastewater flow throughout the year. plot of approximately 929 square meters (10,000 square feet) that is 100% owned by  Will be 1 inch in diameter for the water BuildCo and is accurately registered in the connection and 4 inches in diameter for the cadastre and land registry. sewerage connection. Doing Business 2016 Bangladesh 29 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 13.40 procedures, takes 269.00 days and frontier and ease of doing business ranking at the end of costs 1.70% 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 2016 Bangladesh 30 What it takes to comply with formalities to build a warehouse in Bangladesh - Chittagong Source: Doing Business database. 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. . Doing Business 2016 Bangladesh 31 DEALING WITH CONSTRUCTION PERMITS Globally, Bangladesh stands at 118 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 2016 Bangladesh 32 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 value of information collected from experts in construction BDT 4,534,556 warehouse : 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 that apply to a company and structure matching the The procedures, along with the associated time and cost, standard assumptions used by Doing Business in are summarized below. 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 2 casualties on the other hand impacted the work of some areas of 45 days no charge 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 3 days no charge 3 take anywhere from 3 to 7 days. Agency: Dhaka City Corporation Doing Business 2016 Bangladesh 33 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 4 30 days USD 80 Fees by total project cost 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) 6 BuildCo must obtain the clearance from Dhaka Electricity Supply 15 days no charge Co (DESCO) for the electrical plans. Agency: Dhaka Electricity Supply Co (DESCO) Doing Business 2016 Bangladesh 34 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 8 number of applications, it is extremely difficult to comply with 60 days no charge the original 30-day 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, 9 electricity and a fire safety clearance certificate before applying 105 days BDT 30,000 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 from the City Development Authority 1 day no charge 10 may carry out one random inspection during construction to verify that the work is being done according to the approved plans Agency: City Development Authority (RAJUK) Doing Business 2016 Bangladesh 35 Time to No. Procedure Cost to complete complete Submit notice of completion and obtain the certificate of conformity According to the 2006 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. The notice of completion certifies that the building has been built in 11 compliance with the existing regulations. The authorities may or 21 days no charge may not inspect the building. It is only after receipt of this completion notice that the certificate of conformity can be issued. Agency: City Development Authority (RAJUK) Request and obtain water and sewerage connection 12 10 days BDT 30,000 Agency: Dhaka Water and Sewerage Authority (WASA) * 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 13 there are no fees paid. The tax authority then sends the annual 1 day no charge tax bill which will arrive 30 days later. Agency: Dhaka City Corporation * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. 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 2 would be near the port), BuildCo is required to obtain the approval of 4 days no charge the land commissioner for the project, in addition to the building permit from the Development Authority. An application must therefore be submitted, along with the design plan. Doing Business 2016 Bangladesh 36 Time to No. Procedure Cost to complete complete Agency: Chittagong City Corporation Obtain land use clearance (LUC) from the Chittagong Development Authority The land use clearance is obtained to ensure that the plot of land can 3 be used for construction purposes. 40 days no charge 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 8 the land physically and make its own independent assessment. The 60 days no charge waiting time is about 3-6 months for inspectors to visit the site because of a backlog in requests. If the inspection is satisfactory, the inspector then submits a report to the CDA for the approval of the building permit. Doing Business 2016 Bangladesh 37 Time to No. Procedure Cost to complete complete Agency: Chittagong Development Authority (CDA) Obtain building permit from the Chittagong Development Authority (CDA) BuildCo submits an application for a building permit to the Authorization Committee of CDA. It can take as long as 3-6 months 9 from the moment a satisfactory report on the inspection is issued to 105 days BDT 26,000 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) Request water connection at WASA BuildCo must first submit an application to get a new water connection. 12 1 day no charge 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. If there is road crossing 1 day no charge 13 involved, an extra permit from the city would be required. Agency: Chittagong WASA Doing Business 2016 Bangladesh 38 Time to No. Procedure Cost to complete complete Obtain water connection 14 21 days BDT 30,000 Agency: Chittagong WASA * 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 15 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 * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. . Doing Business 2016 Bangladesh 39 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index The building quality control index is the sum of the The index ranges from 0 to 15, with higher values scores on the quality of building regulations, quality indicating better quality control and safety mechanisms in control before construction, quality control during the construction permitting system. construction, quality control after construction, The indicator is based on the same case study liability and insurance regimes, and professional assumptions as the measures of efficiency. certifications indices. Source: Doing Business database. Table 3.3 Summary of time quality control and safety mechanisms in Bangladesh Answer Score Answer Score (Dhaka ) (Dhaka ) (Chittagong) (Chittagong) Building quality control index (0-15) 11.00 11.00 Quality of building regulations index (0-2) 2.00 2.00 In what way are the building regulations (including the Available 1.0 Available building code) or any regulations dealing with online. 1.0 online. construction permits made available? (0-1) List of 1.0 List of required required documents; Which requirements for obtaining a building permit are documents; Fees to be clearly specified by the building regulations or by any Fees to be 1.0 paid; accessible website, brochure or pamphlet? (0-1) paid; Required Required preapproval preapprovals. s. Quality control before construction index (0-1) 1.00 1.00 Licensed 1.0 Licensed Who is part of the committee or team that reviews and architect; architect; approves building permit applications in the relevant 1.0 Licensed Licensed permit-issuing agency? (0-1) engineer. engineer. Quality control during construction index (0-3) 2.00 2.00 Inspections 1.0 Inspections by by in-house in-house What types of inspections (if any) are required by law to engineer; engineer; 1.0 be carried out during construction? (0-2) Unschedule Unscheduled d inspections. inspections. Mandatory 1.0 Mandatory inspections inspections Do legally mandated inspections occur in practice during are always are always 1.0 construction? (0-1) done in done in practice. practice. Doing Business 2016 Bangladesh 40 Answer Score Answer Score (Dhaka ) (Dhaka ) (Chittagong) (Chittagong) Quality control after construction index (0-3) 3.00 3.00 Yes, in- 2.0 Yes, in-house house engineer Is there a final inspection required by law to verify that engineer submits the building was built in accordance with the approved submits 2.0 report for plans and regulations? (0-2) report for final final inspection. inspection. Final 1.0 Final inspection Do legally mandated final inspections occur in practice? inspection always 1.0 (0-1) always occurs occurs in in practice. practice. Liability and insurance regimes index (0-2) 1.00 1.00 Architect or 1.0 Architect or engineer; engineer; Professional Professional in charge of in charge of Which parties (if any) are held liable by law for structural the the 1.0 flaws or problems in the building once it is in use? (0-1) supervision; supervision; Constructio Construction n company; company; Owner or Owner or investor. investor. No party is 0.0 No party is Which parties (if any) are required by law to obtain an required by required by insurance policy to cover possible structural flaws or law to 0.0 law to obtain problems in the building once it is in use? (0-1) obtain insurance . insurance . Professional certifications index (0-4) 2.00 2.00 University 1.0 degree in University architecture degree in or architecture What are the qualification requirements for the engineering or professional responsible for verifying that the ; Being a engineering; 1.0 architectural plans or drawings are in compliance with registered Being a existing building regulations? (0-2) architect or registered engineer; architect or Passing a engineer. certification exam. What are the qualification requirements for the University 1.0 University professional who supervises the construction on the degree in degree in 1.0 ground? (0-2) engineering engineering, , construction Doing Business 2016 Bangladesh 41 Answer Score Answer Score (Dhaka ) (Dhaka ) (Chittagong) (Chittagong) constructio or n or construction constructio management; n Being a manageme registered nt; Being a architect or registered engineer. architect or engineer. Source: Doing Business database. Doing Business 2016 Bangladesh 42 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 connection a customer is always to gain access by obtaining a (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. In obtaining final supply addition, this year Doing Business adds two new measures: the reliability of supply and transparency Time required to complete each procedure of tariffs index (included in the aggregate distance to (calendar days) frontier score and ranking on the ease of doing Is at least 1 calendar day business) and the price of electricity (omitted from these aggregate measures). The ranking of Each procedure starts on a separate day economies on the ease of getting electricity is Does not include time spent gathering determined by sorting their distance to frontier information scores for getting electricity. These scores are the Reflects the time spent in practice, with little simple average of the distance to frontier scores for follow-up and no prior contact with officials each of the component indicators. To make the data comparable across economies, several assumptions Cost required to complete each procedure (% are used. of income per capita) Assumptions about the warehouse Official costs only, no bribes The warehouse: Excludes value added tax  Is owned by a local entrepreneur. The reliability of supply and transparency of tariffs index  Is located in the economy’s largest business city. For 11 economies the data Sum of the scores of six component indices: are also collected for the second largest Duration and frequency of outages business city. Tools to monitor power outages  Is located in an area where similar warehouses are typically located. In this Tools to restore power supply area a new electricity connection is not Regulatory monitoring of utilities’ performance eligible for a special investment promotion Financial deterrents aimed at limiting outages regime (offering special subsidization or faster service, for example). Transparency and accessibility of tariffs  Is located in an area with no physical Price of electricity (cents per kilowatt-hour)* constraints. For example, the property is Price based on monthly bill for commercial not near a railway. warehouse in case study  Is a new construction and is being *Price of electricity is not included in the calculation of connected to electricity for the first time. distance to frontier nor ease of doing business ranking Doing Business 2016 Bangladesh 43 The warehouse (continued): Assumptions about the monthly consumption  Has two stories, both above ground, with a  It is assumed that the warehouse operates 8 total surface area of approximately 1,300.6 hours a day for 30 days a month, with square meters (14,000 square feet). The equipment utilized at 80% of capacity on plot of land on which it is built is 929 average, and that there are no electricity cuts square meters (10,000 square feet). (assumed for simplicity). The subscribed capacity of the warehouse is 140 kVA, with a  Is used for storage of goods. power factor of 1 (1 kVA = 1 kW). The monthly energy consumption is therefore Assumptions about the electricity connection 26,880 kWh, and the hourly consumption 112 kWh (26,880 kWh/30 days/8 hours). The electricity connection:  If multiple electricity suppliers exist, the  Is a permanent one. warehouse is served by the cheapest supplier.  Is a three-phase, four-wire Y, 140-kilovolt-  Tariffs effective in March of the current year ampere (kVA) (subscribed capacity) are used for calculation of the price of connection (where the voltage is 120/208 electricity for the warehouse. V, the current would be 400 amperes; where it is 230/400 B, the current would be nearly 200 amperes).  Is 150 meters long. The connection is to either the low-voltage or the medium- voltage distribution network and either overhead or underground, whichever is more common in the area where the warehouse is located.  Requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Will supply monthly electricity consumption of 26,880 kilowatt-hours (kWh).  Does not involve work to install the internal electrical wiring. This has already been completed, up to and including the customer’s service panel or switchboard and installation of the meter base. Doing Business 2016 Bangladesh 44 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection business city of an economy, except for 11 economies for in Bangladesh? According to data collected by Doing which the data are a population-weighted average of the Business, getting electricity there requires 9.00 2 largest business cities. See the chapter on distance to procedures, takes 428.90 days and costs 3140.50% of frontier and ease of doing business ranking at the end of income per capita (figure 4.1). this profile for more details. Most indicator sets refer to a case scenario in the largest 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 2016 Bangladesh 45 Source: Doing Business database. 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. Doing Business 2016 Bangladesh 46 GETTING ELECTRICITY Globally, Bangladesh stands at 189 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 2016 Bangladesh 47 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 DB2011 to DB2016 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 2016 Bangladesh 48 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 Price of electricity (or areas) in which warehouses are located. If there is a (US cents per kWh) - 9 choice of distribution utilities, the one serving the largest Chittagong: number of customers is selected. Price of electricity The procedures are those that apply to a warehouse and (US cents per kWh) - 9 electricity connection matching the standard Dhaka : 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 City: Dhaka , Chittagong associated time and cost, are summarized below. *Price is calculated as a monthly consumption of 26,880 kWh for business customers, based on a standardized case study adopted by the Getting Electricity methodology. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. Table 4.2 Summary of time, cost and procedures for getting electricity in Bangladesh Time to No. Procedure Cost to complete complete Obtain clearance for setting up substation The customer must obtain a clearance from the Chief Electric Inspector’s office to set up the substation. To do so, the following documents must be submitted: design plans of warehouse, plan of the substation and the total load requirement. Ideally, this clearance should be obtained 14 calendar days BDT 0 1 immediately, however this can take several weeks and repeated follow- up visits with the office. Agency: Ministry of Power Doing Business 2016 Bangladesh 49 Time to No. Procedure Cost to complete complete Obtain permission for installation of underground cable Once the clearance has been obtained from the City Corporation office for the excavation works, the customer must also inform the local police 2 station for the road works 21 calendar days BDT 0 Agency: City Corporation * Hire electrical contracting firm to purchase substation equipment, get it tested and carry out installation and earthing All electrical equipment, the distribution transformer, etc, must be purchased and tested by Bangladesh University of Engineering and Technology (BUET), before submitting the application for a new 15 calendar days BDT 1,800,000 3 electricity connection to the utility. Usually, all these equipment are readily available in Dhaka. 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 4 • Technical specifications of equipment and test report 28 calendar days BDT 5,000 • 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 (DESCO) and await estimate 1. List of documents to be provided with application • Two duly certified passport size photos 5 • Copy of land deed paper and copy of mutation certificate where 277 calendar days BDT 33,921.28 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 Doing Business 2016 Bangladesh 50 Time to No. Procedure Cost to complete complete Corporation. • Clear location of the meter room, including the S/S in the plan, duly approved by RAJUK/Municipal Corporation. • Certified copy of test result on electrical equipment. • Copy of approved/duly certified single line diagram and earthwork 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 The long duration noted for this procedure is due to the delay in the customer receiving the demand notice from the utility. Agency: DESCO Have electrical contracting firm carry out external works The customer must hire an electrical contracting firm to carry out the external works. This is basically the setting up of the substation on the warehouse premises. All equipment already purchased, electrical 6 contractor firm and builder does the site construction and installation of 20 calendar days BDT 270,000 equipment Agency: Outside firm * Receive installation of solar panels by private firm As per the Ministry’s 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 Have electrical contracting firm purchase meter The meter can be collected once the estimate has been paid, and the 14 calendar days BDT 250,000 8 utility sends communication to the stores department, and stores department then issues an account number, and the meter is then available for pickup. Doing Business 2016 Bangladesh 51 Time to No. Procedure Cost to complete complete Agency: Outside firm Receive meter testing and installation, final inspection and electricity flow 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 Obtain clearance for setting up substation The customer must obtain a clearance from the Chief Electric Inspector’s office to set up the substation. To do so, the following documents must be submitted: design plans of warehouse, plan of the substation and the total load requirement. Ideally, this clearance should be obtained 14 calendar days BDT 0 1 immediately, however this can take several weeks and repeated follow- up visits with the office. Agency: Ministry of Power, Energy and Mineral Resources Obtain permission for installation of underground cable Once the clearance has been obtained from the CDA office for the excavation works, the customer must also inform the local police station 2 for the road works. 28 calendar days BDT 0 Agency: Chittagong Development Authority (CDA) * Hire electrical contracting firm to purchase substation equipment and carry out installation and earthing All electrical equipment, the distribution transformer, etc, must be 3 purchased and tested by a testing lab before submitting the application 30 calendar days BDT 1,400,000 for a new electricity connection to the utility. Usually, all these equipment are readily available in Chittagong. Agency: Outside firm Doing Business 2016 Bangladesh 52 Time to No. Procedure Cost to complete complete Apply for certificate of connection from Electricity License Board The client must apply for the certificate of connection from 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 28 calendar days BDT 5,000 4 • Land registration deed (on which warehouse is located) • CCC approval/mutation certificate • Fire service permission (for underground cabling) • Architectural approval Agency: Ministry of Power, Energy and Mineral Resources 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. 5 • Copy of approved/duly certified single line diagram and earthwork 365 calendar days BDT 66,842.56 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. • 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. Doing Business 2016 Bangladesh 53 Time to No. Procedure Cost to complete complete Agency: PDB Chittagong Have electrical contracting firm carry out external works The customer must hire an electrical contracting firm to carry out the external works. This is basically the setting up of the substation on the warehouse premises. All equipment already purchased, electrical 6 contractor firm and builder does the site construction and installation of 30 calendar days BDT 270,000 equipment Agency: Customer's electrical contracting firm Have electrical contracting firm purchase meter Once payment has been received, the utility will instruct the stores department to issue an account number. The meter is then available for 7 pickup by the electrical contracting, ready for installation. 14 calendar days BDT 250,000 Agency: Customer's electrical contracting firm * Receive installation of solar panels by private firm As per the Ministry’s directive to all the utilities, all new connections with demand above 2KW will now require the 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 Receive meter testing and installation, final inspection and electricity flow After the 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 35 calendar days BDT 0 9 an 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 2016 Bangladesh 54 Doing Business 2016 Bangladesh 55 GETTING ELECTRICITY Reliability of supply and transparency of tariffs index The reliability of supply and transparency of tariffs Doing Business uses the system average interruption index encompasses quantitative data on the duration duration index (SAIDI) and the system average and frequency of power outages as well as interruption frequency index (SAIFI) to measure the qualitative information on the mechanisms put in duration and frequency of power outages in the largest place by the utility for monitoring power outages business city of each economy (for 11 economies the data and restoring power supply, the reporting are also collected for the second largest business city). relationship between the utility and the regulator for SAIDI is the average total duration of outages over the power outages, the transparency and accessibility of course of a year for each customer served, while SAIFI is tariffs and whether the utility faces a financial the average number of service interruptions experienced deterrent aimed at limiting outages (such as a by a customer in a year. Annual data (covering the requirement to compensate customers or pay fines calendar year) are collected from distribution utility when outages exceed a certain cap). companies and national regulators on SAIDI and SAIFI. Both SAIDI and SAIFI estimates include load shedding. The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Table 4.3 Reliability of Supply and Transparency of Tariff Index in Bangladesh Answer Score (Dhaka Answer Score (Dhaka ) ) (Chittagong (Chittagong ) ) Reliability of supply and transparency of tariff index 0.00 0.00 (0-8) Total duration and frequency of outages per customer 0.00 0.00 a year (0-3) System average interruption duration index (SAIDI) .. .. System average interruption frequency index (SAIFI) .. .. Mechanisms for monitoring outages (0-1) 0.0 0.0 Does the distribution utility use automated tools to No No monitor outages? Mechanisms for restoring service (0-1) 0.0 0.0 Does the distribution utility use automated tools to No No restore service? Regulatory monitoring (0-1) 1.00 1.00 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability Yes Yes of supply? Doing Business 2016 Bangladesh 56 Answer Score (Dhaka Answer Score (Dhaka ) ) (Chittagong (Chittagong ) ) Financial deterrents aimed at limiting outages (0-1) 1.00 1.00 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages Yes Yes exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1.00 1.00 Are effective tariffs available online? Yes Yes www.berc.org www.berc.o Link to the website, if available online .bd rg.bd Are customers notified of a change in tariff ahead of Yes Yes the billing cycle? Source: Doing Business database. Note: If data on power outages is not collected or if the SAIFI index or SAIDI index are above the threshold of 100, the economy is not eligible to obtain a score in the Reliability of Supply and Transparency of Tariff Index. If SAIDI and SAIFI are 12 (equivalent to an outage of one hour each month) or below, a score of 1 is assigned. If SAIDI and SAIFI are 4 (equivalent to an outage of one hour each quarter) or below, 1 additional point is assigned. Finally, if SAIDI and SAIFI are 1 (equivalent to an outage of one hour per year) or below, 1 more point is assigned. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. The price of electricity is measured in cents per kilowatt-hour. On the basis of the assumptions about monthly consumption, a monthly bill for a commercial warehouse in the largest business city of the economy is computed for the month of March (for 11 economies the data are also collected for the second largest business city). As noted, the warehouse uses electricity 30 days a month, from 9:00 a.m. to 5:00 p.m., so different tariff schedules may apply if a time-of- use tariff is available. Doing Business 2016 Bangladesh 57 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. In (calendar days) addition, this year Doing Business adds a new Does not include time spent gathering measure to the set of registering property information indicators, an index of the quality of the land administration system in each economy. The Each procedure starts on a separate day. ranking of economies on the ease of registering Procedures that can be fully completed online are recorded as ½ day. property is determined by sorting their distance to frontier scores for registering property. These scores Procedure considered completed once final are the simple average of the distance to frontier document is received scores for each of the component indicators. To No prior contact with officials make the data comparable across economies, several assumptions about the parties to the Cost required to complete each procedure transaction, the property and the procedures are (% of property value) used. Official costs only, no bribes The parties (buyer and seller): No value added or capital gains taxes included  Are limited liability companies, 100% Quality of land administration index (0-30) domestically and privately owned and  Is located in a periurban commercial zone, and perform general commercial activities and no rezoning is required. are located in the economy’s largest business city .  Has no mortgages attached, has been under 2 the same ownership for the past 10 years.  Have 50 employees each, all of whom are nationals.  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value and entire condition and complies with all safety property will be transferred. standards, building codes and legal  Is registered in the land registry or cada- requirements. There is no heating system. stre, or both, and is free of title disputes. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2016 Bangladesh 58 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 8.00 which the data are a population-weighted average of the procedures, takes 244.00 days and costs 7.00% 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 2016 Bangladesh 59 Source: Doing Business database. 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. Doing Business 2016 Bangladesh 60 REGISTERING PROPERTY Globally, Bangladesh stands at 185 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 2016 Bangladesh 61 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 DB2011 to DB2016 DB year Reform Bangladesh reduced the property transfer tax to 6.7% of the DB2011 property value. Source: Doing Business database. 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. Doing Business 2016 Bangladesh 62 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 4,534,556 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 what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in Bangladesh Dhaka Time to No. Procedure Cost to complete complete Conduct RS Mutation on property Since the last survey on Dhaka was done, transfers of property titles created before then must be converted (mutated) to the new survey. Since January 2012 in Dhaka instead of conducting RS Mutation, City surveys are conducted. This is done by the Assistant Commissioner of Lands (Tahsil) and Specific Tahsil Office. In order to obtain this, an application is required to be made to the concerned Assistant 45-60 days Commissioner of Land with particulars of the property. The Assistant (simultaneous 1 Commissioner forwards the same to the Tahsil Office, who are BDT 6,000-15,000 with Procedures 1 responsible for conducting the relevant survey and providing a report to and 3) Assistant Commissioner of Land. Upon receiving the report, the Assistant Commissioner of Land renders the mutation certificate. The inspection is noted in Procedure 3. From January, 1 2012 all properties automatically come under City Survey Khatian. Agency: Assistant Commissioner of Lands (Tahsil) * Obtain inspection for RS Mutation The permission is only mandatory when the property is under the control of either the Ministry of Works (National Housing Authority) or RAJUK (Dhaka Improvement Trust since 1952 until it was renamed Rajdhani 45-60 days Unnayan Kartripakkh –RAJUK in 1982). (simultaneous Included in 2 with Procedures 1 Procedure 2 Although the permission is usually always granted, unofficial payments and 2) are still paid in order to expedite the process and guarantee approval, which amount to BDT 20,000. The buyer also checks that the property is up to date with payments to the City Corporation Revenue Department, gas utility service, electricity utility service, and the water utility service to make sure that there is no Doing Business 2016 Bangladesh 63 Time to No. Procedure Cost to complete complete outstanding dues payable so that the those liabilities do not transfer to him. Each of these checks will cost around BDT 625. These are standard steps customary in Bangladesh and not mandatory for registration. Agency: Assistant Commissioner of Lands (Tahsil) * 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 20 days maintenance of records under the directorate of land records and survey (simultaneous 3 (Ministry of Land). BDT 3,000-6,000 with procedures 2 (b) Land Office or Land Revenue Office under Ministry of Land. There are and 3) 11 administrative offices in each upajela (sub district) (c) There are 64 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 Obtain the non-encumbrance certificate from the relevant Sub- registry office The buyer checks the legal status of the land (mortgaged or leased or ownership) at the relevant Sub-registry. From January 2012 both Sub- registry and Land Revenue Office provide non-encumbrance certificate. Sometimes land report is required. A land report gives an idea about the 4 current situation and ownership of the land that may include chain of 3-12 days BDT 1,000-1,500 ownership, land tax, land record, registry status etc. Whereas a non- encumbrance certificate is used in property transactions as an evidence of free title/ownership. 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 Doing Business 2016 Bangladesh 64 Time to No. Procedure Cost to complete complete 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 Local government registration. tax (1%) + 6 Also, Capital Gains Tax = 2% (Not applicable in rural areas for 1 day registration fee agriculture. Applicable to land above 100 000 Takas, irrespective of when (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. 180 days A certified registration document is obtained within a week for the Already paid in 7 (simultaneous buyer’s record. The original sale deed/certificate requires about 6 Procedure 6 with Procedure 8) months to be obtained. Agency: Municipal Deed Registry Office * Register the change in ownership at the Land Revenue Office The change of ownership must be registered in the Land Revenue Office. The property is recorded under the name of the new owner, who is 45 - 60 days 8 responsible for paying the land taxes from the day it is transferred. (simultaneous BDT 5,000 with Procedure 7) Agency: Land Revenue Office * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Summary of time, cost and procedures for registering property in Bangladesh Chittagong Time to No. Procedure Cost to complete complete Doing Business 2016 Bangladesh 65 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 centers. In Dhaka, the district land registration office has 13 sub-registrar offices under the Ministry of Law. Agency: Land Office or Land Revenue Office * Conduct BS Mutation on property Since the last survey on Chittagong was done, transfers of property titles created before then must be converted (mutated) to the new survey. This is done by the Assistant Commissioner of Lands (Tahsil) and Specific Tahsil Office. In order to obtain this, an application is required to be made to the concerned Assistant Commissioner of Land with particulars of the property. The Assistant Commissioner forwards the same to the 30 days Tahsil Office, who are responsible for conducting the relevant survey and (simultaneous 2 BDT 15000 providing a report to Assistant Commissioner of Land. Upon receiving with procedures 1 the report, the Assistant Commissioner of Land renders the mutation and 3) certificate. The inspection is noted in Procedure 3. From January, 1 2012 all properties automatically come under City Survey Khatian. Agency: Assistant Commissioner of Lands (Tahsil) * Obtain inspection for BS Mutation The permission is only mandatory when the property is under the control of either the Ministry of Works (National Housing Authority) or RAJUK (Dhaka Improvement Trust since 1952 until it was renamed Rajdhani Unnayan Kartripakkh –RAJUK in 1982). 30 days Although the permission is usually always granted, unofficial payments (simultaneous 3 BDT 15000 are still paid in order to expedite the process and guarantee approval, with procedures 1 which amount to BDT 20,000. and 2) The buyer also checks that the property is up to date with payments to the City Corporation Revenue Department, gas utility service, electricity utility service, and the water utility service to make sure that there is no outstanding dues payable so that the those liabilities do not transfer to him. Each of these checks will cost around BDT 625. These are standard steps customary in Bangladesh and not mandatory for registration." Doing Business 2016 Bangladesh 66 Time to No. Procedure Cost to complete complete Agency: Assistant Commissioner of Lands (Tahsil) Obtain the non-encumbrance certificate from the relevant Sub- registry office The buyer checks the legal status of the land (mortgaged or leased or ownership) at the relevant Sub-registry. From January 2012 both Sub- registry and Land Revenue Office provide non-encumbrance certificate. Sometimes land report is required. A land report gives an idea about the current situation and ownership of the land that may include chain of 30 days BDT 2500 4 ownership, land tax, land record, registry status etc. Whereas a non- encumbrance certificate is used in property transactions as an evidence of free title/ownership. 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 Doing Business 2016 Bangladesh 67 Time to No. Procedure Cost to complete complete 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 The change of ownership must be registered in the Land Revenue Office. The property is recorded under the name of the new owner, who is 60-90 days 8 responsible for paying the land taxes from the day it is transferred. (simultaneous BDT 5,000 with procedure 7) 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 2016 Bangladesh 68 REGISTERING PROPERTY Quality of land administration The quality of land administration index is the sum of If private sector entities were unable to register property the scores on the reliability of infrastructure, transfers in an economy between June 2014 and June transparency of information, geographic coverage 2015, the economy receives a “no practice” mark on the and land dispute resolution indices. procedures, time and cost indicators. A “no practice” economy receives a score of 0 on the quality of land The index ranges from 0 to 30, with higher values administration index even if its legal framework includes indicating better quality of the land administration provisions related to land administration. system. Table 5.3 Summary of quality of land administration in Bangladesh Answer Score Answer Score (Dhaka (Chittagong (Chittagong (Dhaka ) ) ) ) Quality of the land administration index (0-30) 4.50 4.50 Reliability of infrastructure index (0-8) 0.00 0.00 Office of What is the institution in charge of immovable Office of the the Sub- property registration? Sub-Registrar Registrar of Chittagong In what format are the majority of title or deed records kept in the largest business city—in a paper format or in Paper 0.0 Paper 0.0 a computerized format (scanned or fully digital)? Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions and the No 0.0 No 0.0 like)? Directorate Directorate of of Land Institution in charge of the plans showing legal Land Records Records boundaries in the largest business city: and Survey and Survey (DLRS) (DLRS) of Chittagong In what format are the majority of maps of land plots kept in the largest business city—in a paper format or in Paper 0.0 Paper 0.0 a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral No 0.0 No 0.0 information (geographic information system)? Doing Business 2016 Bangladesh 69 Answer Score Answer Score (Dhaka (Chittagong (Chittagong (Dhaka ) ) ) ) Is the information recorded by the immovable property registration agency and the cadastral or mapping Separate Separate 0.0 0.0 agency kept in a single database, in different but linked databases databases databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same No 0.0 No 0.0 identification number for properties? Transparency of information index (0–6) 1.50 1.50 Anyone Who is able to obtain information on land ownership at Anyone who who pays the agency in charge of immovable property pays the 1.0 1.0 the official registration in the largest business city? official fee fee Is the list of documents that are required to complete Yes, in any type of property transaction made publicly Yes, in person 0.0 0.0 person available–and if so, how? Link for online access: Is the applicable fee schedule for any property transaction at the agency in charge of immovable Yes, in Yes, in person 0.0 0.0 property registration in the largest business city made person publicly available–and if so, how? Link for online access: Does the agency in charge of immovable property registration commit to delivering a legally binding document that proves property ownership within a No 0.0 No 0.0 specific time frame–and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that occurred at the No 0.0 No 0.0 agency in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the immovable property No 0.0 No 0.0 registration agency? Number of property transfers in the largest business city in 2014: Doing Business 2016 Bangladesh 70 Answer Score Answer Score (Dhaka (Chittagong (Chittagong (Dhaka ) ) ) ) Anyone Anyone who Who is able to consult maps of land plots in the largest who pays pays the 0.5 0.5 business city? the official official fee fee Is the applicable fee schedule for accessing maps of Yes, in Yes, in person 0.0 0.0 land plots made publicly available—and if so, how? person Link for online access: Does the cadastral or mapping agency commit to delivering an updated map within a specific time Yes, in No 0.0 0.0 frame—and if so, how does it communicate the service person standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that occurred at the No 0.0 No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.00 0.00 Are all privately held land plots in the economy No 0.0 No 0.0 formally registered at the immovable property registry? Are all privately held land plots in the largest business city formally registered at the immovable property No 0.0 No 0.0 registry? Are all privately held land plots in the economy No 0.0 No 0.0 mapped? Are all privately held land plots in the largest business No 0.0 No 0.0 city mapped? Land dispute resolution index (0–8) 3.00 3.00 Does the law require that all property sale transactions be registered at the immovable property registry to Yes 1.5 Yes 1.5 make them opposable to third parties? Is the system of immovable property registration Yes 0.5 Yes 0.5 subject to a state or private guarantee? Is there a specific compensation mechanism to cover for losses incurred by parties who engaged in good No 0.0 No 0.0 faith in a property transaction based on erroneous information certified by the immovable property Doing Business 2016 Bangladesh 71 Answer Score Answer Score (Dhaka (Chittagong (Chittagong (Dhaka ) ) ) ) registry? Does the legal system require a control of legality of the documents necessary for a property transaction Yes 0.5 Yes 0.5 (e.g., checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of Registrar. Registrar. the documents? Does the legal system require verification of the Yes 0.5 Yes 0.5 identity of the parties to a property transaction? If yes, who is responsible for verifying the identity of Registrar. Registrar. the parties? Is there a national database to verify the accuracy of No 0.0 No 0.0 identity documents? For a standard land dispute between two local Chittagong businesses over tenure rights of a property worth 50 Dhaka Joint Joint times gross national income (GNI) per capita and District Judge District located in the largest business city, what court would be Court Judge in charge of the case in the first instance? Court How long does it take on average to obtain a decision More than 3 More than from the first-instance court for such a case (without 0.0 0.0 years 3 years appeal)? Are there any statistics on the number of land disputes No 0.0 No 0.0 in the first instance? Number of land disputes in the largest business city in 2014: Source: Doing Business database. Doing Business 2016 Bangladesh 72 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 lenders’ rights to view a potential borrower’s financial Strength of legal rights index (0–12) 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 movable property, as security to generate capital— Depth of credit information index (0–8) while strong creditors’ rights have been associ ated 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 2016 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. Doing Business 2016 Bangladesh 73 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Bangladesh stands at 133 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 0.00 on the depth of rankings for comparator economies provide useful credit information index and a score of 6.00 on the information for assessing how well regulations and strength of legal rights index (see the summary of institutions in Bangladesh support lending and scoring at the end of this chapter for details). Higher borrowing. scores indicate 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 2016 Bangladesh 74 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 Source: Doing Business database. Source: Doing Business database. 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. Doing Business 2016 Bangladesh 75 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 DB2011 to DB2016 DB year Reform Bangladesh improved access to credit information by DB2013 establishing an online platform for sharing such information. Source: Doing Business database. 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. Doing Business 2016 Bangladesh 76 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: 6.00 Index score: 6.00 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? Are secured creditors paid first (i.e. before tax claims and employee Yes Yes claims) when a debtor defaults outside an insolvency procedure? Doing Business 2016 Bangladesh 77 Dhaka Chittagong Strength of legal rights index (0–12) Index score: 6.00 Index score: 6.00 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: 0.00 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: 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 covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2016 Bangladesh 78 Coverage Credit bureau Credit registry Number of firms 0 328,270 Number of individuals 0 589,531 Total 0 917,801 Total percentage of adult population 0.00 0.90 Source: Doing Business database. Doing Business 2016 Bangladesh 79 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- What do the indicators cover? party transactions 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 indicators and shareholders’ rights in corporate interested directors liable for prejudicial related- governance through another. The ranking of economies party transactions; Available legal remedies on the strength of minority investor protections is (damages, disgorgement of profits, fines, determined by sorting their distance to frontier scores imprisonment, rescission of the transaction) for protecting minority investors. These scores are the Ease of shareholder suits index (0–10) simple average of the distance to frontier scores for the extent of conflict of interest regulation index and the Access to internal corporate documents; Evidence extent of shareholder governance index. To make the obtainable during trial and allocation of legal data comparable across economies, a case study uses expenses several assumptions about the business and the Extent of conflict of interest regulation index transaction. (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of shareholder indices  Is a publicly traded corporation listed on the economy’s most important stock exchange Extent of shareholder rights index (0-10) (or at least a large private company with Shareholders’ rights and role in major corporate multiple shareholders). decisions  Has a board of directors and a chief executive Extent of ownership and control index (0-10) officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Governance safeguards protecting shareholders from undue board control and entrenchment specifically required by law. Extent of corporate transparency index (0-10) The transaction involves the following details: Corporate transparency on ownership stakes,  Mr. James, a director and the majority compensation, audits and financial prospects shareholder of the company, proposes that the company purchase used trucks from Extent of shareholder governance index another company he owns. (0–10)  The price is higher than the going price for Simple average of the extent of shareholders rights, used trucks, but the transaction goes forward. extent of ownership and control and extent of corporate transparency indices  All required approvals are obtained, and all required disclosures made, though the Strength of investor protection index (0–10) transaction is prejudicial to Buyer. Simple average of the extent of conflict of interest regulation and extent of shareholder governance  Shareholders sue the interested parties and indices the members of the board of directors. Doing Business 2016 Bangladesh 80 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 5.30 on the strength of minority investor protection minority investors, a higher ranking does indicate that an index, with a higher score indicating stronger economy’s regulations offer stronger minority investor protections. protections against self-dealing in the areas measured. Globally, Bangladesh stands at 88 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 2016 Bangladesh 81 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the A summary of scoring for the protecting minority investors protecting minority investors indicators into context indicators at the end of this chapter provides details on is to see where the economy stands in the how the indices were calculated. distribution of scores across comparator economies. Figure 7.2 highlights the scores on the various minority investor protection indices for Bangladesh. Figure 7.2 Summary of the various minority investor protection indices for Bangladesh and comparator economies. Source: Doing Business database. Doing Business 2016 Bangladesh 82 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, ownership and control 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 2016 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) Strength of minority investor protection index (0-10) 5.30 5.30 Extent of conflict of interest regulation index (0-10) 6.30 6.30 Extent of disclosure index (0-10) 6.00 6.00 Board of Board of directors directors Which corporate body can provide legally sufficient approval excluding 2.0 excluding 2.0 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 2.0 of all material 2.0 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 2.0 and on the 2.0 (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 0.0 and/or shareholders required? (0-2) obligation obligation Must an external body review the terms of the transaction No 0.0 No 0.0 before it takes place? (0-1) Extent of director liability index (0-10) 7.00 7.00 Can shareholders sue directly or derivatively for the damage Yes 1.0 Yes 1.0 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 1.0 1.0 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 2.0 2.0 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 1.0 Yes 1.0 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder Yes 1.0 Yes 1.0 plaintiff? (0-1) Is the interested director fined and imprisoned or No 0.0 No 0.0 Doing Business 2016 Bangladesh 83 disqualified upon a successful claim by the shareholder plaintiff? (0-1) Voidable if Voidable if Can a court void the transaction upon a successful claim by a negligently 1.0 negligently 1.0 shareholder plaintiff? (0-2) concluded concluded Ease of shareholder suits index (0-10) 6.00 6.00 Before filing suit, can shareholders owning 10% of the company’s share capital inspect the transaction documents? Yes 1.0 Yes 1.0 (0-1) Can the plaintiff obtain any documents from the defendant Any relevant Any relevant 3.0 3.0 and witnesses during trial? (0-3) document document Can the plaintiff request categories of documents from the Yes 1.0 Yes 1.0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and No 0.0 No 0.0 witnesses during trial? (0-2) Is the level of proof required for civil suits lower than that of Yes 1.0 Yes 1.0 criminal cases? (0-1) At the Can shareholder plaintiffs recover their legal expenses from At the discretion 0.0 discretion of 0.0 the company? (0-2) of the court the court Extent of shareholder governance index (0-10) 4.30 4.30 Extent of shareholder rights index (0-10) 3.00 3.00 Does the sale of 51% of Buyer’s assets require shareholder No 0.0 No 0.0 approval? Can shareholders representing 10% of Buyer’s share capital No 0.0 No 0.0 call for an extraordinary meeting of shareholders? Must Buyer obtain its shareholders’ approval every time it No 0.0 No 0.0 issues new shares? Do shareholders automatically receive preemption rights Yes 1.0 Yes 1.0 every time Buyer issues new shares? Must shareholders approve the election and dismissal of the Yes 1.0 Yes 1.0 external auditor? Must changes to the voting rights of a class of shares be Yes 1.0 Yes 1.0 approved only by the holders of the affected shares? Assuming that Buyer is a limited company, does the sale of No 0.0 No 0.0 51% of Buyer’s assets requires shareholder approval? Assuming that Buyer is a limited company, can shareholders representing 10% of Buyer’s share capital call for an No 0.0 No 0.0 extraordinary meeting of shareholders? Assuming that Buyer is a limited company, must Buyer obtain its shareholders’ approval every time it issues new No 0.0 No 0.0 shares? Assuming that Buyer is a limited company, do shareholders automatically receive preemption rights every time Buyer No 0.0 No 0.0 issues new shares? Extent of ownership and control index (0-10) 5.00 5.00 Is the CEO prohibited from also being chair of the board of Yes 1.0 No 0.0 directors? Must the board of directors include independent and No 0.0 No 0.0 nonexecutive board members? Can shareholders remove members of Buyer’s board of Yes 1.0 Yes 1.0 directors without cause before the end of their term? Doing Business 2016 Bangladesh 84 Must Buyer’s board of directors include a separate audit Yes 1.0 Yes 1.0 committee? Must a potential acquirer make a tender offer to all Yes 1.0 Yes 1.0 shareholders upon acquiring 50% of Buyer? Must Buyer pay dividends within a maximum period set by No 0.0 No 0.0 law after the declaration date? Is a subsidiary prohibited from acquiring shares issued by its No 0.0 Yes 1.0 parent company? Assuming that Buyer is a limited company, can shareholders remove members of Buyer’s board of directors without cause Yes 1.0 Yes 1.0 before the end of their term? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to all shareholders upon No 0.0 No 0.0 acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer pay dividends within a maximum period set by law after the No 0.0 No 0.0 declaration date? Extent of corporate transparency index (0-10) 5.00 5.00 Must Buyer disclose direct and indirect beneficial ownership No 0.0 No 0.0 stakes representing 5%? Must Buyer disclose information about board members’ other directorships as well as basic information on their Yes 1.0 Yes 1.0 primary employment? Must Buyer disclose the compensation of individual Yes 1.0 Yes 1.0 managers? Must a detailed notice of general meeting be sent 30 days No 0.0 No 0.0 before the meeting? Can shareholders representing 5% of Buyer’s share capital No 0.0 No 0.0 put items on the agenda for the general meeting? Must Buyer's annual financial statements be audited by an Yes 1.0 Yes 1.0 external auditor? Must Buyer disclose its audit reports to the public. Yes 1.0 Yes 1.0 Assuming that Buyer is a limited company, must a detailed notice of general meeting be sent 30 days before the No 0.0 No 0.0 meeting? Assuming that Buyer is a limited company, can shareholders representing 5% of Buyer’s share capital put items on the No 0.0 No 0.0 agenda for the general meeting? Assuming that Buyer is a limited company, must Buyer's annual financial statements be audited by an external Yes 1.0 Yes 1.0 auditor? Source: Doing Business database. Doing Business 2016 Bangladesh 85 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 2014 (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, Using a case scenario, Doing Business records the sales tax or goods and service tax) 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 Time required to comply with 3 major taxes measures of the administrative burden of paying (hours per year) taxes and contributions. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax transactions made over the year. Information is also payable 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 the simple average of the distance to frontier scores required for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to one of the component indicators, the total tax rate . 3 Profit or corporate income tax All financial statement variables are proportional to Social contributions and labor taxes paid by 2012 income per capita. To make the data the employer comparable across economies, several assumptions Property and property transfer taxes are used. Dividend, capital gains and financial  TaxpayerCo is a medium-size business that transactions taxes started operations on January 1, 2013. Waste collection, vehicle, road and other taxes  The business starts from the same financial  Taxes and mandatory contributions include position in each economy. All the taxes corporate income tax, turnover tax and all and mandatory contributions paid during labor taxes and contributions paid by the the second year of operation are recorded. company.  Taxes and mandatory contributions are  A range of standard deductions and measured at all levels of government. exemptions are also recorded. 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. 3 The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2016 Bangladesh 86 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with average of the 2 largest business cities. See the chapter taxes in Bangladesh—and how much do firms pay in on distance to frontier and ease of doing business taxes? On average, firms make 21.00 tax payments a ranking at the end of this profile for more details. year, spend 302.00 hours a year filing, preparing and Globally, Bangladesh stands at 86 in the ranking of 189 paying taxes and pay total taxes amounting to 31.60% of economies on the ease of paying taxes (figure 8.1). The profit (see the summary at the end of this chapter for rankings for comparator economies and the regional details). Most indicator sets refer to a case scenario in average ranking provide other useful information for the largest business city of an economy, except for 11 assessing the tax compliance burden for businesses in economies for which the data are a population-weighted Bangladesh. Figure 8.1 How Bangladesh and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2016 Bangladesh 87 PAYING TAXES Economies around the world have made paying taxes and exemptions. Many have lowered tax rates. Changes faster, easier and less costly for businesses—such as by have brought concrete results. Some economies consolidating payments and filings of taxes, offering simplifying tax payment and reducing rates have seen electronic systems for filing and payment, establishing tax revenue rise. What tax reforms has Doing Business taxpayer service centers or allowing for more deductions recorded in Bangladesh (table 8.1)? Table 8.1 How has Bangladesh made paying taxes easier—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform Bangladesh made paying taxes less costly for companies by DB2016 reducing the corporate income tax rate. This reform applies to both Chittagong and Dhaka. Source: Doing Business database. 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. Doing Business 2016 Bangladesh 88 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 The taxes and contributions paid are listed in the assumptions and transactions that the company summary below, along with the associated number of completed during its 2nd year of operation. payments, time and tax rate. Respondents are asked how much taxes and 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 35% from taxable Corporate income tax 5 140 26.95 July 1, 2014 profit rental Municipal tax (property tax) 1 0.12 3.87 value capital Capital gains tax 0 jointly 0.15 0.76 gains interest included in Tax on interest 0 withheld 0.1 0.26 income other taxes Land development tax area of small 1 fixed fee 0 (khajna) land amount type of small Stamp duty on contracts 1 varies 0 contract amount fixed fee depending small Vehicle tax 1 0 on type of amount vehicle Variable value not Value added tax (VAT) 12 162 rate (up to 0 added included 15%) Doing Business 2016 Bangladesh 89 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 Totals 21.00 302.00 31.60 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 35% from taxable Corporate income tax 5 140 26.95 July 1, 2014 profit rental Municipal tax (property tax) 1 0.12 3.87 value capital Capital gains tax 0 jointly 0.15 0.76 gains interest included in Tax on interest 0 withheld 0.1 0.26 income other taxes Land development tax area of small 1 fixed fee 0 (khajna) land amount type of small Stamp duty on contracts 1 varies 0 contract amount fixed fee depending small Vehicle tax 1 0 on type of amount vehicle Variable value not Value added tax (VAT) 12 162 rate (up to 0 added included 15%) Totals 21.00 302.00 31.60 Source: Doing Business database. Doing Business 2016 Bangladesh 90 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead Documentary compliance – cost (USD) & time to extra costs and delays for exporters and (hours) importers, stifling trade potential. Obtain, prepare and submit documents: What do the indicators cover? -During transport, clearance, inspections and port or border handling in origin economy Doing Business records the time and cost associated with the logistical process of exporting -Required by origin, destination and transit and importing goods. Under the new methodology economies introduced this year, Doing Business measures the Covers all documents by law and in practice time and cost (excluding tariffs) associated with Border compliance – cost (USD) & time (hours) three sets of procedures—documentary compliance, border compliance and domestic Customs clearance and inspections transport—within the overall process of exporting Inspections by other agencies or importing a shipment of goods. The ranking of Port or border handling economies on the ease of trading across borders is determined by sorting their distance to frontier Obtaining, preparing and submitting documents scores for trading across borders. These scores are during clearance, inspections and port or border the simple average of the distance to frontier handling scores for the time and cost for documentary Domestic transport* compliance and border compliance to export and Loading and unloading of shipment import. Transport between warehouse and terminal/port To make the data comparable across economies, a Transport between terminal/port and border few assumptions are made about the traded goods Obtaining, preparing and submitting documents and the transactions: during domestic transport Time Traffic delays and road police checks while shipment is en route  Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as * Although Doing Business collects and publishes data on the 22 × 24 = 528 hours). If customs clearance time and cost for domestic transport, it does not use these takes 7.5 hours, the data are recorded as is. data in calculating the distance to frontier score for trading Alternatively, suppose that documents are across borders or the ranking on the ease of trading across submitted to a customs agency at 8:00 a.m., borders. are processed overnight and can be picked up Cost at 8:00 a.m. the next day. In this case the time  Insurance cost and informal payments for which no for customs clearance would be recorded as receipt is issued are excluded from the costs 24 hours because the actual procedure took recorded. Costs are reported in U.S. dollars. 24 hours. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Doing Business 2016 Bangladesh 91 Assumptions of the case study  Shipping cost based on weight is assumed to be  For each of the 189 economies covered by greater than shipping cost based on volume. Doing Business, it is assumed that a shipment travels from a warehouse in the largest business city of the exporting economy to a  If government fees are determined by the value of warehouse in the largest business city of the the shipment, the value is assumed to be $50,000. importing economy. For 11 economies the data are also collected, under the same case  The product is new, not secondhand or used study assumptions, for the second largest merchandise. business city.  The exporting firm is responsible for hiring and  The import and export case studies assume paying for a freight forwarder or customs broker (or different traded products. It is assumed that both) and pays for all costs related to international each economy imports a standardized shipping, domestic transport, clearance and shipment of 15 metric tons of containerized mandatory inspections by customs and other auto parts (HS 8708) from its natural import government agencies, port or border handling, partner—the economy from which it imports documentary compliance fees and the like for the largest value (price times quantity) of auto exports. The importing firm is responsible for the parts. It is assumed that each economy above costs for imports. exports the product of its comparative advantage (defined by the largest export  The mode of transport is the one most widely used value) to its natural export partner—the for the chosen export or import product and the economy that is the largest purchaser of this trading partner, as is the seaport, airport or land product. Precious metal and gems, live border crossing. animals and pharmaceuticals are excluded from the list of possible export products,  All electronic submissions of information requested however, and the second largest product by any government agency in connection with the category is considered as needed. shipment are considered to be documents obtained, prepared and submitted during the export or import  To identify the trading partners and export process. product for each economy, Doing Business collected data on trade flows for the most  A port or border is defined as a place (seaport, recent four-year period from international airport or land border crossing) where merchandise databases such as the United Nations can enter or leave an economy. Commodity Trade Statistics Database (UN Comtrade). For economies for which trade  Government agencies considered relevant are flow data were not available, data from agencies such as customs, port authorities, road ancillary government sources (various police, border guards, standardization agencies, ministries and departments) and World Bank ministries or departments of agriculture or industry, Group country offices were used to identify national security agencies and any other government the export product and natural trading authorities. partners.  A shipment is a unit of trade. Export shipments do not necessarily need to be containerized, while import shipments of auto parts are assumed to be containerized. Doing Business 2016 Bangladesh 92 TRADING ACROSS BORDERS Where does the economy stand today? The Trading across Border indicator refers to a case Globally, Bangladesh stands at 172 in the ranking of 189 study scenario of a warehouse in the largest business city economies on the ease of trading across borders (figure of an economy (except for 11 economies for which the 9.1). For more information on distance to frontier and data are a population-weighted average of the 2 largest ease of doing business ranking, please see the Distance business cities) trading with the main import and export to frontier and ease of doing business ranking chapter. partner through the economy’s main border crossing. Figure 9.1 How Bangladesh and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2016 Bangladesh 93 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 DB2011 to DB2016 DB year Reform 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. Source: Doing Business database. 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. Doing Business 2016 Bangladesh 94 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 procedures for trading a shipment of goods by the most widely used mode of transport (whether sea, land, air or some City: Dhaka , Chittagong combination of these). The information on the time and cost to complete export and import is collected The details on the predefined set of procedures, and the from local freight forwarders, customs brokers and associated time and cost, for exporting and importing a traders. shipment of goods are listed in the summary bellow, along with the required documents. Table 9.2 Summary of export and import time and cost for trading across borders in Bangladesh Dhaka Chittagong South Asia Time to export: Border compliance 100 100 61 (hours) Cost to export: Border compliance 408 408 376 (USD) Time to export: Documentary 147 147 80 compliance (hours) Cost to export: Documentary 225 225 184 compliance (USD) Time to import: Border compliance 183 183 114 (hours) Cost to import: Border compliance 1294 1294 653 (USD) Time to import: Documentary 144 144 108 compliance (hours) Cost to import: Documentary 370 370 349 compliance (USD) Source: Doing Business database. Doing Business 2016 Bangladesh 95 Table 9.3 Summary of trading details, transport time and documents for trading across borders in Bangladesh Dhaka Chittagong Export Import Export Import HS 61 : Articles of HS 61 : Articles of HS 8708: Parts and HS 8708: Parts and apparel and apparel and Product accessories of accessories of clothing accessories, clothing accessories, motor vehicles motor vehicles knitted or crocheted knitted or crocheted Trade partner Germany India Germany India Domestic transport time (hours) 24 24 6 6 Domestic transport cost (USD) 231 231 77 77 Border Chittagong port Chittagong port Chittagong port Chittagong port Distance (km) 263 263 20 20 Domestic transport speed 11.0 11.0 3.4 3.4 (km/hour) Domestic transport cost per 0.9 0.9 3.9 3.9 distance (USD/km) Source: Doing Business database. Documents to export Bill of lading Cargo release order Certificate of origin Commercial invoice Customs Export Declaration Customs Transit Document Foreign exchange authorization Letter of Credit Packing list Pre-shipment inspection clear report Technical standards certificate Terminal handling receipt Utilized Declaration for garments Documents to import Bill of lading Doing Business 2016 Bangladesh 96 Cargo release order (Gate Pass) Certificate of origin Commercial invoice Customs import declaration Letter of credit Packing list Technical standard/Cleanliness certificate Terminal handling receipts Source: Doing Business database. Note: Doing Business continues to collect data on the number of documents needed to trade internationally. Unlike in previous years, however, these data are excluded from the calculation of the distance to frontier score and ranking. The time and cost for documentary compliance serve as better measures of the overall cost and complexity of compliance with documentary requirements than does the number of documents required. Doing Business 2016 Bangladesh 97 Figure 9.2 Summary of Bangladesh on the ease of trading across borders Export (Dhaka ) Import (Dhaka ) Export (Chittagong) Import (Chittagong) Source: Doing Business database. Doing Business 2016 Bangladesh 98 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 Time required to enforce a contract through businesses know they can rely on the courts if a new the courts (calendar days) customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long court dispute. Time to enforce the judgment What do the indicators cover? Cost required to enforce a contract through the courts (% of claim) Doing Business measures the time and cost for resolving a standardized commercial dispute through Attorney fees a local first-instance court. In addition, this year it Court fees introduces a new measure, the quality of judicial Enforcement fees processes index, evaluating whether each economy has adopted a series of good practices that promote Quality of judicial processes index (0-18) quality and efficiency in the court system. This new Court structure and proceedings (0-5) index replaces the indicator on procedures, which was eliminated this year. The ranking of economies Case management (0-6) on the ease of enforcing contracts is determined by Court automation (0-4) sorting their distance to frontier scores. These scores Alternative dispute resolution (0-3) are the simple average of the distance to frontier scores for each of the component indicators. The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The  The value of the dispute is 200% of the case study assumes that the court hears an expert on income per capita or the equivalent in local the quality of the goods in dispute. This distinguishes currency of USD 5,000, whichever is greater. the case from simple debt enforcement. To make the  The seller sues the buyer before the court data comparable across economies, Doing Business with jurisdiction over commercial cases worth uses several assumptions about the case: 200% of income per capita or $5,000.  The dispute concerns a lawful transaction  The seller requests a pretrial attachment to between two businesses (Seller and Buyer), secure the claim. both located in the economy’s largest  The dispute on the quality of the goods business city. For 11 economies the data requires an expert opinion. are also collected for the second largest business city.  The judge decides in favor of the seller; there is no appeal.  The buyer orders custom-made goods, then fails to pay.  The seller enforces the judgment through a public sale of the buyer’s movable assets. Doing Business 2016 Bangladesh 99 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial frontier and ease of doing business ranking at the end of dispute through the courts in Bangladesh? According to this profile for more details. data collected by Doing Business, contract enforcement Globally, Bangladesh stands at 188 in the ranking of 189 takes 1442.00 days and costs 66.80% of the value of the economies on the ease of enforcing contracts (figure claim. Most indicator sets refer to the largest business 10.1). The rankings for comparator economies and the city of an economy, except for 11 economies for which regional average ranking provide other useful the data are a population-weighted average of the 2 benchmarks for assessing the efficiency of contract largest business cities. See the chapter on distance to enforcement in Bangladesh. Figure 10.1 How Bangladesh and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2016 Bangladesh 100 ENFORCING CONTRACTS What are the details? The data on time and cost reported here for ECONOMY DETAILS Bangladesh are built by following the step-by-step evolution of a commercial sale dispute within the Court name - court, under the assumptions about the case Joint District Judge Chittagong: described above (figure 10.2). The time and cost of resolving the standardized dispute are identified Court name - Dhaka : Joint District Judge through study of the codes of civil procedure and other court regulations, as well as through City: Dhaka , Chittagong questionnaires completed by local litigation lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). Figure 10.2 Time and cost of contract enforcement in Bangladesh and comparator economies Source: Doing Business database. Doing Business 2016 Bangladesh 101 Table 10.2 Details on time and cost for enforcing contracts in Bangladesh South Asia Indicator Dhaka Chittagong average Time (days) 1442.00 1442.00 1,077 Filing and service 30.0 30.0 Trial and judgment 1047.0 1047.0 Enforcement of judgment 365.0 365.0 Cost (% of claim) 66.80 66.80 30.5 Attorney fees (% of claim) 40.0 40.0 Court fees (% of claim) 8.3 8.3 Enforcement fees (% of claim) 18.5 18.5 Source: Doing Business database. Doing Business 2016 Bangladesh 102 ENFORCING CONTRACTS Quality of judicial processes index The quality of judicial processes index measures The scores reported here show which of these good whether each economy has adopted a series of good practices are available in Bangladesh. practices in its court system in four areas: court This methodology was initially developed by Djankov and structure and proceedings, case management, court others (2003) and is adopted here with several changes. automation and alternative dispute resolution. The The quality of judicial processes index was introduced in score on the quality of judicial processes index is the Doing Business 2016. The good practices tested in this sum of the scores on these 4 sub-components. The index were developed on the basis of internationally index ranges from 0 to 18, with higher values recognized good practices promoting judicial efficiency. indicating better, more efficient judicial processes. Figure 10.3 Quality of judicial processes index in Bangladesh and comparator economies Source: Doing Business database. Doing Business 2016 Bangladesh 103 Table 10.3 Details of the quality of judicial processes index in «dsGetData.Economy_Name» Answer Score Answer Score (Dhaka (Chittagon (Chittagon (Dhaka ) ) g) g) Quality of judicial processes index (0-18) 7.50 7.50 Court structure and proceedings (0-5) 3.0 3.0 1. Is there a court or division of a court dedicated No 0.0 No 0.0 solely to hearing commercial cases? 2. Small claims court 1.5 1.5 2.a. Is there a small claims court or a fast-track Yes Yes procedure for small claims? 2.b. If yes, is self-representation allowed? Yes Yes 3. Is pretrial attachment available? Yes 1.0 Yes 1.0 4. Are new cases assigned randomly to judges? Yes 0.5 Yes 0.5 Case management (0-6) 1.0 1.0 1. Time standards 0.5 0.5 1.a. Are there laws setting overall time standards for Yes Yes key court events in a civil case? 1.b. If yes, are the time standards set for at least Yes Yes three court events? 1.c. Are these time standards respected in more than No No 50% of cases? 2. Adjournments 0.5 0.5 2.a. Does the law regulate the maximum number of Yes Yes adjournments that can be granted? 2.b. Are adjournments limited to unforeseen and Yes Yes exceptional circumstances? 2.c. If rules on adjournments exist, are they respected No No in more than 50% of cases? 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) clearance rate report; (iii) age of No 0.0 No 0.0 pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent No 0.0 No 0.0 court? 5. Are there any electronic case management tools in No 0.0 No 0.0 Doing Business 2016 Bangladesh 104 Answer Score Answer Score (Dhaka (Chittagon (Chittagon (Dhaka ) ) g) g) place within the competent court for use by judges? 6. Are there any electronic case management tools in No 0.0 No 0.0 place within the competent court for use by lawyers? Court automation (0-4) 0.5 0.5 1. Can the initial complaint be filed electronically through a dedicated platform within the competent No 0.0 No 0.0 court? 2. Is it possible to carry out service of process electronically for claims filed before the competent No 0.0 No 0.0 court? 3. Can court fees be paid electronically within the No 0.0 No 0.0 competent court? 4. Publication of judgments 0.5 0.5 4.a Are judgments rendered in commercial cases at all levels made available to the general public No No through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the general public through publication in official Yes Yes gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 3.0 3.0 1. Arbitration 1.5 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section Yes Yes of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements Yes Yes usually enforced by the courts? 2. Mediation/Conciliation 1.5 1.5 2.a. Is voluntary mediation or conciliation available? Yes Yes 2.b. Are mediation, conciliation or both governed by Yes Yes a consolidated law or consolidated chapter or section Doing Business 2016 Bangladesh 105 Answer Score Answer Score (Dhaka (Chittagon (Chittagon (Dhaka ) ) g) g) of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or Yes Yes conciliation is successful, a refund of court filing fees, income tax credits or the like)? Source: Doing Business database. Doing Business 2016 Bangladesh 106 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE 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 clarifying the expectations of creditors and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and sustainably grow the economy. estate) What do the indicators cover? Measured as percentage of estate value Doing Business studies the time, cost and outcome of Court fees insolvency proceedings involving domestic legal Fees of insolvency administrators entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Lawyers’ fees dollar recovered by secured creditors through Assessors’ and auctioneers’ fees reorganization, liquidation or debt enforcement Other related fees (foreclosure or receivership) proceedings. To determine the present value of the amount Outcome recovered by creditors, Doing Business uses the Whether business continues operating as a lending rates from the International Monetary Fund, going concern or business assets are sold supplemented with data from central banks and the piecemeal 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) framework index. The index tests whether economies determines the maximum value that can be adopted internationally accepted good practices in recovered 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 economies on the ease of resolving account insolvency is determined by sorting their distance to Present value of debt recovered frontier scores for resolving insolvency. These scores are the simple average of the distance to frontier Strength of insolvency framework index (0- scores for the recovery rate and the strength of 16) insolvency framework index. The Resolving Sum of the scores of four component indices: Insolvency indicator does not measure insolvency Commencement of proceedings index (0-3) proceedings of individuals and financial institutions. The data are derived from questionnaire responses Management of debtor’s assets index (0-6) by local insolvency practitioners and verified through Reorganization proceedings index (0-3) a study of laws and regulations as well as public information on bankruptcy systems. Creditor participation index (0-4) Doing Business 2016 Bangladesh 107 RESOLVING INSOLVENCY Where does the economy stand today? According to data collected by Doing Business, resolving 11.1). The resolving insolvency indicators are based on insolvency takes 4.00 years on average and costs 8.00% detailed information collected through questionnaires of the debtor’s estate. The average recovery rate is 25.80 completed by insolvency experts, including lawyers, cents on the dollar. Most indicator sets refer to a case practitioners (administrators, trustees), accountants and scenario in the largest business city of an economy, judges. Data on the time, cost and outcome refer to the except for 11 economies for which the data are a most likely in-court insolvency procedure applicable population-weighted average of the 2 largest business under specific case study assumptions. Data on cities. provisions applicable to judicial liquidation and reorganization is based on the current law governing Globally, Bangladesh stands at 155 in the ranking of 189 insolvency proceedings in each economy. economies on the ease of resolving insolvency (figure Figure 11.1 How Bangladesh and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2016 Bangladesh 108 Figure 11.2 Efficiency of proceedings - time, cost and recovery rate in Bangladesh and comparator economies. Source: Doing Business database. Note: The recovery rate is calculated based on the time, cost and outcome of insolvency proceedings involving domestic legal entities and is recorded as cents on the dollar recovered by secured creditors. The calculation takes into account the outcome: whether the business emerges from the proceedings as a going concern or the assets are sold piecemeal. Then the costs of the proceedings are deducted. Finally, the value lost as a result of the time the money remains tied up in insolvency proceedings is taken into account. The recovery rate is the present value of the remaining proceeds, based on end-2014 lending rates. Doing Business 2016 Bangladesh 109 Table 11.1 Summary of data for the strength of insolvency framework index Bangladesh Answer Explanation After 90 days of automatic stay, the Bizbank would initiate foreclosure through Artha Rin Adalat Bankruptcy Court which is established under the Artha Rin Adalat Act 2003 for banks and non-banking financial institutions (NBFIs). Artha Rin Adalat Bankruptcy Court would then Dhaka , Proceeding foreclosure review the case and makes decision on Mirages's application. Once a Chittagong decree has been passed against the entity, the bank files for execution of the decree and the Court conducts a piecemeal sale of Mirage's assets in a public auction. No, the hotel will stop operating and Mirage assets will be sold Dhaka , Outcome piecemeal sale piecemeal in a public auction conducted by the Artha Rin Courts after Chittagong granting the order on the BizBank's foreclosure application. A foreclosure procedure will approximately take 4 years in total. BizBank would initiate foreclosure after the 90 days automatic stay, and after filing the application to the Artha Rin Bankruptcy Court, it Time (in Dhaka , 4.0 usually takes another year to get a decree from the Artha Rin years) Chittagong Bankruptcy Court (1-2 years). The execution of the decree until BizBank is repaid some or all of the money owed to it from the auction proceeds would take additional 1 to 2 years. The costs associated with the case would amount to approximately 8% of the value of the debtor's estate. Cost incurred during the entire Cost (% of Dhaka , insolvency process mainly include court or government agency fees 8.0 estate) Chittagong (1%), attorney fees (2%), costs of notification and publication (1%), insolvency representative fees(2%), fees of accountants, assessors, inspectors and other professionals (1%), and auctioneer fees (1%). Recovery rate: 25.80 Source: Doing Business database. Doing Business 2016 Bangladesh 110 RESOLVING INSOLVENCY Strength of resolving insolvency index The strength of insolvency framework index is the with higher values indicating insolvency legislation that is sum of the scores on the commencement of better designed for rehabilitating viable firms and proceedings index, management of debtor’s assets liquidating nonviable ones. Bangladesh scores 4.00 out of index, reorganization proceedings index and creditor 16 on the strength of resolving insolvency index. participation index. The index ranges from 0 to 16, Figure 11.3 Strength of insolvency framework index (0-16) in Bangladesh and comparator economies Source: Doing Business database. Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice”. Doing Business 2016 Bangladesh 111 Table 11.3 Summary of data for the strength of insolvency framework index Bangladesh Answer Score Answer Score (Dhaka ) (Chittagong (Chittagong (Dhaka ) ) ) Strength of insolvency framework index (0-16) 4.00 4.00 Commencement of proceedings index (0-3) 2.00 2.00 (b) Debtor (b) Debtor What procedures are available to a DEBTOR when may file for may file for 0.5 0.5 commencing insolvency proceedings? liquidation liquidation only only (b) Yes, but a (b) Yes, but creditor may a creditor Does the insolvency framework allow a CREDITOR to file for 0.5 may file for 0.5 file for insolvency of the debtor? liquidation liquidation only only (a) Debtor (a) Debtor is is generally What basis for commencement of the insolvency generally unable to proceedings is allowed under the insolvency unable to pay 1.0 pay its 1.0 framework? its debts as debts as they mature they mature Management of debtor's assets index (0-6) 2.00 2.00 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to No 0.0 No 0.0 the debtor? Does the insolvency framework allow the rejection by Yes 1.0 Yes 1.0 the debtor of overly burdensome contracts? Does the insolvency framework allow avoidance of Yes 1.0 Yes 1.0 preferential transactions? Does the insolvency framework allow avoidance of No 0.0 No 0.0 undervalued transactions? Does the insolvency framework provide for the possibility of the debtor obtaining credit after No 0.0 No 0.0 commencement of insolvency proceedings? (c) No priority (c) No is assigned to priority is Does the insolvency framework assign priority to post- assigned to post- 0.0 0.0 commencement credit? post- commencem ent creditors commence ment Doing Business 2016 Bangladesh 112 Answer Score Answer Score (Dhaka ) (Chittagong (Chittagong (Dhaka ) ) ) creditors Reorganization proceedings index (0-3) 0.00 0.00 Which creditors vote on the proposed reorganization N/A 0.0 N/A 0.0 plan? Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as No 0.0 No 0.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class No 0.0 No 0.0 vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 0.00 0.00 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency No 0.0 No 0.0 representative? Does the insolvency framework require approval by the No 0.0 No 0.0 creditors for sale of substantial assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or No 0.0 No 0.0 rejecting creditors' claims? Source: Doing Business database. Doing Business 2016 Bangladesh 113 LABOR MARKET REGULATION Doing Business has historically studied the flexibility of regulations as well as secondary sources are reviewed to regulation of employment, specifically as it relates to the ensure accuracy. areas of hiring, working hours and redundancy. This year Doing Business has expanded the scope of the labor To make the data comparable across economies, several market regulation indicators by adding 16 new assumptions about the worker and the business are questions, most of which focus on measuring job quality. used. Over the period from 2007 to 2011 improvements were The worker: made to align the methodology for the labor market  Is a cashier in a supermarket or grocery store, regulation indicators (formerly the employing workers age 19, with one year of work experience. indicators) with the letter and spirit of the International  Is a full-time employee. Labour Organization (ILO) conventions. Ten of the 189  Is not a member of the labor union, unless ILO conventions cover areas now measured by Doing membership is mandatory. Business (up from four previously): employee The business: termination, weekend work, holiday with pay, night work,  Is a limited liability company (or the equivalent protection against unemployment, sickness benefits, in the economy). maternity protection, working hours, equal remuneration  Operates a supermarket or grocery store in the and labor inspections. economy’s largest business city. For 11 economies the data are also collected for the Between 2009 and 2011 the World Bank Group worked second largest business city. with a consultative group—including labor lawyers,  Has 60 employees. employer and employee representatives, and experts  Is subject to collective bargaining agreements if from the ILO, the Organisation for Economic Co- such agreements cover more than 50% of the operation and Development (OECD), civil society and the food retail sector and they apply even to firms private sector—to review the methodology for the labor that are not party to them. market regulation indicators and explore future areas of  Abides by every law and regulation but does not research. grant workers more benefits than those mandated by law, regulation or (if applicable) A full report with the conclusions of the consultative collective bargaining agreements. group, along with the methodology it proposed, is available on the Doing Business website at: http://www.doingbusiness.org/methodology/labor- market-regulation. Doing Business 2016 presents the data for the labor market regulation indicators in an annex. The report does not present rankings of economies on these indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business. Detailed data collected on labor market regulation are available on the Doing Business website (http://www.doingbusiness.org). The data on labor market regulation are based on a detailed questionnaire on employment regulations that is completed by local lawyers and public officials. Employment laws and Doing Business 2016 Bangladesh 114 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. Hiring Data on hiring cover five areas: (i) whether fixed-term wage to the average value added per worker (the ratio of contracts are prohibited for permanent tasks; (ii) the an economy’s GNI per capita to the working-age maximum cumulative duration of fixed-term contracts; population as a percentage of the total population), and (iii) the minimum wage for a cashier, age 19, with one (v) the availability of incentives for employers to hire year of work experience; (iv) the ratio of the minimum employees under the age of 25*. Dhaka Chittagong Hiring 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 0.0 0.0 (US$/month) Ratio of minimum wage to value added per worker 0.0 0.0 Incentives for employing workers under age 25? No No Source: Doing Business database. *A new question introduced in the Doing Business 2016 report for the first time. Doing Business 2016 Bangladesh 115 LABOR MARKET REGULATION Working hours Data on working hours cover nine areas: i) the maximum and nonnursing women can work the same night hours number of working days allowed per week; (ii) the as men*; (vii) whether there are restrictions on weekly premium for night work (as a percentage of hourly pay); holiday work; (viii) whether there are restrictions on (iii) the premium for work on a weekly rest day (as a overtime work*; and (ix) the average paid annual leave percentage of hourly pay); (iv) the premium for overtime for workers with 1 year of tenure, 5 years of tenure, and work (as a percentage of hourly pay)*; (v) whether there 10 years of tenure. are restrictions on night work; (vi) whether nonpregnant Dhaka Chittagong Working Hours Data Data Maximum number of working days per week 5.5 5.5 Premium for night work (% of hourly pay) 0.0 0.0 Premium for work on weekly rest day (% of hourly pay) 0.0 0.0 Premium for overtime work (% of hourly pay) 100.0 100.0 Restrictions on night work? 0.0 0.0 Whether nonpregnant and nonnursing women can work the same Yes Yes night hours as men Restrictions on weekly holiday? 0.0 0.0 Restrictions on overtime work? No No Paid annual leave for a worker with 1 year of tenure (working days) 17.0 17.0 Paid annual leave for a worker with 5 years of tenure (working days) 17.0 17.0 Paid annual leave for a worker with 10 years of tenure (working days) 17.0 17.0 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. *A new question introduced in the Doing Business 2016 report for the first time. Doing Business 2016 Bangladesh 116 LABOR MARKET REGULATION Redundancy rules Data on redundancy cover nine areas: (i) the length of whether the employer needs approval from a third party the maximum probationary period (in months) for to terminate one redundant worker; (vi) whether the permanent employees; (ii) whether redundancy is employer needs approval from a third party to terminate allowed as a basis for terminating workers; (iii) whether a group of nine redundant workers; (vii) whether the law the employer needs to notify a third party (such as a requires the employer to reassign or retrain a worker government agency) to terminate one redundant worker; before making the worker redundant; (viii) whether (iv) whether the employer needs to notify a third party to priority rules apply for redundancies; and (ix) whether terminate a group of nine 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 one worker is dismissed? Yes Yes Third-party approval if one worker is dismissed? No No Third-party notification if nine workers are dismissed? Yes Yes Third-party approval if nine 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 2016 Bangladesh 117 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice severance payments applicable to a worker with 1 year requirements and severance payments due when of tenure, a worker with 5 years and a worker with 10 terminating a redundant worker, expressed in weeks of years is considered. One month is recorded as 4 and salary. The average value of notice requirements 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. Doing Business 2016 Bangladesh 118 LABOR MARKET REGULATION Job quality Doing Business 2016 report presents, for the first time, on-the-job training at no cost to the employee; (viii) data on 12 job quality areas: (i) whether the law whether a worker is eligible for an unemployment mandates equal remuneration for work of equal value; protection scheme after one year of service; (ix) the (ii) whether the law mandates nondiscrimination based minimum duration of the contribution period (in months) on gender in hiring, (iii) whether the law mandates paid required for unemployment protection; (x) whether an or unpaid maternity leave; (iv) the minimum length of employee can create or join a union; (xi) the availability maternity leave in calendar days (minimum number of of administrative or judicial relief in case of infringement days that legally have to be paid by the government, the of employees’ rights; and (xii) the availability of a labor employer or both); (v) whether employees on maternity inspection system. If no maternity leave is mandated by leave receive 100 % of wages; (vi) the availability of five law, parental leave is measured if applicable. fully paid days of sick leave a year; (vii) the availability of Dhaka Chittagong Job Quality Data Data Equal remuneration for work of equal value? Yes Yes Gender nondiscrimination in hiring? No No Paid or unpaid maternity leave mandated by law? Yes Yes Minimum length of maternity leave (calendar days)? 112.0 112.0 Receive 100% of wages on maternity leave? Yes Yes Five fully paid days of sick leave a year? Yes Yes On-the-job training? No No Unemployment protection after one year of employment? No No Minimum contribution period for unemployment protection (months)? n.a. n.a. Can employee create or join union? Yes Yes Administrative or judicial relief for infringement of employees' rights? Yes Yes Labor inspection system? Yes Yes Source: Doing Business database. Doing Business 2016 Bangladesh 119 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is Distance to Frontier defined as 1 hour even though in many economies the time is less than that. The distance to frontier score captures the gap between an economy’s performance and a measure of best In the same formulation, to mitigate the effects of practice across the entire sample of 36 indicators for 10 extreme outliers in the distributions of the rescaled data Doing Business topics (the labor market regulation for most component indicators (very few economies indicators are excluded). For starting a business, for need 700 days to complete the procedures to start a example, the former Yugoslav Republic of Macedonia business, but many need 9 days), the worst performance and New Zealand have the smallest number of is calculated after the removal of outliers. The definition procedures required (1), and New Zealand the shortest of outliers is based on the distribution for each time to fulfill them (0.5 days). Slovenia has the lowest component indicator. To simplify the process two rules cost (0.0), and Australia, Colombia and 103 other were defined: the 95th percentile is used for the economies have no paid-in minimum capital indicators with the most dispersed distributions requirement (table 14.1 in the Doing Business 2016 (including minimum capital, number of payments to pay report). taxes, and the time and cost indicators), and the 99th percentile is used for number of procedures. No outlier is Calculation of the distance to frontier score removed for component indicators bound by definition Calculating the distance to frontier score for each or construction, including legal index scores (such as the economy involves two main steps. In the first step depth of credit information index, extent of conflict of individual component indicators are normalized to a interest regulation index and strength of insolvency common unit where each of the 36 component framework index) and the recovery rate. indicators y (except for the total tax rate) is rescaled In the second step for calculating the distance to frontier using the linear transformation (worst − y)/(worst − score, the scores obtained for individual indicators for frontier). In this formulation the frontier represents the each economy are aggregated through simple averaging best performance on the indicator across all economies into one distance to frontier score, first for each topic since 2005 or the third year in which data for the and then across all 10 topics: starting a business, dealing indicator were collected. Both the best performance and with construction permits, getting electricity, registering the worst performance are established every five years property, getting credit, protecting minority investors, based on the Doing Business data for the year in which paying taxes, trading across borders, enforcing contracts they are established, and remain at that level for the five and resolving insolvency. More complex aggregation years regardless of any changes in data in interim years. methods—such as principal components and Thus an economy may set the frontier for an indicator unobserved components—yield a ranking nearly Doing Business 2016 Bangladesh 120 identical to the simple average used by Doing Business . The nonlinear transformation is not based on any 4 Thus Doing Business uses the simplest method: economic theory of an “optimal tax rate” that minimizes weighting all topics equally and, within each topic, giving distortions or maximizes efficiency in an economy’s equal weight to each of the topic components . overall tax system. Instead, it is mainly empirical in 5 nature. The nonlinear transformation along with the An economy’s distance to frontier score is indicated on a threshold reduces the bias in the indicator toward scale from 0 to 100, where 0 represents the worst economies that do not need to levy significant taxes on performance and 100 the frontier. All distance to frontier companies like the Doing Business standardized case calculations are based on a maximum of five decimals. study company because they raise public revenue in However, indicator ranking calculations and the ease of other ways—for example, through taxes on foreign doing business ranking calculations are based on two companies, through taxes on sectors other than decimals. manufacturing or from natural resources (all of which are The difference between an economy’s distance to outside the scope of the methodology). In addition, it frontier score in any previous year and its score in 2015 acknowledges the need of economies to collect taxes illustrates the extent to which the economy has closed from firms. the gap to the regulatory frontier over time. And in any Calculation of scores for economies with 2 cities given year the score measures how far an economy is covered from the best performance at that time. For each of the 11 economies in which Doing Business Treatment of the total tax rate collects data for the second largest business city as well The total tax rate component of the paying taxes as the largest one, the distance to frontier score is indicator set enters the distance to frontier calculation in calculated as the population-weighted average of the a different way than any other indicator. The distance to distance to frontier scores for these two cities (table frontier score obtained for the total tax rate is 13.1). This is done for the aggregate score, the scores for transformed in a nonlinear fashion before it enters the each topic and the scores for all the component distance to frontier score for paying taxes. As a result of indicators for each topic. the nonlinear transformation, an increase in the total tax rate has a smaller impact on the distance to frontier score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 in the Doing Business 2016 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores than it would have had before (line D is bigger than line C in figure 14.2 in the Doing Business 2016 report). 4 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 5 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2016 Bangladesh 121 Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this year’s aggregate distance to frontier score. Changes Economy City Weight (%) making it more difficult to do business are subtracted Dhaka 78 Bangladesh from the total number of those making it easier to do Chittagong 22 São Paulo 61 business. Twenty-four economies meet this criterion: Brazil Armenia; Azerbaijan; Benin; Costa Rica; Côte d’Ivoir e; Rio de Janeiro 39 Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica; China Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania; Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda; India Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates; Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts Indonesia Surabaya 22 these economies on the increase in their distance to Tokyo 65 Japan frontier score from the previous year using comparable Osaka 35 data. Mexico City 83 Mexico Monterrey 17 Selecting the economies that implemented regulatory Lagos 77 reforms in at least three topics and had the biggest Nigeria Kano 23 improvements in their distance to frontier scores is Karachi 65 intended to highlight economies with ongoing, broad- Pakistan Lahore 35 based reform programs. The improvement in the Moscow 70 Russian Federation distance to frontier score is used to identify the top St. Petersburg 30 New York 60 improvers because this allows a focus on the absolute United States improvement—in contrast with the relative improvement Los Angeles 40 Source: United Nations, Department of Economic and Social shown by a change in rankings—that economies have Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business. 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking Economies that improved the most across 3 or more Doing Business topics in 2014/15 The ease of doing business ranking ranges from 1 to 189. The ranking of economies is determined by sorting the Doing Business 2016 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2 which economies improved the ease of doing business decimals. the most. First, it selects the economies that in 2014/15 Doing Business 2016 Bangladesh 122 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 11,400 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 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 189 economies to the frontier Methodology in regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2016 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2016 Bangladesh 123